Intelligent Systems Corporation
- Company Name
- Intelligent Systems Corporation
- Stock Symbol
- Class Period
- January 23, 2019 to May 29, 2019
- Motion Deadline
- September 7, 2019
- Eastern District of New York
The complaint charges Intelligent Systems and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Intelligent Systems provides technology solutions and processing services to the financial technology and services markets.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Intelligent Systems’ business and operations. Specifically, defendants failed to disclose that defendant Parker H. Petit, the “financial expert” on Intelligent Systems’ Audit Committee, had engaged in accounting fraud as the CEO of MiMedx Group, Inc.; that Intelligent Systems’ CEO, defendant J. Leland Strange, had engaged in undisclosed related-party transactions with defendant Petit and others and had an undisclosed personal relationship with the Company’s auditor; and that Intelligent Systems had its employees set up or take control of shell companies in Asia so they could engage in undisclosed related-party transactions for the purpose of either fabricating revenue for the Company or siphoning money out of the Company. As a result of this information being withheld from the market, Intelligent Systems securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of more than $48 per share.
On May 23, 2019, MiMedx disclosed that an investigation by its Audit Committee found that Petit had engaged in accounting fraud when he was CEO of MiMedx. On May 24, 2019, Aurelius Value published a report discussing the disclosures regarding Petit’s accounting fraud at MiMedx and accusing the Company’s CEO, defendant Strange, of having engaged in undisclosed related-party transactions with Petit and others and having an undisclosed personal relationship with the Company’s auditor, Nicolas Cauley. On this news, Intelligent Systems stock price fell more than 10% to close at $34.93 per share on May 24, 2019.
Then on May 30, 2019, before the market opened, Grizzly Research issued a report on Intelligent Systems presenting evidence that the Company had “its employees set up or take control of undisclosed shell companies in Asia, who [would] then partake in undisclosed related party transactions with [the Company] intended to either round-trip revenue back to [the Company] or siphon money out of the company.” The report further stated that “there is a possibility that all revenue growth since January 2018 has been a result of undisclosed round-trip transactions with Indian related parties.” On this news, the price of Intelligent Systems stock fell over 20% to close at $26.99 per share on May 30, 2019.