U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ......... to ...............
Commission File No.: 0-22254
INTELLIGENT DECISION SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 38-3286394
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
88 Danbury Road
Wilton, Connecticut 06987
(Address of Principal Executive Offices)
203-761-1057
(Issuer's Telephone No.)
No Changes
(Former name and former fiscal year if changed since last report)
Weyhill Building, Suite 400, 2025 East Beltline Ave., SE,
Grand Rapids, Michigan 49546
(Former address if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days:
Yes [x] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date.
Title of Class: Common Stock
Shares outstanding at: November 10, 1997: 15,228,712
Transitional Small Business Disclosure Format: Yes [ ]; No [x]
<PAGE>
INTELLIGENT DECISION SYSTEMS, INC.
I N D E X
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1997 and June 30, 1997 1
Condensed Consolidated Statements of Operations
for the three months ended September 30, 1997
and September 30, 1996 3
Condensed Consolidated Statements of Cash Flows
for the three months ended September
30, 1997 and September 30, 1996 4
Notes to Condensed Consolidated Financial
Statements 5
Item 2. Management's Discussion and Analysis or Plan
of Operation 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
Part I. - Financial Information
Item 1. Financial Statements
INTELLIGENT DECISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
ASSETS
Sept. 30, June 30,
1997 1997
------------ ------------
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 19,187 $ 355,009
Accounts Receivable
Trade, net of allowance for doubtful
accounts of $16,598 and $16,598,
respectively 107,643 123,795
Net investment in direct
finance leases, current portion 84,101 342,205
Inventories 48,557 53,534
Contractual rights 371,659 420,282
Prepaid expenses 31,563 36,740
--------- ---------
TOTAL CURRENT ASSETS 662,710 1,331,565
PROPERTY AND EQUIPMENT, NET 348,006 392,412
OTHER ASSETS
Contractual rights 15,396 24,604
Net investment in direct finance
leases, net of current portion 174,355 199,914
Intellectual property - net of
amortization 1,279,762 1,369,048
Other - net of amortization 152,694 157,033
--------- ---------
$ 2,632,923 $3,474,576
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
1
<PAGE>
INTELLIGENT DECISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Sept. 30, June 30,
1997 1997
----------- ------------
(unaudited)
CURRENT LIABILITIES
Related party notes payable $ 128,494 $ 30,553
Accounts payable 875,638 890,388
Accrued expenses 438,994 702,702
Long term obligations, current 195,707 121,355
---------- ----------
TOTAL CURRENT LIABILITIES 1,638,833 1,744,998
LONG-TERM OBLIGATIONS, net of current portion 534,486 333,338
COMMITMENTS AND CONTINGENCIES 0 0
STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value;
1,000,000 and 1,000,000 shares
authorized; 0 and 0 shares
issued and outstanding;
cumulative, 7% payable annually 0 0
Additional paid-in capital - preferred 0 0
Common stock; $.001 and 30,000,000 and
30,000,000 shares authorized;
14,748,196 and 14,548,196
shares issued and outstanding 14,748 14,548
Additional paid in capital - common 13,248,464 13,076,276
Accumulated deficit (12,803,608) (11,694,584)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 459,604 1,396,240
---------- ----------
$ 2,632,923 $ 3,474,576
========== ==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
2
<PAGE>
INTELLIGENT DECISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
Three Months Ended
Sept. 30,
------------------------
1997 1996
--------- ---------
Revenues $ 264,819 $ 215,123
Costs of Goods and Services 398,109 345,013
--------- ---------
Gross Profit (Loss) (133,290) (129,890)
Expenses
Selling 257,843 205,740
Administration 368,995 438,370
Research & development 170,957 192,058
Depreciation & amortization 149,324 138,427
Interest expense 34,727 8,455
--------- ---------
981,846 983,050
Net loss from operations (1,115,136) (1,112,940)
Other income (expense) 6,112 35,251
--------- ---------
Net loss $(1,109,024) $(1,077,689)
========= =========
Net loss per share $(0.08) $(0.08)
==== ====
Weighted average
shares outstanding 14,681,529 12,895,934
========== ==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE>
INTELLIGENT DECISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
Three Months Ended
Sept. 30,
------------------------
1997 1996
--------- ---------
Net cash flows from
operating activities $(1,104,903) $(1,398,871)
Net cash flows from
investing activities 283,640 (45,899)
Net cash flows from
financing activities 485,441 585,740
--------- ---------
Net change in
cash and equivalents (335,822) (859,030)
Beginning cash and equivalents 355,009 3,064,329
--------- ---------
Ending cash
and equivalents $ 19,187 $ 2,205,299
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE>
INTELLIGENT DECISION SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Note A -- Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions contained in Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1998. The unaudited condensed financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-KSB for the year ended June 30, 1997. The
year end condensed consolidated balance sheet was derived from audited financial
statements, but does not include all disclosures by generally accepted
accounting principles.
Note B -- Stockholders' Equity
Changes in stockholders' equity for the three months ended September 30, 1997
are:
<TABLE>
<CAPTION>
Common Stock
Additional Total
Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balance, June 30,
1997 14,548,193 $14,548 $13,076,276 $(11,694,584) $1,396,240
Exercise of
warrants and options 200,000 200 111,800 112,000
Stock options
issued for services 5,000 5,000
Stock option
exercise price
reductions granted
for services and
settlements 55,388 55,388
Net loss (1,109,024) (1,109,024)
---------- ------ ---------- ---------- ----------
Balance, June 30,
1997 14,748,196 $14,748 $13,248,464 $(12,803,608) $ 459,604
========== ====== ========== ========== ==========
</TABLE>
5
<PAGE>
INTELLIGENT DECISION SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Note C -- Earnings Per Share Computation
Earnings per share amounts are based on the weighted average number of shares
outstanding exclusive of warrants and options in view of the fact that inclusion
of these common stock equivalents would be anti-dilutive.
Note D -- Related Party Transactions
During the three months ended September 30, 1997, Mid America Venture Capital
Fund, Inc. ("Mid America"), an affiliate through stock ownership of more than 10
per cent of the Company's outstanding common shares, loaned the Company $97,941
in exchange for notes payable (which are payable upon demand) collateralized by
all assets of the Company. The loans were in addition to previous loans
outstanding at June 30, 1997 of $30,553, also collateralized by all assets of
the Company. On September 22, 1997, the Company granted to Mid America Venture
an option to purchase 150,000 shares of common stock at an exercise price of
$.50/share as consideration for cash advances made to the Company by Mid America
Venture Capital Fund, Inc.
Note E -- Commitments and Contingencies
In June 1996, the Company agreed to assume the defense of a lawsuit with a
former sales agent of The Neptune Group, Inc. ("Old Neptune") and has also
acquired the rights to a counter suit against the same agent. Old Neptune is
seeking damages against the former sales agent for breach of contract and breach
of fiduciary duty. The former sales agent is seeking commissions of $753,420
plus statutory interest, punitive damages and attorney's fees. Old Neptune filed
a Motion for Summary Judgment whereby it is requesting, among other things, that
the Court enter summary judgment dismissing MKT Inc.'s counterclaims against Old
Neptune. MKT, Inc. has filed a notice of opposition to Old Neptune's motions for
summary judgment and cross motion for summary judgment whereby MKT, Inc. is
requesting that the court enter summary judgment dismissing Old Neptune's claims
and defenses. Neither Old Neptune's motion for summary judgment nor MKT, Inc.'s
motion for summary judgment have been ruled upon by the Court. Although
management believes the former agent's claim to be without merit, successful
assertion of the claim could have a materially adverse effect on the financial
condition, liquidity and operations of the Company.
The Company has a supply agreement that called for minimum software purchases
from a supplier of $250,000 by September 30, 1997. The Company had purchased
$10,000 of this software as of September 30, 1997. The Company has not taken
delivery of the remaining $240,000 of this software. Certain disputes regarding
other provisions of the agreement exist between the supplier and the Company.
On July 10, 1997, the Company entered into an agreement with Old Neptune and
Visys modifying the June 28, 1997 Neptune Purchase Agreement and Visys
Consulting Agreement respectively. In connection with such agreements, The
Company reduced the exercise price of warrants to purchase 300,000 shares of
common stock previously granted to Old Neptune to $1.00 from $2.50 and the
exercise price of warrants to purchase 750,000 shares of common stock previously
granted to Old Neptune to $2.00 from $4.00. The Company also terminated the
Visys consulting agreement and restructured its payments to Visys in the form of
a promissory note and security agreement with payments totaling $406,764 over a
42 month period, with a present value of $343,750, discounted at 10 per cent per
annum. A security agreement and collateralized promissory note for $406,764 was
executed. The Company is also obligated to pay to Visys 2% of the invoice price
for all Vision and Focus sales or leases made through a four year period ending
June 30, 2001. In accordance with the Agreement, payments of $47,352 have been
deferred through October 31, 1997 and an additional $23,676 in future payments
will be deferred through December 31, 1997. On January 15, 1998, the total of
$88,788, which includes deferral fees, will become due.
6
<PAGE>
INTELLIGENT DECISION SYSTEMS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Note F -- Income Taxes
No income tax provision was made for either period as losses were incurred. Net
deferred tax assets were not recorded due to the uncertainty of future earnings.
Note G -- Reclassifications
Certain amounts, as presented in prior periods, have been reclassified to
conform with the amounts presented in the three months ended September 30, 1997.
These reclassifications do not have an impact on the net loss that was
previously reported.
7
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
INTELLIGENT DECISION SYSTEMS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis or
Plan of Operation
For the Three Ended September 30, 1997 and 1996
- --------------------------------------------------------------------------------
Results of Operations
A summary of sales and gross profits:
(all amounts in thousands)
Three Months Ended
Sept. 30 1997 Sept. 30 1996
------------- -------------
Sales
Vision $ 25 $ 39
Focus 0 0
Other DSI 120 28
Leasing 120 148
------ ------
Total Sales $ 265 $ 215
====== ======
Gross Profit
Vision $ 9 $ 12
Focus (1) 0
Other DSI 34 16
Leasing 14 11
------ ------
Direct Gross Profit $ 56 $ 39
Customer Service Costs 189 169
------ ------
Gross Profit (Loss) $ (133) $ (130)
====== ======
In July, 1997 the Company completed customized programming and installation of
its Focus systems pursuant to a contract with Pioneer Eye Care Information
Systems. Due to the significant complexities of this project, the Company
committed management and personnel resources to supporting this project, which
required extensive product customization, increased training needs and
assistance in on-going data entry at the client's site necessary to manage their
business.
The Company elected to allocate personnel and programming resources to Pioneer
in the first fiscal quarter with the expectation of additional orders during
phase II of the relationship with this expanding Physician Practice Management
corporation. Pioneer Eye Care, through their acquisition of additional medical
practices, represents incremental revenue opportunities for the Company in
fiscal 1998.
The other technology-based products developed by the Company, Vision and MDS2,
are distributed exclusively by HPSI. Sales of these products have been static to
date. Management believes future sales from HPSI will come in the form of MDS2
systems that can then be upgraded to a full Vision product in the future.
The Company, through its newly formed executive management committee, is
currently reviewing its present business strategy and strategic business focus.
Through this process the Company intends to extensively review the following
alternatives and then make a determination regarding which alternative is best
suited for the Company's outlook: (a) Complete the proposed merger of the
Company and HPSI (b) in lieu of a merger, strengthen the current distribution
contract with HPSI to include financial performance benchmarks that will support
the Company's infrastructure or (c) search for and identify other distribution
and licensing opportunities for these advanced information technologies.
8
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Three Months Ended September 30, 1997 and 1996
- -------------------------------------------------------------------------------
Revenues in the next two quarters will come primarily from Neptune Technology
Leasing Corp, a wholly owned subsidiary of IDSI. This direction has been
followed for the past sixty days and is expected to generate more than $100,000
in initial net revenues monthly. Significant contract discussions have taken
place, and together with pending leasing transactions, that if consummated, will
increase net revenues from leasing to $200,000 per month by the end of the first
calendar quarter, or the third quarter of fiscal 1998.
Pioneer is now developing their information systems budget for calendar 1998.
the Company has been informed that there will be an expansion of the Pioneer Eye
Care Information System project in the first calendar quarter of 1998. An
announcement will be forthcoming once those figures are conveyed to the Company.
Operating expenses were:
Three Months Ended Sept. 30, % incr.
1997 1996 (decr.)
-------- ------- --------
Selling $ 257,843 $ 205,740 25.3
Administration 368,995 438,370 (15.8)
Research & development 170,957 192,058 (11.0)
Depreciation & amortization 149,324 138,427 7.9
Interest expense 34,727 8,455 310.7
-------- -------
$ 981,846 $ 983,050 (0.1)
======== =======
Selling expenses increased due to the first stages of building a direct sales
force for the Focus system. For the three months ended September 30, 1997,
personnel expenses were $174,150, travel totaled $49,499 and bad debt expense
was $28,781. For the first three months ended September 30, 1996, personnel
expenses were $117,903 and travel totaled $51,718.
Administration expenses decreased by $69,375 due primarily to a decrease in
expenses related to consulting contracts.
Research and development costs were lower than the same period in the previous
year due to an adjustment in the number of programmers working on developmental
projects.
Depreciation and amortization increased over the same period of the previous
year due to additional depreciation associated with the purchases of office
equipment and furniture for the Neptune leasing operation.
Interest expense increased over the same period of the previous year due to
additional borrowings from a related party, and from notes payable exchanged in
lieu of cash payments required pursuant to the termination of a consulting
contract with the former owners of Old Neptune.
Total employment was 33 at September 30, 1997, a decrease of 9 from September
30, 1996.
Operational Streamlining
In the past 90 days, significant head count reduction has taken place in the
Company's three operating locations. In addition, the Grand Rapids, MI location
is to be closed. CFO responsibilities and other accounting functions are
currently being transitioned to the Wilton, Connecticut facility. This location
will also serve as the new headquarters for the Company.
The impact of our streamlining operations is expected to result in net savings
of $750,000 in operating expenses, assuming current levels of operating
activity.
9
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Three Months Ended September 30, 1997 and 1996
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
During the first three months of fiscal 1998, the Company used cash of
$1,104,903 in its operations. The net loss for the three months ended September
30, 1997 was $1,109,024. Non-cash charges to income were $255,174. Proceeds from
the sale of leases held for resale were $248,377. Collections of lease payments
totaled $39,748. The Company borrowed an additional $97,941 from a related party
via short-term collateralized note payable and exchanged collateralized notes
payable of $343,750 for accrued amounts owed consultants.
Sources of cash included proceeds from the exercise of options totaling
$112,000. The remainder of the shortfall from operations was made up by reducing
cash reserves by $335,822.
Cash and cash equivalents were $19,187 at September 30, 1997, which represented
only a fraction of one month's operating capital, assuming no increase in
current sales levels.
Management's Plan for Viability
The Company expects its operating expenses, including customer service and
assembly, to be $3.6 million dollars for the next twelve months. In order to
sustain the Company, management plans to:
1. Allocate the proper resources needed to support the increased business being
generated from Neptune Technology Leasing Corp. It is expected that these
revenues will cover a significant portion of the Company's operating budget in
the short term.
2. Redefine the relationship that will be in place between the Company and HPSI.
3. Pursue product license agreements with other health care technology
companies.
4. Begin phase II of the Pioneer Eye Care Information System project. Budgets
are currently being developed within this Physician Practice Management Company
("PPMC"). Revenues from this project are expected to offset any shortfalls due
to activities in the first two quarters. The Company will continue to pursue
similar opportunities with other PPMCs.
5. Discussions are currently taking place with investment partner prospects to
raise cash in the form of debt and/or equity.
Organizational Structure
Currently the Company is functioning under the direction of an interim executive
management committee. This committee is comprised of managers from each
subsidiary of the corporation. An active search is now taking place for a Chief
Financial Officer. Further management changes are not planned until December 31,
1997, at which time the status of the intended merger with HPSI should be more
assessable.
Management believes that a combination of revenues and new financing will
provide sufficient operating capital to sustain operations for the next twelve
months.
10
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Three Months Ended September 30, 1997 and 1996
- -------------------------------------------------------------------------------
Commitments and Contingencies
In June 1996, the Company agreed to assume the defense of a lawsuit with a
former sales agent of The Neptune Group, Inc. and has also acquired the rights
to a counter suit against the same agent. The Neptune Group is seeking damages
against the former sales agent for breach of contract and breach of fiduciary
duty. The former sales agent is seeking commissions of $753,420 plus statutory
interest, punitive damages and attorney's fees. Old Neptune filed a Motion for
Summary Judgment whereby it is requesting, among other things, that the Court
enter summary judgment dismissing MKT Inc.'s counterclaims against Old Neptune.
MKT, Inc. has filed a notice of opposition to Old Neptune's motions for summary
judgment and cross motion for summary judgment whereby MKT, Inc. is requesting
that the court enter summary judgment dismissing Old Neptune's claims and
defenses. Neither Old Neptune's motion for summary judgment nor MKT, Inc.'s
motion for summary judgment have been ruled upon by the Court. Although
management believes the former agent's claim to be without merit, successful
assertion of the claim could have a materially adverse effect on the financial
position, liquidity and operations of the Company.
The Company has a supply agreement that called for minimum software purchases
from a supplier of $250,000 by September 30, 1997. The Company had purchased
$10,000 of this software as of September 30, 1997. The Company has not taken
delivery of the remaining $240,000 of this software. Certain disputes regarding
other provisions of the agreement exist between the supplier and the Company.
On July 10, 1997, the Company entered into an agreement with Old Neptune and
Visys modifying the June 28, 1997 Neptune Purchase Agreement and Visys
Consulting Agreement respectively. In connection with such agreements, The
Company reduced the exercise price of warrants to purchase 300,000 shares of
common stock previously granted to Old Neptune to $1.00 from $2.50 and the
exercise price of warrants to purchase 750,000 shares of common stock previously
granted to Old Neptune to $2.00 from $4.00. The Company also terminated the
Visys consulting agreement and restructured its payments to Visys in the form of
a promissory note and security agreement with payments totaling $406,764 over a
42 month period, with a present value of $343,750, discounted at 10 per cent per
annum. A security agreement and collateralized promissory note for $406,764 was
executed. The Company is also obligated to pay to Visys 2% of the invoice price
for all Vision and Focus sales or leases made through a four year period ending
June 30, 2001. In accordance with the Agreement, payments of $47,352 have been
deferred through October 31, 1997 and an additional $23,676 in future payments
will be deferred through December 31, 1997. On January 15, 1998, the total of
$88,788, which includes deferral fees, will become due. Discussions are on going
with Visys that will result in meeting their needs as well as the needs of the
Company.
11
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Three Months Ended September 30, 1997 and 1996
- --------------------------------------------------------------------------------
Subsequent Events
New Board and Management
On October 30, 1997, James Keller and Mark Babin resigned as directors of the
Company, leaving three positions held and four open. On November 3, 1997, the
remaining directors appointed an interim management team to run the Company
which includes David Horowitz, Robert Hyte, Eugene Feher, Ron Greenberg, Jon
Preiser, Scott Preiser and Jerry Beck. Mark Babin resigned as CFO of IDSI on
November 3, 1997.
David Horowitz remains as CEO and President and was appointed Treasurer. Roger
Fowler, controller of IDSI's subsidiary DSI, was named as interim CFO. Robert
Hyte was appointed as Secretary.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-QSB, including all documents incorporated by reference, includes
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. All statements other than statements of
historical facts included in this Form 10-QSB (and in documents incorporated by
reference), including without limitation, statements under "Management's
Discussion and Analysis or Plan of Operation" regarding the Company's financial
position, business strategy and plans and objectives of management of the
Company for future operations, are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by this section.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
As reported in the Company's Form 10-KSB for the fiscal year
ended June 30, 1997, The Neptune Group, Inc. ("Old Neptune") is
involved in litigation with MKT, Inc. MKT, Inc. has filed a
notice of opposition to Old Neptune's motions for summary
judgment and cross motion for summary judgment whereby MKT, Inc.
is requesting that the court enter summary judgment dismissing
Old Neptune's claims and defenses. Neither Old Neptune's motion
for summary judgment nor MKT, Inc.'s motion for summary judgment
have been ruled upon by the Court.
No other reportable events have occurred which would require
modification of the discussion under Legal Proceedings set forth
in the Company's Form 10-KSB Annual Report for the fiscal year
ended June 30, 1997.
Item 2. Changes in Securities:
None.
Item 3. Defaults by the Company upon its Senior Securities:
None.
Item 4. Submission of Matters to a Vote of Security Holders:
None.
Item 5. Other Information:
None.
Item 6. Exhibits and Reports on Form 8-K:
A) Exhibits.
EX-10.22 Amendment to the Neptune Purchase Agreement
EX-10.23 Modification of Visys Agreement
EX-10.24 Vision Promissory Note
EX-10.25 Security Agreement
EX-27 Financial Data Schedule
B) Reports on Form 8-K filed during the quarter ended September
30, 1997.
None
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INTELLIGENT DECISION SYSTEMS, INC.
Date: November 13, 1997 /s/ David A. Horowitz
--------------------------
David A. Horowitz
President
Date: November13, 1997 /s/ Roger Fowler
--------------------------
Roger Fowler
Chief Financial Officer
14
THE NEPTUNE GROUP, INC.
1266 MAIN STREET
STAMFORD, CT 06902
(203) 356-9282 Fax: (203) 348-0506
July 10, 1997
Mr. David Horowitz, Chairman
Intelligent Decision Systems, Inc.
88 Danbury Road
Wilton, CT 06897
Dear David:
Reference is made to the Agreement of Sale dated June 27, 1996 (the
"Sale Agreement") between Intelligent Decision Systems, Inc. ("IDSI"), The
Neptune Group, Inc. ("Neptune"), Stephen M. Chaleff and Fred Wiener
(collectively the "Stockholders"). As a result of various discussions regarding
IDSI's failure to pay certain amounts due and owing pursuant to the Sale
Agreement and certain disputes which have arisen over certain other sums claimed
by Neptune to be due and owing, we have agreed, in settlement thereof, to the
following:
1. Discharge of Outstanding Obligations. For and in consideration of
the execution, delivery and performance by IDSI of this Agreement, Neptune and
the Stockholders hereby release and forever discharge IDSI from any obligation
or liability with respect to the outstanding amounts (approximately $140,000)
heretofore claimed by Neptune to be due and owing to Neptune under the Sale
Agreement. All other obligations, liabilities and representations set forth in
the Sale Agreement shall remain in full force and effect. In consideration of
the foregoing, IDSI hereby releases, forever discharges and agrees to hold
Neptune and its Stockholders harmless from any obligation or liability to make
any payments or assume any liability under or in connection with that certain
dispute involving DVI Financial Services, Inc. as lender and American Mobile
Imaging as lessee, including any obligations or liabilities to IDSI (including
with respect to the escrow of warrant shares) under that certain letter
agreement dated June 27, 1996 between IDSI and Neptune regarding said dispute.
2. Warrant Amendment. The Warrant to purchase 300,000 shares of Common
Stock of IDSI issued on or about December 27, 1995 by IDSI to Neptune's
wholly-owned subsidiary (then known as Neptune Technology Leasing Corp.) shall
be amended to reduce the exercise price thereunder from $2.50 to $1.00 per share
pursuant to an Amendment in the form of Exhibit A hereto which shall be issued
by IDSI simultaneously herewith. As so modified, said Warrant shall continue in
full force and effect.
-1-
<PAGE>
3. Continuance of Sale Agreement. Except as herein modified, the Sale
Agreement shall remain in full force and effect in accordance with its terms.
4. Miscellaneous.
(a) Any notice, request, instruction or other document to be given
hereunder shall be in writing, and except as otherwise provided for herein,
shall be delivered personally, or sent by registered or certified mail to the
parties at their respective addresses set forth on the first page hereof or to
such other address as either of the parties hereto may hereinafter designate in
writing to the other party hereto.
: (b) After the date hereof, each of the parties hereto, at the reasonable
request of the other, will take such action and execute and deliver such further
documents and instruments as may be necessary to assure complete and full and
effective consummation of the transactions contemplated hereunder.
(c) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. Except as set
forth above, nothing in this Agreement expressed or implied is intended to
confer upon any persons, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason thereof.
(d) This Agreement cannot be modified, changed, discharged or
terminated except by an instrument in writing, signed by the party against whom
the enforcement of any waiver, change, discharge or termination is sought. This
Agreement contains the entire understanding between the parties with respect to
the transactions covered hereby.
(e) In the event that any one or more provisions of this Agreement
shall be deemed to be illegal or unenforceable, such illegality or
unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions hereof, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
(f) This Agreement will be construed and governed in accordance with
the laws of the State of Connecticut, without giving effect to the conflict of
laws provisions thereof.
(g) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
(h) Each of the parties hereto represents and warrants that this
Agreement has been duly authorized by all requisite corporate and other action
including, in the case of IDSI, approval of the Board of Directors of IDSI with
authorization for David Horowitz to execute this Agreement on its behalf.
-2-
<PAGE>
Please acknowledge and confirm your agreement with, and acceptance of,
this Agreement by executing same below whereupon it shall become the binding
agreement of the parties hereto.
Very truly yours,
THE NEPTUNE GROUP, INC.
By /s/ Stephen M. Chaleff
---------------------------
Title President
------------------------
THE STOCKHOLDERS:
/s/ Stephen M. Chaleff
--------------------------
Stephen M. Chaleff
/s/ Fred Wiener
--------------------------
Fred Wiener
ACCEPTED AND AGREED TO:
INTELLIGENT DECISION SYSTEMS, INC.
By /s/ David Horowitz
------------------------------------
Title Chairman
--------------------------------
Date 7/11/97
---------------------------------
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<PAGE>
Exhibit A
AMENDMENT TO WARRANT NO. 3
Reference is made to that certain Warrant No. 003 to purchase 300,000 shares of
common stock of Intelligent Decision Systems, Inc. (formerly Digital Sciences,
Inc.) issued to NTLC Asset Corp. (formerly Neptune Technology Leasing Corp.) on
December 27, 1995.
Intelligent Decision Systems, Inc., hereby amends the foregoing Warrant as
follows: The purchase price in said Warrant is hereby changed from "$2.50 per
share" to "$1.00 per share". All other terms and conditions remain in full force
and effect.
The undersigned represents and warrants that this Warrant Amendment has been
duly authorized by all requisite corporate and other action including approval
of the Board of Directors of Intelligent Decision Systems, Inc. for David
Horowitz to execute this revision on its behalf.
Intelligent Decision Systems, Inc.
Attest:
By_____________________________
_________________________ David Horowitz, Chairman
Date___________________________
VISION CAPITAL GROUP, LLC
1266 Main Street
Stamford, Connecticut 06902
203-356-9282 Fax: 203-348-0506
July 10, 1997
Mr. David Horowitz, Chairman
Intelligent Decision Systems, Inc.
88 Danbury Road
Wilton, CT 06897
Dear David:
Reference is made to the Management and Non-Compete Agreement dated
June 27, 1996 (the "Consulting Agreement") between Intelligent Decision Systems,
Inc. ("IDSI") and Vision Capital Group, LLC (formerly Visys Capital Group, LLC)
("Vision"). As a result of various discussions regarding IDSI's failure to pay
amounts due and owing under the Consulting Agreement and other matters
thereunder, we have agreed, in settlement thereof, to terminate the Consulting
Agreement upon and subject to the following terms:
1. Termination of Agreement. Subject to the due and timely payment by
IDSI to Vision of the amounts set forth in Section 2(a) below:
(a) The Consulting Agreement shall be, and hereby is, terminated
and of no further force and effect and neither party thereto
shall have any further obligations or liabilities thereunder,
including under the provisions of Section 4 thereof (relating
to non-competition) which shall have no further applicability
notwithstanding anything to the contrary contained in the
Consulting Agreement.
(b) In furtherance of the foregoing, each of IDSI and Vision
hereby releases the other (and their respective members,
stockholders, directors, officers, employees and agents) from
any and all debts, liabilities, covenants, representations,
obligations, claims, demands, lawsuits, losses, costs and
expenses arising out of the Consulting Agreement or the
performance or non-performance thereof, except as otherwise
provided in this Agreement; it being understood and agreed
that this Agreement shall not in any way be subject to such
release.
2. Payments to Vision. In consideration of and notwithstanding the
aforesaid termination of the Consulting Agreement, IDSI shall pay to Vision the
following:
(a) On or before July 14, 1997, IDSI shall pay to Vision an amount
equal to any and all "Vision System Payments" (represented by
IDSI to be $8,000) which would otherwise have been payable to
Vision under Section 3.2 of the Consulting Agreement (but for
the termination of same) for any and all periods up to and
including June 30, 1997. Such payment shall include an
accounting of the
-1-
<PAGE>
calculation and basis for such payment and Vision shall be
entitled to examine IDSI's books and records for verification
of same.
(b) IDSI shall pay to Vision an aggregate of $406,764 payable in
monthly installments as follows:
(i) Six (6) monthly installments of $11,838 each shall be
due and payable on July 31, 1997 and on the last day
of each consecutive month thereafter through and
including December 31, 1997; provided, however, that
IDSI shall have the option, upon at least 10 days
prior written notice to Vision, to defer such
payment(s) to January 15, 1998 whereupon all such
deferred payments shall be made together with a
deferral fee of $2,960 for each such deferred
payment;
(ii) Thirty-six (36) monthly installments of $9,326 each
shall be due and payable on January 31, 1998 and on
the last day of each consecutive month thereafter
through and including December 31, 2000;
(iii) IDSI shall have the right to prepay the aforesaid
installments, in whole but not in part, at any time
upon at least 10 days prior written notice to Vision,
in an amount which is the present value of the then
remaining outstanding payments (using a discount rate
of 10% per annum in computing such present value); it
being understood that any election by IDSI to prepay
as aforesaid shall be irrevocable; and
(iv) The foregoing payment obligations of IDSI shall be
evidenced by a promissory note in the form attached
hereto as Exhibit A which shall be issued
simultaneously herewith by IDSI to Vision.
(c) IDSI shall also pay to Vision two percent (2%) of the invoice
price (if for sale, IDSI's or its subsidiary's invoice price
to its customer, or if for lease, the invoice price for
financing purposes with IDSI's or its subsidiary's lender) for
each Vision and/or Focus System (as more particularly
described on Schedule I hereto) sold or leased (whether
through IDSI's subsidiary, Neptune Technology Leasing Corp.,
or any other leasing or financing company) to customers
(including wholesale customers such as leasing companies or
other intermediaries who lease or otherwise provide such
systems to their customers) of IDSI and/or of any of its
affiliates (including Digital Sciences, Inc.) during the four
(4) year period from and after July 1, 1997. Such payments
shall be made on a monthly basis on or before the tenth (10th)
day of the month for sales made and/or leases funded during
the immediately preceding month. Each such payment shall be
accompanied by an accounting of the computation and basis for
such payment and Vision shall have the right to examine IDSI's
(and its affiliates') books and records to verify such
payment and accounting.
-2-
<PAGE>
3. Security Agreement. The payment obligations of IDSI to Vision under
Section 2 above shall be secured by a lien and security interest in favor of
Vision, all as more particularly described (including IDSI's right to require
Vision to subordinate such lien and security interest in the case of certain
financing events as specified) in the form of Security Agreement attached hereto
as Exhibit B which shall be executed and delivered simultaneously herewith by
IDSI and Vision.
4. Warrant Amendment. The Warrant to purchase 750,000 shares of Common
Stock of IDSI issued by IDSI to Vision pursuant to the Consulting Agreement
shall be amended to reduce the exercise price thereunder from $4.00 to $2.00 per
share pursuant to an Amendment in the form of Exhibit C hereto which shall be
issued by IDSI to Vision simultaneously herewith. As so modified, said Warrant
shall continue in full force and effect notwithstanding the termination of the
Consulting Agreement.
5. Miscellaneous.
(a) Any notice, request, instruction or other document to be given
hereunder shall be in writing, and except as otherwise provided for herein,
shall be delivered personally, or sent by registered or certified mail to the
parties at their respective addresses set forth on the first page hereof or to
such other address as either of the parties hereto may hereinafter designate in
writing to the other party hereto.
(b) After the date hereof, each of the parties hereto, at the reasonable
request of the other, will take such action and execute and deliver such further
documents and instruments as may be necessary to assure complete and full and
effective consummation of the transactions contemplated hereunder.
(c) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. Except as set
forth above, nothing in this Agreement expressed or implied is intended to
confer upon any persons, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason thereof.
(d) This Agreement cannot be modified, changed, discharged or
terminated except by an instrument in writing, signed by the party against whom
the enforcement of any waiver, change, discharge or termination is sought. This
Agreement contains the entire understanding between the parties with respect to
the transactions covered hereby.
(e) In the event that any one or more provisions of this Agreement
shall be deemed to be illegal or unenforceable, such illegality or
unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions hereof, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
(f) This Agreement will be construed and governed in accordance with
the laws of the State of Connecticut, without giving effect to the conflict of
laws provisions thereof.
(g) This Agreement may be executed in any number of counterparts,
each of which
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<PAGE>
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
(h) Each of the parties hereto represents and warrants that this
Agreement has been duly authorized by all requisite corporate
and other action including, in the case of IDSI, approval of
the Board of Directors of IDSI with authorization for David
Horowitz to execute this Agreement on its behalf.
Please acknowledge and confirm your agreement with, and acceptance of,
this Agreement by executing same below whereupon it shall become the binding
agreement of the parties hereto.
Very truly yours,
VISION CAPITAL GROUP, LLC
By
--------------------------
Stephen M. Chaleff
Title Member
------------------------
ACCEPTED AND AGREED TO:
INTELLIGENT DECISION SYSTEMS, INC.
By /s/ David Horowitz
------------------------------------
Title Chairman
--------------------------------
Date 7/11/97
---------------------------------
-4-
<PAGE>
SCHEDULE I
Vision and focus systems as currently manufactured and marketed by IDSI and
subsidiaries and third parties using the nomenclature "Vision" and "Focus"
together with all upgrades, modifications, enhancements and replacements
hereafter created whether or not called "Vision" and "Focus"
-5-
<PAGE>
Exhibit B
Security Agreement
SECURITY AGREEMENT
THIS IS A SECURITY AGREEMENT made this 10th day of July, 1997 by and between
VISION CAPITAL GROUP, LLC
a Delaware limited liability company with an office at
1266 Main Street
Stamford, Connecticut 06902 ("Lender")
INTELLIGENT DECISION SYSTEMS, INC.
a Delaware corporation
with an office at
88 Danbury Road
Wilton, Connecticut 06897 ("Borrower")
WITNESSETH:
WHEREAS, Borrower is this date entering into a letter agreement with
Lender (the "Agreement") pursuant to which, among other things, Borrower has
agreed to make certain payments to Lender and, to evidence certain of such
payments, is issuing to Lender Borrower's Secured Promissory Note in the
principal amount of $406,764 (the "Note");
WHEREAS, as an inducement to Lender to accept the Agreement and the
Note (collectively the "Payment Documents"), Borrower has agreed to grant to
Lender a security interest and lien upon the assets of Borrower and its
subsidiaries who are or are required to become signatories to this Security
Agreement (collectively with Borrower, jointly and severally the "Debtor"), all
as herein provided.
NOW, THEREFORE, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
Section 1. Security Interests; Subordination.
1.1 Creation of Security Interest.
As security for the payments due from Borrower to Lender under the
Payment Documents and the performance by Borrower of its obligations under this
Agreement the Debtor hereby gives and grants to Lender a security interest in
the collateral described herein. The Collateral includes all accounts, account
and lease receivable, leases, sales contracts and other agreements calling for
the lease or sale of Vision and/or Focus Equipment (as defined on Schedule A
hereto), all rights to receive payment under any of the foregoing and all
instruments, notes, chattel paper and other evidences of payment relating
thereto now existing or hereafter entered into or acquired by any of Borrower,
Digital Sciences, Inc., Neptune Technology Leasing Corp. and/or any present or
future subsidiaries of any of the foregoing and all Vision and Focus Equipment
underlying or the subject of any of the foregoing. Lender agrees and
<PAGE>
acknowledges that its interest in the Collateral is subordinate to existing
senior liens payable in full out of rentals under leases constituting Collateral
and to the right of "quiet enjoyment" on the part of lessees and customers of
Vision and/or Focus Equipment.
1.2 Subordination.
In the event that Borrower, in the ordinary course of its business for
purposes of raising funds to operate and/or expand its business and/or to
purchase or otherwise acquire additional assets and/or other business (including
by merger, stock or asset acquisition or otherwise), determines from time to
time to raise such funds through a third party financing requiring a
subordination of Lender's security interest in any of the Collateral, Lender
agrees, upon reasonable notice thereof (including a description of the terms
thereof and a copy of the documentation evidencing same) from such third party
financing source, to subordinate its security interest hereunder to such third
party financing lien so long as the terms of such financing are fair and
reasonable and consistent with industry practice.
The foregoing subordination obligations and provisions shall include
and apply to financing transaction(s) hereinafter entered into, with, or
arranged by Mid America Venture Capital Fund and/or its affiliates.
Section 2. Representations and Warranties and Covenants.
Borrower represents and warrants to Lender as of the date hereafter
that:
2.1 Organization, Charter, Laws and Capitalization.
(A) Borrower is a duly organized and validly existing corporation
under the laws of the State of Delaware;
and
(B) The execution, delivery and performance of this Agreement are
within each Debtor's corporate powers, have been duly authorized, are not in
contravention of any law or any terms of any Debtor's charter or by-laws or
other incorporation papers or any agreement or undertaking to which any Debtor
is a party.
2.2 Payments.
Borrower shall pay punctually any and all of the payments, when due, as
required by the terms of the Payment Documents.
2.3 Preservation of Collateral.
Borrower shall, and shall cause each other Debtor (as applicable), to:
(A) Preserve the Collateral in good condition and order (ordinary
wear and tear excepted) and not permit it to be abused or misused;
<PAGE>
(B) Perfect a security interest (using a method satisfactory to Lender)
in goods covered by any instrument, document or chattel paper in the Collateral.
(C) Execute and agree to be bound by the terms and provisions of this
Security Agreement.
Section 3. Events of Default - Acceleration.
The Note shall, at the sole option of Lender, be immediately due and
payable, without notice or demand, upon the occurrence of any of the following,
(hereinafter, "Events of Default"): Default in the payment, when due or payable,
of any installments or other amounts due under the Payment Documents, which
default continues for a period of ten (10) days.
Section 4. Remedies on Default: Provision re Collateral, Etc.
If an Event of Default shall have occurred, Lender may accelerate and
declare to be immediately due and payable all obligations under the Payment
Documents and may proceed to protect and enforce its rights by suit in equity,
action at law or other appropriate proceedings, whether for the specific
performance of any agreement contained therein or in any other document, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any right, power or remedy granted thereby law, equity or
otherwise.
Without limitation of any rights and remedies of Lender as a security
party under the Uniform Commercial Code and any rights or remedies set forth
herein or in any other document, if an Event of Default shall exist hereunder,
Lender shall have all of the following rights and remedies with respect to the
Collateral or any portion thereof:
(i) Lender may at any time and from time to time with judicial
process where legally required and the aid or assistance of others, enter upon
any premises in which any of the Collateral may be located and, without
resistance or interference by any Debtor, take possession of the Collateral
and/or dispose of any part of all of the Collateral on any such premises; and/or
require Debtor to assemble and make available to Lender, at the expense of
Borrower, any part or all of the Collateral at any place or time designated by
Lender which is convenient to Lender, and/or remove any part or all of the
Collateral from any premises on which any part may be located for the purpose of
effecting sale or other disposition thereof, and/or sell, resell, lease, assign
and deliver, grant option for or otherwise dispose of any or all of the
Collateral in its then condition or following any commercially reasonable
preparation or processing at public or private sale or proceedings, by one or
more contracts, in one or more parcels, at the same or different times, with or
without having the Collateral at the place of sale or other disposition, for
cash and/or credit, and upon any terms, at such place(s) and time(s) and to such
persons as Lender shall deem best, all without demand for performance or any
notice or advertisement whatsoever, except that unless any of the Collateral
shall be perishable or is of a type that can decline speedily in value, the
Debtor shall be given five business days' notice of the place and time of any
public sale or of the time after which any private sale or other intended
disposition is to be made, which notice Borrower hereby agrees shall be deemed
reasonable notice thereof. If any of the Collateral is sold by Lender upon
credit or for future delivery, Lender shall not be liable for the failure of the
purchaser to pay for same and in such
<PAGE>
event Lender may resell such Collateral. Lender may buy any part or all of the
Collateral at any public sale and if any part or all of the Collateral is of a
type customarily sold in a recognized market or is of the type which is subject
of widely distribute standard price quotations Lender may buy at private sale
and may make payment therefor by application of all or a part of the Payment
Documents;
(ii) Lender may, in Lender's discretion, apply the cash
proceeds from any sale or other disposition of the Collateral, first, to the
reasonable expenses of retaking, holding, preparing for sale, selling, leasing
and otherwise disposing of such Collateral, to reasonable appraisal, accounting
and attorneys' fees and all legal expenses, travel and other expenses which are
to be paid or reimbursed to Lender, pursuant hereto or pursuant to any other
document, (provided, however, that Lender may not apply said proceeds against
any such costs and expenses incurred by Lender during the first fifteen days
after the Event of Default giving rise thereto) second, to all accrued
interests, fees and charges outstanding with respect to the Note in such order,
as Lender shall determine, third, any surplus to any other secured parties
having an interest in the Collateral known to Lender in accordance with their
interests, and fourth, any surplus to the Debtor or other party entitled
thereto; provided, however, that Borrower shall remain liable with respect to
unpaid portions of the Payment Documents and will pay Lender on demand any
deficiency remaining together with interest thereon. Notwithstanding any of the
foregoing, Lender shall have no liability to marshall assets for the benefit of
any other creditor, or be subject to any restrictions with respect to the
liquidation or other disposal of the Collateral.
(iii) Effective upon an Event of Default, subject to the
rights and prior approval (which shall not be unreasonably withheld) of any
third party financing source to whom Lender has become subordinated under
Section 1.2 hereof, Lender is hereby granted by each Debtor the irrevocable
right and interest to collect and receive proceeds and revenues of the
Collateral, to endorse such Debtor's name on any checks, notes, acceptances,
money orders, drafts or other forms of payment or security with respect to the
Collateral; to sign such Debtor's name on an invoice or bill of lading or other
document relating to the Collateral, and on notices of assignment, financing
statements and other public records; to do any act which such Debtor is
obligated to do under the terms and conditions of this Agreement; to exercise
such rights as such Debtor might exercise and to do all other things necessary
to enforce and carry out Lender's rights and remedies under this Agreement.
During the term of the Note, each Debtor shall give Lender periodic (no less
often than monthly) reports of all leases, sales agreements and other agreements
constituting Collateral hereunder. Such reports shall include the identify and
address of each lessee, buyer or other party thereto, the description and
location of all Equipment covered thereby and the payment terms under each such
agreement.
Section 5. Cumulative Remedies: No waivers, Etc.
No right, power or remedy granted to Lender in this Agreement is
intended to be exclusive, but each shall be cumulative and in addition to any
other rights, power or remedies referred to in this Agreement or otherwise
available to Lender at law or in equity; and the exercise or beginning of
exercise by Lender of any one or more of such rights, powers or remedies, shall
not preclude the simultaneous or later exercise by Lender of any or all such
other rights, powers or remedies. No waiver by, nor any failure or delay on the
part of Lender in any one or more instances to insist upon strict performance or
observance of one or more covenants or conditions hereof shall in any way be, or
be construed to be, a waiver of such covenants in any other instance or to
prevent Lender's rights to later require the strict
<PAGE>
performance or observance of such covenants or conditions, or otherwise
prejudice Lender's rights, power or remedies.
Section 6. Partial Invalidity: Waivers.
6.1 If any term or provision of this agreement or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable by reason of any applicable law, the remainder of this Agreement,
or application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law. To the full extent, however,
that the provisions of any such applicable law may be waived, they are hereby
waived by Borrower.
6.2 To the extent permitted by applicable law, Borrower hereby waives
protest, notice of default or dishonor, notice of payments and nonpayments, or
of any default.
Section 7. Further Assurances Possession of Collateral: Custodians.
Borrower will deliver, and will cause each other Debtor to deliver, to
Lender such financing statements and other instruments constituting or
evidencing items of the Collateral, as may be requested by Lender, to better
assure it with respect to the security interests granted to it pursuant to this
Agreement. Borrower will execute and deliver, and cause to be executed an
delivered, such other and further instruments and/or documents as Lender shall
require to implement and carry out the transaction described herein.
Section 8. Failure to Perform.
If Borrower shall fail to observe or perform any of the covenants
hereof, Lender may pay amounts or incur liabilities to remedy or attempt to
remedy any such failure and all such payments made and liabilities incurred
shall be for the account of Borrower, and consequently, and all such amounts
shall be repaid by Borrower on demand. The provisions of this Section and any
such action by Lender shall not prevent any default in the observance or
performance of any covenant hereof constituting an Event of Default hereunder.
Section 9. Notices, Etc.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to be duly delivered if mailed, postage
prepaid, by first class registered mail, return requested, or by any nationally
recognized receipted delivery or courier service, to the respective address of
the parties set forth at the head of this Agreement or at such other address as
may have been furnished by either party to the other.
Section 10. Amendments and Waivers.
This Agreement may not be changed, waived, discharged or terminated,
except by writing signed by the party to be charged.
<PAGE>
Section 11. Miscellaneous.
11.1 This Agreement shall be deemed a security agreement within the
meaning of the Connecticut Uniform Commercial Code. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Connecticut. Borrower and Lender hereby consent to the jurisdiction of the
courts of the State of Connecticut and to be bound by the decisions of the
courts of the State of Connecticut. All of the terms of this Agreement shall be
binding upon and inure to the benefit of and be enforced by the respective
successors and assigns of the parties hereto, whether so expressed or not, and
other holder or holders at the time of the Note. The headings in this Agreement
are for the purpose of reference only and shall not limit or otherwise affect
any of the terms hereof. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and by the several
partied hereto in separate counterparts, but all of which together shall
constitute one and the same instrument.
11.2 This Agreement shall not be relied upon by any third party.
Without limiting the foregoing, Lender shall have no liability to any party
whatever (including, without limitation, Borrower, any other Debtor or anyone
conducting business with any of the foregoing) in the event Lender, for any
reason and at any time, exercise its rights under this Agreement.
Section 12. Release.
Upon full payment and satisfaction of the Payment Documents and upon
termination of this Agreement by Lender, the parties shall thereupon
automatically each be fully, finally, and forever released and discharged from
any further claim, liability or obligation in connection with the payments due
thereunder. Notwithstanding the foregoing, in the event any payment is recovered
from Lender in whole or in part, as a result of any insolvency proceedings or
otherwise, the rights, benefits and security interests of Lender under this
Agreement shall remain in full force and effect as to any and all of such
recovered sums.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement on the day first above mentioned.
INTELLIGENT DECISION SYSTEMS, INC.(Debtor) DIGITAL SCIENCES, INC.(Debtor)
BY:__________________________________ BY:__________________________
ITS; ________________________________ ITS:_________________________
VISION CAPITAL GROUP, LLC NEPTUNE TECHNOLOGY LEASING, CORP.
(Debtor)
BY:__________________________________ BY:__________________________
ITS:_________________________________ ITS:_________________________
<PAGE>
SCHEDULE A
Vision and focus systems as currently manufactured and
marketed by IDSI and subsidiaries and third parties using the
nomenclature "Vision" and "Focus" together with all upgrades,
modifications, enhancements and replacements hereafter created
whether or not called "Vision" and "Focus"
<PAGE>
Exhibit C
AMENDMENT TO WARRANT NO. 6
Reference is made to that certain Warrant No. 003 to purchase 750,000 shares of
common stock of Intelligent Decision Systems, Inc. issued to VISYS Capital
Group, LLC on June 28, 1996.
Intelligent Decision Systems, Inc., hereby amends the foregoing Warrant as
follows: The purchase price in said Warrant is hereby changed from "$4.00 per
share" to "$2.00 per share". All other terms and conditions remain in full force
and effect.
The undersigned represents and warrants that this Warrant Amendment has been
duly authorized by all requisite corporate and other action including approval
of the Board of Directors of Intelligent Decision Systems, Inc. for David
Horowitz to execute this revision on its behalf.
Intelligent Decision Systems, Inc.
Attest:
By_____________________________
_________________________ David Horowitz, Chairman
Date___________________________
-6-
SECURED PROMISSORY NOTE
$406,764.00 Stamford, Connecticut
July 10, 1997
FOR VALUE RECEIVED, INTELLIGENT DECISION SYSTEMS, INC., a
Delaware corporation with an office at 88 Danbury Road, Wilton, Connecticut
06897 ("Maker") promises to pay to the order of VISION CAPITAL GROUP, LLC. a
Delaware limited liability company having a place of business at 1266 Main
Street, Stamford, Connecticut 06902 ("Payee") or other holder of this Note, the
principal sum of FOUR HUNDRED SIX THOUSAND SEVEN HUNDRED SIXTY FOUR DOLLARS
($406,764.00) as hereinafter provided. So long as timely paid as hereinafter
provided, the principal of this Note shall not bear interest.
Commencing on July 31, 1997 and on the last day of each and every month
thereafter through December 31, 2000, Maker shall make payments of principal
under this Note as follows:
(i) Six monthly installments of $11,838 each shall be due
and payable on July 31, 1997 and on the last day of
each consecutive month thereafter through and
including December 31, 1997; provided, however, that
Maker shall have the option, upon at least 10 days
prior written notice to Payee, to defer such
payment(s) to January 15, 1998 whereupon all such
deferred payments shall be made together with a
deferral fee of $2,960 for each such deferred payment
(the election by Maker to defer payment as described
herein shall not constitute an event of default
regarding this Note or the Security Agreement [as
hereinafter defined]); and
(ii) 36 monthly installments of $9,326 each shall be due
and payable on January 31, 1998 and on the last day
of each consecutive month thereafter through and
including December 31, 2000.
So long as no default has occurred and is continuing hereunder, Maker
shall have the right to prepay the then outstanding principal balance of this
Note, in whole but not in part, at any time upon at least 10 days prior written
notice to Payee, in an amount which is the present value of such then remaining
outstanding principal balance and any deferral fees then existing (using a
discount rate of 10% per annum in computing such present
1
<PAGE>
value); it being understood that any election by Maker to prepay as aforesaid
shall be irrevocable.
On December 31, 2000, the entire unpaid principal balance of this Note
and all other sums owing hereunder and/or under the Security Agreement shall be
due and payable without notice or demand.
All payments hereunder shall be payable together with all lawful taxes
and assessments levied thereon, or upon this Note, and together with all
reasonable costs and expenses, incurred by Payee at any time after the fifteenth
(15th) day after any payment due hereunder has not been paid, related to
collecting this Note and/or foreclosing on any collateral which may be given to
secure the payment of this Note, and/or in any litigation or controversy arising
from or connected with this Note and/or any such collateral, including without
limitation reasonable attorneys' fees.
The Payee shall have and may exercise a right of set-off for the
payment of this Note and the aforesaid costs and expenses against, and Maker
hereby gives and grants to Payee a security interest (perfected by Payee's
possession thereof) in, all monies, securities and property left with the Payee
by the Maker or by any guarantor, endorser or otherwise to the credit of or
belonging to the Maker or any such party, and upon a default hereunder, the
Payee shall have full power and authority at any time and without notice to
sell, assign and deliver any such property at public or private sale, and apply
the proceeds in satisfaction hereof.
The Maker hereby waives presentment, demand, protest, notice of protest
or other notice or notice of dishonor of any kind and further waives the right
to trial by jury in any action to collect this Note or relating to any
collateral securing this Note.
This Note is secured under and pursuant to a Security Agreement of even
date (the "Security Agreement") by and between the Maker and the Payee.
Upon the failure of Maker to duly and timely pay any installment of
principal or other amount due under this Note (except as provided in clause (i)
above), interest shall accrue hereunder on the unpaid installment or other
amount, from such default, at the rate of fifteen percent (15%) per annum and
this Note shall, at the option of the holder hereof, become forthwith due and
payable without presentment, demand, protest or notice of any kind, all of which
being hereby expressly waived by the undersigned.
MAKER AND PAYEE HEREBY EACH WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
DEFENSE, COUNTERCLAIM, CROSSCLAIM AND/OR ANY FORM OF PROCEEDING BROUGHT IN
CONNECTION WITH THIS NOTE OR
2
<PAGE>
RELATING TO ANY INDEBTEDNESS EVIDENCED HEREBY AND/OR ANY COLLATERAL NOW OR
HEREAFTER SECURING THIS NOTE.
THIS NOTE HAS BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF
CONNECTICUT AND SHALL BE CONSTRUED AND ENFORCED UNDER AND IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CONNECTICUT.
IN WITNESS WHEREOF, the Maker has duly executed, delivered and issued
this Note as of the date first herein above written.
INTELLIGENT DECISION SYSTEMS, INC.
By /s/ David Horowitz
------------------------------------
Its Chairman
-----------------------------------
3
SECURITY AGREEMENT
THIS IS A SECURITY AGREEMENT made this 10th day of July, 1997 by and between
VISION CAPITAL GROUP, LLC
a Delaware limited liability company with an office at
1266 Main Street
Stamford, Connecticut 06902 ("Lender")
INTELLIGENT DECISION SYSTEMS, INC.
a Delaware corporation
with an office at
88 Danbury Road
Wilton, Connecticut 06897 ("Borrower")
WITNESSETH:
WHEREAS, Borrower is this date entering into a letter agreement with
Lender (the "Agreement") pursuant to which, among other things, Borrower has
agreed to make certain payments to Lender and, to evidence certain of such
payments, is issuing to Lender Borrower's Secured Promissory Note in the
principal amount of $406,764 (the "Note");
WHEREAS, as an inducement to Lender to accept the Agreement and the
Note (collectively the "Payment Documents"), Borrower has agreed to grant to
Lender a security interest and lien upon the assets of Borrower and its
subsidiaries who are or are required to become signatories to this Security
Agreement (collectively with Borrower, jointly and severally the "Debtor"), all
as herein provided.
NOW, THEREFORE, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
Section 1. Security Interests; Subordination.
1.1 Creation of Security Interest.
As security for the payments due from Borrower to Lender under the
Payment Documents and the performance by Borrower of its obligations under this
Agreement the Debtor hereby gives and grants to Lender a security interest in
the collateral described herein. The Collateral includes all accounts, account
and lease receivable, leases, sales contracts and other agreements calling for
the lease or sale of Vision and/or Focus Equipment (as defined on Schedule A
hereto), all rights to receive payment under any of the foregoing and all
instruments, notes, chattel paper and other evidences of payment relating
thereto now existing or hereafter entered into or acquired by any of Borrower,
Digital Sciences, Inc., Neptune Technology Leasing Corp. and/or any present or
future subsidiaries of any of the foregoing and all Vision and Focus Equipment
underlying or the subject of any of the foregoing. Lender agrees and
<PAGE>
acknowledges that its interest in the Collateral is subordinate to existing
senior liens payable in full out of rentals under leases constituting Collateral
and to the right of "quiet enjoyment" on the part of lessees and customers of
Vision and/or Focus Equipment.
1.2 Subordination.
In the event that Borrower, in the ordinary course of its business for
purposes of raising funds to operate and/or expand its business and/or to
purchase or otherwise acquire additional assets and/or other business (including
by merger, stock or asset acquisition or otherwise), determines from time to
time to raise such funds through a third party financing requiring a
subordination of Lender's security interest in any of the Collateral, Lender
agrees, upon reasonable notice thereof (including a description of the terms
thereof and a copy of the documentation evidencing same) from such third party
financing source, to subordinate its security interest hereunder to such third
party financing lien so long as the terms of such financing are fair and
reasonable and consistent with industry practice.
The foregoing subordination obligations and provisions shall include
and apply to financing transaction(s) hereinafter entered into, with, or
arranged by Mid America Venture Capital Fund and/or its affiliates.
Section 2. Representations and Warranties and Covenants.
Borrower represents and warrants to Lender as of the date hereafter
that:
2.1 Organization, Charter, Laws and Capitalization.
(A) Borrower is a duly organized and validly existing corporation
under the laws of the State of Delaware;
and
(B) The execution, delivery and performance of this Agreement are
within each Debtor's corporate powers, have been duly authorized, are not in
contravention of any law or any terms of any Debtor's charter or by-laws or
other incorporation papers or any agreement or undertaking to which any Debtor
is a party.
2.2 Payments.
Borrower shall pay punctually any and all of the payments, when due, as
required by the terms of the Payment Documents.
2.3 Preservation of Collateral.
Borrower shall, and shall cause each other Debtor (as applicable), to:
(A) Preserve the Collateral in good condition and order (ordinary
wear and tear excepted) and not permit it to be abused or misused;
<PAGE>
(B) Perfect a security interest (using a method satisfactory to Lender)
in goods covered by any instrument, document or chattel paper in the Collateral.
(C) Execute and agree to be bound by the terms and provisions of this
Security Agreement.
Section 3. Events of Default - Acceleration.
The Note shall, at the sole option of Lender, be immediately due and
payable, without notice or demand, upon the occurrence of any of the following,
(hereinafter, "Events of Default"): Default in the payment, when due or payable,
of any installments or other amounts due under the Payment Documents, which
default continues for a period of ten (10) days.
Section 4. Remedies on Default: Provision re Collateral, Etc.
If an Event of Default shall have occurred, Lender may accelerate and
declare to be immediately due and payable all obligations under the Payment
Documents and may proceed to protect and enforce its rights by suit in equity,
action at law or other appropriate proceedings, whether for the specific
performance of any agreement contained therein or in any other document, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any right, power or remedy granted thereby law, equity or
otherwise.
Without limitation of any rights and remedies of Lender as a security
party under the Uniform Commercial Code and any rights or remedies set forth
herein or in any other document, if an Event of Default shall exist hereunder,
Lender shall have all of the following rights and remedies with respect to the
Collateral or any portion thereof:
(i) Lender may at any time and from time to time with judicial
process where legally required and the aid or assistance of others, enter upon
any premises in which any of the Collateral may be located and, without
resistance or interference by any Debtor, take possession of the Collateral
and/or dispose of any part of all of the Collateral on any such premises; and/or
require Debtor to assemble and make available to Lender, at the expense of
Borrower, any part or all of the Collateral at any place or time designated by
Lender which is convenient to Lender, and/or remove any part or all of the
Collateral from any premises on which any part may be located for the purpose of
effecting sale or other disposition thereof, and/or sell, resell, lease, assign
and deliver, grant option for or otherwise dispose of any or all of the
Collateral in its then condition or following any commercially reasonable
preparation or processing at public or private sale or proceedings, by one or
more contracts, in one or more parcels, at the same or different times, with or
without having the Collateral at the place of sale or other disposition, for
cash and/or credit, and upon any terms, at such place(s) and time(s) and to such
persons as Lender shall deem best, all without demand for performance or any
notice or advertisement whatsoever, except that unless any of the Collateral
shall be perishable or is of a type that can decline speedily in value, the
Debtor shall be given five business days' notice of the place and time of any
public sale or of the time after which any private sale or other intended
disposition is to be made, which notice Borrower hereby agrees shall be deemed
reasonable notice thereof. If any of the Collateral is sold by Lender upon
credit or for future delivery, Lender shall not be liable for the failure of the
purchaser to pay for same and in such
<PAGE>
event Lender may resell such Collateral. Lender may buy any part or all of the
Collateral at any public sale and if any part or all of the Collateral is of a
type customarily sold in a recognized market or is of the type which is subject
of widely distribute standard price quotations Lender may buy at private sale
and may make payment therefor by application of all or a part of the Payment
Documents;
(ii) Lender may, in Lender's discretion, apply the cash
proceeds from any sale or other disposition of the Collateral, first, to the
reasonable expenses of retaking, holding, preparing for sale, selling, leasing
and otherwise disposing of such Collateral, to reasonable appraisal, accounting
and attorneys' fees and all legal expenses, travel and other expenses which are
to be paid or reimbursed to Lender, pursuant hereto or pursuant to any other
document, (provided, however, that Lender may not apply said proceeds against
any such costs and expenses incurred by Lender during the first fifteen days
after the Event of Default giving rise thereto) second, to all accrued
interests, fees and charges outstanding with respect to the Note in such order,
as Lender shall determine, third, any surplus to any other secured parties
having an interest in the Collateral known to Lender in accordance with their
interests, and fourth, any surplus to the Debtor or other party entitled
thereto; provided, however, that Borrower shall remain liable with respect to
unpaid portions of the Payment Documents and will pay Lender on demand any
deficiency remaining together with interest thereon. Notwithstanding any of the
foregoing, Lender shall have no liability to marshall assets for the benefit of
any other creditor, or be subject to any restrictions with respect to the
liquidation or other disposal of the Collateral.
(iii) Effective upon an Event of Default, subject to the
rights and prior approval (which shall not be unreasonably withheld) of any
third party financing source to whom Lender has become subordinated under
Section 1.2 hereof, Lender is hereby granted by each Debtor the irrevocable
right and interest to collect and receive proceeds and revenues of the
Collateral, to endorse such Debtor's name on any checks, notes, acceptances,
money orders, drafts or other forms of payment or security with respect to the
Collateral; to sign such Debtor's name on an invoice or bill of lading or other
document relating to the Collateral, and on notices of assignment, financing
statements and other public records; to do any act which such Debtor is
obligated to do under the terms and conditions of this Agreement; to exercise
such rights as such Debtor might exercise and to do all other things necessary
to enforce and carry out Lender's rights and remedies under this Agreement.
During the term of the Note, each Debtor shall give Lender periodic (no less
often than monthly) reports of all leases, sales agreements and other agreements
constituting Collateral hereunder. Such reports shall include the identify and
address of each lessee, buyer or other party thereto, the description and
location of all Equipment covered thereby and the payment terms under each such
agreement.
Section 5. Cumulative Remedies: No waivers, Etc.
No right, power or remedy granted to Lender in this Agreement is
intended to be exclusive, but each shall be cumulative and in addition to any
other rights, power or remedies referred to in this Agreement or otherwise
available to Lender at law or in equity; and the exercise or beginning of
exercise by Lender of any one or more of such rights, powers or remedies, shall
not preclude the simultaneous or later exercise by Lender of any or all such
other rights, powers or remedies. No waiver by, nor any failure or delay on the
part of Lender in any one or more instances to insist upon strict performance or
observance of one or more covenants or conditions hereof shall in any way be, or
be construed to be, a waiver of such covenants in any other instance or to
prevent Lender's rights to later require the strict
<PAGE>
performance or observance of such covenants or conditions, or otherwise
prejudice Lender's rights, power or remedies.
Section 6. Partial Invalidity: Waivers.
6.1 If any term or provision of this agreement or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable by reason of any applicable law, the remainder of this Agreement,
or application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law. To the full extent, however,
that the provisions of any such applicable law may be waived, they are hereby
waived by Borrower.
6.2 To the extent permitted by applicable law, Borrower hereby waives
protest, notice of default or dishonor, notice of payments and nonpayments, or
of any default.
Section 7. Further Assurances Possession of Collateral: Custodians.
Borrower will deliver, and will cause each other Debtor to deliver, to
Lender such financing statements and other instruments constituting or
evidencing items of the Collateral, as may be requested by Lender, to better
assure it with respect to the security interests granted to it pursuant to this
Agreement. Borrower will execute and deliver, and cause to be executed an
delivered, such other and further instruments and/or documents as Lender shall
require to implement and carry out the transaction described herein.
Section 8. Failure to Perform.
If Borrower shall fail to observe or perform any of the covenants
hereof, Lender may pay amounts or incur liabilities to remedy or attempt to
remedy any such failure and all such payments made and liabilities incurred
shall be for the account of Borrower, and consequently, and all such amounts
shall be repaid by Borrower on demand. The provisions of this Section and any
such action by Lender shall not prevent any default in the observance or
performance of any covenant hereof constituting an Event of Default hereunder.
Section 9. Notices, Etc.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to be duly delivered if mailed, postage
prepaid, by first class registered mail, return requested, or by any nationally
recognized receipted delivery or courier service, to the respective address of
the parties set forth at the head of this Agreement or at such other address as
may have been furnished by either party to the other.
Section 10. Amendments and Waivers.
This Agreement may not be changed, waived, discharged or terminated,
except by writing signed by the party to be charged.
<PAGE>
Section 11. Miscellaneous.
11.1 This Agreement shall be deemed a security agreement within the
meaning of the Connecticut Uniform Commercial Code. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Connecticut. Borrower and Lender hereby consent to the jurisdiction of the
courts of the State of Connecticut and to be bound by the decisions of the
courts of the State of Connecticut. All of the terms of this Agreement shall be
binding upon and inure to the benefit of and be enforced by the respective
successors and assigns of the parties hereto, whether so expressed or not, and
other holder or holders at the time of the Note. The headings in this Agreement
are for the purpose of reference only and shall not limit or otherwise affect
any of the terms hereof. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and by the several
partied hereto in separate counterparts, but all of which together shall
constitute one and the same instrument.
11.2 This Agreement shall not be relied upon by any third party.
Without limiting the foregoing, Lender shall have no liability to any party
whatever (including, without limitation, Borrower, any other Debtor or anyone
conducting business with any of the foregoing) in the event Lender, for any
reason and at any time, exercise its rights under this Agreement.
Section 12. Release.
Upon full payment and satisfaction of the Payment Documents and upon
termination of this Agreement by Lender, the parties shall thereupon
automatically each be fully, finally, and forever released and discharged from
any further claim, liability or obligation in connection with the payments due
thereunder. Notwithstanding the foregoing, in the event any payment is recovered
from Lender in whole or in part, as a result of any insolvency proceedings or
otherwise, the rights, benefits and security interests of Lender under this
Agreement shall remain in full force and effect as to any and all of such
recovered sums.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement on the day first above mentioned.
INTELLIGENT DECISION SYSTEMS, INC.(Debtor) DIGITAL SCIENCES, INC.(Debtor)
BY: /s/ David Horowitz BY: /s/ David Horowitz
--------------------------------- -----------------------------
ITS: Chairman ITS: President
--------------------------------- -----------------------------
VISION CAPITAL GROUP, LLC NEPTUNE TECHNOLOGY LEASING, CORP.
(Debtor)
BY: /s/ Stephen M. Chaleff BY: /s/ Jonathan Preiser
--------------------------------- ----------------------------
ITS: Member ITS: Vice President
--------------------------------- ----------------------------
<PAGE>
SCHEDULE A
Vision and focus systems as currently manufactured and
marketed by IDSI and subsidiaries and third parties using the
nomenclature "Vision" and "Focus" together with all upgrades,
modifications, enhancements and replacements hereafter created
whether or not called "Vision" and "Focus"
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the financial
statements contained in Intelligent Decision Systems, Inc.'s Report on Form
10-QSB for the quarter ended September 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 19,187
<SECURITIES> 0
<RECEIVABLES> 382,697
<ALLOWANCES> 16,598
<INVENTORY> 48,557
<CURRENT-ASSETS> 662,710
<PP&E> 786,217
<DEPRECIATION> 438,211
<TOTAL-ASSETS> 2,632,923
<CURRENT-LIABILITIES> 1,638,833
<BONDS> 534,486
0
0
<COMMON> 13,263,212
<OTHER-SE> (12,803,608)
<TOTAL-LIABILITY-AND-EQUITY> 2,632,923
<SALES> 0
<TOTAL-REVENUES> 264,819
<CGS> 0
<TOTAL-COSTS> 398,109
<OTHER-EXPENSES> 941,007
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,727
<INCOME-PRETAX> (1,109,024)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,109,024)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,109,024)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
