U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1998
[ ] TRANSITION REPORT UNDER 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.)
Not Applicable
(Former name and former fiscal year 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 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: May 15, 1998: 22,718,047
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
March 31, 1998 and June 30, 1997 1
Condensed Consolidated Statements of Operations
for the three and nine months ended March 31,
1998 and March 31, 1997 3
Condensed Consolidated Statements of Cash Flows
for the nine months ended March
31, 1998 and March 31, 1997 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 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
Part I. - Financial Information
Item 1. Financial Statements
INTELLIGENT DECISION SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
ASSETS
Mar. 31, June 30,
1998 1997
------------ ------------
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 38,896 $ 355,009
Accounts receivable
Trade, net of allowance for doubtful
accounts of $16,598 and $16,587,
respectively 25,312 123,795
Net investment in direct
finance leases, current portion 77,096 342,205
Inventories 0 53,534
Contractual rights 292,442 420,282
Prepaid expenses 98,178 36,740
--------- ---------
TOTAL CURRENT ASSETS 531,924 1,331,565
PROPERTY AND EQUIPMENT, NET 247,512 392,412
OTHER ASSETS
Contractual rights 17,544 24,604
Net investment in direct finance
leases, net of current portion 134,491 199,914
Intellectual property - net of
amortization 1,101,191 1,369,048
Other - net of amortization 144,053 157,033
--------- ---------
TOTAL ASSETS $ 2,176,715 $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
Mar. 31, June 30,
1998 1997
----------- ------------
(unaudited)
CURRENT LIABILITIES
Notes payable $ 375,234 $ 0
Related party notes payable 438,621 30,553
Accounts payable 1,170,623 890,388
Accrued expenses 414,086 702,702
Long term obligations, current 90,733 121,355
---------- ----------
TOTAL CURRENT LIABILITIES 2,489,297 1,744,998
LONG-TERM OBLIGATIONS, net of current portion 171,111 333,338
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;
20,743,675 and 14,548,196
shares issued and outstanding 20,744 14,548
Additional paid in capital - common 13,813,857 13,076,276
Accumulated deficit (14,318,294) (11,694,584)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (483,693) 1,396,240
---------- ----------
$ 2,176,715 $ 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)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Mar. 31, Mar. 31,
------------------------ ------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 168,313 $ 142,786 $ 546,453 $ 753,818
Costs of Goods and Services 97,091 341,793 512,265 1,120,547
--------- --------- --------- ---------
Gross Profit (Loss) 71,222 (199,007) 34,188 (366,729)
Expenses
Selling 38,213 255,848 501,806 833,325
Administration 309,327 433,535 1,057,792 1,202,458
Research & development 69,527 202,043 284,105 625,801
Depreciation & amortization 144,602 146,068 441,437 437,060
Interest expense 56,816 6,928 369,166 17,778
--------- --------- --------- ---------
618,485 1,044,422 2,654,305 3,116,422
Net loss from operations (547,263) (1,243,429) (2,620,117) (3,483,151)
Other income (expense) 14,122 16,482 (3,593) 69,392
--------- --------- --------- ---------
Net loss $ (533,141) $(1,226,947) $(2,623,710) $(3,413,759)
========= ========= ========= =========
Net loss per share $(0.03) $(0.08) $(0.16) $(0.25)
==== ==== ==== ====
Weighted average
shares outstanding 19,159,096 14,485,787 16,503,064 13,894,984
========== ========== ========== ==========
</TABLE>
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)
- --------------------------------------------------------------------------------
Nine Months Ended
Mar. 31,
------------------------
1998 1997
--------- ---------
Net cash flows from
operating activities $(2,100,075) $(3,574,670)
Net cash flows from
investing activities 449,732 (158,545)
Net cash flows from
financing activities 1,334,230 952,792
--------- ---------
Net change in
cash and equivalents (316,113) (2,780,423)
Beginning cash and equivalents 355,009 3,064,329
--------- ---------
Ending cash
and equivalents $ 38,896 $ 283,906
========= =========
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 and nine month periods ended March 31, 1998 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 required by generally accepted
accounting principles.
Note B -- Stockholders' Equity
Changes in stockholders' equity for the nine months ended March 31, 1998 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 14,548,196 $14,548 $13,076,276 $(11,694,584) $1,396,240
Exercise of
warrants and options 200,000 200 111,800 112,000
Stock issued
for services 5,995,479 5,996 388,223 394,219
Stock options
issued for services 5,000 5,000
Stock option
exercise price
reductions granted
for services,
interest and
settlements 232,558 232,558
Net loss (2,623,710) (2,623,710)
---------- ------ ---------- ---------- ----------
Balance, Mar. 31,
1998 20,743,675 $20,744 $13,813,857 $(14,318,294) $ (483,693)
========== ====== ========== ========== ==========
</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 nine months ended March 31, 1998, Mid America Venture Capital Fund,
Inc. ("Mid America"), loaned the Company $408,068 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, which are 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 loans made to the Company by Mid America. The Company recorded
a charge to interest expense of $177,170, as a result of the grant.
On December 5, 1997, in consideration for loans made and to be made, the Company
entered into an agreement with Mid America which granted conversion rights of
all current or future debt outstanding into an amount of common shares equal to
the debt to be converted, if any, divided by the lowest price per share during
the twelve months immediately preceding the conversion date. These stock
conversion rights expire on December 4, 1999.
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 requesting, among other things, that the Court
enter summary judgment dismissing MKT Inc.'s counter claims against Old Neptune.
MKT, Inc. filed a notice of opposition to Old Neptune's motions for summary
judgment and cross motion for summary judgment whereby MKT, Inc. requested that
the court enter summary judgment dismissing Old Neptune's claims and defenses.
The Old Neptune's motion for summary judgment and MKT, Inc.'s motion for summary
judgment has been denied by the appointed Magistrate of the Court. No further
action has taken place to date. 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 such date. 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 $71,028 were
deferred through December 31, 1997. On January 15, 1998, a total of $88,788,
which includes deferral fees, became due, and on January 28, 1998, the Company
received a notice of acceleration and demand for payment of all amounts due to
Old Neptune, together with additional interest charges at 15 per cent per annum.
Old Neptune agreed to forbear further collection efforts until February 28,
1998. No action has been taken by either party since February 28, 1998.
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 and nine months ended March 31,
1998. 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 and Nine Months Ended March 31, 1998 and 1997
- --------------------------------------------------------------------------------
General
On February 4, 1998, at the conclusion of its mandated 90-day term, the interim
Executive Management Committee made its final recommendation to the Company's
Board of Directors. The committee was formed for the purpose of developing and
implementing strategies that would streamline the Company's present business,
restructure its relationship with National Purchasing Corporation, a California
corporation doing business as HPSI, and formalize a new strategic direction for
the Company's technology and products. The following outlines the committee's
recommendations and the current direction of the Company.
Streamlining of business
The Company has taken measures to streamline its business as a result of the
lack of revenue from the sale of the Company's Vision product. Poor sales of the
Vision product are primarily attributable to the Company's exclusive
distribution agreement with HPSI and the lack of performance. Further, the
Company's subsidiary, Digital Sciences, Inc. ("DSI"), has downsized in personnel
and moved to new office facilities in Utah, resulting in a significant reduction
in operational costs.
In addition, the Company has accepted the resignations of the former employees
of Neptune Technology Leasing Corp. ("Neptune") and has entered into a Letter of
Intent with these former employees to purchase certain of the assets of Neptune.
The poor financial performance of the Company contributed to the inability of
Neptune to obtain access to sufficient capital, including bank lines, to fund
its operations and growth plans. The Neptune agreement, when finalized, will
release IDSI from substantial contractual liabilities and further contribute to
reductions in IDSI operating expenses on a going forward basis.
Implement strategic shift in Company's marketing and product strategy
The Company has identified the World Wide Web as the appropriate vehicle for the
distribution of its suite of health care and other related products. In this
regard, efforts are currently under way to develop strategies for entering the
Internet market.
IDSI has re-directed its development resources towards an Internet based product
portfolio. The Company has reduced and reallocated its operating expenses to
allow the current personnel to focus on the development and commercial
exploitation of Internet based products and services. Discussions are also
underway with several entities that have value-added products and services that
could position IDSI technology in a favorable position within the Internet
commerce industry. However, no assurance can be made that the Company will be
able to successfully develop Internet based products or otherwise generate
profits from such operations.
Strategic Alliances
The Company has established contacts with several entities that represent
potential for strategic alliances and/or for the sale or licensing of its
current products and technology. Preliminary discussions have been on-going with
one of these companies that the Company believes could result in the
availability of capital resources and/or strategic partnerships.
Results of Operations
A summary of sales:
<TABLE>
<CAPTION>
(all amounts in thousands)
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales
Vision $ 0 $ 92 $ 72 $ 434
Focus 0 0 (22) 29
Other DSI 39 (9) 166 55
Leasing 129 45 330 236
------ ------ ------ ------
Total Sales $ 168 $ 128 $ 546 $ 754
====== ====== ====== ======
</TABLE>
8
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Nine Months Ended March 31, 1998 and 1997
- -------------------------------------------------------------------------------
Sales for the three and nine months ended March 31, 1998 increased by 31% and
decreased by 27%, respectively, from the same periods in the previous fiscal
year. The increase in sales for the three months ended March 31, 1998, was
primarily attributable to an increase in the sales from the Company's leasing
operations. The decline in sales for the nine months ended March 31, 1998, was
primarily attributable to a sharp decline in Vision sales in the current
periods, which decline was partially offset by an increase in the Company's
leasing operations.
Selling expenses decreased 85% and 40% for the three and nine months ended March
31, 1998, respectively, due to cuts in personnel and redeployment of personnel
into administration.
Administrative expenses decreased by 29% for the third fiscal quarter over the
same period in the prior fiscal year. For the first three fiscal quarters,
administrative expenses decreased by 12%.
Research and development costs decreased by 66% and 55% for the three and nine
months ended March 31, 1998, respectively, from the same period in the prior
fiscal year due to a significant adjustment to the number of programmers working
on developmental projects, and reductions in programming resources in general.
Liquidity and Capital Resources
During the first nine months of fiscal 1998, the Company used cash of $2,100,670
in its operations. The net loss for the nine months ended March 31, 1998 was
$2,623,710. Non-cash charges to income were $1,012,826, including $394,219 of
stock issued to employees in lieu of cash payroll and $177,170 of non-cash
interest charges related to a grant of stock conversion rights to a related
party lender. Proceeds from the sale of leases held for resale were $248,377.
The Company borrowed an additional $408,068 from a related party in exchange for
collateralized demand notes payable and the aforementioned conversion rights.
The Company also exchanged collateralized notes payable of $343,750 for accrued
amounts owed consultants and incurred deferral and default provision charges
that have been added to the original note balance, bringing the amount of the
amounts due on the note to $484,693.
Cash and cash equivalents were $38,896 at March 31, 1998, which represented only
a fraction of one month's operating capital, assuming no increase in sales over
current levels.
9
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Nine Months Ended March 31, 1998 and 1997
- -------------------------------------------------------------------------------
Management's Plan for Viability
The Company expects its operating expenses to be $300,000 per quarter, or $1.2
million dollars, for the next twelve months. In order to fund the Company's
future operations, the Company intends to implement the following strategies:
1. Finalize current negotiations for capital formation that will support IDSI
and its technology development as it enters the electronic commerce industry and
the Internet.
2. Retain only the necessary personnel required to support current DSI customers
and move the Internet based product and services portfolio forward.
3. Complete the asset sale of Neptune Technology Leasing Corp. by May 31, 1998.
4. Implement a joint venture strategy to move quickly into the Internet based
products and services.
5. Implement its plan to resolve the issues between IDSI and HPSI regarding the
exclusive distribution rights of Vision and associated products.
6. Continue discussions with potential distribution partners for DSI's FOCUS
software product for physician's offices. Companies targeted currently have the
infrastructure necessary to support this client base, but lack the integrated
benefits of the FOCUS software product.
No assurances can be given that the Company will be able to implement any of the
above strategies. The failure to implement some or all of these strategies could
have a material adverse effect on the Company's business, financial condition
and results of operations. Management believes that new financing will be
necessary to provide sufficient operating capital to sustain operations for the
next twelve months.
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 requesting, among other things, that the Court
enter summary judgment dismissing MKT Inc.'s counter claims against Old Neptune.
MKT, Inc. filed a notice of opposition to Old Neptune's motions for summary
judgment and cross motion for summary judgment whereby MKT, Inc. requested that
the court enter summary judgment dismissing Old Neptune's claims and defenses.
The Old Neptune's motion for summary judgment and MKT, Inc.'s motion for summary
judgment has been denied by the appointed Magistrate of the Court. No further
action has taken place to date. 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.
10
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Nine Months Ended March 31, 1998 and 1997
- -------------------------------------------------------------------------------
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 $71,028 were
deferred through December 31, 1997. On January 15, 1998, the total of $88,788,
which includes deferral fees, became due, and on January 28, 1998, the Company
received a notice of acceleration and demand for payment of all amounts due to
Old Neptune, together with additional interest charges at 15 per cent per annum.
Old Neptune has agreed to forbear further collection efforts until February 28,
1998. No action has been taken by either party since February 28,1998.
Conclusion
The Company's cash flows from operations and its available capital have been
insufficient to meet its current operating expenses. Operating expenses for the
nine months ended March 31, 1998, have been funded primarily through a
combination of cash flows from operations, specifically revenues derived from
the Company's leasing operation, and the issuance of Common Stock for the
payment of salaries. Further, upon the consummation of the Company's proposed
sale of Neptune, the Company will be left without the revenue contribution of
Neptune's leasing operations. In the absence of obtaining additional capital
through the sale and/or licensing of the Company's Vision and Focus products,
the successful, timely and profitable implementation of Internet-based products
and services, the refinancing of existing indebtedness, asset sales, securing a
credit facility, consensual restructuring of existing debt and agreement terms
and/or similar measures, the Company will be unable to fund its operations or
repay its indebtedness to Mid-American or Visys. Should the Company default with
respect to the repayment of existing indebtedness, certain lenders could
foreclose on Company assets securing their indebtedness, which would include
substantially all of the Company's assets. Accordingly, the Company's financial
condition could require that the Company seek the protection of applicable
reorganization laws in order to avoid or delay actions by it creditors which
would materially adversely affect or cause the cessation of the Company's
operations.
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.
11
<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, Old Neptune is involved in litigation with
MKT, Inc. MKT, Inc. filed a notice of opposition to Old Neptune's
motions for summary judgment and cross motion for summary
judgment whereby MKT, Inc. requested that the court enter summary
judgment dismissing Old Neptune's claims and defenses. Old
Neptune's motion for summary judgment and MKT, Inc.'s motion for
summary judgment have been ruled upon and denied by a Magistrate
of the Court. No further action has been taken as of this date.
Care Inn Properties, Inc. ETAL., filed a suit against Digital
Sciences, Inc., DSI Financial Corp., Neptune Technology Leasing
Corp., HPSI, Inc., Sterling National Bank and Trust and Brian
Horner. The suit No. 98-CI-02421 was filed in the District Court,
166 Judicial District, Bexar County, Texas on the 17th day of
February, 1998. The suit alleges breach of contract, breach of
warranty, fraudulent inducement, request for declaratory
judgment, punitive damages and attorney's fees. The Company
intends to vigorously defend this matter. Successful assertion of
the claims could have a materially adverse effect on the
business, financial condition, liquidity and operations of the
Company.
No other reportable events have occurred which would require
identification 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-27 Financial Data Schedule
B) Reports on Form 8-K filed during the quarter ended March 31
1998.
None
12
<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: May 19, 1998 /s/ David A. Horowitz
--------------------------
David A. Horowitz
President
Date: May 19, 1998 /s/ David A. Horowitz
--------------------------
David A. Horowitz
Acting Chief Financial Officer
13
<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 nine months ended March 31, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> Mar-31-1998
<CASH> 38,896
<SECURITIES> 0
<RECEIVABLES> 334,352
<ALLOWANCES> 16,598
<INVENTORY> 0
<CURRENT-ASSETS> 531,924
<PP&E> 772,711
<DEPRECIATION> 525,199
<TOTAL-ASSETS> 2,176,715
<CURRENT-LIABILITIES> 2,489,297
<BONDS> 171,111
0
0
<COMMON> 13,834,601
<OTHER-SE> (14,318,294)
<TOTAL-LIABILITY-AND-EQUITY> 2,176,715
<SALES> 0
<TOTAL-REVENUES> 546,453
<CGS> 0
<TOTAL-COSTS> 512,265
<OTHER-EXPENSES> 1,723,471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 369,166
<INCOME-PRETAX> (2,623,710)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,623,710)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,623,710)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
