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 December 31, 1997
[ ] 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.)
No Changes
(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: February 12, 1998: 18,424,883
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
December 31, 1997 and June 30, 1997 1
Condensed Consolidated Statements of Operations
for the three and six months ended December 31,
1997 and December 31, 1996 3
Condensed Consolidated Statements of Cash Flows
for the six months ended December
31, 1997 and December 31, 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
Dec. 31, June 30,
1997 1997
------------ ------------
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 23,895 $ 355,009
Accounts Receivable
Trade, net of allowance for doubtful
accounts of $16,598 and $16,598,
respectively 39,539 123,795
Net investment in direct
finance leases, current portion 84,101 342,205
Inventories 70,475 53,534
Contractual rights 324,367 420,282
Prepaid expenses 13,000 36,740
--------- ---------
TOTAL CURRENT ASSETS 555,377 1,331,565
PROPERTY AND EQUIPMENT, NET 304,512 392,412
OTHER ASSETS
Contractual rights 3,904 24,604
Net investment in direct finance
leases, net of current portion 192,619 199,914
Intellectual property - net of
amortization 1,190,476 1,369,048
Other - net of amortization 150,234 157,033
--------- ---------
$ 2,397,122 $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
Dec. 31, June 30,
1997 1997
----------- ------------
(unaudited)
CURRENT LIABILITIES
Notes payable $ 484,693 $ 0
Related party notes payable 358,001 30,553
Accounts payable 928,772 890,388
Accrued expenses 454,775 702,702
Long term obligations, current 195,407 121,355
---------- ----------
TOTAL CURRENT LIABILITIES 2,421,648 1,744,998
LONG-TERM OBLIGATIONS, net of current portion 185,795 333,338
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;
16,471,697 and 14,548,196
shares issued and outstanding 16,472 14,548
Additional paid in capital - common 13,561,360 13,076,276
Accumulated deficit (13,788,153) (11,694,584)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (210,321) 1,396,240
---------- ----------
$ 2,397,122 $ 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 Six Months Ended
Dec. 31, Dec. 31,
------------------------ ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 113,321 $ 410,927 $ 378,140 $ 626,050
Costs of Goods and Services 17,065 446,956 415,174 791,969
--------- --------- --------- ---------
Gross Profit (Loss) 96,256 (36,029) (37,034) (165,919)
Expenses
Selling 193,428 389,257 463,593 594,997
Administration 379,470 330,557 748,465 768,927
Research & development 43,621 231,701 214,578 423,759
Depreciation & amortization 147,511 152,565 296,835 290,992
Interest expense 280,622 2,394 315,349 10,849
--------- --------- --------- ---------
1,044,652 1,106,474 2,038,820 2,089,524
Net loss from operations (948,396) (1,142,503) (2,075,854) (2,255,443)
Other income (expense) (23,827) 33,373 (17,715) 68,623
--------- --------- --------- ---------
Net loss $ (972,223) $(1,109,130) $(2,093,569) $(2,186,820)
========= ========= ========= =========
Net loss per share $(0.06) $(0.08) $(0.14) $(0.16)
==== ==== ==== ====
Weighted average
shares outstanding 15,668,567 14,303,232 15,175,048 13,599,583
========== ========== ========== ==========
</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)
- --------------------------------------------------------------------------------
Six Months Ended
Dec. 31,
------------------------
1997 1996
--------- ---------
Net cash flows from
operating activities $(1,447,140) $(2,566,396)
Net cash flows from
investing activities 265,376 (142,470)
Net cash flows from
financing activities 850,650 878,222
--------- ---------
Net change in
cash and equivalents (331,114) (1,830,644)
Beginning cash and equivalents 355,009 3,064,329
--------- ---------
Ending cash
and equivalents $ 23,895 $ 1,233,685
========= =========
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 six month periods ended December 31, 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 required by generally accepted
accounting principles.
Note B -- Stockholders' Equity
Changes in stockholders' equity for the six months ended December 31, 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 14,548,196 $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 1,723,501 1,724 135,726 137,450
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 (2,093,569) (2,093,569)
---------- ------ ---------- ---------- ----------
Balance, Dec. 31,
1997 16,471,697 $16,472 $13,561,360 $(13,788,153) $ (210,321)
========== ====== ========== ========== ==========
</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 Six months ended December 31, 1997, Mid America Venture Capital Fund,
Inc. ("Mid America"), an affiliate through stock ownership of more than ten per
cent of the Company's outstanding common shares, loaned the Company $327,448 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 Venture
Capital Fund, Inc. 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. The Company
recorded a charge to interest expense of $177,170, as a result of the grant.
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 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 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, 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.
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 six months ended December
31, 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 and Six Months Ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
General
In November, 1997, the Company formed an executive management committee for the
purpose of developing and implementing strategies that would streamline the
Company's present business, restructure its relationship with HPSI and formalize
a new strategic direction for the Company's technology and products. The
following outlines the accomplishments to date and the present direction of the
Company.
Shift in Strategic Focus
The Company has determined that it can compete more effectively in its markets
once it focuses on its core strengths and its technology, rather than on
competing head-on with other companies and similar products. Accordingly, rather
than building and maintaining a large infrastructure necessary to install,
maintain and train customers, the Company is in the process of identifying
companies that have a successful history of marketing and supporting similar
products. The Company believes that the sale or license of its products should
produce increased profits for the Company with significantly less associated
overhead. This concept of a technology-driven company versus a product-driven
company should enable the Company to develop new products in other market areas
in an effort to maximize the use of the Company's core technology, Screenware.
As part of this shift in focus, the Company has identified the World Wide Web as
the appropriate vehicle for the cost-effective distribution of its suite of
health care related technologies. In this regard, efforts are currently under
way to develop strategies for entering the Internet market.
Streamlining of Business
In December, 1997, the Company closed its operations in Grand Rapids, Michigan
and transferred all essential functions to the Company's Wilton, Connecticut
office. In addition, the number of full-time employees company-wide has been
reduced from 33 to 13, Similarly, measures have been taken to reduce overhead
expenses in the Company's Draper, Utah and Wilton offices. These steps have
resulted in savings to the Company of $180,000 per month or $2.2 million per
year on a going forward basis, exclusive of interest expense, which exceeds the
Company's previous expectations.
Status of Relationship with HPSI
In the past, the Company has placed significant emphasis on its relationship
with HPSI, the exclusive distributor of the Company's Vision product. While
efforts to structure a satisfactory merger transaction with HPSI have not been
successful, the Company continues to pursue various avenues in hopes of creating
a mutually beneficial relationship for the future of both companies. In January,
1998, the Company proposed the terms of a marketing and support relationship
between the companies, which is presently under review by HPSI. While the
Company believes that a relationship between the companies would be beneficial,
no assurance can be given that the parties will be able to reach agreement
regarding the terms of such a relationship.
8
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Six Months Ended December 31, 1997 and 1996
- -------------------------------------------------------------------------------
Neptune's Contribution
Revenue from Neptune operations represented 71% of the Company's total revenue
for the quarter ended December 31,1997. Neptune's contribution to the Company's
overall revenue is expected to continue until such time as the Company has fully
implemented its strategy to market its products vis-a-vis the Internet and
through partnered marketing organizations.
Strategic Alliances
The Company has established contacts with several financial entities that
represent potential for strategic alliances and capital sources. The company has
selected two of these entities for further consideration. Serious discussions
have been on-going for the past thirty days with one of these companies that
could result in the availability of significant capital resources and/or
strategic partnerships. By the end of the quarter ending 3/31/98, management
expects progress that should result in material improvements in the company's
financial viability.
Results of Operations
A summary of sales:
<TABLE>
<CAPTION>
(all amounts in thousands)
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales
Vision $ 47 $ 303 $ 72 $ 342
Focus (22) 29 (22) 29
Other DSI 8 36 127 64
Leasing 80 43 201 191
------ ------ ------ ------
Total Sales $ 113 $ 411 $ 378 $ 626
====== ====== ====== ======
</TABLE>
9
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Six Months Ended December 31, 1997 and 1996
- -------------------------------------------------------------------------------
Sales for the three and six months ended December 31, 1997 decreased by 73% and
40%, respectively, from the same periods in the previous year. The decline was
due to a sharp decline in Vision sales in the current periods.
Selling expenses decreased 50% and 22% for the three and six months ended
December 31, 1997, due to cuts in personnel and redeployment of personnel into
administration.
As a result, administrative expenses increased by 15% for the second fiscal
quarter over the same period in the prior year. For the first two fiscal
quarters, administrative expenses decreased by 3%.
Research and development costs decreased by 81% and 49% for the three and six
months ended December 31, 1997, respectively, from the same period in the prior
year due to a significant adjustment to the number of programmers working on
developmental projects, and reductions in programming resources in general.
Interest expense increased over the same period of the previous year due to
significant additional borrowings from, and conversion rights extended to, 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. Due to the Company's default on the Old Neptune note, the
Company accrued additional interest charges totaling $75,880 in accordance with
the default provisions in the note and related security agreement. The interest
expense associated with the grant of conversion rights was $177,170.
Liquidity and Capital Resources
During the first six months of fiscal 1998, the Company used cash of $1,447,140
in its operations. The net loss for the six months ended December 31, 1997 was
$2,093,569. Non-cash charges to income were $754,899, including $137,450 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 $327,448 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.
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 $331,114.
Cash and cash equivalents were $23,895 at December 31, 1997, which represented
only a fraction of one month's operating capital, assuming no increase in sales
over current levels.
10
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Six Months Ended December 31, 1997 and 1996
- -------------------------------------------------------------------------------
Management's Plan for Viability
The Company expects its operating expenses to be $550,000 per quarter, or $2.2
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. Discussions are currently taking place with investment partner prospects to
raise cash in the form of debt and/or equity.
Operating expenses, exclusive of interest expense, and other infrastructure
expenses were reduced by a total of $451,000 in the three months ended December
31, 1997, as compared to the three months immediately prior.
Management believes that a combination of revenues and new financing will
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. 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 would 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.
11
<PAGE>
Intelligent Decision Systems, Inc.
Management's Discussion and Analysis or
Plan of Operation
For the Six Months Ended December 31, 1997 and 1996
- -------------------------------------------------------------------------------
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.
Approximately 50% of DSI's leased premises in Draper, Utah was subleased to
another party in January, 1998.
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 committeeto run the Company
which included 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.Roger Fowler, controller of IDSI's subsidiary DSI, was named as
interim CFO, and was terminated on January 9, 1998. Jerry Beck was terminated
January 2, 1998. An active search is taking place for a Chief Financial Officer.
David Horowitz remains as CEO and President and was appointed Treasurer and
Acting Chief Financial Officer. 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
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 December
31, 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: February 17, 1998 /s/
--------------------------
David A. Horowitz
President
Date: February 17, 1998 /s/
--------------------------
David A. Horowitz
Acting Chief Financial Officer
14
<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 six months ended December 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,895
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<CURRENT-LIABILITIES> 2,421,648
<BONDS> 185,795
0
0
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<OTHER-SE> (13,788,153)
<TOTAL-LIABILITY-AND-EQUITY> 2,397,122
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<CGS> 0
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<OTHER-EXPENSES> 1,723,471
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<INCOME-PRETAX> (2,093,569)
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<INCOME-CONTINUING> (2,093,569)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,093,569)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
