U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1996
RESOURCE FINANCE GROUP, LTD.
(Exact name of registrant as specified in charter)
COLORADO 33-42904 84-1178112
(State or other jurisdiction of (Commission File No.) (I.R.S. Employer ID No.)
incorporation or organization)
Weyhill Building, Suite 400
2025 East Beltline Ave., SE
Grand Rapids, Michigan 49546 616-285-5830
(Address of Principal's Executive Offices) (Registrant's Telephone No.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 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:
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practicable date.
Title of Class: Common Stock
Shares outstanding at: March 31, 1996: 6,363,236
RESOURCE FINANCE GROUP, LTD.
I N D E X
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Balance Sheets
March 31, 1996 and June 30, 1995 1
Condensed Statements of Income (unaudited) For the three
and nine months ended March 31, 1996 and March 31,
1995, and cumulative amounts since inception 2
Condensed Statements of Cash Flows (unaudited)
For the nine months ended March 31, 1996
and March 31, 1995 and cumulative amounts
since inception 3
Notes to Condensed Financial Statements (unauditd) 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Resource Finance Group, Ltd.
(a development stage company)
Condensed Balance Sheets
(All amounts in thousands) Mar. 31 June 30
1996 1995
--------- ---------
ASSETS (unaudited)
CURRENT ASSETS
Cash $ 68.2 $ 18.5
Accounts receivable - trade (net) - 8.8
Accounts receivable - related parties - -
Notes receivable - related parties 329.7 -
Prepaid expenses - 10.3
--------- ---------
TOTAL CURRENT ASSETS 397.9 37.6
PROPERTY AND EQUIPMENT 40.5 44.3
OTHER ASSETS
Contractual rights - 246.0
Restricted investments - 686.3
Intellectual property - net of amort. 1,815.5 2,083.3
Other 152.3 161.1
--------- ---------
$2,406.2 $3,258.6
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable 9.0 224.5
Accounts payable - trade 72.0 56.7
Advances payable - related parties - 284.9
Accrued expenses 56.8 30.1
--------- ---------
TOTAL CURRENT LIABILITIES 137.8 596.2
LONG-TERM DEBT - -
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock .6 .6
Additional paid in capital 5,066.9 4,812.7
Deficit accumulated
during the development stage (2,799.1) (2,150.9)
--------- ---------
2,268.4 2,662.4
--------- ---------
$2,406.2 $3,258.6
========= =========
See notes to condensed financial statements.
1
Resource Finance Group, Ltd.
(a development stage company)
Condensed Statements of Operations (Unaudited)
(All amounts in thousands) Three Months Ended Nine Months Ended Cumulative
Mar. 31, 1996 Mar. 31, 1995 Mar. 31, 1996 Mar. 31, 1995 Amounts Since Inception
------------- ------------- ------------- ------------- -----------------------
NET REVENUES $ 364.5 $ 125.7 $1,247.5 $ 979.9 $ 8,637.0
COSTS AND EXPENSES
Cost of Goods 221.4 88.3 1,107.7 884.7 6,827.5
Salaries, Wages & Benefits 61.4 86.2 206.9 312.6 1,521.8
Depreciation & Amortization 94.3 111.5 283.0 344.8 788.2
Other Expenses 187.8 114.4 284.0 526.8 2,198.2
-------- -------- --------- ---------- ----------
TOTAL COSTS & EXPENSES 564.9 400.4 1,881.6 2,068.9 11,335.7
NET LOSS FROM OPERATIONS (200.4) (274.7) (634.1) (1,089.0) (2,698.7)
OTHER INCOME (EXPENSE) 5.4 72.7 (23.4) (19.5) (239.0)
PROVISION FOR INCOME TAXES - - - - -
-------- -------- --------- ---------- ----------
NET LOSS BEFORE
EXTRAORDINARY ITEM (195.0) (202.0) (657.5) (1,108.5) (2,937.7)
EXTRAORDINARY ITEM
(NET OF INCOME TAX) - - - - 138.6
-------- -------- --------- ---------- ----------
NET LOSS $(195.0) $(202.0) $ (657.5) $(1,108.5) $(2,799.1)
======== ======== ========= ========== ==========
EARNINGS(LOSS) PER COMMON SHARE (0.03) (0.03) (0.11) (0.19)
====== ====== ====== ======
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,251.9 5,887.2 6,048.1 5,855.2
======= ======= ======= =======
See notes to condensed financial statements.
2
Resource Finance Group, Ltd.
(a development stage company)
Condensed Statements of Cash Flows (Unaudited)
(All amounts in thousa Nine Months Ended Cumulative
Mar. 31 Mar. 31 Amounts Since
1996 1995 Inception
------------ ------------ -------------
CASH FLOW FROM OPERATIONS $ (67.3) $ (571.5) $ (2,362.7)
CASH FLOW FROM INVESTING 662.3 (68.1) 296.9
CASH FLOW FROM FINANCING (545.3) 552.4 2,134.0
------------ ------------ -------------
NET INCREASE
(DECREASE)IN CASH 49.7 (87.2) 68.2
BEGINNING CASH BALANCE 18.5 96.4 -
------------ ------------ -------------
ENDING CASH BALANCE $ 68.2 $ 9.2 $ 68.2
============ ============ =============
See notes to condensed unaudited financial statements.
3
RESOURCE FINANCE GROUP, LTD.
(A Development Stage Company)
Condensed Balance Sheets
- - --------------------------------------------------------------------------------
Note A -- Basis of Presentation
The accompanying unaudited condensed 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, 1996 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1996. 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, 1995.
Note B -- Accounts Receivable
Trade accounts receivable of $0 as of March 31, 1996 and of $8,760 as of
June 30, 1995 are net of allowances for doubtful accounts of $0 and $0
respectively.
Note C -- Property, Plant and Equipment
The major classes of property, plant and equipment are as follows:
Mar. 31, June 30,
1996 1995
------------ ------------
Furniture and fixtures $ 11,620 $ 8,928
Office equipment 5,991 5,991
Production equipment 2,082 2,082
Computer equipment 37,006 38,532
------------ ------------
$ 56,699 $ 55,533
Less accumulated depreciation 16,171 11,192
------------ ------------
$ 40,528 $ 44,341
============ ============
Note D -- Contractual Rights
During the three months ended December 31, 1995, the Company sold contractual
rights to services from Epoch Resources, Inc. ("ERI"), a related party, to
Digital Sciences, Inc., a related party, for $235,000. The Company used the
remainder of the services it purchased from ERI in its own operations during the
three months ended December 31, 1995. The multimedia services agreement with ERI
has been terminated by mutual agreement between the parties.
4
RESOURCE FINANCE GROUP, LTD.
(A Development Stage Company)
Condensed Balance Sheets
-----------------------------------------------------------------------
Note E -- Restricted Investments
Restricted investments included the following:
March 31, June 30,
1996 1995
------------ ------------
Common shares of Digital Sciences, Inc., an
affiliate, valued at $1.69, 92,500 shares (1) $ 0 $ 156,325
Common shares of Digital Sciences, Inc.,
valued at $1.69, 187,500 shares (2) 0 316,875
Common shares of Digital Sciences, Inc.,
valued at $3.60, 59,173 shares (3) 0 213,023
------------ ------------
$ 0 $ 686,223
============ ============
(1) These shares were pledged to a venture capital firm as collateral for
a guaranty. The shares were originally recorded less a fifty percent
discount from market due to the restrictions on the trading of the stock.
These shares were stated at the lower of cost or market as of June 30,
1995. During fiscal 1996, 92,500 shares were transferred to the guarantor
as reimbursement for moneys advanced to the Company.
(2) The shares were originally recorded less a fifty percent discount from
market because the shares are not registered and are restricted from free
trading. These shares are stated at the lower of cost or market. In March
of 1996 the Company sold the shares to Mid America Venture Capital Fund,
which became a related party on March 27, 1996, for $316,875.
(3) Unregistered shares, restricted from free trading, valued at $3.60 per
share, and used to extinguish debt (notes payable) due Mid America Venture
Capital Fund Inc., per prior agreement between the parties. The debt was
extinguished in July, 1995.
Note F -- 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 G -- Supplemental Disclosure of Cash Flow Information
Cash paid for interest during the nine months ended March 31, 1996 was $1,350
and cash paid for income taxes was $--0--.
Cash paid for interest during the nine months ended March 31, 1995 was $1,918
and cash paid for income taxes was $--0--.
5
RESOURCE FINANCE GROUP, LTD.
(A Development Stage Company)
Condensed Balance Sheets
- - --------------------------------------------------------------------------------
Note H -- Related Party Transactions
In March of 1996, the Company sold 187,500 shares of Digital Sciences, Inc.
stock that it owned to Mid America Venture Capital Fund, Inc. for $316,875 in
exchange for promissory notes. Also in March of 1996, the Company issued stock
pursuant to a Form S-8 Registration Statement to James M. Keller, an officer and
director, in the amount of 122,000 shares (112,000 for wages & 10,000 as a
performance bonus) and to Mark A. Babin, an officer and director, in the amount
of 20,000 shares as a performance bonus. The Company received revenues from
Digital Sciences, Inc. during the three and nine months ended March 31, 1996 of
$364,530 and $1,214,468, respectively, for subcontracted programming and
administrative services and $30,000 and $70,000 during the three and nine months
ended March 31, 1995 for subcontracted programming services. The Company paid
Epoch Resources, a corporation controlled by a significant stockholder and a
former officer, $23,932 and $279,800 during the three and nine months ended
March 31, 1996 for multimedia programming services and the development of
collateral marketing materials for the Vision system project.
Note I -- Stock Based Compensation
Effective December 15, 1995, the Company has adopted SFAS 123 "Accounting for
Stock-Based Compensation" for non-employee stock purchase options and warrants
granted from that date forward. The Company has elected to account for stock
based compensation plans involving employees according to the provisions of APB
25 as allowed by SFAS 123. The adopted standard is not applicable to stock
derivatives granted prior to adoption and no "catch- up" adjustments are allowed
or required. The effect of the change in the method of accounting for
derivatives granted to non-employees since its adoption results to an additional
charge to expense of $100,000 for the three months ended March 31, 1996 over the
amount of $0 that would have been recorded under the old standard. The effect of
the change in accounting method on future financial statements cannot be
reasonably estimated at this time.
There were two such stock option grants made in the three months ended March
31, 1996:
3/12/96 - To a consultant, 400,000 shares at $.25, expires 3/12/00
3/12/96 - To a consultant, 400,000 shares at $.375, expires 3/12/00
The value of the options granted was determined to be $.125 per share based on
the provisions of SFAS 123, as of the grant date.
Note J -- Commitments and Contingencies
The Company had no material commitments and contingencies existing at March 31,
1996.
Note K -- Subsequent Events
The Company effected a reincorporation under the laws of the State of
Delaware. Both Resource Finance Group, Ltd. and Digital Sciences, Inc. received
sufficient votes to approve the merger transactions. The merger transactions
were made effective on April 1, 1996. DSI's shareholders, in the aggregate,
owned 85% of the outstanding shares of Intelligent Decision Systems, Inc.
("IDS") immediately after the consummation of the merger, therefore DSI is
deemed to be the acquiring company for purposes of accounting and financial
reporting. The results of RFG operations will be reflected in the results of
operations of IDS from the date of the merger only.
6
Resource Finance Group, Ltd.
Management's Discussion and Analysis of Financial Condition and Results of
Operations For the Nine Months Ended March 31, 1996
- - -------------------------------------------------------------------------------
Results of Operations
Virtually all of the revenues for the third quarter of fiscal 1996 were
generated pursuant to a joint operating agreement between Digital Sciences, Inc.
("DSI") and the Company. The joint operating agreement, which had been extended
periodically, provided for DSI to purchase programming and administrative
services from the Company. This agreement expired on March 31, 1996 in
anticipation of the merger of the two companies, which was consummated on April
1, 1996. The efforts of both companies have been directed towards the
fulfillment of the contracts that have been signed with National Purchasing
Corporation ("NPC"). These agreements included the opportunity to provide
computers, software, training and transaction management to numerous skilled
nursing home facilities that operate in the U.S. The Vision system ("Vision") is
the computer system that has been developed under the agreements. Sales of the
Vision sytem, in limited quantities, have been made by DSI prior to the merger
of the two companies. Increased selling activity commenced on April 1, 1996 with
the introduction of a complete Mininum Data Set module (MDS II), which is now
contained in the Vision system.
The Company's net revenues increased by 190.0% to $364,530 for the third quarter
of fiscal 1996, from $125,695 during the same period in fiscal 1995. Revenues
for the third quarter of fiscal 1995 included $86,094 from the retailing and
wholesaling of computer hardware and $39,601 of sales made pursuant to the
development of the Vision sytem. The Vision system project was newly underway in
March of 1995 and was virtually complete in March of 1996.
Vision related revenues for the nine months ended March 31, 1996 were $1,247,500
and were $171,170 for the same period of the previous year. The increase was due
to the increase in product development activity levels. Retail and wholesale
computer hardware sales were $0 in the nine months ended March 31, 1996 and were
$808,697 during the same period in the previous year. The Company entirely
exited the retail and wholesale computer hardware businesses by March 31, 1995
due to the effects of unprofitable operations resulting from intense competition
from large hardware manufacturers and large computer retail chains.
Operating costs and expenses increased by 11.9% to $448,100 for the third
quarter of fiscal 1996, from $400,400 for the same quarter of fiscal 1995. The
increase was due to much higher activity levels resulting in the aforementioned
190.0% increase in revenues. The increase was largely due to higher programming
activity levels associated with the development of the Vision system.
Operating costs and expenses decreased by 14.7% to $1,764,800 for the nine
months ended March 31, 1996, from $2,068,900 for the same period of the prior
year. The decrease was due to the elimination of the sales of computer systems,
which resulted in reductions in materials, labor, office personnel, selling and
research and development costs and expenses, offset by higher programming costs
during the first fiscal quarter of 1996.
Effective December 15, 1995, the Company has adopted SFAS 123 "Accounting for
Stock-Based Compensation" for non-employee stock purchase options and warrants
granted from that date forward. The Company has elected to account for stock
based compensation plans involving employees according to the provisions of APB
25 as allowed by SFAS 123. The adopted standard is not applicable to stock
derivatives granted prior to adoption and no "catch-up" adjustments are allowed
or required. The effect of the change in the method of accounting for
derivatives granted to non-employees since its adoption results to an additional
charge to expense of $100,000 for the three months ended March 31, 1996 over the
amount of $0 that would have been recorded under the old standard. The effect of
the change in accounting method on future financial statements cannot be
reasonably estimated at this time.
7
There were two such stock option grants made in the three months ended March 31,
1996:
3/12/96 - To a consultant, 400,000 shares at $.25, expires 3/12/00
3/12/96 - To a consultant, 400,000 shares at $.375, expires 3/12/00
The value of the options granted was determined to be $.125 per share based on
the provisions of SFAS 123, as of the grant date.
Interest expense was not material for each of the three and nine month periods
presented.
No income tax provision was made for either period as losses were incurred. Net
tax assets were not recorded due to the uncertainty of future earnings.
Liquidity and Capital Resources
During fiscal 1996, the Company has financed its activities through loans from a
venture capital firm, sales of services to Digital Sciences, Inc., ("DSI"),
which was an affiliate, related party (prior to the April 1, 1996 merger of the
two companies) and a participant in the Vision system nursing home computer
system. DSI raised its project capital through a private placement of debt and
through stock issued for cash. The Company continued to be reliant on DSI for
the funding of its operations through the time of the consummation of the
merger.
Both DSI and the Company were dependent for their financing on revenues from
sales of the Vision computer system in conjunction with financing provided by a
leasing firm that agreed to buy hardware, software site licenses and maintenance
agreements from DSI. The leasing firm subleases the assets to DSI Financial
Corp., a wholly owned subsidiary of DSI (now a wholly owned subsidiary of
Intelligent Decision Systems, Inc. ("IDS"), the successor to the Company), which
in turn provides operating leases to the ultimate users of the Vision system.
Lines of credit needed to fund the purchase of computer components and to cover
remaining development and installation costs have been arranged by DSI. These
lines of credit represent a maximum availability of $900,000.
In the opinion of management, the lines of credit, together with expected
revenues from the sale of Vision systems, will be adequate to finance the
activities of the Company's successor, IDS, and those of DSI, its wholly owned
subsidiary, for the next twelve months.
The Company extinguished its note payable of $213,023 to a venture capital
firm via an exchange of 59,173 shares of DSI stock for the debt in July, 1995.
It also sold 187,500 shares of DSI common stock that it owned to the same
venture capital firm in March, 1996 for a total of $316,875 in promissory notes.
IDS will assume the debts of DSI, which include notes payable to that same
venture capital firm of $271,331. The promissory notes were accepted as payment
for the stock in anticipation of a formal set-off agreement extinguishing the
outstanding notes payable.
The Company sold its contractual rights to multimedia programming and
advertising services to DSI prior to the merger of the two companies, which
reduced the amount of accounts receivable and payable between the two companies
to an immaterial amount.
8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
Clay Kahler vs. Resource Finance Group, Ltd. The lawsuit was
dismissed on February 15, 1996. The matter was settled for $5,000.
WilTel vs. Resource Finance Group, Ltd. The lawsuit was dismissed
on March 18, 1996. The matter was settled for $4,000.00.
B.R. King vs. Resource Finance Group, Ltd. The claim of B.R. King
against the Company was dismissed on February 29, 1996, the
Company obtained a judgement against B.R. King in the amount of
$10,000 on February 29, 1996.
Forrest Wheeler vs. Resource Finance Group, Ltd. The lawsuit was
dismissed on April 29, 1996 after hearing on Company's motion for
summary disposition.
No further lawsuits are pending against the Company.
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 end
June 30, 1995.
Item 2. Changes in Securities:
At April 1, 1996 the merger of Resource Finance Group, Ltd. with
and into Intelligent Decision Systems, Inc. became effective with
the result that each outstanding share of common stock, $.0001
par value, of Resource Finance Group, Ltd. was converted into
One-fourth of a share of common stock, $.001 par value, of
Intelligent Decision Systems, Inc.
Item 3. Defaults by the Company upon its Senior Securities:
None.
Item 4. Submission of Matters to a Vote of Security Holders:
The Form S-4 Registration Statement of Intelligent Decision
Systems, Inc. ("IDS") containing the Joint Proxy
Statement-Prospectus of the Company and Digital Sciences, Inc.
("DSI") was declared effective by the Securities and Exchange
Commission on February 9, 1996 and the Company initiated a mailing
of the documents to its shareholders on February 9, 1996. The
Company had set a special meeting date of March 22, 1996 to vote
on the proposed mergers. The shareholders of the Company voted on
(a) a proposal to approve the merger of the Company with IDS
pursuant to the Agreement and Plan of Merger, dated April 15, 1995
among the Company and IDS. The Company received 3,594,875 "yes"
votes, 7,500 "no" votes and 14,175 abstentions. The shareholders
of the Company also voted on (b) a proposal to approve a merger of
DSI with DSI Acquisition Corp. pursuant to the amended and
restated agreement and plan of merger dated July 14, 1995 among
the Company, DSI and DSI Acquisition Corp. The Company received
3,597,375 "yes" votes, 7,500 "no" votes and 11,675 abstentions.
9
Both Resource Finance Group, Ltd. and Digital Sciences, Inc.
received sufficient votes to approve the matters voted on as
described in the Joint Proxy Statement-Prospectus. The merger
transactions were made effective on April 1, 1996.
Item 5. Other Information
The Company was incorporated June 1, 1995, under the laws of the State
of Delaware. The Company was originally formed as a wholly owned subsidiary of
Resource Finance Group, Ltd. ("RFG"), a Colorado corporation. In accordance with
the terms set forth in the Company's Registration Statement on Form S-4 declared
effective by the SEC on February 9, 1996, the Company entered into a series of
transactions whereby RFG merged with and into the Company and Digital Sciences,
Inc. ("Old DSI") merged with and into a wholly owned subsidiary of the Company
("New DSI") on April 1, 1996 (the "Mergers"). As a result of the Mergers, from
and after April 1, 1996, the business of the Company (together with its
subsidiaries) is changed as described below:
Business of the Company
The Company, together with its subsidiaries, (the "Company") is
primarily engaged in the development and distribution of computerized business
systems designed specifically for the long term (non-acute) health care industry
pursuant to the terms of an agreement, dated July 14, 1994, with National
Purchasing Corporation, a California corporation doing business as HPSI
("HPSI"). HPSI is a group purchasing organization which presently serves
approximately 3,000 licensed nursing home clients, as well as 3,000 other
clients who operate principally in health care, hospitality, restaurants, and
institutions markets. Pursuant to the HPSI Agreement, the Company and HPSI have
agreed to combine their expertise and resources with the Company developing an
interactive, multimedia computerized management business system ("Vision
System") that will provide to system users various components, including an
order processing and confirmation module, a vendor/supplier module, and training
and installation modules. During the Quarter ended March 31, 1996, HPSI began
marketing the Vision System to its clients
The Vision System software developed by the Company in accordance with
the HPSI Agreement is and will be owned by HPSI Online, Inc., a California
corporation and a wholly owned subsidiary of HPSI ("HPSI Online"). The Company
receives the revenues from the sales/rental of the hardware and the software
maintenance support. Other revenues which may arise from the use of the Vision
System are to be distributed by HPSI Online as determined by the board of
directors of HPSI Online. HPSI Online will be the corporation responsible for
collecting revenues from the Vision project and for disbursing these revenues to
HPSI and the Company. While the Company does not own a controlling share of HPSI
Online, it has the right to choose representatives for the Board of Directors of
HPSI Online. The Company is currently dependent on the HPSI Agreement and the
successful marketing and sales/rental of the Vision System.
The term of the HPSI Agreement expires in July 2004, after which the
term will automatically renew for one-year periods, unless a party to the
agreement shall give at least one-year's prior written notice of termination.
Notwithstanding termination, the parties to the HPSI Agreement will continue to
be entitled to receive revenues thereafter paid for the Vision System from
licenses of the Vision System on the date of termination.
Vision System
As HPSI presently serves approximately 3,000 licensed nursing home
clients, the Vision System has been developed to be utilized by HPSI's nursing
home clients. Accordingly, the Vision System has been designed to assist nursing
homes with their voluminous data gathering and reporting tasks including
dietary, nursing and business information. Some of the Vision System's functions
are pre admissions, admissions, medical records, patient assessments, system
management, human resource management, dietary menu programs, accounting,
quality assurance, communications, purchasing/inventory, and interactive
multimedia training. The Vision System also features , multimedia "help"
screens, CD Rom supplier catalogs, bar code data entry, real time record
updating, customized management reports, on-line deposit transfers, "cross talk"
between departments and sites, and on-line connectivity to other services. The
Company is working to develop other business, accounting and marketing type
functions for the Vision System.
10
The Company has completed development of the Vision System in 1995 and
has installed 10 systems in 1996. The Company will continue to add features to
the Vision System.
The Vision System is based upon the Company's fourth generation
software language called Screenware. Screenware is designed to be used on an
operating system called PICK, a multi-user, multi-tasking operating system which
results in a less costly investment in hardware.
The Vision System is currently the Company's primary product. The
Company has only sold the Vision System product in limited quantities and there
can be no assurance that the Vision System will be effective, capable of being
manufactured at commercial quantities at acceptable costs, or successfully
marketed. The Company expects that the Vision System, when fully commercialized,
will account for substantially all the Company's earnings for the foreseeable
future. Furthermore, because the Vision System currently represents the
Company's sole product focus, if the Vision System is not successful, the
Company's business, financial condition and results of operation could be
materially adversely affected.
The Vision System is currently being marketed by HPSI's national sales
force and is being leased to HPSI's customers with three to five year lease
agreements.
The Company currently integrates various components into the Vision
System in limited quantities in Draper, Utah. However, the Company does not have
experience in producing the Vision System in commercial quantities. The Company
may encounter difficulties in scaling up production of the Vision System to meet
customer demand, including problems involving production yields, quality control
and assurance, components supply and shortages of qualified personnel. There can
be no assurance that the Company will not encounter manufacturing difficulties,
which could have a material adverse effect on the Company's business and
financial condition and results of operation. Should the company elect to obtain
additional collaborative partners to assist in producing Vision Systems in
commercial quantities, there can be no assurance that the Company will be
successful in reaching satisfactory arrangements with such parties.
The Company has entered into the Leasing Program Agreement, dated as of
June 7, 1995 (together with Master Lease Agreement and other related documents,
the "Leasing Agreement") with Neptune Leasing Corp. ("Neptune") whereby Neptune
will purchase Vision System products and modules from the Company and will lease
those systems to New DSI Leasing Corporation, a wholly owned subsidiary of DSI,
which in turn will sublease the Vision System to end users of the system. Except
as provided under the Leasing Agreement, Neptune will be the Company's exclusive
leasing source during the term of such agreement. The term of the Leasing
Agreement expires on May 1, 1998 and renews automatically unless terminated in
accordance with its terms. The failure or inability of Neptune to perform its
obligations under the Leasing Agreement would have a material adverse effect on
the Company and in such circumstances, the Company would need to identify and
obtain alternative financing and leasing sources. No assurances can be given
that such alternative sources will be available at all or available on terms and
conditions satisfactory to DSI.
The Company has a contract dated March 1, 1996 with IBM in which IBM
will install the Vision System and provide warranty service to the Vision System
on a nationwide basis at the various facilities that have rented the Vision
System. The Company relies on IBM to perform the installation and service
functions for the Vision System.
DSI/MED System
The Company's other product, the DSI/MED System, is designed to
automate and manage physicians' offices. The DSI/MED System is a bar-code system
that offers efficient, easy to use methods of data collection, storage and
retrieval, along with billing, scheduling and report analysis. Since early 1993,
the Company has completed approximately 10 installations.
Written in its proprietary fourth generation language called
"Screenware," the DSI/MED System utilizes advanced design concepts to create or
customize menus, screens, and reports that meet many of the requirements of
11
health care providers. The "Point of Care" design allows data to be entered or
retrieved, via a bar-code scanner, at each point that care is being provided.
The user can enter history, billing information, and other pertinent information
in the examining room. When the patient's visit is concluded, payment
information can be entered immediately and the patient can leave the office with
a statement detailing all services performed during that visit and displaying
relevant financial data.
Products in Development
The markets for the Company's existing and planned computer software
and hardware products are characterized by rapidly changing technology, evolving
industry standards, frequent new product introductions and enhancements. The
successful development and commercialization of new products involve many risks,
including the identification of new product opportunities, the successful
completion of the development process, and the retention and hiring of
appropriate research and development personnel. The introduction of products
embodying new technologies and the emergence of new industry standards could
render the Company's existing products and products currently under development
obsolete and unmarketable. The Company's future success will depend upon the
success of the Vision System under the HPSI Agreement and thereafter upon its
ability to enhance its products and to develop and introduce new products that
keep pace with technological developments, respond to evolving end-user
requirements and achieve market acceptance. Any failure by the Company to
anticipate or respond adequately to technological developments or end-user
requirements, or any significant delays in product development or introduction,
could result in a loss of competitiveness or revenues. There can be no assurance
that products or technologies developed by others will not render the Company's
products or technologies noncompetitive or obsolete or that the Company will not
experience significant delays in the future, which could have a material adverse
effect on the Company's results of operations. In addition, there can be no
assurance the Company will be successful in developing and marketing new
products or product enhancements on a timely basis or that new products or
product enhancements developed by the Company will achieve market acceptance.
In addition, the life cycle of the Company's products are difficult to
predict due to the effect of new product introductions or product enhancements
by the Company or to competitors, market acceptance of new or enhanced versions
of the Company's products and competition in the Company's marketplace. Declines
in the demand for the Vision System or the DSI/MED System whether as a result of
competition, technological change, price reductions or otherwise, could have a
material adverse effect on the Company's business, operating results and
financial condition.
Patents and Copyrights.
The Company does not currently hold any patent or copyright protection
for their principal assets. Management of the Company may file for appropriate
intellectual property protection in the future but there are no assurances such
protection will be granted or that protection will be adequate to deter
misappropriation of the Company's technologies or that there will not be
independent third party development of similar technologies. The Company's
success and revenues will depend, in part, on its ability to obtain or license
patents, protect trade secrets and operate without infringing on the proprietary
rights of others.
The Company has not in the past, but intend that the Company will in
the future, adhered to a disciplined regimen relating to the execution of
confidential disclosure, proprietary rights and non-competition agreements with
its vendors, customers, employees and consultants. Because the Company has not
adhered to a regimen to adequately protect their intellectual property rights,
there are significant risks that claims may be brought against the Company in
the future for infringing on the proprietary rights of others.
Backlog
As of May 1, 1996 the Company has a backlog of approximately $264,000
in Vision System orders.
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Competition
A large number of companies compete in the computer software business,
including the portion of the market targeted at developing and providing
business management systems in which the Company will compete. Many of these
companies have far greater capital, technical, personal, marketing and other
resources than the Company. Furthermore, there can be no assurance that these or
other firms will not develop new or enhanced products and software systems that
are more effective than any that have been or may be developed by the Company.
Employees and Consultants
The Company employed 4 people at May 1, 1996 in Grand Rapids, Michigan
with an additional 25 full-time employees working at the facilities in Draper,
Utah.
Property
The Company maintains its headquarters at the leased facility at 2025
East Beltline Avenue SE, Suite 400, Grand Rapids, Michigan 49546 which contains
2,700 square feet of office space. The Company also maintains 153 square feet of
office space and 2,027 square feet of warehouse space. New DSI also maintains a
leased office facility in Scottsdale, Arizona containing 641 square feet and a
leased office facility in Stamford, Connecticut.leased office space and a
production center in Draper, Utah which contains 7,153 square feet of office
space and 2,027 square feet of warehouse space. New DSI also maintains a leased
office facility in Scottsdale, Arizona containing 641 square feet and a leased
office facility in Stamford, Connecticut.
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed with the Securities and Exchange
Commission on April 15, 1996 and is incorporated herein by
reference. The report on Form 8-K summarized the merger
(reincorporation) of Resource Finance Group, Ltd. into
Intelligent Decision Systems, Inc. and the Merger of Digital
Sciences, Inc. into DSI Acquisition Corp. which is a wholly owned
subsidiary of Intelligent Decision Systems, Inc. The report on
Form 8-K also contained financial statements and pro-forma
financial information.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: May 7, 1996
RESOURCE FINANCE GROUP, LTD.
By /s/ Mark A. Babin
Mark A. Babin, Chief Executive
Officer, President
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Name
Date
Title
/s/ Mark A. Babin
Mark A. Babin, President
May 7, 1996
Chairman, Director
Chief Executive Officer
Chief Financial Officer
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