Registration Statement No. 333-
As Filed With the Securities and Exchange Commission on August 14, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------
INTELLIGENT DECISION SYSTEMS, INC.
(Successor to Resource Finance Group, Ltd.)
(Exact name of registrant as specified in its charter)
Delaware 38-3286394
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2025 East Beltline Avenue SE, Suite 400
Grand Rapids, Michigan 49546
(616) 285-5830
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
Mark A. Babin
President and Chief Executive Officer
Intelligent Decision Systems, Inc.
2026 East Beltline Avenue SE, Suite 400
Grand Rapids, Michigan 49546
(616) 285-5830
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Gregory R. Hall, Esq.
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
(602) 382-6000
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. ___
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. _X_
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ___
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ___
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ___
Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities Amount to be Offering Aggregate Offering Registration
Being Registered(1) Registered(2) Price Per Unit(3) Price(3) Fee(3)
Common Stock, 3,690,500 Shares 1.875 $6,919,688 $2,386
$.001 par value
(Facing Page Continued on Following Page)
(1) This registration statement covers the resale by a selling securityholder of
(i) 150,000 shares of Common Stock previously acquired by such Selling
Securityholder, and (ii) shares of Common Stock that may be acquired by such
selling securityholder upon the exercise of Common Stock Purchase Warrants
(the "Warrants") previously acquired. This registration statement also
covers the resale by certain other selling securityholders of 2,740,500
shares of Common Stock that may be acquired by such selling securityholders
upon the exercise of options previously acquired.
(2) In the event of a stock split, stock dividend, or similar transaction
involving Common Stock of the Company, in order to prevent dilution, the
number of shares of Common Stock of the Company registered shall be
automatically increased to cover the additional shares of Common Stock in
accordance with Rule 416(a) under the Securities Act of 1933.
(3) The registration fee has been calculated based on the average of the high
"asked" and low "bid" prices of the Common Stock on August 13, 1996, as
reported in the over-the-counter market on the "OTC Electronic Bulletin
Board" pursuant to Rule 457(c).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION; DATED AUGUST ____, 1996
PROSPECTUS
FOR UP TO 3,690,500 SHARES
OF COMMON STOCK
INTELLIGENT DECISION SYSTEMS, INC.
This Prospectus relates to the resale by certain securityholders (the
"Selling Securityholders") of up to 3,690,500 shares of Common Stock, $.001 par
value per share ("Common Stock") of Intelligent Decision Systems, Inc., a
Delaware corporation (the "Company"), that may be acquired upon the exercise of
Common Stock Purchase Warrants (the "Warrants") or options to purchase Common
Stock ("Options") that are currently outstanding, as more fully described below.
This Prospectus also relates to the resale by one of the Selling Securityholders
of 150,000 shares of Common Stock previously acquired by such Selling
Securityholder.
The Common Stock is traded under the symbol "IDSI" in the over-the-counter
market on the "OTC Electronic Bulletin Board" operated by the National
Association of Securities Dealers, Inc. (the "OTC Bulletin Board"). On August
13, 1996, the low "bid" and high "asked" prices for the Common Stock were $1.75
and $2.00, respectively.
There is no established market for the Warrants or the Options.
The Selling Securityholders may sell the Common Stock from time to time in
underwritten public offerings, in transactions pursuant to Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), in privately
negotiated transactions, in ordinary brokers' transactions through the
facilities of Nasdaq or otherwise, at market prices prevailing at the time of
such sale, at prices relating to such prevailing market prices, or at negotiated
prices. The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Securityholders. The net proceeds to the Selling
Securityholders will be the proceeds received by such Selling Securityholders
upon such sales, less brokerage commissions. All expenses incurred in connection
with the registration of the Common Stock, other than any underwriting or
brokerage discounts, commissions and selling expenses with respect to the Common
Stock being sold by the Selling Securityholders, will be borne by the Company.
There can be no assurance that the Selling Securityholders will sell any or all
of the Shares registered hereunder. See "Plan of Distribution" and "Selling
Securityholders."
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is August ____, 1996
1
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copies thereof may be
obtained, at prescribed rates, at the public reference facilities maintained by
the Commission at the Public Reference Section, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located
at 7 World Trade Center, 13th Floor, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material may be obtained at prescribed rates by writing to the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a web site (http://www.sec.gov)
that contains reports, proxy, and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission.
The Company has filed a Registration Statement on Form S-3 under the
Securities Act covering the Common Stock included in this Prospectus. As
permitted by the rules and regulations of the Commission, this Prospectus omits
certain of the information contained in the Registration Statement and reference
is hereby made to the Registration Statement and related exhibits for further
information with respect to the Company and the securities offered hereby. Any
statements contained herein concerning the provisions of any documents filed as
an exhibit to the Registration Statement are not necessarily complete, and, in
each instance reference is made to the copy of such document so filed.
Each such statement is qualified in its entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been previously filed by the Company with the
Commission and are hereby incorporated by reference in this Prospectus: (i) the
Company's Joint Proxy Statement-Prospectus included in the Registration
Statement on Form S-4, File No. 33-93058, as filed pursuant to Rule 424(b) under
the Securities Act; (ii) the Annual Report of the Company on Form 10-KSB for the
fiscal year ended June 30, 1995; (iii) the Quarterly Reports of the Company on
Form 10-QSB for the fiscal quarters ended September 30, 1995, December 31, 1995,
and March 31, 1996; (iv) the Current Report on Form 8-K, dated April 12, 1996;
and (v) amendment No. 1 to the Current Report on Form 8-K/A, dated August 7,
1996 and (v) the description of the Company's Common Stock contained in the
Company's Form 8-A filed under the Exchange Act. All other documents and reports
filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the securities described herein shall be deemed
to be incorporated by reference into this Prospectus and to be made a part
hereof from the respective dates such documents and reports are filed.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained herein or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus.
The Company will cause to be furnished, without charge, to each person who
receives this Prospectus, upon the written or telephonic request of any such
person, a copy of any or all of the documents which have been incorporated
herein by reference, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference). Requests should be directed in
writing to the Secretary, Intelligent Decision Systems, Inc., 2025 East Beltline
Avenue SE, Suite 400, Grand Rapids, Michigan 49545 or by telephone at (616)
285-5830.
2
RISK FACTORS
Investment in the Common Stock offered hereby involves certain risks. In
addition to the other information included elsewhere in this Prospectus,
prospective investors should give careful consideration to the following factors
before purchasing shares of the Common Stock offered hereby.
Net Operating Losses
The Company is currently spending approximately $300,000 per month on the
development of its products and its administrative structure and currently
generates monthly cash flow of approximately $200,000 from the sales and rental
of its products, most significantly, those involving its interactive, multimedia
computerized management business system ("the Vision System"). The prospective
cash flows from sales of the Vision System through the Company's marketing
agreement with National Purchasing Corporation, a California corporation doing
business as HPSI (the "HPSI Agreement"), are the Company's material source of
operational cash flow. The Company addresses its capital needs through financing
negotiated by Neptune Technology Leasing Corp. ("Neptune") and its own financial
reserves, which are equivalent to approximately ten months of operating costs
and expenses (excluding non-cash items such as depreciation and amortization).
Period of Transition
The Company is experiencing a period of transition as it emerges from its
status as a development stage company. The transition has placed, and will
continue to place, a significant strain on the Company's resources. The Company
declared itself out of the development stage as of July 1, 1996, a date that
corresponded to the beginning of its next fiscal year. The likelihood of success
of the Company must be considered in light of the expenses, difficulties and
delays frequently encountered in connection with the continuing development of a
new business. If the Company is unable to manage the transition out of the
development stage, the Company's business, competitive position, results of
operations and financial condition will be materially and adversely affected.
In addition, the Company has recently undergone a restructuring involving
the merger of Resource Finance Group, Ltd., a Colorado corporation and the
Company's parent corporation ("RFG"), with and into the Company and the merger
of Digital Sources, Inc., a Nevada corporation ("Old DSI"), with and into
Digital Services, Inc., a wholly-owned subsidiary of the Company ("New DSI")
(collectively, the "Mergers"), and the entire board of directors and the
management has changed. See "Certain Recent Developments." The Company's ability
to manage growth successfully will require the personnel of RFG and Old DSI to
work together effectively and will require the Company to improve its
operational, management and financial systems and controls. Prior to the
consummation of the Mergers, Old DSI and RFG had been operated as separate,
independent corporations. While Old DSI and RFG were engaged in related
businesses and were parties to a joint operating agreement pursuant to which
certain administrative, financial and other services were performed
cooperatively, there can be no assurance that management of the Company will be
able to integrate or allocate properly the two businesses on an economic basis
or be able to oversee and implement successfully the business strategy of the
Company after the Mergers. If the Company is unable to manage this transition
effectively, the Company's business, competitive position, results of operation
and financial condition will be materially and adversely affected.
Dependence on Collaborative Relationships
The Company is reliant on other companies for the marketing, sales and
installation of its main product, Vision System, and accordingly, there can be
no assurances that the Company will be able to oversee and implement
successfully the business strategy of the Company.
The Company has minimal direct sales or marketing capability. The Company
will rely on HPSI for sales of the Vision System. See "Certain Recent
Developments." The failure or inability of HPSI to perform its obligations under
the HPSI Agreement or to effectively sell or market the Vision System would have
a material adverse effect on the Company. If the Company determines to broaden
its business to provide Vision System or other systems to users other than
HPSI's clients, the Company will either have to develop the capabilities to
commercialize and market its technologies itself or will be dependent on others
to do so. Should the Company elect to commercialize and market its
3
technologies itself, the Company would need to develop additional resources, and
there can be no assurance that it will be successful in developing these
capabilities. Also, should the Company elect to obtain additional collaborative
partners to assist in commercializing and marketing its technologies and the
resultant products, there can be no assurance that the Company will be
successful in reaching satisfactory arrangements with such third parties.
The Company's ability to install and maintain the Vision System is limited.
The Company has entered into certain agreements with IBM Corporation
(collectively, the "IBM Agreement") pursuant to which IBM installs and services
the Vision System. The failure or inability of IBM to satisfactorily perform its
obligations under the IBM Agreement or to adequately install and service the
Vision System would have a material adverse effect on the Company.
History of Losses and Expectation of Future Losses
The Company has generated cumulative operating losses in the past and there
can be no assurance that the Company will become profitable in the future. The
continuing development and commercialization of the Company's products will
require substantial expenditures. There can be no assurance that the Company's
products will ever gain commercial acceptance or that the Company will ever
generate significant revenues or achieve profitability.
Dependence on the Vision System; Uncertainty of Market Acceptance
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 Company's continuing efforts will be successful or that
the Vision System and any other product developed by the Company 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 the majority of the Company's
earnings for the foreseeable future. Because the Vision System currently
represents the Company's main product focus, if the Vision System is not
successful, the Company's business, financial condition and results of operation
could be materially and adversely affected.
Risk of Product Defects
Software products as complex as those offered by the Company may contain
defects or failures when introduced or when new versions are released. The
Company may discover software defects in the Vision System or its other products
and may experience delays or lost revenues to correct such defects in the
future. There can be no assurance that despite testing by the Company, errors
will not be found in new products released after the commencement of commercial
shipment, resulting in loss of market share or failure to achieve market
acceptance. Any such occurrence could have a material adverse effect upon the
Company's business, operating results or financial condition.
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
successfully developing and distributing the Vision System in connection with
the HPSI Agreement, and thereafter upon its ability to enhance the Vision System
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 introducing new products 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
4
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 its 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, 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.
Limited Production Capabilities
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.
Limited Trading Market for Common Stock
The Common Stock is traded in the over-the-counter market through the OTC
Bulletin Board under the symbol "IDSI." Prior to the Mergers, the trading market
for the Common Stock of the Company's predecessor, RFG, was extremely limited
and sporadic. There can be no assurance that an active trading market will
develop or be sustained.
Commercial/Consumer Acceptance of PICK Operating System
The Company's Screenware software, which is used for the Vision System, is
designed to be used on a unique operating system called PICK. PICK is a
multi-user, multi-tasking operating system which results in a less costly
investment in hardware. In addition, PICK's operating system is itself a data
base which results in a much faster system that is more user-friendly than most
other operating systems and eliminates the need for purchasing a third party
database. It is estimated that nearly 80% of the Fortune 1000 companies have
PICK-based applications in their organizations. The Company's products are based
on the PICK operating system. Any factors that adversely affect the availability
or popularity of PICK in the market would have a material adverse effect on the
Company's operating system. The Company has no control over the factors that
affect the availability or commercial acceptance of the PICK operating system.
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, personnel, 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.
5
Importance of Intellectual Property
The Company does not currently hold any patent or copyright protection for
its principal assets. Management of the Company may file for appropriate
intellectual property protection in the future but there can be no assurance
that such protection will be granted or that it 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 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. Accordingly,
there are significant risks that claims may be brought against the Company in
the future for infringing on the proprietary rights of others. The Company is
not aware of any actual material infringement, and no such claims are currently
pending against the Company.
The patent and proprietary protection of software is highly competitive and
involves complex legal and factual questions. There can be no assurance that any
patents issued to the Company will provide it with competitive advantages or
will not be challenged by others, or that the patents or proprietary rights of
others will not have an adverse effect on the ability of the Company to do
business. Furthermore, there can be no assurance that others will not
independently develop similar products or, if patents are issued to the Company,
that others will not design around such patents or proprietary rights. In
addition, the Company may be required to obtain licenses to patents or other
proprietary rights of other parties. No assurance can be given that any licenses
required under any such patents or proprietary rights would be made available on
terms acceptable to the Company, if at all. If the Company does not obtain such
licenses, it could encounter delays in product market introductions while it
attempts to design around such patents, or could find that the development,
manufacture or sale of products requiring such licenses could be foreclosed. In
addition, the Company could experience a loss of revenues as well as incur
substantial costs in defending itself and indemnifying its partners in suits
brought against it or one or more of them on such patents or proprietary rights
or in suits in which the Company's patents or proprietary rights may be asserted
by it against another party. Further, there can be no assurance that any patent
obtained or licensed by the Company will be held valid and enforceable if
challenged by another party.
Dividends
Neither the Company nor its predecessor has ever paid cash dividends on
shares of its Common Stock, and the Company does not intend to pay any dividends
in the foreseeable future. The Company intends to reinvest earnings, if any, in
the development of its business.
Dependence on Key Employees
The Company's success will depend, to a significant extent, on the Company'
Chief Executive and Financial Officer, and President, Mark A. Babin, New DSI's
President, Chief Executive Officer and Treasurer, David A. Horowitz, and New
DSI's Executive Vice President, Chief Science Officer and Secretary, Robert B.
Hyte, and on other members of its senior management. Mr. Hyte is the creator of
the Screenware Software which operates on the PICK operating system upon which
New DSI's existing software is based, and upon which the Company's software is
based. The loss of the services of Mr. Babin, Mr. Horowitz or Mr. Hyte or any of
its other key employees, could have a material adverse effect on the Company.
The Company's future success will also depend largely upon its ability to
attract and retain other highly qualified personnel. There can be no assurance
that the Company will be successful in attracting and retaining such personnel.
Possible Volatility of Stock Price
The market price of the Company's and its predecessor's common stock has
been volatile. Future announcements concerning the Company or its competitors,
quarterly variations in operating results, announcements of technological
innovations, the introduction of new products or changes in product pricing
policies by the Company or its competitors, litigation relating to proprietary
rights or other litigation, changes in earnings estimates by analysts or other
factors could cause the market price of the Common Stock to fluctuate
substantially. In addition, the stock market has from time to
6
time experienced significant price and volume fluctuations that have
particularly affected the market price for the common stock of technology
companies and that have often been unrelated to the operating performance of
particular companies. These broad market fluctuations may also adversely affect
the market price of the Company's common stock. In certain circumstances,
following periods of volatility in the market price of a company's securities,
securities class action litigation has occurred against the issuing company.
There can be no assurances that such litigation will not occur in the future
with respect to the Company. Such litigation could result in substantial cost
and divert management's attention and resources, which could have a material and
adverse effect on the Company's business, financial condition and results of
operation.
Potential Dilution
There may be a dilution resulting from the Mergers and the Company's private
placement of Series A Preferred Shares in June 1996, and the issued and
outstanding warrants, options and other rights to acquire up to 9,030,200 shares
of Common Stock. Such options, warrants and other rights are exercisable at per
share prices ranging from $0.50 to $20.00, and most are exercisable through the
year 2000. The exercise of all or a material portion of such options, warrants
or other rights would substantially dilute the ownership percentage of Common
Stock owned by holders of Common Stock.
SEC Investigation of Regulation S Offerings
The Company is being investigated by the staff of the Commission. Management
of the Company believes that this investigation primarily concerns certain
offerings in 1994 and earlier of the common stock of the Company's predecessor,
RFG, to overseas investors made by RFG in reliance upon Regulation S under the
Securities Act, but may relate to other operational matters as well. Although
the management of the Company believes that the Company has not engaged in any
wrongdoing, there can be no assurances as to the outcome of any such
investigation.
THE COMPANY
The Company was incorporated in Delaware on June 1, 1995 and is the
successor by merger to RFG. See "Certain Recent Developments." Except as
otherwise specified, all references in this Prospectus to the "Company" refer to
Intelligent Decision Systems, Inc. and its subsidiaries. The Company, together
with its subsidiaries, develops and distributes computerized business systems
designed specifically for the long-term (non-acute) health care industry and
physicians' offices. The Company's principal executive offices are located at
2025 East Beltline Avenue SE, Suite 400, Grand Rapids, Michigan 49546 and its
telephone number is (616) 285-5830. The Company maintains offices in Draper,
Utah, Stamford, Connecticut and Scottsdale, Arizona.
CERTAIN RECENT DEVELOPMENTS
The Company was originally formed as a wholly owned subsidiary of RFG. 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 ("Form S-4"), the
Company, on April 1, 1996, entered into a series of transactions whereby RFG
merged with and into the Company, and Old DSI merged with and into New DSI.
As a result of the Mergers, among other things, the Company has succeeded to
the rights and obligations of RFG and Old DSI under the HPSI Agreement, a
twelve-year agreement, dated July 13, 1994, as amended, with 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 the health care, hospitality, restaurant and institution markets.
Pursuant to the HPSI Agreement, the Company and HPSI have agreed to combine
their expertise and resources to develop the Vision System, a product which
offers to system users various components, including an order processing and
confirmation module, a vendor/supplier module, and training and installation
modules. HPSI has begun marketing the Vision System to its clients. The Vision
System developed in accordance with the HPSI Agreement will be owned by HPSI
Online, Inc., a California corporation and a wholly owned subsidiary of HPSI.
The business plan of the Company will rely heavily on the success of its
relationship with HPSI.
7
In addition, the Company became a party to a Leasing Program Agreement,
dated as of June 7, 1995 (together with Master Lease Agreement and other related
documents, the "Leasing Agreement") with Neptune whereby Neptune will purchase
the Vision System from the Company and will lease those systems to DSI Leasing
Corporation, a wholly owned subsidiary of the Company, 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.
Effective June 28, 1996, the Company acquired substantially all of the
assets of Neptune in a transaction valued at $2,061,215, including the issuance
of 750,000 shares of Common Stock and the assumption of $515,796 of
indebtedness. In connection with this acquisition, the Company formed a
subsidiary corporation named The Neptune Group, Inc. ("TNG"). TNG specializes in
the area of medical and computer equipment leasing. TNG is currently operating
the sale and leaseback program for the Vision System. TNG currently provides
maintenance services under the former Neptune leases and plans to continue to
develop leasing relationships with other third parties.
The Company is also a party to a Customer Agreement, a Vision Base System
Installation Agreement, a Servicing Agreement, and other related agreements,
each dated March 1, 1996 with IBM Corporation (collectively, the "IBM
Agreement"), whereby IBM will assist the Company by providing installation and
maintenance and warranty services for the Vision System to end users of the
system. IBM will provide the services on a nationwide basis at the end-users
facilities which are located throughout the United States.
In June 1996, the Company completed the private placement of 1,631 shares of
7% Cumulative Convertible Preferred Stock, Series A (the "Series A Shares"),
resulting in net proceeds to the Company of $1,500,520. The Series A Shares have
a stated value of $1,000 per share and each share is convertible into the number
of shares of Common Stock determined by dividing $1,000 by the lesser of (i) the
average closing bid price of the Common Stock for the five trading days
immediately prior to June 27, 1996 or (ii) 78% of the average closing bid price
of the Common Stock for the five trading days immediately prior to the date of
conversion. See "Description of Securities." In connection with this private
placement, the Company issued to the purchaser of the Series A Shares a warrant
(the "June 1996 Warrants") to purchase an aggregate of 100,000 shares of Common
Stock at a per share price of $4.00, subject to adjustment in certain
circumstances. The July 1996 Warrants expire on June 27, 1999.
Statements contained in this Registration Statement which are not historical
facts are forward-looking statements, as that term is defined in The Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks and uncertainties which could cause actual results to differ
materially from those projected. Such risks and uncertainties include
fluctuations in customer demand, and timing and acceptance of new product
introductions and general economic conditions, as well as other risks detailed
in the Company's filings with the Securities and Exchange Commission, including
its Form S-4 filing and its most recent Form S-3 filing.
USE OF PROCEEDS
Other than the exercise price of such of the Warrants and Options as may be
exercised, the Company will not receive any of the proceeds from the sale of the
Common Stock offered hereby. The Company will pay the costs of this offering,
which are estimated to be $12,000. The Selling Securityholders are not obligated
to exercise their Warrants or Options, as the case may be, and there can be no
assurance that they will choose to exercise all or any of such Warrants or
Options. The gross proceeds to the Company in the event that all of the Warrants
and Options are exercised would be $4,420,250 (800,000 shares issued upon
exercise of the Warrants bearing an exercise price of $2.25 per share, 240,500
shares issued upon exercise of Options bearing an exercise price of $.50 per
share, and 2,500,000 shares issued upon exercise of Options bearing an exercise
price of $1.00 per share).
The Company intends to apply the net proceeds it receives from the exercise
of the Warrants and the Options, to the extent any are exercised, to augment its
working capital for general corporate purposes.
8
SELLING SECURITYHOLDERS
The following table sets forth certain information as of August 10, 1996
with respect to the Selling Securityholders. The shares to be sold by the
Selling Securityholders represent shares of Common Stock currently owned by the
Selling Securityholders or which may be acquired by them upon exercise of the
Warrants or Options. Beneficial ownership after this offering will depend on the
number of shares of Common Stock actually sold by the Selling Securityholders.
Shares of Common Stock Shares of Shares of Common Stock
Name of Beneficially Owned Prior Common Stock Beneficially Owned After
Securityholder to the Offering Offered Hereby the Offering(1)
Number % of Class Number Number Percent
AMC Consumer 950,000(2) 7.3% 950,000 0 0
Services LLC
Mark A. Babin(3) 571,250 4.3% 500,000 71,250(7) .5%
David A. Horowitz(4) 913,447 6.7% 862,500 50,947 .3%
Robert B. Hyte(5) 1,067,8007 7.8% 878,000 189,800 1.5%
James M. Keller(6) 583,000 4.4% 500,000 83,000 .6%
(1) Assumes that the Selling Securityholders dispose of all of the shares of
Common Stock covered by this Prospectus and do not acquire any additional
shares of Common Stock.
(2) Includes 800,000 shares of the Company's Common Stock underlying the
Warrants.
(3) Mark A. Babin, has served as President, Chief Executive Officer, Chief
Financial Officer, and Director of RFG following the Mergers, the Company,
since January 15, 1995, and served as a consultant to RFG's Chief Financial
Officer from June 1994 to January 15, 1995. Prior to 1994, Mr. Babin was
President of Babin & Company, P.C., a consulting firm assisting development
stage companies in various industries. The total for Mr. Babin includes
500,000 shares of the Company's Common Stock underlying the Options.
(4) David A. Horowitz has served as President, Chief Executive Officer,
Treasurer, and a Director of DSI since January 1993. The total for Mr.
Horowitz includes 862,500 shares of the Company's Common Stock underlying
the Options.
(5) Robert B. Hyte has served as Executive Vice-President, Secretary, Chief
Science Officer, and a Director of DSI since January 1993. Mr. Hyte is the
author of Screenware, a 4th generation computer programming language used to
simplify the development of computer programs written for the Pick operating
system. The total for Mr. Hyte includes 878,000 shares of the Company's
Common Stock underlying the Options.
(6) James M. Keller, Jr., has served as Secretary, Treasurer, and Director of
RFG and, following the Mergers, the Company, since April 15, 1993. Mr.
Keller has an undergraduate degree from the University of Michigan and a law
degree from Wayne State University. He is a partner in the law firm of
DeGroot, Keller & Vincent, Grand Rapids, Michigan, with which he became
associated in 1986. The total for Mr. Keller includes 500,000 shares of the
Company's Common Stock underlying the Options.
(7) Includes 50,000 shares of the Company's Common Stock underlying an option.
9
DESCRIPTION OF SECURITIES
The Company has authorized 30,000,000 shares of Common Stock and 1,000,000
of preferred stock ("Preferred Stock"). As of the date of this Prospectus,
12,796,332 shares of Common Stock were issued and outstanding; and a total of
1,631 shares of Preferred Stock in one series were issued and outstanding.
The Company's Board of Directors has the authority, without further action
by the shareholders, to issue additional shares of Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
granted to or imposed upon any series of unissued shares of Preferred Stock and
to fix the number of shares constituting any series and the designation of such
series, without any further vote or action by the shareholders. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the shareholders, may
discourage bids for the Company's Common Stock at a premium over the market
price of the Common Stock, and may adversely affect the market price of and
other rights of the holders of Common Stock.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and is
qualified in its entirety by, the amended Certificate of Incorporation of the
Company and the Bylaws of the Company which are included as exhibits to the Form
S-4, and by the provisions of applicable law.
Common Stock
Holders of Common Stock are entitled to one vote per share on all matters on
which shareholders are entitled to vote. Subject to the rights of holders of any
class or series of shares, including holders of Preferred Stock, having a
preference over the Common Stock as to dividends or upon liquidation, holders of
Common Stock are entitled to such dividends as may be declared by the Company's
Board of Directors out of funds lawfully available therefor, and are entitled
upon liquidation to receive pro rata the assets available for distribution to
shareholders. Holders of the Common Stock have no preemptive, subscription or
conversion rights. The Common Stock is not subject to assessment and has no
redemption provisions.
7% Cumulative Convertible Preferred Stock, Series A
The Series A Shares consist of a total of 1,631 shares which have a stated
value of $1,000.00 per share. Each share is convertible into the number of
shares of Common Stock determined by dividing $1,000 by the lesser of (i) the
average closing bid price of the Common Stock for the five trading days
immediately prior to June 27, 1996 or (ii) 78% of the average closing bid price
of the Common Stock for the five trading days immediately prior to the date of
conversion. The conversion provisions are subject to adjustment in certain
circumstances. Series A Shares are convertible at any time subject to the
following conditions: (i) only 33-1/3% of the Series A Shares may be converted
from and after August 19, 1996; (ii) only 66-2/3% of the Series A Shares may be
converted from and after September 12, 1996; and (iii) all of the Series A
Shares may be converted on or after October 7, 1996. If, at any time after
October 7, 1996, one of the following events occurs, the holder of Series A
Shares may convert such shares into a secured demand note of the Company having
an original principal balance equal to $1,000 multiplied by the number of shares
to be converted: (i) the Company's total assets and total stockholders equity,
as calculated in accordance with generally acceptable accounting principles
("GAAP") fails to equal or exceed $4,000,000 and $2,000,000, respectively, or
the Company otherwise fails to meet the minimum financial requirements for
listing or maintaining a listing of its Common Stock on The Nasdaq Small Cap
Market; (ii) the Company fails to issue and deliver to the holder of the Series
A Shares certificates representing shares of Common Stock issuable upon the
conversion of such shares; (iii) the book value of the assets of the Company's
subsidiary, Neptune, that are free of any security interest, lien, pledge or
other encumbrance, as calculated in accordance with GAAP, shall fail to equal or
exceed the aggregate original issue price of the Series A Shares then
outstanding.
Cumulative dividends on the Series A Shares accrue at the rate of 7% per
annum and are payable when, as, and if declared by the Board of Directors of the
Company. No dividends may be paid on the Common Stock or other series junior to
the Series A Shares unless all accrued dividends have been paid on the Series A
Shares. On liquidation of the Company, holders of the Series A Shares will be
entitled to receive, before any distribution to holders of Common Stock or other
series junior to the Series A Shares, liquidation distributions equal to the
stated value per Series A Share, plus accrued and unpaid dividends. The Company
may redeem the Series A Shares, upon 30 days prior written notice, at
10
any time up to and including September 12, 1996, at the redemption price of
$1,150.00 per share and at any time thereafter at the redemption price of
$1,200.00 per share. The Series A Shares have no voting rights except as
otherwise provided by law or the Certificate of Incorporation. As of July 5,
1996, all of the Series A Shares were held by one shareholder of the Company.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is American
Securities Transfer, Incorporated.
PLAN OF DISTRIBUTION
The Common Stock offered hereby is being sold by the Selling Securityholders
acting as principal for their own accounts. The Company will receive none of the
proceeds from such offering, with the exception of the exercise price of such
Warrants and Options as may be exercised.
The distribution of the shares of Common Stock by the Selling
Securityholders is not subject to any underwriting agreement. The Company
expects that the Selling Securityholders will sell the shares covered by this
Prospectus through customary brokerage channels, either through broker-dealers
acting as principals, who may then resell the shares in the over-the-counter
market, or at private sales or otherwise, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Securityholders may effect such transactions by
selling shares through broker-dealers, and such broker-dealers will receive
compensation in the form of commissions from the Selling Securityholders and/or
the purchasers of the Common Stock for whom they may act as agent (which
compensation may be in excess of customary commissions). The Selling
Securityholders and any broker-dealers that participate with such Selling
Securityholders in the distribution of the Common Stock may be deemed to be
underwriters and any commission received by such broker-dealers and any profit
on resale of the Common Stock sold by them might be deemed to be underwriting
discounts or commissions under the Securities Act. All expenses of registration
incurred in connection with this offering are being borne by the Company, but
all brokerage commissions and other similar expenses incurred by any Selling
Securityholder will be borne by such Selling Securityholder.
At the time a particular offer of the Common Stock is made, to the extent
required, a supplement to this Prospectus will be distributed which will
identify and set forth the aggregate amount of Common Stock being offered and
the terms of the offering.
The Selling Securityholders are not restricted as to the price or prices at
which they may sell the Common Stock. Sales of shares of the Common Stock at
less than market prices may depress the market price of the Company's Common
Stock. Moreover, the Selling Securityholders are not restricted as to the number
of shares which may be sold at any one time, and it is possible that a
significant number of shares could be sold at the same time.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Common Stock may not simultaneously engage in
market making activities with respect to the Common Stock for a period of nine
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, the Selling Securityholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation rules 10b-6 and 10b-7, which provisions
may limit the timing of purchases and sales of the shares by the Selling
Securityholders.
In order to comply with certain states' securities laws, if applicable, the
shares may be sold in such jurisdiction only through registered or licensed
brokers or dealers. In certain states the shares may not be sold unless the
shares have been registered or qualified for sale in such state, or unless an
exemption from registration or qualification is available and is obtained.
11
EXPERTS
Certain financial statements of Resource Finance Group, Ltd. and Digital
Sciences, Inc. are incorporated by reference in this Prospectus from the
Company's Form S-4 and the Company's Form 8-K dated April 12, 1996 have been
audited by Wilber & Townshend, P.C., independent certified public accountants,
as indicated in their reports with respect thereto, and included herein in
reliance upon the authority of said firm as experts in auditing and accounting
in giving said reports.
LEGAL MATTERS
The legality of the shares offered under the Registration Statement of which
this Prospectus is a part will be passed upon for the Company by Snell & Wilmer
L.L.P., special counsel to the Company.
12
No dealer, sales representative or other person has been authorized to give
any information or to make any representation not contained in this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company, the Selling Securityholders, or
any other person. This Prospectus does not constitute an offer of any securities
other than those to which it relates or an offer to sell, or a solicitation of
an offer to buy, to any person in any jurisdiction where such an offer to buy,
to any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
and thereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
----------------------------------------
----------------------------------------
3,690,500 Shares of
Common Stock
INTELLIGENT DECISION
SYSTEMS, INC.
-----------------
_________________
TABLE OF CONTENTS PROSPECTUS
Page _________________
Available Information...........2
Information Incorporated
by Reference..................2
The Company.....................8
Risk Factors....................3 August __, 1996
Use of Proceeds.................9
Selling Securityholders.........9
Description of Securities......10
Plan of Distribution .........11
Legal Opinions.................12
Experts........................12
================================= =============================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS.
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that expenses in connection with the distribution
described in this Registration Statement will be as follows. All expenses
incurred with respect to the distribution will be paid by the Company.
SEC registration fee.....................$2,400*
Printing expenses....................... 250*
Accounting fees and expenses.......... 120*
Legal fees and expenses.... 8,000*
Fees and expenses for qualification
under state securities laws 1,000*
Miscellaneous.......................... 250*
---------
Total................................12,020*
*Estimated
ITEM 15.INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the corporation's best interests, and for criminal proceedings,
had no reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation in the performance of his duty. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or directly actually and reasonably incurred.
In accordance with the Delaware Law, the Certificate of Incorporation of the
Company contains a provision to limit the personal liability of the directors
for violations of their fiduciary duty. This provision eliminates each
director's liability to the Company or its respective securityholders for
monetary damages except (i) for any breach of the director's duty of loyalty to
the Company or its securityholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware Law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence.
1
Section 6.4 of the By-Laws of the Company provides for indemnification of
directors, officers and employees as follows:
ARTICLE VIII
INDEMNIFICATION
Each Director and officer of the Corporation now or hereafter serving as
such shall be indemnified by the Corporation against any and all claims and
liabilities to which he or she has or may become subject by reason or serving or
having served as such Director or officer, or by reason of any action alleged to
have been taken, omitted, neglected as such Director or officer and the
Corporation shall reimburse each such person for all legal expenses reasonably
incurred in connection with any such claim or liability or wrong payments made
by him or her in satisfaction of such claim or claims, either by compromise or
in satisfaction of judgment. No such person shall be indemnified against, or be
reimbursed for any expense or payments incurred in connection with, any claim or
liability established to have arisen out of his own wilful misconduct or gross
negligence.
The right of indemnification hereinabove provided for shall not be exclusive
of any right to which any Director or officer of the Corporation may otherwise
be entitled by law.
ITEM 16.EXHIBITS
The following exhibits are filed herewith or incorporated by reference as a
part of this Registration Statement:
4.1 Form of Common Stock certificate (previously filed as exhibit 4.01 to
the Company's registration statement on Form S-4, Registration
No. 33-93058, and incorporated herein by reference)
5.1 Opinion of Snell & Wilmer L.L.P.
23.1 Consent of Snell & Wilmer L.L.P. (included in Exhibit 5.1)
23.2 Consent of Wilber & Townshend
ITEM 17.UNDERTAKINGS
A. The undersigned Company hereby undertakes:
1. To file, during any period in which offers or sales are being made of
the securities registered hereby, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii)To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 42(b) if, in the
aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
II-2
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that (i) and (ii) do not apply if the registration
statement is on Form S-3 or Form S-8, and the information required to be
included in a post-effective amendment is contained in periodic reports
filed by the registrant pursuant to section 13 or section 14(d) of the
Exchange Act that are incorporated by reference in the registration
statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
B. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing of Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized in the City of Grand Rapids, State of Michigan, on August 14, 1996.
INTELLIGENT DECISION SYSTEMS, INC.
By: /s/ Mark Babin
Mark A. Babin
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons of Intelligent
Decision Systems, Inc., in the capacities and on the dates respectively
indicated.
Signature Title Date
/s/ Mark A. Babin President, Chief Executive Officer, August 14, 1996
Mark A. Babin Chief Financial and Accounting
Officer and Director
/s/ Raymond F. Blue Director August 14, 1996
Raymond F. Blue
/s/ David A. Horowitz Chairman of the Board and Director August 14, 1996
David A. Horowitz
/s/ Robert B. Hyte Director August 14, 1996
Robert B. Hyte
/s/ James M. Keller, Jr. Director, Secretary, Treasurer August 14, 1996
James M. Keller, Jr.
II-4
INDEX TO EXHIBITS
Exhibit No. Exhibit
4.1* Form of Common Stock Certificate of IDS
5.1 Opinion of Snell & Wilmer L.L.P. as to legality of securities
being registered
24.1 Consent of Snell & Wilmer L.L.P. (included in exhibit 5.1)
24.2 Consent of Wilber & Townshend
* Filed as an exhibit to the Company's Registration Statement on Form S-4,
Registration No. 33-93058, and incorporated herein by reference.
II-5