<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
Commission File Number 0-20979
INDUSTRIAL SERVICES OF AMERICA, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
Florida 59-0712746
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
7100 Grade Lane, PO Box 32428
Louisville, Kentucky 40232
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(502) 368-1661
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant (1) has filed all Reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 1, 1997: 1,929,600.
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets
June 30, 1997 and December 31, 1996 3
Condensed Statements of Operations
three months ended June 30, 1997 5
and 1996
Condensed Statements of Operations
six months ended June 30, 1997 6
and 1996
Condensed Statements of Cash Flows-
six months ended June 30, 1997
and 1996 7
Notes to Condensed Consolidated
Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10
Part II. Other Information
Item 5. 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
INDUSTRIAL SERVICES OF AMERICA, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,836,609 $ 1,371,435
Receivables:
Trade, net of allowance for doubtful
accounts of $16,000 in 1997 and 1996 4,098,933 3,300,728
Related parties 86,218 100,360
Income tax refunds 281,755 1,203,900
Other 16,796 10,599
----------- -----------
Total receivables 4,483,702 4,615,587
Net investment in sales-type leases 3,898 8,435
Inventories 637,702 433,103
Deferred income taxes 45,400 45,400
Other 146,716 158,385
----------- -----------
Total current assets 7,154,027 6,632,345
Net property and equipment 3,057,663 2,704,192
Deposits for property and equipment 310,415 0
Investment in joint venture 0 15,684
Other assets 43,470 87,247
----------- -----------
TOTAL ASSETS $10,565,575 $ 9,439,468
=========== ===========
</TABLE>
See accompanying notes
3
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
CONDENSED BALANCE SHEETS
CONTINUED
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Current liabilities
Accounts payable $ 5,721,188 $ 4,790,710
Income taxes payable 82,000 0
Current maturities of long-term debt 755,042 611,774
Affiliated company payable 0 179,778
Other current liabilities 119,290 82,019
------------ ------------
Total current liabilities 6,677,520 5,664,281
Long-term debt 5,334 5,356
Deferred income taxes 161,000 161,000
Stockholders' equity
Common stock, $.01 par value,
10,000,000 shares authorized;
1,957,500 shares issued as of
June 30, 1997 19,575 19,575
Additional paid-in capital 1,405,000 1,405,000
Retained earnings 2,305,146 2,192,256
Treasury stock, at cost, 27,900 shares (8,000) (8,000)
------------ ------------
Total stockholders' equity 3,721,721 3,608,831
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,565,575 $ 9,439,468
============ ============
</TABLE>
See accompanying notes
4
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
REVENUE
Net equipment and scrap sales $ 2,165,605 $ 2,549,657
Service and consulting revenue 7,789,336 6,395,296
Rental income 133,246 88,095
------------ ------------
Total revenue 10,088,187 9,033,048
COST AND EXPENSES
Costs of sales:
Equipment and scrap 1,292,008 1,533,460
Service and consulting 7,465,157 6,026,147
------------ ------------
Total cost of sales 8,757,165 7,559,607
Direct expenses applicable to rental income 31,246 27,490
Selling, general and administrative expenses 1,330,416 1,327,056
------------ ------------
Total cost and expenses 10,118,827 8,914,153
------------ ------------
Income (loss) from operations (30,640) 118,895
Other income, net 40,562 13,106
------------ ------------
Income before provision for income taxes 9,922 132,001
Provision for income taxes 5,000 51,000
------------ ------------
NET INCOME $ 4,922 $ 81,001
============ ============
EARNINGS PER COMMON SHARE
Primary $ 0.01 $ 0.04
============ ============
Fully diluted $ 0.01 $ 0.04
============ ============
WEIGHTED AVERAGE SHARES
Primary 1,986,280 1,831,112
============ ============
Fully diluted 1,986,280 1,840,545
============ ============
</TABLE>
See accompanying notes
5
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
REVENUE
Net equipment and scrap sales $ 4,245,285 $ 5,196,910
Service and consulting revenue $14,623,760 $11,414,213
Rental income 272,463 181,488
----------- -----------
Total revenue 19,141,508 16,792,611
COST AND EXPENSES
Costs of sales:
Equipment and scrap 2,333,226 3,017,081
Service and consulting 14,012,152 10,794,365
----------- -----------
Total cost of sales 16,345,378 13,811,446
Direct expenses applicable to rental income 62,681 49,650
Selling, general and administrative expenses 2,608,265 2,395,083
----------- -----------
Total cost and expenses 19,016,324 16,256,179
----------- -----------
Income from operations 125,184 536,432
Other income, net 57,706 28,377
----------- -----------
Income before provision for income taxes 182,890 564,809
Provision for income taxes 70,000 215,000
----------- -----------
NET INCOME $ 112,890 $ 349,809
=========== ===========
EARNINGS PER COMMON SHARE
Primary $ 0.06 $ 0.19
=========== ===========
Fully diluted $ 0.06 $ 0.19
=========== ===========
WEIGHTED AVERAGE SHARES
Primary 1,986,280 1,831,112
=========== ===========
Fully diluted 1,986,280 1,840,545
=========== ===========
</TABLE>
See accompanying notes
6
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 112,890 $ 349,809
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 271,897 230,037
Increase (decrease) in cash resulting
from changes in:
Receivables 131,885 (515,218)
Inventories (204,559) (213,139)
Other assets 55,446 (4,709)
Accounts payable 930,478 501,055
Income taxes payable 82,000 (208,030)
Other current liabilities 37,271 (76,899)
----------- -----------
Net cash provided by operating activities 1,417,268 62,906
INVESTING ACTIVITIES
Investment in affiliate (179,778) 83,637
Proceeds from sale of investment 100,000
Purchase for investments (134,316)
Payments for property and equipment (475,368) (572,449)
Deposits for property and equipment (310,415)
Additions to notes receivables (233,789)
----------- -----------
Net cash used in investing activities (1,099,877) (622,601)
FINANCING ACTIVITIES
Payments on long-term debt (6,754) (10,755)
Proceeds from issuance of notes payable to bank 0 100,000
Proceeds from issuance of long-term debt 150,000
Investment in sales-type leases (2,463)
Proceeds from sales-type leases 4,537 16,230
Proceeds from issuance of stock options 250,000
----------- -----------
Net cash provided by financing activities 147,783 353,012
----------- -----------
Net increase (decrease) in cash 465,174 (206,683)
Cash at beginning of period 1,371,435 507,889
----------- -----------
CASH AT END OF PERIOD $ 1,836,609 $ 301,206
=========== ===========
</TABLE>
See accompanying notes
7
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and Article 10 of Regulation S-X. They do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements. The information furnished includes all adjustments which
are, in the opinion of management, necessary to present fairly the Registrant's
financial position as of June 30, 1997 and the results of its operations and
changes in cash flows for the periods ended June 30, 1997 and 1996. Results of
operations for the period ended June 30, 1997 are not necessarily indicative of
the results that may be expected for the entire year. Additional information,
including the audited 1996 Financial Statements and the Summary of Significant
Accounting Policies, is included in the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996 on file with the Securities and Exchange
Commission. Net income and earnings per share for the revised six-month periods
ended June 30, 1996 differ from amounts previously reported on the Registrant's
filing on form 10-QSB for the second quarters of 1996. Such changes are the
result of fourth quarter 1996 charges and adjustments as described on Note 14
to the Financial Statements filed as part of the 1996 Form 10-K.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- --------
<S> <C> <C>
Equipment and parts $133,834 $ 84,858
Scrap materials 503,868 348,245
-------- --------
Total inventories $637,702 $433,103
======== ========
</TABLE>
8
<PAGE>
3. Commitments
The Registrant has purchase agreements with Industrial Hydraulics for a GC-K
100 Baler and a H-L 800 shearer/baler/logger. As of June 30, 1997, deposits made
toward this equipment totaled $310,415. Remaining commitments relating to these
purchase agreements, as of June 30, 1997, total $514,602. This equipment is to
be received and placed in service during the third quarter 1997.
4. Subsequent Event
Subsequent to June 30, 1997, the Registrant refinanced certain debt. Under the
refinance agreement this debt matures in June 1998. Therefore, as of June 30,
1997, debt related to the refinance agreement is classified as short-term.
5. New Accounting Pronouncements
In March 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which
generally simplified the calculation requirements for earnings per share. Basic
earnings per share for year-end 1997 and later will be calculated solely on
average common shares outstanding. Diluted earnings per share will reflect the
potential dilution of stock options and other common stock equivalents, as well
as securities which are convertible into common stock. All prior calculations
will be restated at December 31, 1997 and will restate all prior periods at
that time. Implementation before December 31, 1997, including 1997 interim
periods, is prohibited.
In June 1997, the FASB issued SFAS No. 188, Reporting Comprehensive Income.
This standard requires that certain items currently reported as direct changes
in separate components of stockholders' equity be reported in a separate
statement of comprehensive income or is included as a separate, additional
component of the statement of income. Such items include foreign currency
translation, accounting for futures contracts, accounting for defined benefit
pension plans, and accounting for certain investments in debt and equity
securities. If a company has no items of comprehensive income in any periods
reported a statement of comprehensive income is not required. The Registrant
has not had any items of comprehensive income in prior periods. This standard
is effective for the Registrant in 1998.
9
<PAGE>
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. This standard changes the way public
companies report information about operating segments in annual financial
statements and requires that those companies report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and
major customers. Operating segments are parts of a company for which separate
information is available, which is evaluating performance. Required disclosures
for operating segments include total segment revenues, total segment profit or
loss, and total segment assets. The standard also requires disclosure regarding
revenues derived from products and services (or similar groups of products or
services), countries in which the company derives revenue or holds assets, and
about major customers, regardless of whether this information is used in
operating decision making. Certain additional descriptive information to help
the financial statement reader understand how the information was developed and
how it compares to total amounts reflected in the company's financial
statements are also required. The Registrant is required to adopt the
disclosure requirements in its 1998 annual report, and in interim periods in
1999. The 1999 interim period disclosures are required to include comparable
1998 information.
6. Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation. These reclassifications have no impact on net
income or stockholder's equity as previously reported.
MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
The following table presents, for the periods indicated, the percentage
relationship which certain captioned items in the Registrant's Statements of
Operations bear to total revenues and other pertinent data:
10
<PAGE>
<TABLE>
<CAPTION>
Six Months ended June 30,
1997 1996
------ ------
<S> <C> <C>
Statements of Operations Data:
Total Revenue............................ 100.0% 100.0%
Cost of Sales............................ 85.4% 82.3%
Selling, general and administrative
expenses................................ 13.6% 14.3%
Income from operations................... 00.7% 3.2%
</TABLE>
Six months ended June 30, 1997 compared to six months ended June 30, 1996
Total revenue increased 14% from $16,792,611 in 1996 to $19,141,508 in
1997. This increase in total revenue is the result of: (i) service and
consulting revenue increasing 28% from $11,414,213 in 1996 to $14,623,760
in 1997 and (ii) a decrease in net equipment and scrap sales of 18% from
$5,196,910 in 1996 to $4,245,285 in 1997. While the volume related to scrap
recycling operations and corrugated paper recycling operations both increased,
these increases were more than offset by a decrease in the market prices in
1997 compared to 1996. Rental income increased 50% from $181,488 in 1996 to
$272,463 in 1997 due to an increase in the number of equipment units leased
by the Registrant to customers.
Cost of sales increased 18% from $13,811,446 in 1996 to $16,345,378 in
1997. As a percentage of total revenue, these costs were 82.3% and 85.4% in
1996 and 1997, respectively. This increase was primarily related to service and
consulting costs increasing 30% from $10,794,365 in 1996 to $14,012,152 in
1997. Equipment and scrap cost of sales decreased 23% from $3,017,081 in 1996
to $2,333,226 in 1997.
Direct expenses applicable to rental income increased 26% from $49,650 in
1996 to $62,681 in 1997, primarily due to the increase in the units of
equipment leased by the Registrant to customers. As a percentage of rental
income, these costs were 27% and 23% in 1996 and 1997, respectively.
Selling, general and administrative expenses increased 9% from $2,395,083
in 1996 to $2,608,265 in 1997. However, as a percentage of total revenue,
selling, general and administrative expenses remained constant at approximately
14% in 1996 and 1997.
11
<PAGE>
Depreciation expense increased 18% from $230,037 in 1996 to $271,897 in 1997
due to the purchase of new operational and rental fleet equipment totaling
$475,368. Interest expense increased 12% from $24,885 in 1996 to $27,881 in
1997 due to increased financing related to the purchase of new equipment.
Expenses to related parties increased 1% from $195,550 in 1996 to $197,000
in 1997. The commissions expense decreased 15% from $105,550 in 1996 to $92,000
in 1997. Rent expense increased 17% from $90,000 in 1996 to $105,000 in 1997,
primarily due to the Registrant renting additional properties from K & R, an
affiliated company, due to the continuing growth of business.
Effective May 1, 1997, the Registrant entered into a Management Agreement
with MGM Services, Inc. ("MGM") (the "Management Agreement") whereby the
Registrant, for a one-year term (subject to earlier termination under certain
conditions), shall manage and be responsible for the day-to-day business
operations of MGM and its subsidiaries. For further information see the
Registrant's Form 10-Q for the quarter ended March 31,1997 filed with the
Securities and Exchange Commission which is incorporated herein by reference.
On July 1, 1997, the Registrant acquired certain assets of TMG
Enterprises, Inc. ("TMG"), John Fellonneau and Mark Trakhtenberg pursuant to
the terms and conditions set forth in an Asset Purchase Agreement dated July 1,
1997, among the Registrant, TMG and Messrs. Fellonneau and Trakhtenberg. TMG
owned and operated a non-ferrous scrap metal recycling facility in Louisville,
Kentucky known as "The Metal Center". The Registrant is utilizing the assets to
operate a non-ferrous scrap metal recycling facility under the name "ISA
Recycling" at the same location that "The Metal Center" formerly operated. For
further information see the Registrant's Form 8-K filed on July 15, 1997 with
the Securities and Exchange Commission which is incorporated herein by
reference.
12
<PAGE>
Three months ended June 30, 1997 compared to three months ended June 30, 1996
The following table presents, for the periods indicated, the percentage
relationship which certain captioned items in the Registrant's Statements of
Operations bear to total revenues and other pertinent data:
13
<PAGE>
<TABLE>
<CAPTION>
Three Months ended June 30,
1997 1996
------ -------
<S> <C> <C>
Statements of Operations Data:
Total Revenue................................ 100.0% 100.0%
Cost of Sales................................ 86.8% 83.7%
Selling, general and administrative
expenses.................................... 13.1% 14.7%
Income from operations....................... (0.3%) 1.3%
</TABLE>
Total revenue increased 12% from $9,033,048 in 1996 to $10,088,187 in
1997. This increase in total revenue is the result of: (i) Service and
consulting revenues increasing 22% from $6,395,296 in 1996 to $7,789,336 in
1997 and (ii) a decrease in net equipment and scrap sales of 15% from
$2,549,657 in 1996 to $2,165,605 in 1997. While the volume related to scrap
recycling operations and corrugated paper recycling operations both increased,
these increases were more than offset by a decrease in the market prices in
1997 compared to 1996. Rental income increased 51% from $88,095 in 1996 to
$133,246 in 1997 due to an increase in the number of equipment units leased by
the Registrant to customers.
Cost of sales increased 16% from $7,559,607 in 1996 to $8,757,165 in 1997.
As a percentage of total revenue, these costs were 83.7% and 86.8% in 1996 and
1997, respectively. This increase was primarily related to service and
consulting costs increasing 24% from $6,026,147 in 1996 to $7,465,157 in 1997.
Equipment and scrap cost of sales decreased 16% from $1,533,460 in 1996 to
$1,292,008 in 1997.
Direct expenses applicable to rental income increased 14% from $27,490 in
1996 to $31,246 in 1997, primarily due to the increase in the units of
equipment leased by the Registrant to customers. As a percentage of rental
income, these costs were 31% and 23% in 1996 and 1997, respectively.
Selling, general and administrative expenses increased 1% from $1,327,056
in 1996 to $1,330,416 in 1997. However, as a percentage
14
<PAGE>
of total revenue, selling, general and administrative expenses remained
constant at approximately 14% in 1996 and 1997. Depreciation expense increased
11% from $122,455 in 1996 to $134,174 in 1997 due to the purchase of new
operational and rental fleet equipment totaling $475,368. Interest expense
remained constant at approximately $14,000.
Expenses to related parties decreased 5% from $73,926 in 1996 to $197,000
in 1997. The commissions expense increased 65% from $28,926 in 1996 to $47,650
in 1997. Rent expense decreased 50% from $45,000 in 1996 to $22,500 in 1997.
Financial Condition at June 30, 1997 Compared to December 31, 1996
Accounts receivable-trade increased $798,205 from $3,330,728 as of
December 31, 1996 to $4,098,933 as of June 30, 1997. The increase in accounts
receivable-trade was due to higher volumes related to the scrap recycling
operations, corrugated paper recycling operations, service and consulting
servicing and rental operations.
Accounts payable-trade increased $930,478 from $4,790,710 as of December
31, 1996 to $5,721,188 as of June 30, 1997 primarily due to service and
consulting business increases.
Working Capital decreased $491,557 from $968,064 as of December 31, 1996
to $476,507 as of June 30, 1997. This decrease was primarily due to an increase
in accounts payable of $930,478 from $4,790,710 at December 31, 1996 to
$5,721,188 at June 30, 1997 at collection of income tax refund of approximately
$922,000, which was offset by inventories increasing $204,599 from $433,103 as
of December 31, 1996 to $637,702 as of June 30, 1997, and trade accounts
receivable increasing $798,205 from $3,300,728 at December 31, 1996 to
$4,098,933 at June 30, 1997.
Liquidity and Capital Resources
As of June 30, 1997 the Registrant held cash and cash equivalents of
$1,836,609.
The Registrant derives its revenues from a variety of sources, including
customer services, equipment sales, consulting fees and from its scrap metal
and recycling operations. The scrap metal and recycling operations comprised
approximately 85% and 60% of the Registrant's income before provision for
income taxes for the years ended December 31, 1996 and 1995 respectively.
The Registrant currently maintains a working capital line of credit with
the Mid-America Bank of Louisville and Trust Company (the "Bank") in the amount
of $2,000,000. Outstanding principal under this credit facility (the "Credit
Facility") bears interest based at prime rate plus a fee of .005. The maturity
date under this Credit Facility is June 30, 1998. As of June 30, 1997,
approximately $750,000 was outstanding under this Credit Facility.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On April 21, 1997, the Registrant entered into Stock Option Agreements
with Richard Bolton ("Bolton") and Joseph Turchyn ("Turchyn"), respectively.
Pursuant to the terms of these agreements, Bolton and Turchyn have each been
granted options to purchase 125,000 shares of common stock of the Registrant at
a purchase price of $5.50 per share. Both Bolton and Turchyn provide financial
and advisory consulting services for the Registrant. Under the terms of the
option agreement, Bolton and Turchyn have until April 21, 2000 to exercise
their respective options to purchase shares. To date, neither Bolton nor
Turchyn have exercised their respective options to purchase any shares.
On July 1, 1997, the Registrant acquired certain assets of TMG
Enterprises, Inc. ("TMG"), John Fellonneau and Mark Trakhtenberg pursuant to
the terms and conditions set forth in an Asset Purchase Agreement dated July 1,
1997, among the Registrant, TMG and Messrs. Fellonneau and Trakhtenberg. TMG
owned and operated a non-ferrous scrap metal recycling facility in Louisville,
Kentucky known as "The Metal Center". The Registrant is utilizing the assets to
operate a non-ferrous scrap metal recycling facility under the name "ISA
Recycling" at the same location that "The Metal Center" formerly operated. For
further information see the Registrant's Form 8-K filed on July 15, 1997 with
the Securities and Exchange Commission which is incorporated herein by
reference.
16
<PAGE>
On July 10, 1997, the Registrant advised Mather Hamilton & Company
("Mather") that the Registrant was discontinuing Mather's services as the
Registrants' independent auditor. On July 29, 1997, the Registrant engaged
Crowe, Chizek to serve as the Registrant's certified public accountants. For
further information see the Registrant's Form 8-K filed with the Securities
and Exchange Commission on July 15, 1997 which is incorporated herein by
reference.
On July 18, 1997, the shareholders of MGM held a meeting in Houston, Texas
to vote on the proposed merger with the Registrant. Approximately, 70% of MGM's
shareholders voted in favor of the proposed merger and approximately 25% voted
against the proposed merger; 5% abstained. Based on the terms of the Merger
Agreement between MGM and the Registrant, the merger was not to be consummated
unless 100% of the shareholders of MGM approved of the merger. Accordingly, the
parties are currently re-negotiating the terms of the potential merger between
MGM and the Registrant. For further information see the Registrant's Form 10-Q
for the quarter ended March 31,1997 filed with the Securities and Exchange
Commission which is incorporated herein by reference.
On July 22, 1997 the Board of Directors filled the vacancy that existed on
the Board of Directors by electing Peter Cullinan to serve on the Board of the
Registrant until the next annual meeting of shareholders.
Item 6. Exhibits and Reports on Form 8-K
The Registrant filed a Form 8-K with the Securities and Exchange
Commission on May 9th, 1997 with respect to Item 2 "Acquisition or Disposition
of Assets."
The Registrant filed two (2) Form 8-K's with the Securities and Exchange
Commission on July 15, 1997 with respect to Item 2 "Acquisition or Disposition
of Assets" and Item 4. "Changes in Registrant's Certifying Accountant."
17
<PAGE>
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, thereunto duly authorized.
INDUSTRIAL SERVICES OF AMERICA, INC.
DATE: ______, 1997 /s/ Harry Kletter
----------------------------
President and Chief Executive
Officer
(Principal Executive and Financial
Officer)
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 000004187
<NAME> INDUSTRIAL SERVICES OF AMERICA, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,836,609
<SECURITIES> 0
<RECEIVABLES> 4,499,702
<ALLOWANCES> 16,000
<INVENTORY> 637,702
<CURRENT-ASSETS> 7,154,027
<PP&E> 4,360,772
<DEPRECIATION> 1,303,109
<TOTAL-ASSETS> 10,565,575
<CURRENT-LIABILITIES> 6,677,520
<BONDS> 5,334
0
0
<COMMON> 19,575
<OTHER-SE> 3,702,146
<TOTAL-LIABILITY-AND-EQUITY> 10,565,575
<SALES> 18,869,045
<TOTAL-REVENUES> 19,141,508
<CGS> 16,345,378
<TOTAL-COSTS> 18,988,443
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,881
<INCOME-PRETAX> 182,900
<INCOME-TAX> 70,000
<INCOME-CONTINUING> 112,890
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,890
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
