<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from __________ to __________
Commission File Number 1-9547
INTERSYSTEMS INC.
-----------------
(Exact name of registrant as specified in charter)
Delaware 13-3256265
----------------------------------- -------------------------
(State or other jurisdiction IRS Employer
of incorporation or organization) (Identification number)
8790 Wallisville Road
Houston, Texas 77029
---------------------
(Address of principal executive offices)
(Zip Code)
713-675-0307
----------------------------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No
----- -----
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
As of November 10, 1995 there were 4,366,566 shares of the Company's common
stock, par value $.01 per share, outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
September 30,1995
(In thousands, unaudited)
Assets
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 39
Trade Receivables 2,480
Inventories 1,827
Prepaid expenses and other 149
Note receivable - Sale of Trading Business 265
---------------
4,760
Equipment and leasehold improvements, net 5,454
Notes receivable - Sale of Trading Business 250
Other assets 392
---------------
$ 10,856
===============
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES:
Revolving line of credit $ 1,670
Current portion of long-term debt 615
Accounts payable 1,601
Accrued expenses 722
Due to Helm Resources, Inc. and subsidiaries 16
Note payable - affiliated company 320
---------------
4,944
Convertible subordinated debentures 2,950
Long term debt - net of current portion 1,882
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000 shares
authorized; none issued and outstanding
Common stock $.01 par value, 20,000
shares authorized; 4,366
shares issued and outstanding 44
Additional paid-in capital 2,886
Retained earnings (deficit) (1,750)
Note receivable - sale of common stock (100)
---------------
TOTAL SHAREHOLDERS' EQUITY 1,080
---------------
$ 10,856
===============
</TABLE>
page 2 of 11
<PAGE> 3
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts, Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Sept 30
1995 1994
---- ----
<S> <C> <C>
Net sales $ 4,747 $ 4,255
Cost of sales 3,254 2,935
---------------- ----------------
Gross Profit 1,493 1,320
Selling, general and administrative
expenses 1,215 1,103
---------------- ----------------
Operating income 278 217
Interest income (16) (10)
Interest expense 210 167
Acquisition costs 25 --
Special non recurring charge -- 300
---------------- ----------------
Net income (loss) $ 59 $ (240)
================ ================
Per share
Net income (loss) $ .01 $ (.06)
================ ================
Average number of common shares
outstanding 4,362,589 3,977,000
================ ================
</TABLE>
page 3 of 11
<PAGE> 4
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts, Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30
1995 1994
---- ----
<S> <C> <C>
Net sales $ 11,906 $ 11,602
Cost of sales 8,093 7,679
---------------- ----------------
Gross Profit 3,813 3,923
Selling, general and administrative
expenses 3,365 3,331
---------------- ----------------
Operating income 448 592
Interest income (55) (59)
Interest expense 613 495
Acquisition costs 49 --
Special non recurring charge -- 300
Debt conversion expense -- 46
---------------- ----------------
Net loss $ (159) $ (190)
================ ==============
Per share
Net loss $ (.04) $ (.05)
================ ==============
Average number of common shares
outstanding 4,156,159 3,811,000
================ ==============
</TABLE>
page 4 of 11
<PAGE> 5
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30
1995 1994
-------------------- -------------------
<S> <C> <C>
Net cash used by operating
activities $ (43) $ (504)
-------------------- -------------------
Cash flows from investing activities:
Acquisition of fixed assets (328) (305)
Proceeds from sale of trading business 265 265
-------------------- -------------------
Net cash provided (used)
in investing activities (63) (40)
-------------------- -------------------
Cash from financing activities:
Net borrowings 38 617
Repayments of long-term debt (315) (141)
Proceeds from promissory note 220 150
Issuance of common stock 170 --
Payments on promissory note to Helm -- (190)
-------------------- -------------------
Net cash provided by financing activities 113 436
-------------------- -------------------
Net increase (decrease) in cash 7 (108)
Cash at beginning of period 32 159
-------------------- -------------------
Cash at end of period $ 39 $ 51
==================== ===================
Cash paid during the periods for:
Interest $ 517 $ 248
Taxes $ 30 $ 8
</TABLE>
page 5 of 11
<PAGE> 6
InterSystems, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1995
Note 1. The accompanying condensed consolidated financial statements are
unaudited, but, in the opinion of management, include all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation of financial position and results of operations.
Interim results are not necessarily indicative of results for a full
year.
Note 2. In April 1993, the Company sold the net assets and operations related
to the Company's Trading Business to certain members of management.
The Company remains liable under certain operating leases which were
either sublet or assigned to the purchaser. The leases expire in
years through 1998 and, at September 30, 1995, have aggregate future
minimum rentals of approximately $715,000.
Note 3. During the nine months ended September 30, 1995, $100,000 principal
amount of 8% convertible debentures were converted into 67,568 shares
of common stock.
Note 4. The Company is considering the acquisition of Interpak Holdings, Inc.
which is wholly owned by Helm Resources, Inc.. The acquisition would
be subject to a number of conditions, including the arrangement of
financing. It is expected that the purchase price would consist of a
combination of shares of the Company's common stock, assumption of
existing Helm debentures by the Company and a cash down payment.
Note 5. In April 1995, the Company made an offer to issue new warrants to
purchase 275,000 shares of common stock at $1.50 per share to those
holders of $1 warrants for the purchase of 275,000 shares of common
stock, if they exercised the $1 warrant at a reduced price of $.60 per
share. The new warrants expire June 30, 2000 and the $1 warrants
expire April 30, 1996. All holders of the 275,000 warrants accepted
the offer and 275,000 shares of common stock were issued.
Note 6. In the third quarter of 1994, InterSystems Nebraska provided a
$300,000 special charge for damage to conveying equipment resulting
from a harmonic vibration which developed after installation of two
en-masse conveyors built for one of its customers. The charge is an
unusual one-time charge. The Company has built conveyors of that
length before and has never encountered a similar problem either
during product testing or after installation.
page 6 of 11
<PAGE> 7
Note 7. The Company has terminated its agreement to acquire privately-held
Metallurgical Technologies, Incorporated, a metals compounding company
based in Houston, Texas. Total costs for legal fees and feasibility
studies related to the proposed acquisition totaled $49,000 for the
nine months ended September 30, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company's operations consist of the custom compounding business operated by
Chemtrusion and the designing, manufacturing, selling and leasing of equipment
for the industrial and agricultural sectors of the economy operated by
InterSystems, Nebraska.
RESULTS OF OPERATIONS
Three Month Periods Ended September 30, 1995 and 1994
Net sales increased $492,000 (11.6%) for the three month period ending
September 30, 1995 (the "1995 period") compared to the three month period
ending September 30, 1994 (the "1994 period"). The increase is primarily due
to higher sales volumes of bulk material handling and industrial sampling
equipment at Nebraska.
Gross profit as a percentage of sales remained constant at 31% in the 1995 and
the 1994 periods.
Selling, general and administrative expenses increased approximately $112,000
from $1,103,000 in the 1994 period compared to $1,215,000 in the 1995 period.
InterSystems Nebraska's expenses increased approximately $88,000, primarily due
to an increase in professional fees ($21,000), salaries and bonuses ($26,000),
and other general and administrative ($41,000). Parent company's expenses
increased approximately $28,000, primarily due to an increase in office expense
and rent ($15,000), and other general and administrative ($13,000).
Chemtrusion's other general and administrative expenses decreased approximately
$4,000.
Interest expense increased approximately $43,000 in the 1995 period as compared
to the 1994 period. Parent company interest expense increased approximately
$15,000 due to interest expense incurred on additional borrowings.
Chemtrusion's interest expense increased approximately $22,000 due to the
financing of its new extruding line purchased in the first quarter of 1995.
InterSystems Nebraska's interest expense increased approximately $6,000 due to
an increase in the line of credit and loans for additional equipment.
The Company has terminated its agreement to acquire privately-held
Metallurgical Technologies, Incorporated, a metals compounding company based in
Houston, Texas. Costs related to the proposed acquisition totaled $25,000 for
the three months ended September 30, 1995.
page 7 of 11
<PAGE> 8
In the third quarter of 1994, InterSystems Nebraska provided a $300,000 special
charge for damage to conveying equipment resulting from a harmonic vibration
which developed after installation of two en-masse conveyors built for one of
its customers. The charge is an unusual one-time charge. The Company has
built conveyors of that length before and has never encountered a similar
problem either during product testing or after installation.
RESULTS OF OPERATIONS
Nine Month Periods Ended September 30, 1995 and 1994
There was an increase of $304,000 (2.6%) in net sales for the nine month period
ending September 30, 1995 (the "1995 period") compared to the nine month period
ending September 30, 1994 (the "1994 period"). Chemtrusion's sales increased
$205,000 (7.3%) which is attributable to an increase in tolling volume.
InterSystems Nebraska's sales increased $99,000 (1.1%) in the 1995 period as
compared to the 1994 period. Absent a one-time overseas sale of $850,000 in
the first quarter of 1994, sales in the 1995 period would have increased
$949,000 compared to the 1994 period.
Gross profit as a percentage of sales decreased to 32% in the 1995 period as
compared to 33.8% in the 1994 period. Chemtrusion's gross profit as a
percentage of sales decreased 2.3% to 31.2% in the 1995 period as compared to
33.5% in the 1994 period primarily as a result of higher direct labor costs and
an increase in property taxes. Nebraska's gross profit as a percentage of
sales was relatively constant between the two periods.
Interest expense increased approximately $118,000 in the 1995 period as
compared to the 1994 period. Chemtrusion's interest expense increased
approximately $70,000 due primarily to the financing of its new extruding line
purchased in the first quarter 1995. InterSystems Nebraska's interest expense
increased approximately $35,000 due primarily to an increase in the line of
credit and loans for additional equipment. Parent company interest expense
increased approximately $13,000 due to interest expense incurred on additional
borrowings.
The Company has terminated its agreement to acquire privately-held
Metallurgical Technologies, Incorporated, a metals compounding company based in
Houston, Texas. Costs related to the proposed acquisition totaled $49,000 for
the nine months ended September 30, 1995.
During the nine months ended September 30, 1994, $46,000 of debt conversion
expense was incurred due to the issuance of 30,711 additional shares of common
stock reflecting a reduced conversion price on the conversion of $175,000
principal amount of 10% convertible debentures.
In the third quarter of 1994, InterSystems Nebraska provided a $300,000 special
charge for damage to conveying equipment resulting from a harmonic vibration
which developed after installation of two en-masse conveyors built for one of
its customers. The charge is an unusual one-time charge. The Company has
built conveyors of that length before and has never encountered a similar
problem either during product testing or after installation.
page 8 of 11
<PAGE> 9
Liquidity and Capital Resources
Cash used by operating activities for the nine months ended September 30, 1995
amounted to $43,000; $328,000 was used for purchases of fixed assets; $315,000
was used for repayment of long-term debt. Proceeds of $265,000 were received
on the note receivable from the sale of the Trading Business; $258,000 was
provided by long-term borrowings and $170,000 was provided by the issuance of
common stock. Cash increased during the period by $7,000.
The Company anticipates that its future operating needs will be satisfied from
the operations of its subsidiaries which, on a combined basis, are expected to
generate positive cash flow, and collections on the notes receivable from the
Trading Business. The Company may also seek financing, possibly including a
debt or equity offering, to supplement available resources. There can be no
assurances that management will be able to obtain any such bank debt or equity
financing.
InterSystems Nebraska is currently seeking financing for plant expansion. The
expansion is anticipated to be effected through bank financing and operating
leases. It would include approximately $1,350,000 for production equipment,
$300,000 for new computers and software, and a five year commitment for 30,000
additional square feet of production space. The proposed facility would cost
approximately $100,000 per year over a five year lease term. There can be no
assurances that management will be able to obtain any such bank financing or
operating lease commitments.
InterSystems Nebraska is a party to a credit agreement that provides for
advances of up to $1,500,000 secured by accounts receivable and inventory.
Interest on borrowings is .5% in excess of the financial institution's base
lending rate. At September 30, 1995 InterSystem's borrowing rate was 10.25%.
At September 30, 1995 outstanding borrowings were $1,375,000, with $125,000
available. The Company believes this credit facility is sufficient to finance
InterSystems Nebraska's present operations.
Chemtrusion is a party to a credit agreement that provides for advances of up
to $300,000 and expires September 5, 1996. The agreement bears interest at
10.5% and is collateralized by Chemtrusion's accounts receivable and inventory.
At September 30, 1995, Chemtrusion had borrowings outstanding totaling
$295,000.
Seasonality
A substantial portion of InterSystems Nebraska's revenues are derived from the
agricultural sector of the economy and, accordingly, are subject to seasonal
fluctuations. InterSystems Nebraska's revenues are highest in the third
quarter (38% of annual revenues in 1994 were recorded). While revenues for the
remaining quarters are generally constant, InterSystems Nebraska's success is,
to some extent, dependent upon weather conditions affecting domestic grain
production, conditions in the grain industry generally and the value of the
United States dollar against foreign currency. However, first quarter 1994
sales were higher than normal because of an increase in overseas sales of
agricultural equipment. At September 30, 1995 InterSystems Nebraska's backlog
was $2,317,000 compared with $2,074,000 at September 30, 1994.
page 9 of 11
<PAGE> 10
PART II - OTHER INFORMATION
Item 2. Changes in Securities
On July 11, 1995, the expiration date of the Company's $3.50 common stock
purchase warrants was extended from December 31, 1996 to December 31, 1999.
These warrants are traded on the American Stock Exchange.
Item 4. Submission of Matters to a Vote of Security Holders
On July 11, 1995, the Company held it 1995 Annual Meeting of Shareholders, at
which the shareholders elected the following individuals to serve as directors
until the 1998 annual meeting of shareholders and until their successors are
elected: Herbert M. Pearlman, John E. Stieglitz and Fred S. Zeidman. In
addition, David S. Lawi and Walter M. Craig, Jr. continue to serve as directors
for terms ending in 1996, and Daniel T. Murphy continues to serve as director
for a term ending in 1997.
The holders of record of the respective number of shares of common stock of the
Company set forth below voted for, or withheld authority for, the election of
the following individuals:
<TABLE>
<CAPTION>
No. of No. of Votes
Name Votes for Withheld
- ---- --------- --------
<S> <C> <C>
Herbert M. Pearlman 3,642,610 43,155
John E. Stieglitz 3,642,377 43,388
Fred S. Zeidman 3,642,610 43,155
</TABLE>
Item 5. Other Information
Tropical Systems, Inc. ("TSI"), a subsidiary of InterSystems, Inc., a Nebraska
corporation and a subsidiary of the Company, has entered into an operating
agreement with Tropical Manufacturing Group, Inc., a Miami-based Florida
corporation ("TMG") engaged in the business of manufacturing and selling
commercial rolling doors and hurricane resistant doors and shutters in South
Florida. Under the operating agreement, TMG (i) has assigned to TSI its rights
to sell, market, and distribute its products and (ii) is manufacturing its
products for the sole account of TSI, in exchange for the agreement of TSI to
pay TMG cost plus 1% for each product so manufactured. This is intended as an
interim arrangement which may be terminated at any time by TSI, and which will
be terminated upon the purchase by TSI of all of TMG's assets and the
assumption by TSI of certain liabilities of TMG pursuant to a letter of intent
signed by TMG and the Company in September 1995. The consummation of the
purchase is conditioned upon arranging the necessary financing to complete the
purchase and obtaining clear title to the assets of TMG. At the present time,
the cost of acquiring the assets of TMG is expected to be approximately
$250,000, although transactional expenses and the cost of clearing title may
increase this estimate considerably.
page 10 of 11
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERSYSTEMS, INC.
Dated: November 10, 1995 /s/ Fred S. Zeidman
-----------------------------------
Fred S. Zeidman
President
Chief Executive Officer
page 11 of 11
<PAGE> 12
Index to Exhibits
Exhibit 27 Financial Data Schedule Ended September 30, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 39
<SECURITIES> 0
<RECEIVABLES> 2,480
<ALLOWANCES> 0
<INVENTORY> 1,827
<CURRENT-ASSETS> 4,760
<PP&E> 5,454
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,856
<CURRENT-LIABILITIES> 4,944
<BONDS> 0
<COMMON> 44
0
0
<OTHER-SE> 1,036
<TOTAL-LIABILITY-AND-EQUITY> 10,856
<SALES> 11,906
<TOTAL-REVENUES> 11,906
<CGS> 8,096
<TOTAL-COSTS> 8,096
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 613
<INCOME-PRETAX> (159)
<INCOME-TAX> 0
<INCOME-CONTINUING> (159)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
