<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 June 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
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(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 August 1, 1995 there were 4,361,846 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
June 30,1995
(In thousands, unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
CURRENT ASSETS:
Cash $ 166
Trade Receivables 2,394
Inventories 1,943
Prepaid expenses and other 139
Note receivable - Sale of Trading Business 265
--------
4,907
Equipment and leasehold improvements, net 5507
Notes receivable - Sale of Trading Business 244
Other assets 340
--------
$ 10,998
========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 1,745
Current portion of long-term debt 630
Accounts payable 1,796
Accrued expenses 510
Due to Helm Resources, Inc. and subsidiaries 124
Note payable - affiliated company 235
--------
5,040
Convertible subordinated debentures 2,948
Long term debt - net of current portion 2,016
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000 shares
authorized; none issued and outstanding
Common stock $.01 par value, 20,000
shares authorized; 4,362
shares issued and outstanding 44
Additional paid-in capital 2,868
Retained earnings (deficit) (1,818)
Note receivable - sale of common stock (100)
--------
TOTAL SHAREHOLDERS' EQUITY 994
--------
$ 10,998
========
</TABLE>
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<PAGE> 3
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts, Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
1995 1994
---- ----
<S> <C> <C>
Net sales $ 3,906 $ 3,809
Cost of sales 2,608 2,561
----------- -----------
Gross Profit 1,298 1,248
Selling, general and administrative
expenses 1,073 1,054
----------- -----------
Operating income 225 194
Interest income (16) (34)
Interest expense 209 158
Debt conversion expense -- 46
----------- -----------
Net income $ 32 $ 24
=========== ===========
Per share
Net income .01 .01
=========== ===========
Average number of common shares
outstanding 4,176,392 3,842,000
=========== ===========
</TABLE>
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<PAGE> 4
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts, Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
1995 1994
---- ----
<S> <C> <C>
Net sales $ 7,159 $ 7,347
Cost of sales 4,839 4,744
----------- -----------
Gross Profit 2,320 2,603
Selling, general and administrative
expenses 2,175 2,228
----------- -----------
Operating income 145 375
Interest income (39) (49)
Interest expense 402 328
Debt conversion expense -- 46
----------- -----------
Net income $ (218) $ 50
=========== ===========
Per share
Net income $ (.06) $ .01
=========== ===========
Average number of common shares
outstanding 4,102,748 3,737,000
=========== ===========
</TABLE>
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<PAGE> 5
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1995 1994
------- -------
<S> <C> <C>
Net cash used by operating
activities $ (141) (392)
------- -------
Cash flows from investing activities:
Acquisition of fixed assets (239) (242)
Proceeds from sale of trading business 265 265
Other -- (58)
------- -------
Net cash provided (used)
in investing activities $ 26 (35)
------- -------
Cash from financing activities:
Net borrowings 114 476
Repayments of long-term debt (165) ------
Proceeds from promissory note 135 --
Exercise of common stock warrants 165 --
Payments on promissory note to Helm -- (50)
------- -------
Net cash provided by financing activities 249 426
------- -------
Net increase (decrease) in cash 134 (1)
Cash at beginning of period 32 159
------- -------
Cash at end of period $ 166 158
======= =======
Cash paid during the periods for:
Interest $ 385 163
Taxes $ 24 6
</TABLE>
page 5 of 10
<PAGE> 6
InterSystems, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 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 June 30, 1995, have aggregate
future minimum rentals of approximately $750,000.
Note 3. During the six months ended June 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. Through June 30, 1995, all holders of the
275,000 warrants have accepted the offer.
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.
page 6 of 10
<PAGE> 7
RESULTS OF OPERATIONS
Three Month Periods Ended June 30, 1995 and 1994
There was an increase of $97,000 (2.5%) in net sales for the three month period
ending June 30, 1995 (the "1995 period") compared to the three month period
ending June 30, 1994 (the "1994 period"). The sales increase is primarily due to
higher tolling volumes at Chemtrusion because of the addition of a third twin
screw extruding line in the first quarter 1995.
Gross profit as a percentage of sales was 33% in the 1995 and the 1994 periods.
Selling, general and administrative expenses were relatively constant, amounting
to $1,073,000 in the 1995 period compared to $1,054,000 in the 1994 period.
Interest expense increased $51,000 in the 1995 period as compared to the 1994
period. Parent company interest expense increased approximately $11,000 due to
interest expense incurred on borrowings for operations. Chemtrusion's interest
expense increased approximately $25,000 due to the financing of its new
extruding line purchased in the first quarter of 1995. InterSystems Nebraska's
interest expense increased approximately $15,000 due to an increase in the line
of credit and loans for additional equipment.
During the three months ended June 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.
RESULTS OF OPERATIONS
Six Month Periods Ended June 30, 1995 and 1994
There was a decrease of $189,000 (2.6%) in net sales for the six month period
ending June 30, 1995 (the "1995 period") compared to the six month period ending
June 30, 1994 (the "1994 period"). Chemtrusion's sales increased $143,000 (7.6%)
which is attributable to an increase in tolling volume. InterSystems Nebraska's
sales decreased $332,000 (6%) 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 $518,000 compared to the 1994 period.
Gross profit as a percentage of sales decreased to 32.4% in the 1995 period as
compared to 35.4% in the 1994 period. Chemtrusion's gross profit as a percentage
of sales decreased 3% in the 1995 period as compared to the 1994 period
primarily due to increased labor costs and property taxes. Nebraska's gross
profit as a percentage of sales was 32.9% in the 1995 period as compared to 35%
in the 1994 period. The 1994 period included large overseas sales and the
related sales commissions are included in selling, general and administrative
expenses. If the related sales commissions had reduced the sales price of the
equipment sold, the gross margins for the two periods would have been
approximately the same.
page 7 of 10
<PAGE> 8
Selling, general and administrative expenses decreased $53,000 in the 1995
period as compared to the 1994 period primarily as a result of a decrease in
outside sales commissions at InterSystems Nebraska.
Interest expense increased approximately $74,000 in the 1995 period as compared
to the 1994 period. Chemtrusion's interest expense increased approximately
$47,000 due primarily to the financing of its new extruding line purchased in
the first quarter 1995. InterSystems Nebraska's interest expense increased
approximately $27,000 due primarily to an increase in the line of credit and
loans for additional equipment.
During the six months ended June 30, 1994, $46,000 of debt conversion expense
was incurred as explained above in the results of operations for the three
months.
Liquidity and Capital Resources
Cash used by operating activities for the six months ended June 30, 1995
amounted to $141,000; $239,000 was used for purchases of fixed assets; $165,000
was used for repayment of long-term debt; $265,000 proceeds were received on the
note receivable from the sale of the Trading Business; $249,000 was provided by
long-term borrowings and $165,000 was provided by the exercise of common stock
warrants. Cash increased during the period by $134,000.
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.
The Company has no significant commitments for capital expenditures.
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 June 30, 1995 InterSystem's borrowing rate was 10.5%. At June
30, 1995 outstanding borrowings were $1,500,000. 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, 1995. The agreement bears interest at 10.5%
and is collateralized by Chemtrusion's accounts receivable and inventory. At
June 30, 1995, Chemtrusion had borrowings outstanding totaling $245,000 and
$55,000 was available.
page 8 of 10
<PAGE> 9
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 June 30, 1995 InterSystems Nebraska's backlog was $3,372,000 compared with
$3,252,000 at June 30, 1994.
page 9 of 10
<PAGE> 10
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: August 7, 1995 /s/ Fred S. Zeidman
---------------------
Fred S. Zeidman
President
Chief Executive Officer
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<PAGE> 11
EXHIBIT INDEX
EX-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 166
<SECURITIES> 0
<RECEIVABLES> 2,394
<ALLOWANCES> 0
<INVENTORY> 1,943
<CURRENT-ASSETS> 4,907
<PP&E> 5,507
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,998
<CURRENT-LIABILITIES> 5,040
<BONDS> 0
<COMMON> 44
0
0
<OTHER-SE> 950
<TOTAL-LIABILITY-AND-EQUITY> 10,998
<SALES> 7,159
<TOTAL-REVENUES> 7,159
<CGS> 4,839
<TOTAL-COSTS> 4,839
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 402
<INCOME-PRETAX> (218)
<INCOME-TAX> 0
<INCOME-CONTINUING> (218)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (218)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
