<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1993
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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of May 5, 1995 there were 4,086,846 shares of the Company's common stock,
par value $.01 per share, outstanding.
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<PAGE> 2
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(In thousands, unaudited)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
March 31,1995
-------------
<S> <C>
ASSETS
-------
CURRENT ASSETS:
Cash $ 18
Trade Receivables 1,867
Inventories 1,581
Prepaid expenses and other 96
Note receivable - sale of Trading Business 265
---------------
3,827
Equipment and leasehold improvements, net 5,532
Notes receivable - sale of Trading Business 504
Other assets 320
---------------
$ 10,183
===============
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES:
Revolving lines of credit $ 1,520
Current portion of long-term debt 619
Accounts payable 1,144
Accrued expenses 686
Due to Helm Resources, Inc. and subsidiaries 136
Note payable - affiliated company 278
---------------
4,383
Convertible subordinated debentures 2,996
Long term debt - net of current portion 2,039
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000 shares
authorized; none issued and outstanding
Common stock $.01 par value, 20,000
shares authorized; 4,053
shares issued and outstanding 40
Additional paid-in capital 2,666
Retained earnings (deficit) (1,841)
Note receivable - sale of common stock (100)
---------------
TOTAL SHAREHOLDERS' EQUITY 765
---------------
$ 10,183
===============
</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 March 31
1995 1994
---- ----
<S> <C> <C>
Net sales $ 3,253 $ 3,538
Cost of sales 2,231 2,183
---------- ----------
Gross Profit 1,022 1,355
Selling, general and administrative
expenses 1,102 1,174
Interest income (23) (15)
Interest expense 193 170
---------- ----------
Net income (loss) $ (250) $ 26
---------- ----------
Per share:
Net income (loss) $ (.06) $ .01
---------- ----------
Average number of common shares
outstanding 4,028,000 3,639,000
========== ===========
</TABLE>
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<PAGE> 4
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994
---- -----
<S> <C> <C>
Net cash provided by operating
activities $ 154 $ 193
------- -------
Cash flows from investing activities:
Acquisition of fixed assets (81) (219)
Other -- $ (47)
------- -------
Net cash used in investing activities $ (81) (266)
------- -------
Cash from financing activities:
Net borrowings 66 8
Repayments of long-term debt (153) --
------- -------
Net cash provided (used) by financing activities (87) 8
------- -------
Net decrease in cash (14) (65)
Cash at beginning of period 32 159
------- -------
Cash at end of period $ 18 $ 94
======= =======
Cash paid during the periods for:
Interest $ 110 $ 75
Taxes $ 13 $ 6
</TABLE>
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<PAGE> 5
InterSystems, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 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 March 31, 1995, have aggregate future minimum
rentals of approximately $800,000.
Note 3. During the three months ended March 31, 1995, $50,000 principal amount
of 8% convertible debentures were converted into 33,784 shares of
the Company's 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 May 10, 1995, holders of 165,200
warrants have accepted the offer.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Company's continuing 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.
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<PAGE> 6
RESULTS OF OPERATIONS
Three Month Periods Ended March 31, 1995 and 1994
There was a decrease of $286,000 (8%) in net sales for the three month period
ended March 31, 1995 (the "1995 period") compared to the three month period
ended March 31, 1994 (the "1994 period"). The decrease was primarily
attributable to lower sales volumes of bulk materials handling equipment at
InterSystems Nebraska. InterSystems Nebraska's sales for the 1994 period were
higher than normal as a result of an increase in overseas sales of bulk
material handling equipment amounting to $850,000.
Gross profit as a percentage of sales was 31.4% in the 1995 period as compared
to 38.3% 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 31.3% in the 1995 period as compared to 38.3% in the
1994 period. The 1994 period included large overseas sales and 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.
Selling, general and administrative expenses decreased by $72,000 (6.2%) in the
1995 period as compared to the 1994 period. Parent company expenses increased
$98,000 due mainly to an increase in office and rental expense ($28,000), legal
and professional fees ($29,000) and other general and administrative expenses
($41,000). InterSystems Nebraska's expenses decreased $151,000 mainly as a
result of a decrease in outside sales commissions. Chemtrusion's expenses
decreased approximately $19,000.
Interest expense increased approximately $23,000 in the 1995 period as compared
to the 1994 period. Parent company interest expense decreased approximately
$12,900 primarily as a result of bond conversions to common stock. Nebraska's
interest expense increased approximately $12,700 due to an increase in interest
rates on line of credit borrowings ($7,700) and interest expense on an increase
in long-term debt ($5,000). Chemtrusion's interest expense increased
approximately $23,200 as a result of interest expense on a new line of credit
($8,600), financing for a new twin screw extruder ($12,300) and an increase in
the interest rate on long-term debt ($2,300).
Liquidity and Capital Resources
Cash provided by operating activities for the three months ended March 31,
1995 amounted to $154,000; $81,000 was used for purchases of fixed assets;
$66,000 was provided by net borrowings, $153,000 was used for payments on
notes. Cash decreased during the period by $14,000.
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.
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<PAGE> 7
There can be no assurances that management will be able to obtain any such
debt or equity financing.
The Company has no significant commitments for capital expenditures.
InterSystems Nebraska ordinarily manufactures products to meet customer
specification and, consequently, maintains relatively small amounts of
inventory, most of which is required to meet existing contracts. InterSystems
Nebraska is a party to a credit agreement that provides for advances of up to
$1,400,000 secured by accounts receivable and inventory. Interest on
borrowings is .5% in excess of the financial institution's base lending rate.
At March 31, 1995 InterSystems' borrowing rate was 10.50%. At March 31, 1995
outstanding borrowings were $1,250,000 and $126,000 was 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, 1995. The agreement bears interest at
10.5% and is collateralized by Chemtrusion's accounts receivable and inventory.
At March 31, 1995, Chemtrusion had borrowings outstanding totaling $270,000 and
net book value of collateral totaled approximately $740,000.
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 $850,000 one-time sale to China of
agricultural equipment.
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<PAGE> 8
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: May 12, 1995 /s/ Fred S. Zeidman
-------------------------------
Fred S. Zeidman
President
Chief Executive Officer
page 8 of 8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 1,867
<ALLOWANCES> 0
<INVENTORY> 1,581
<CURRENT-ASSETS> 3,827
<PP&E> 5,532
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,183
<CURRENT-LIABILITIES> 4,383
<BONDS> 2,996
<COMMON> 40
0
0
<OTHER-SE> 725
<TOTAL-LIABILITY-AND-EQUITY> 10,183
<SALES> 3,253
<TOTAL-REVENUES> 3,253
<CGS> 2,231
<TOTAL-COSTS> 2,231
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 193
<INCOME-PRETAX> (250)
<INCOME-TAX> 0
<INCOME-CONTINUING> (250)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (250)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
