<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT OF 1934
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)
7115 Clinton Drive
Houston, Texas 77020
---------------------
(Address of principal executive offices)
(Zip Code)
713-622-7710
------------------------------------------------------------
(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 of 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, 1999 there were 7,925,989 shares of the Company's common stock,
par value $.01 per share, outstanding.
<PAGE>
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1999 (Unaudited) and December 31, 1998 3
Consolidated Statements of Operations (unaudited)
for the Three Months Ended June 30, 1999 and 1998 4
Consolidated Statements of Operations (unaudited)
for the Six Months Ended June 30, 1999 and 1998 5
Consolidated Statements of Comprehensive Income for the
Three and Six Months Ended June 30, 1999 and 1998 6
Consolidated Statements of Cash Flows (Unaudited) for the
Six Months Ended June 30, 1999 and 1998 7
Notes to Consolidated Interim Financial Statements 8 - 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 16
Part II - Other Information
Item 5. Other Information 16
Page 2 of 17
<PAGE>
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
June 30, December 31,
1999 1998
---------- ------------
ASSETS
- ------
CURRENT ASSETS:
Cash $ 260 $ 133
Marketable equity securities 76 94
Trade receivables 4,947 3,329
Inventories 2,932 2,273
Prepaid expenses and other 364 360
Time deposits -- 123
------- -------
8,579 6,312
Equipment and leasehold improvements, net 26,344 23,479
Other assets 563 262
------- -------
Total Assets $35,486 $30,053
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 2,330 2,405
Current portion of long-term debt 2,258 2,332
Accounts payable 2,092 1,459
Accrued expenses 1,490 1,528
Unearned revenue and customer deposits 759 --
------- -------
8,929 7,724
Convertible subordinated debentures 642 642
Long term debt - net of current portion 22,173 17,806
------- -------
Total Liabilities 31,744 26,172
------- -------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000 shares
authorized; none issued and outstanding
Common stock $.01 par value, 20,000
shares authorized; 7,926
shares issued and outstanding 79 79
Additional paid-in capital 7,774 7,769
Deficit (3,741) (3,617)
Unrealized holding losses (113) (96)
Treasury stock - 91 shares at cost (157) (154)
Note receivable - sale of common stock (100) (100)
------- -------
TOTAL SHAREHOLDERS' EQUITY 3,742 3,881
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $35,486 $30,053
======= =======
See accompanying notes to consolidated financial statements
Page 3 of 17
<PAGE>
InterSystems, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts, Unaudited)
Three months ended June 30
1999 1998
------------ -----------
Net sales $8,803 $9,803
Cost of sales 6,122 7,226
------ ------
Gross Profit 2,681 2,577
Selling, general and administrative
expenses 1,910 1,932
Interest expense - net 540 434
------ ------
Net income $ 231 $ 211
====== ======
Per share - basic and assuming
dilution $ .03 $ .03
====== ======
Average number of common shares
outstanding 7,837 7,808
====== ======
See accompanying notes to consolidated financial statements
Page 4 of 17
<PAGE>
InterSystems, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts, Unaudited)
Six months ended June 30
1999 1998
------------ ----------
Net sales $15,127 $17,990
Cost of sales 10,404 13,013
------- -------
Gross Profit 4,723 4,977
Selling, general and administrative
expenses 3,702 3,702
Interest expense - net 1,011 835
------- -------
Income from operations 10 440
Cumulative effect of change in
accounting principle (133) --
------- -------
Net income (loss) $ (123) $ 440
======= =======
Per share - basic
Continuing operations $ .00 $ .06
Cumulative effect of change in
accounting principle (.02) --
------- -------
Net income (loss) $ (.02) $ .06
======= =======
Per share - assuming dilution
Continuing operations $ .00 $ .05
Cumulative effect of change in
Accounting principle (.02) --
------- -------
Net income (loss) $ (.02) $ .05
======= =======
Average number of common shares
outstanding
Basic 7,835 7,791
Assuming dilution 7,835 8,299
See accompanying notes to consolidated financial statements
Page 5 of 17
<PAGE>
InterSystems, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In Thousands, Unaudited)
Three months ended June 30
1999 1998
---- ----
Net income (loss) $231 $211
Unrealized holding losses arising during period (17) (42)
---- ----
Comprehensive income $214 $169
==== ====
Six months ended June 30
1999 1998
---- ----
Net income (loss) $(123) $440
Unrealized holding losses arising during period ( 17) --
----- ----
Comprehensive income (loss) $(140) $440
===== ====
See accompanying notes to consolidated financial statements
Page 6 of 17
<PAGE>
InterSystems, Inc. And Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands, Unaudited)
Six months ended June 30,
1999 1998
------- -------
Cash flows from operating activities:
Net income (loss) $ (123) $ 440
Adjustments to reconcile net income to net cash
Provided (used) in operating activities:
Depreciation and amortization 969 1,002
Changes in:
Operating working capital (973) (992)
Non-current assets and liabilities 125 38
------- -------
Net cash provided by (used in)
operating activities ( 2) 488
------- -------
Net cash used in investing activities:
Acquisition of fixed assets (4,089) (2,886)
------- -------
Cash flows from financing activities:
Net borrowings (repayments) 145 2,261
Proceeds from long-term debt obligations 4,816 --
Repayment of long-term debt (740) (198)
Purchase of Treasury stock (3) (22)
Issuance of common stock -- 92
------- -------
Net cash provided by (used in)
financing activities 4,218 2,133
------- -------
Net increase (decrease) in cash 127 ( 265)
Cash at beginning of period 133 802
------- -------
Cash at end of period $ 260 $ 537
======= =======
Cash paid during the periods for:
Interest $ 297 $ 274
Taxes $ 22 $ 10
See accompanying notes to consolidated financial statements
Page 7 of 17
<PAGE>
InterSystems, Inc. And Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 1999
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. The information included in this Form 10-Q should be read in
conjunction with Management's Discussion and Analysis and
Consolidated Financial Statements and notes thereto included in the
InterSystems, Inc. 1998 Form 10-KSB.
NOTE 2. Inventories consisted of the following at June 30, 1999 (in
thousands):
Raw materials and component parts 1,502
Finished goods 1,430
-----
Total inventory 2,932
=====
NOTE 3. The basic net income (loss) per common share is computed by dividing
the net income (loss) by the weighted average number of common shares
outstanding.
Diluted net income (loss) per common share is computed by dividing the
net income (loss), adjusted on an as if converted basis, by the
weighted average number of common shares outstanding plus potential
dilutive securities.
The following table sets forth the computation of basic and diluted
earnings (loss) per share (in thousands, except per share amounts):
THREE MONTHS ENDED
-------------------
JUNE 30, JUNE 30,
1999 1998
-------- --------
Net income: $ 231 $ 211
====== ======
Weighted average shares outstanding:
Basic weighted average shares 7,837 7,808
Effect of dilutive securities:
Options and warrants -- 581
------ ------
Dilutive weighted average shares 7,837 8,389
====== ======
Page 8 of 17
<PAGE>
For the periods ended June 30, 1999 and 1998, certain securities were
not included in the calculation of diluted earnings because of their
anti-dilutive effect. Those securities are as follows (in thousands):
1999 1998
----- -----
Stock options 1,039 744
Stock warrants 2,920 1,100
Shares issuable on conversion of debentures 512 512
SIX MONTHS ENDED
----------------------
JUNE 30, JUNE 30,
1999 1998
--------- --------
Net income (loss):
Continuing operations $ 10 $ 440
Effect of change in accounting principle (133) --
------ ------
Net income (loss) $ (123) $ 440
====== ======
Weighted average shares outstanding:
Basic weighted average shares 7,835 7,791
Effect of dilutive securities:
Options and warrants -- 508
------ ------
Dilutive weighted average shares 7,835 8,299
====== ======
For the period ended June 30, 1999 and 1998, certain securities were not
included in the calculation of diluted earnings (loss) because of their
anti-dilutive effect. Those securities are as follows (in thousands):
1999 1998
------ ------
Stock options 1,039 970
Stock warrants 2,920 1,100
Shares issuable on conversion of debentures 512 512
NOTE 4. In April, 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the
Costs of Start-up Activities." The statement is effective for fiscal
Years beginning after December 15, 1998. The statement requires costs
of start-up activities and organizational costs to be expensed as
incurred and to write off any previously deferred expenses. The
Company adopted SOP 98-5 for calendar year 1999, and accordingly,
$133,000 of start-up and organizational costs at Chemtrusion has been
expensed, as a cumulative effect of change in accounting principle, in
the first quarter of 1999.
Page 9 of 17
<PAGE>
NOTE 5. The Company's management has defined its operating segments by the type
of products and services provided and the related industries.
Accordingly, the Company has two reportable business segments, as noted
below:
Plastic Resins Group: custom-compounding of thermoplastic resins.
Industrial Products Group: designs, manufactures and sells equip-
ment utilized by the agricultural industry in weighing or moving
grain, soybeans and other agricultural products and develops,
manufactures, leases and sells sampling equipment for use in hand-
ling agricultural products and in manufacturing and other
industries.
Three months
June 30, June 30,
1999 1998
------------- --------
(in thousands)
Revenues from unaffiliated customers:
Plastic resins
major customers $ 3,235 $2,642
all others 375 197
Industrial products
foreign country - Romania -- 2,545
all others 5,193 4,419
------- ------
Total revenues $ 8,803 $9,803
======= ======
Operating profit:
Plastic resins $ 474 $ 395
Industrial products 521 538
------- ------
Total operating profit 995 933
------- ------
Expenses and other:
General and administrative
Parent ( 224) ( 288)
------- ------
Interest expense:
Plastic resins 414 308
Industrial products 72 75
Corporate (net) 54 51
------- ------
(540) (434)
------- ------
Income from operations $ 231 $ 211
======= ======
Identifiable assets:
Plastic resins $26,471
Industrial products 8,429
Corporate 586
-------
$35,486
=======
Page 10 of 17
<PAGE>
Three months
June 30, June 30,
1999 1998
--------- ---------
(in thousands)
Capital expenditures:
Plastic resins $ 2,661 $ 2,823
Industrial products (111) $ 23
Corporate 0 15
------- -------
$ 2,550 $ 2,861
======= =======
Depreciation and amortization:
Plastic resins $ 498 $ 438
Industrial products 61 56
Corporate 32 29
------- -------
$ 591 $ 523
======= =======
Six months
June 30, June 30,
1999 1998
------- -------
(in thousands)
Revenues from unaffiliated customers:
Plastic resins
major customers $ 6,181 $ 4,984
all others 812 510
Industrial products
foreign country - Romania -- 4,446
all others 8,134 8,050
------- -------
Total revenues $15,127 $17,990
======= =======
Operating profit:
Plastic resins $ 943 $ 823
Industrial products 536 1,006
------- -------
Total operating profit 1,479 1,829
------- -------
Expenses and other:
General and administrative
Parent (458) (554)
------- -------
Page 11 of 17
<PAGE>
Six months
June 30, June 30,
1999 1998
------- -------
(in thousands)
Interest expense:
Plastic resins 780 608
Industrial products 125 143
Corporate (net) 106 84
------- ------
(1,011) (835)
------- ------
Income from operations $ 10 $ 440
======= ======
Identifiable assets:
Plastic resins $26,471
Industrial products 8,429
Corporate 586
-------
$35,486
=======
Capital expenditures:
Plastic resins $ 4,154 $3,403
Industrial products (71) 66
Corporate 6 0
------- ------
$ 4,089 $3,469
======= ======
Depreciation and amortization:
Plastic resins $ 785 $ 830
Industrial products 121 112
Corporate 63 60
------- ------
$ 969 $1,002
======= ======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
In June 1999, InterSystems, Inc. entered into a letter of intent with Enduro
Holdings, Inc., a privately held holding company based in Houston, for the sale
of the business of InterSystems' Nebraska subsidiary. The Company expects the
purchase price, including the assumption of liabilities, to exceed $10 million,
subject to final review and adjustments. Upon completion of the transaction,
the stated net worth of InterSystems, Inc. is expected to more than double.
The sale, which is expected to close by the end of September, is subject to
completion of a due diligence examination, and negotiation and execution of a
definitive purchase agreement.
Page 12 of 17
<PAGE>
RESULTS OF OPERATIONS
Three and Six Month Periods Ended June 30, 1999 and 1998
The Company's revenues for the 1999 second quarter decreased by $1,000,000 (10%)
as compared to the second quarter 1998. In making the year to year comparison,
it is important to note that during the first and second quarters 1998,
InterSystems Nebraska recorded a $4,446,000 export order to Romania (the
"Romanian Order"). Accordingly, without including the Romanian Order in the
1998 figures, the Company's revenues for the 1999 second quarter were $1,545,000
higher than the 1998 second quarter. Similarly, Nebraska's total revenues for
the 1999 second quarter were approximately $1,770,000 lower than 1998 second
quarter. Without including the Romanian Order in the 1998 figures, Nebraska's
revenues for the 1999 quarter were approximately $774,000 higher as compared to
the prior year quarter.
Chemtrusion's revenues for the 1999 second quarter increased by approximately
$772,000 as compared to the same period 1998. This increase is attributable to
increased toll processing volumes at both the Texas and Indiana facilities.
The Company's revenues for the first six months of 1999 decreased by $2,863,000
(15.9%) as compared to the second quarter 1998. However, without including the
Romanian Order in the 1998 figures, the Company's revenues for the 1999 six
month period increased by $1,583,000, while Nebraska's revenues increased by
$84,000.
Chemtrusion's revenues for the first six months of 1999 increased by $1,500,000
as compared to the second quarter 1998. The increase is attributable to
increased processing volumes at both the Texas and Indiana facilities.
Gross margins were 30.4% in the second quarter 1999, and 31.2% for the six month
period 1999, as compared to 26.3% in the second quarter 1998 and 27.7% for the
six month period 1998. InterSystems Nebraska's gross margin increased
significantly to 28.6% in the second quarter 1999 versus 22.3% in the second
quarter 1998, with gross margins increasing from 29.2% for the six month 1999
period as compared with 23.4% in the 1998 six month period. Nebraska's 1999
increase is due to the fact that outside contractors were used in completing the
Romanian Order in 1998, resulting in lower margins, as well as increased
efficiency achieved through streamlining operations over the past 12 months.
Chemtrusion's gross margin decreased to 32% in the second quarter 1999 as
compared to 34.6% in the second quarter 1998, and decreased to 32.4% in the 1999
six month period from 35.8% for the 1998 six month period. The decrease is
primarily attributable to increased fixed costs at Chemtrusion Texas to
facilitate future growth, coupled with a cutback in commitments of two major
customers. Indiana's gross margin remained unchanged at 36%.
Interest expense increased $106,000 in the second quarter 1999 as compared to
the second quarter 1998 and $176,000 for the six month period 1999 versus 1998.
The increase was primarily attributable to the Indiana facility and is due to
financing charges associated with new compounding lines installed in late 1998
and early 1999 as well as recent equipment modifications in Texas. Interest
expense at the Indiana facility is billed to Mytex and is included in sales for
the facility.
Liquidity and Capital Resources
The Company purchased fixed assets during the first six months 1999 in the
amount of $4,089,000. A majority of the fixed asset purchases were for new
compounding lines installed at the Mytex facility, with the balance used to fund
improvements to a compounding line at Chemtrusion, Texas ($410,000).
Page 13 of 17
<PAGE>
Net borrowings provided by financing activities amounted to $145,000. The
proceeds were used to finance working capital needs. The proceeds from long-term
debt obligations of $4,816,000 were utilized primarily to finance the new
compounding lines at the Mytex facility, along with improvements made to a
compounding line at Chemtrusion Texas. Repayment of long-term debt was
$740,000.
Cash increased $127,000 for the period ending June 30, 1999.
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. The Company from time to time may seek to borrow
funds for actual or anticipated capital needs. There can be no assurances that
management will be able to obtain such financing.
Parent Company
In January 1999, the parent company arranged for short-term working capital
financing. The Company executed a note in the amount of $200,000 with a private
lender. The note bears interest at the rate of 15% per annum, with monthly
interest payments of $2,500. The note is due January 19, 2000.
InterSystems Nebraska
InterSystems Nebraska has a revolving credit agreement with a bank. The
financing agreement provides for borrowings of up to $3,000,000 based upon
eligible collateral and is due on demand. At June 30, 1999, borrowings of
$2,030,000 were outstanding under this agreement and bear interest at the bank's
base rate plus .50% (8.25% at June 30, 1999). At June 30, 1999, $270,000 was
available under this line of credit. The net book value of the collateral
totaled approximately $5,935,000 at June 30, 1999. Under the terms of the
agreement, Nebraska is subject to certain covenant requirements that, among
other things, require maintenance of minimum net worth, working capital, debt to
net worth ratio, and also limits the amount of capital expenditures, payments to
affiliates, indebtedness, dividends and management fees. InterSystems Nebraska
has pledged its accounts receivable, inventory, equipment and fixtures and
intangibles as collateral for the debt.
Chemtrusion
Chemtrusion is party to a credit agreement that provides for advances of up to
$300,000 and expires April 21, 2002. The agreement bears interest at the bank's
prime rate plus 1% (8.75% at June 30, 1999) and is collateralized by
Chemtrusion's accounts receivable. As of June 30, 1999, borrowings were
$300,000.
During March 1999, Chemtrusion Texas arranged for a $410,000 capital lease with
a financial institution to provide for capital improvements to one of its
compounding lines. The financing arrangement requires 47 monthly principal and
interest payments in the amount of $9,975 each, bears interest at the rate of
10.42% per annum, and contains a purchase option of $40,000 at the end of the
lease term.
During the six month period ending June 30, 1999, Chemtrusion completed
installation of new lines at the Mytex facility. The approximate cost of the
project was $3,822,000. The finance agreement has not been finalized, but Mytex
will carry the note under terms similar to prior financing agreements at the
Mytex facility.
Page 14 of 17
<PAGE>
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 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. As of June 30, 1999, InterSystems' backlog was $6.3 million.
YEAR 2000
Company's Compliance Program. Computer equipment using microprocessors that use
only two digits to identify a year may be unable to accurately process data
after December 31, 1999. In early 1998, InterSystems, Inc. and its subsidiaries
initiated their Year 2000 compliance project. The evaluation addressed internal
hardware and software, production machinery, key vendors, customers and other
significant third parties.
Company's State of Readiness. InterSystems, Inc. and its subsidiaries utilize
recently purchased computer hardware and software which has been deemed Year
2000 compliant. In the 1997 fourth quarter, our Nebraska subsidiary made a
significant transition to Year 2000 compliant equipment. Nebraska's System 36
and installed software was discarded and replaced with Pentium processor based
CPU's and Year 2000 compliant manufacturing and accounting software. Our
Chemtrusion locations already had installed Year 2000 compliant hardware and
software.
Since the Company's two subsidiaries are engaged in manufacturing activities and
place heavy reliance on their production equipment, the Company has undertaken
to determine whether this equipment is Year 2000 compliant. Production equipment
that contains embedded systems may be unable to process date sensitive data.
Key vendors of the Company, therefore, include those from whom the subsidiaries
purchase equipment. Chemtrusion has received vendor assurance that its
production equipment is Year 2000 compliant. Nebraska has completed its
investigation and testing with respect to its production and office equipment,
and has deemed all to be Year 2000 compliant. The testing was completed at a
minimal cost to the Company.
The Company is also evaluating the readiness of its third party supply chains
and major customers. The Company has requested Year 2000 compliance
certification from each of its major vendors, suppliers and customers.
Risks of Non-compliance and Contingency Plans. The major factors which pose the
greatest Year 2000 risks for the Company if implementation of the Year 2000
compliance program is not successful is the reliance on key third party vendors
and major customers. If those parties do not achieve compliance, the Company's
operating subsidiaries could experience interruption in production scheduling.
Based on initial information received from our vendors and customers, the
Company does not expect such delays.
The estimated costs of, and timetable for, becoming Year 2000 compliant
constitute "forward looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such estimates are
based on numerous assumptions by management, including accuracy of
representations made by third parties concerning their compliance with Year 2000
issues, and other factors. The estimated costs of Year 2000 compliance also do
not give effect to any future corporate acquisitions or divestitures made by the
Company or its subsidiaries.
Page 15 of 17
<PAGE>
Forward Looking Statements
This quarterly report for the quarter and six months ended June 30, 1999 as well
as other public documents of the Company contains forward-looking statements
which involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievement of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such statements
include, without limitation, the Company's expectations and estimates as to
future financial performance, cash flows from operations, capital expenditures
and the availability of funds from refinancings of indebtedness. Readers are
urged to consider statements which use the terms "believes," "intends,"
"expects," "plans," "estimates," "anticipated," or "anticipates" to be uncertain
and forward looking. In addition to other factors that may be discussed in the
Company's filings with the Securities and Exchange Commission, including this
report, the following factors, among others, could cause the Company's actual
results to differ materially from those expressed in any forward-looking
statement made by the Company: (i) general economic and business conditions,
acts of God and natural disasters which may effect the demand for the Company's
products and services or the ability of the Company to manufacture and/or
provide such products and services; (ii) the loss, insolvency or failure to pay
its debts by a significant customer or customers; (iii) increased competition;
(iv) changes in customer preferences and the inability of the Company to develop
and introduce new products to accommodate these changes; and (v) the maturing of
debt and the ability of the Company to raise capital to repay or refinance such
debt on favorable terms.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's financial instruments include time deposits, notes payable, long-
term debt, subordinated debentures and letters of credit. The carrying value of
these instruments approximate market values because the rates of return and
borrowing rates are similar to other financial instruments with similar
maturities and terms.
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist primarily of trade accounts receivable. Concentrations
of credit risk with respect to such receivables are limited due to generally
short payment terms and their dispersion across geographic areas.
Available-for-sale securities are based on quoted market prices.
The Company's interest rates on lines of credit fluctuate based on the financial
institutions prime lending rate.
Part II:
Item 5. Other Information
The Board of Directors of InterSystems, Inc. (the "Company") has resolved to
extend the expiration date of the Company's outstanding publicly held warrants
(AMEX: II.WS) to December 31, 2001, and to lower the purchase price of each
warrant from $3.50 to $2.00 per share, effective August 11, 1999. All other
terms of the warrants, which were due to expire at the end of 1999, will remain
the same.
New certificates will not be issued in exchange for the outstanding
certificates; rather, each outstanding certificate will represent the right to
purchase one share of common stock of InterSystems, Inc. (AMEX: II) for $2.00
per share instead of $3.50 per share.
Page 16 of 17
<PAGE>
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 9, 1999 /s/ Fred S. Zeidman
-------------------
Fred S. Zeidman
President
Chief Executive Officer
/s/ Wm. Chris Mathers
---------------------
Wm. Chris Mathers
Principal Financial Officer
Page 17 of 17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 260
<SECURITIES> 76
<RECEIVABLES> 4,947
<ALLOWANCES> 0
<INVENTORY> 2,932
<CURRENT-ASSETS> 8,579
<PP&E> 26,344
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,486
<CURRENT-LIABILITIES> 8,929
<BONDS> 642
0
0
<COMMON> 79
<OTHER-SE> 3,663
<TOTAL-LIABILITY-AND-EQUITY> 35,486
<SALES> 15,127
<TOTAL-REVENUES> 15,127
<CGS> 10,404
<TOTAL-COSTS> 14,106
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,011
<INCOME-PRETAX> 10
<INCOME-TAX> 0
<INCOME-CONTINUING> 10
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (133)
<NET-INCOME> (123)
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
