<PAGE> 1
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 September 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 October 28, 1999 there were 7,925,989 shares of the Company's common
stock, par value $.01 per share, outstanding.
<PAGE> 2
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1999 (Unaudited) and December 31, 1998 3
Consolidated Statements of Operations (unaudited)
for the Three Months Ended September 30, 1999 and 1998 4
Consolidated Statements of Operations (unaudited)
for the Nine Months Ended September 30, 1999 and 1998 5
Consolidated Statements of Comprehensive Income for the
Three and Nine Months Ended September 30, 1999 and 1998 6
Consolidated Statements of Cash Flows (Unaudited) for the
Nine Months Ended September 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 13 - 17
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 17
Part II - Other Information
Item 5. Changes in securities 17
</TABLE>
Page 2 of 18
<PAGE> 3
InterSystems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
September 30, December 31,
1999 1998
--------- ------------
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ASSETS
CURRENT ASSETS:
Cash $ 249 $ 133
Marketable equity securities 78 94
Trade receivables 3,601 3,329
Inventories 2,689 2,273
Time deposits -- 123
Prepaid expenses and other 425 360
--------- ---------
7,042 6,312
Equipment and leasehold improvements, net 26,112 23,479
Other assets 351 262
--------- ---------
Total Assets $ 33,505 $ 30,053
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit & short-term notes payable $ 775 1,955
Current portion of long-term debt 1,155 2,332
Accounts payable and accrued expenses 4,355 2,987
-------- --------
6,285 7,274
Convertible subordinated debentures 645 642
Line of credit 670 450
Long term debt - net of current portion 22,065 17,806
-------- ---------
Total Liabilities 29,665 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 7,769 7,769
Deficit (3,640) (3,617)
Accumulated other comprehensive loss (111) (96)
Treasury stock - 91 shares at cost (157) (154)
Note receivable - sale of common stock (100) (100)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 3,840 3,881
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 33,505 $ 30,053
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
Page 3 of 18
<PAGE> 4
InterSystems, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts, Unaudited)
Three months ended September 30,
1999 1998
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Net sales $ 8,906 $ 8,599
Cost of sales 6,391 6,297
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Gross Profit 2,515 2,302
Selling, general and administrative
expenses 1,884 1,868
Interest expense - net 530 414
--------- ----------
Net income $ 101 $ 20
========= ==========
Per share - basic and assuming dilution $ .01 $ .00
========= ==========
Average number of common shares
outstanding 7,832 7,801
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements
Page 4 of 18
<PAGE> 5
InterSystems, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts, Unaudited)
Nine months ended September 30,
1999 1998
---- ----
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Net sales $ 24,033 $ 26,589
Cost of sales 16,795 19,310
--------- ----------
Gross Profit 7,238 7,279
Selling, general and administrative
expenses 5,586 5,570
Interest expense - net 1,541 1,249
--------- ----------
Income from operations 111 460
Cumulative effect of change in
accounting principle (133) --
--------- ----------
Net income (loss) $ ( 22) $ 460
========= ==========
Per share - basic and assuming dilution $ .00 $ .06
========= ==========
Average number of common shares
outstanding 7,830 7,795
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements
Page 5 of 18
<PAGE> 6
InterSystems, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In Thousands, Unaudited)
Three months ended September 30,
1999 1998
---- ----
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Net income (loss) $ 101 $ 20
Unrealized holding gains (losses) arising
during period 2 (63)
--------- ---------
Comprehensive income $ 103 $ (43)
========= ========
Nine months ended September 30,
1999 1998
---- ----
Net income (loss) $ ( 22) $ 460
Unrealized holding losses arising during period ( 16) ( 63)
-------- --------
Comprehensive income (loss) $ ( 38) $ 397
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
Page 6 of 18
<PAGE> 7
InterSystems, Inc. And Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands, Unaudited)
Nine months ended September 30,
1999 1998
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Cash flows from operating activities:
Net income (loss) $ ( 22) $ 460
Adjustments to reconcile net income to net cash
Provided (used) in operating activities:
Depreciation and amortization 1,637 1,522
Changes in:
Operating working capital 545 (752)
Non-current assets and liabilities 9 11
---------- --------
Net cash provided by operating activities 2,169 1,241
---------- --------
Net cash used in investing activities:
Acquisition of fixed assets (4,292) (3,438)
Maturity of time deposits 123 --
----------- ---------
Net cash used in investing activities (4,169) (3,438)
Cash flows from financing activities:
Net borrowings (repayments) ( 490) 302
Proceeds from long-term debt obligations 4,392 3,534
Repayment of long-term debt (1,783) (2,018)
Purchase of Treasury stock (3) (38)
Issuance of common stock -- 92
----------- --------
Net cash provided by financing activities 2,116 1,872
----------- --------
Net increase (decrease) in cash 116 ( 325)
Cash at beginning of period 133 802
----------- --------
Cash at end of period $ 249 $ 477
=========== ========
Cash paid during the periods for:
Interest $ 421 $ 418
Taxes $ 22 $ 23
</TABLE>
See accompanying notes to consolidated financial statements
Page 7 of 18
<PAGE> 8
InterSystems, Inc. And Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 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 September 30, 1999 (in
thousands):
<TABLE>
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Raw materials and component parts 1,295
Finished goods 1,394
-----
2,689
=====
</TABLE>
NOTE 3. The basic net income per common share is computed by dividing
the net income by the weighted average number of common shares
outstanding.
Diluted net income per common share is computed by dividing the
net income, 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 per share (in thousands, except per share amounts):
THREE MONTHS ENDED
----------------------
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
----------------------
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Net income $ 101 $ 20
====== ======
Weighted average shares outstanding:
Basic weighted average shares 7,832 7,801
Effect of dilutive securities:
Options and warrants -- 251
----- -----
Dilutive weighted average shares 7,832 8,052
===== =====
</TABLE>
Page 8 of 18
<PAGE> 9
For the three month periods ended September 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
---- ----
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Stock options 1,039 1,010
Stock warrants 2,920 1,781
Shares issuable on conversion of debentures 512 512
NINE MONTHS ENDED
----------------------
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------------------
Income from operations $ (634) $ (795)
Effect of change in accounting principle (133) --
------ ------
Net income (loss) $ ( 22) $ 460
====== ======
Weighted average shares outstanding:
Basic weighted average shares 7,830 7,795
Effect of dilutive securities:
Options and warrants -- 419
----- -----
Dilutive weighted average shares 7,830 8,214
===== =====
</TABLE>
For the period ended September 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
---- ----
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Stock options 1,039 970
Stock warrants 2,920 1,100
Shares issuable on conversion of debentures 512 512
</TABLE>
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
Page 9 of 18
<PAGE> 10
expensed, as a cumulative effect of change in accounting principle,
in the first quarter of 1999.
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
September 30, September 30,
1999 1998
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(in thousands)
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Revenues from unaffiliated customers:
Plastic resins
major customers $ 3,276 $ 2,621
all others 331 251
Industrial products 5,299 5,727
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Total revenues $ 8,906 $ 8,599
======= =======
Operating profit:
Plastic resins $ 435 $ 180
Industrial products 520 555
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Total operating profit 955 735
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Expenses and other:
General and administrative
Parent ( 324) ( 301)
------- ------
Interest expense:
Plastic resins 415 319
Industrial products 59 61
Corporate (net) 56 34
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(530) (414)
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Net income $ 101 $ 20
======= ======
</TABLE>
Page 10 of 18
<PAGE> 11
Three months
September 30, September 30,
1999 1998
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(in thousands)
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Identifiable assets:
Plastic resins $26,279
Industrial products 6,287
Corporate 939
-------
$33,505
=======
Capital expenditures:
Plastic resins $ 296 $ 512
Industrial products (89) $ 26
Corporate 0 4
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$ 207 $ 542
======= =======
Depreciation and amortization:
Plastic resins $ 447 $ 450
Industrial products 59 26
Corporate 32 31
------- -------
$ 538 $ 507
======= =======
Nine months
September 30, September 30,
1999 1998
--------- ---------
(in thousands)
Revenues from unaffiliated customers:
Plastic resins
major customers $ 9,457 $ 7,605
all others 1,143 761
Industrial products
foreign country - Romania -- 4,446
all others 13,433 13,777
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Total revenues $24,033 $26,589
======= =======
</TABLE>
Page 11 of 18
<PAGE> 12
Nine months
September 30, September 30,
1999 1998
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(in thousands)
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Operating profit:
Plastic resins $ 1,511 $ 1,002
Industrial products 1,010 1,652
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Total operating profit 2,521 2,654
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Expenses and other:
General and administrative
Parent (869) (946)
Interest expense:
Plastic resins 1,195 927
Industrial products 185 204
Corporate (net) 161 117
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(1,541) (1,248)
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Income from operations 111 460
Cumulative effect of change in
Accounting principle (133) --
------- ------
Net income $ (22) $ 460
======= ======
Identifiable assets:
Plastic resins $26,279
Industrial products 6,287
Corporate 939
-------
$33,505
=======
Capital expenditures:
Plastic resins $ 4,206 $ 3,915
Industrial products (160) 92
Corporate 0 24
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$ 4,046 $ 4,031
======= =======
Depreciation and amortization:
Plastic resins $ 1,362 $ 1,303
Industrial products 180 129
Corporate 95 90
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$ 1,637 $ 1,522
======= =======
</TABLE>
Page 12 of 18
<page 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
In June 1999, the Company's Nebraska subsidiary ("InterSystems Nebraska")
signed a letter of intent to sell its assets to Enduro Systems, Inc., a
privately held company located in Houston, Texas. The sale is conditioned upon
negotiation and execution of a definitive asset purchase agreement and related
documents, as well as the completion of financing arrangements to the
satisfaction of the purchaser and other conditions.
RESULTS OF OPERATIONS
- ---------------------
Three and Nine Month Periods Ended September 30, 1999 and 1998
- -------------------------------------------------------------
Revenue for the three months ended September 30, 1999 increased $307,000 (3.6%)
over the same period ending September 30, 1998. Revenue for the nine months
ended September 30, 1999 decreased $2,556,000 (9.7%) over the nine month period
ending September 30, 1998.
In the fourth quarter 1998 and first quarter 1999, Chemtrusion added a fifth
and sixth compounding line in Jeffersonville, Indiana (the "Mytex facility").
As a direct result of the addition of these two lines, the Company's revenues
increased $735,000 (25.6%) for the third quarter ending September 30, 1999 and
$ 2,234,000 (26.7%) for the nine-month period ending September 30, 1999, as
compared to the respective periods ending September 30, 1998. While revenue
increased at both the Mytex facility and Houston, Texas facility (the "Texas
facility"), the majority of the increase for the 1999 periods was attributable
to the addition of two new lines at the Mytex facility.
Demand for InterSystems Nebraska's products remains strong. Revenue, however,
decreased $4,790,000 for the nine-month period ending September 30, 1999 as
compared to the same period ending September 30, 1998. Of the $4,790,000
decrease, $4,446,000 was directly attributable to the large Romania order
booked during 1998.
Gross margins increased slightly in the third quarter ending September 30, 1999
as compared to the third quarter ending September 30, 1998. The increase is
primarily a result of increased compounding volume at both the Texas and Mytex
facilities. The Texas facility's gross margins are beginning to improve as a
result of new business and in fact increased from approximately 16% to 22% for
the three-month period ending September 30, 1999, as compared to the same
period ending September 30, 1998.
The Company's gross margins for the nine-month period ending September 30, 1999
increased approximately 3% to 30% over nine months ended September 30, 1998.
The largest component of the increase was at InterSystems Nebraska. For the
nine-month period ending September 30, 1998, InterSystems Nebraska recorded
approximately $4,446,000 in revenue from the large Romanian order. 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.
Page 13 of 18
<PAGE> 14
Interest expense increased $116,000 in the third quarter ending September 30,
1999 as compared to the third quarter ending September 30, 1998 and $292,000 for
the nine-month period 1999 versus 1998. The increase was primarily attributable
to the Mytex facility and is due to financing charges associated with the two
new compounding lines. Interest expense at the Mytex 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 nine months 1999 in the
amount of $4,292,000. A majority of the fixed asset purchases was for the new
compounding lines installed at the Mytex facility, with the balance used to
fund improvements to a compounding line at the Texas facility ($410,000).
During 1997, InterSystems Nebraska issued standby letters of credit to secure
their performance on a large order to China. These standby letters of credit
reduced InterSystems Nebraska's line of credit availability. Amounts equal to
the standby letters of credit were placed in certificates of deposits with a
financial institution. During 1999, the certificates of deposit matured and the
funds are now available through InterSystems Nebraska's line of credit.
Net repayments under lines of credit were $490,000. As a result of the late
1998 and early 1999 plant expansion at the Mytex facility, Chemtrusion was
advanced an additional $220,000 during 1999 by Mytex to finance working capital
needs at that facility. InterSystems Nebraska reduced the balance of its
outstanding line of credit borrowings by $710,000. InterSystems Nebraska was
awarded the bid for a large order in Mexico that required a partial advance
payment from the customer. The advance was used to reduce InterSystems
Nebraska's line of credit balance.
The proceeds from long-term debt obligations of $4,392,000 were utilized
primarily to finance the new compounding lines at the Mytex facility, along
with improvements made to a compounding line at the Texas facility ($410,000).
Repayment of long-term debt was $1,783,000.
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. 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 on terms acceptable to the
Company.
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.
Page 14 of 18
<PAGE> 15
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 September 30, 1999, borrowings of
$475,000 were outstanding under this agreement and bear interest at the bank's
base rate plus .50% (8.5% at September 30, 1999). At September 30, 1999,
$ 1,825,000 was available under this line of credit. The net book value of the
collateral totaled approximately $4,367,000 at September 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
- -----------
The Texas facility 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% (9% at September 30, 1999) and is collateralized by
Chemtrusion's accounts receivable. As of September 30, 1999, borrowings were
$300,000.
During March 1999, the Texas facility 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 nine-month period ending September 30, 1999, Chemtrusion completed
installation of two new lines at the Mytex facility. The approximate cost of
the project was $3,882,000. The finance agreement has not been finalized, but
Mytex will carry the note under terms similar to prior financing agreements at
the Mytex facility.
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 $4,036
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
Page 15 of 18
<PAGE> 16
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.
Forward Looking Statements
This quarterly report for the quarter and six months ended June 30, 1999 as
well as other public documents and press releases 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
Page 16 of 18
<PAGE> 17
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 2. Changes in Securities
Effective August 11, 1999, the Board of Directors of the Company extended the
expiration date of the Company's outstanding publicly held warrants (AMEX:
II.WS) to December 31, 2001, and lowered the purchase price of each warrant
from $3.50 to $2.00 per share. 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 17 of 18
<PAGE> 18
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 12, 1999 /s/ Fred S. Zeidman
-------------------
Fred S. Zeidman
President
Chief Executive Officer
/s/ Wm. Chris Mathers
---------------------
Wm. Chris Mathers
Principal Financial Officer
Page 18 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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0
0
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