<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 10-KSB/A
AMENDMENT NO. 1
TO
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to _______________.
COMMISSION FILE NUMBER 1-12312
INTERSCIENCE COMPUTER CORPORATION
(Name of small business issuer in its charter)
CALIFORNIA 95-3880130
(State of incorporation) (I.R.S. Employer Identification No.)
5171 CLARETON DRIVE, AGOURA HILLS, CALIFORNIA 91301
(Address of principal executive offices) (zip code)
Issuer's telephone number: (818) 707-2000
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act: COMMON
STOCK
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 filing requirements for the past 90
days. YES X NO
----- ------
Check mark indicates that disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $11,253,383.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of December 27, 1996 was approximately $7,625,000.
There were 2,541,666 shares outstanding of registrant's Common Stock as of
December 27, 1996.
The following documents are incorporated by reference into this report: None
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<PAGE> 2
ITEM 3. LEGAL PROCEEDINGS.
The Company is the assignee of the entire right, title and interest in
and to U.S. Patent No. 5,333,042 (the "Patent") directed to a method for using
fusing agent in cold fusion laser printers. On October 16, 1995, the Patent
Office issued a notice to the Company that an unnamed party had copied a claim
of the Patent for purposes of instituting an Interference Proceeding under 35
U.S.C. 135 to determine priority of invention. The Patent Office has not yet
notified the Company whether or not an Interference will be declared, and the
Company is unable to estimate when the Patent Office will issue its
determination on the claim. If an Interference is declared by the Patent
Office, the Patent Office will then institute formal proceedings to determine
who was the first inventor of the copied claim. Such proceedings could take
several years to resolve and be expensive to defend. The Company believes that
it was the first inventor of the inventions claimed in the patent and that,
accordingly, no Interference should be declared. However, if an Interference is
declared, the Company will vigorously defend its rights to the Patent.
Pursuant to that certain Agreement of Purchase and Sale of Shares,
dated January 1996 and effective as of June 30, 1995, Messrs. Greb, Lynn, Casey
and Hively (collectively, the "Sellers") sold all of the stock of Laser Support
& Engineering ("LSE") to the Company for $1,678,038. The purchase price was to
be paid by an $800,000 cash payment plus the delivery of two equal installment
payments pursuant to promissory notes secured by all of the LSE stock. Following
the acquisition, the Company informed the Sellers that the Sellers had breached
certain provisions of the Purchase Agreement. Until the matter was resolved the
Company deposited the first installment ($438,018) due under the purchase price
promissory notes in an interest-bearing account. The Sellers responded to the
Company's claim that there was a breach of the representations and warranties by
purportedly accelerating the notes, demanding late fees, and purportedly re-
electing themselves as the LSE directors. The Sellers then sued the Company in
the Superior Court of California, County of Orange, on August 2, 1996 to enjoin
the Company from interfering with their management of LSE (John Greb, Barry N.
Lynn, Dennis Casey, John G. Hively, v. Interscience Computer Corporation). The
Company countersued the Sellers in the same court on August 6, 1996
(Interscience Computer Corporation vs. John Hively, Barry N. Lynn, Dennis Casey,
John Greb, Laser Support & Engineering) for breach of contract, fraud and
rescission. On September 5, 1996, the Company posted a $952,000 bond for the
full amount of the unpaid principal balance of the promissory notes and the
superior court accepted the parties' stipulation that the dispute would be
resolved by arbitration. John Greb, Barry N. Lynn, Dennis Casey, and John G.
Hively v. Interscience Computer Corporation, JAMS Arbitration Link No.
960-258-046. As of the date of this Annual Report, the Sellers are not involved
in the operation of LSE and the Company is continuing to operate and manage LSE.
The Company anticipates that the arbitration will commence in February 1997.
On August 13, 1996, Thomas Zirnite ("Zirnite") filed an action against
the Company for breach of contract and wrongful termination in Los Angeles
County Superior Court, North District, Zirnite v. Interscience Computer
Corporation, seeking unspecified damages. The Company has cross-complained for
$1,000,000 of damages and $10,000,000 of punitive damages based on slander. In
June 1995, the Company hired Zirnite as Vice President of Finance and
Administration to assist Company's Chief Financial Officer. The Company
subsequently terminated Zirnite's employment on December 7, 1995. Zirnite
alleges that the termination was in retaliation for his refusal to perform
accounting procedures which would have violated the law and generally accepted
accounting procedures. Zirnite made such allegations to third parties, for
which the Company has filed a cross-complaint.
On August 30, 1996, Julie Zuniga filed a lawsuit in Los Angeles County
Superior Court alleging sexual harassment and naming Michael Brennan, the
former President of the Company, and the Company as defendants. Mr. Brennan's
five-year employment agreement expired in October 1996, and Mr. Brennan is
<PAGE> 3
no longer employed by the Company. The complaint alleges inappropriate sexual
comments and conduct by Mr. Brennan and others on behalf of the Company. The
complaint asks for an unspecified amount of actual and punitive damages.
On September 23, 1996, Laura Brennan filed a complaint against the
Company and Jim Mitchelli, Vice President of the Company, for employment
discrimination and wrongful termination. The suit is pending in Los Angeles
County Superior Court, Northwestern District, Case No. LC038584. Ms. Brennan
alleges that she was terminated upon becoming pregnant. The complaint asks for
an unspecified amount of actual and punitive damages. Ms. Brennan is not
related to Mr. Michael Brennan, the former President of the Company.
Michael Brennan, the former President and Chief Financial Officer of
the Company, has filed a complaint against the Company, Frank LaChapelle, the
Chief Executive Officer of the Company, Michael T. Wells, the Secretary and the
general counsel of the Company, and certain lawyers and law firms formerly
associated with Mr. Wells. The First Amended Complaint, which was filed in the
Superior Court, Los Angeles County, on December 20, 1996 and was served on the
Company on January 10, 1997, is a complaint for negligence, breach of fiduciary
duty, and interference with contractual relations. During 1996, Mr. Wells, in
his capacity as an independent attorney and not as the general counsel for the
Company, represented Mr. Brennan as Mr. Brennan's personal attorney in a
lawsuit filed against Mr. Brennan by a foreign bank (the "Bank Action"). Mr.
Brennan's employment agreement with the Company expired on October 15, 1996 and
was not renewed by the Company. Accordingly, Mr. Brennan's employment with the
Company ended on October 15, 1996. In November 1996, a judgement for over
$900,000 was entered against Mr. Brennan in the Bank Action. In his action
against the Company, Mr. Wells and the other defendants, Mr. Brennan alleges
that the defendants actively sought to have Mr. Brennan removed from the office
of President of the Company and that the defendants conspired to cause him harm
by, among other things, losing two motions for summary judgment in the Bank
Action and causing an adverse judgment for over $900,000 to be entered against
him. Mr. Brennan claims damages in the following amounts: $5,000,000 for
general damages, $3,000,000 for special damages, and $50,000,000 as punitive
damages. The Company has not yet filed an answer or otherwise responded to the
action.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
MANAGEMENT OF THE COMPANY
Set forth below is certain information with respect to all persons
who, as of the date of the filing of this report, were the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position Director Since
---- --- -------- --------------
<S> <C> <C> <C>
Frank J. LaChapelle 56 Chairman of the Board, Chief Executive 1983
Officer and Director
Joseph R. Mancuso, Ph.D. 55 Director 1993
George O. Harmon 73 Director 1993
Norman Baker 56 Director, Managing Director Interscience PLC 1995
Stephen Crosson 37 Vice President --
</TABLE>
Frank J. LaChapelle is a founder of the Company and has served as the
Chairman of the Board since the formation of the Company in 1983. Mr.
LaChapelle served as President of the Company from 1983 until January 1991, and
has served as the Company's Chief Executive Officer since September 1991. Mr.
<PAGE> 4
LaChapelle was Vice President-Technical Director of Interscience Systems Inc.,
a publicly-held company principally engaged in manufacturing and marketing
mainframe computer compatible peripheral subsystems, from 1973 until 1983. In
1983, Mr. LaChapelle and four other investors formed the Company to purchase
the computer maintenance division of Interscience Systems, Inc. Mr. LaChapelle
holds a Bachelor of Science degree in mathematics from the University of
Washington.
Dr. Joseph R. Mancuso became a director of the Company in September
1993 following the closing of the Company's initial public offering of its
Common Stock. Since 1978, Dr. Mancuso has been the publisher of the
Entrepreneurial Manager's Newsletter and the principal of both the Center for
Entrepreneurial Management, Inc. and the Chief Executive Officers Club. He is
director of the Globus Growth Group, a venture capital firm.
George O. Harmon became a director of the Company in September 1993
following the closing of the Company's initial public offering. From March
1988 to the present, Mr. Harmon has been the Chairman of the Board and the
Chief Executive Officer of Harmon Associates, and since March 1987 he has been
the Chairman of the Board of Omnidata Corporation. Mr. Harmon is a director of
Triad Systems Corp.
Norman Baker, a U.K. National, joined the Company in January 1994 as
Managing Director of Interscience PLC. Mr. Baker has for the past fifteen
years been a director and associate of N.B. Direct Mail Ltd., a U.K. domiciled
direct marketing, research and mailing operation. Mr. Baker was appointed to
the Board on March 15, 1995.
Stephen Crosson joined the Company in 1991 as the Company's Director
of Operations, and in April 1995, Mr. Crosson became Vice President of
Operations.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and certain of its officers, and persons who own more than
10 percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than 10 percent
shareholders are required by the Commission's regulations to furnish the
Company with copies of all Section 16(a) forms they file. The Company believes
that all Section 16(a) forms were filed as required during the last fiscal
year. However, the Company has no record of filings required to be made after
the end of the last fiscal year by Mr. Brennan, the former President of the
Company.
4.
<PAGE> 5
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company
for its fiscal years ended September 30, 1996, September 30, 1995 and September
30, 1994 to its Chief Executive Officer and all other executive officers
(collectively, the "Named Executive Officers") whose total salary and bonus
from the Company exceeded $100,000 in fiscal year ended September 30, 1996:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
-------------------------------------------- ----------------
FISCAL YEAR SECURITIES
NAME AND ENDED UNDERLYING
PRINCIPAL POSITION SEPTEMBER 30, SALARY BONUS OPTIONS
------------------ -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Frank J. LaChapelle 1996 $150,000 -- --
Chairman of the Board 1995 151,700 -- 100,000
and Chief Executive Officer 1994 151,600 -- --
Michael W. Brennan(3) 1996 144,000 -- --
President and Chief 1995 144,000 -- 200,000
Financial Officer 1994 144,000 $50,000(2) --
James Mitchelli(4) 1996 140,000 -- --
Vice President 1995 140,000 -- 40,000
</TABLE>
___________
(1) The compensation described in this table does not include medical
insurance, retirement benefits and other benefits received by the
foregoing executive officers which are available generally to all
employees of the Company and certain perquisites and other personal
benefits received by the foregoing executive officers of the Company,
the value of which did not exceed the lesser of $50,000 or 10% of the
executive officer's cash compensation in the table. Includes matching
payments made under the 401(k) plan.
(2) In October 1993, the Board of Directors awarded Mr. Brennan a
discretionary bonus of $50,000.
(3) Mr. Brennan's employment with the Company terminated upon the
expiration of his employment contract with the Company on October 15,
1996. On November 14, 1996, Mr. Brennan resigned as a member of the
Company's Board of Directors.
(4) Mr. Mitchelli's employment with the Company was terminated on January
31, 1997.
5.
<PAGE> 6
The following table contains information concerning stock options
exercised in the last fiscal year and stock options remaining unexercised on
September 30, 1996 with respect to the Named Executives.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED SEPTEMBER 30, 1996
AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END (1)
FISCAL YEAR-END -------------------------
-------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. LaChapelle 0 0 100,000 0 $0 $0
Michael W. Brennan 0 0 200,000 0 $0 $0
James Mitchelli 0 0 0 40,000 $0 $0
</TABLE>
- ------------------
(1) Value is determined by subtracting the exercise price from the fair
market value (the closing price for the Company's Common Stock as
reported on the Nasdaq National Market) as of September 30, 1996
($3.625 per share) and multiplying the resulting number by the number
of underlying shares of Common Stock.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company does not have any employment contracts, termination of
employment or any change-in-control arrangements currently in effect with any
of its Named Executive Officers.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no compensation for
serving on the Board of Directors. Outside directors are reimbursed for their
out-of-pocket expenses in attending Board meetings and, from time to time,
receive options to purchase Common Stock. In 1995, the Company granted to each
of Mr. Mancuso and Mr. Harmon, the Company's independent directors,
nonqualified options to purchase 10,000 shares of Common Stock exercisable at
$5.00 per share. One-half of these options vested on October 15, 1995, and the
balance vested on October 15, 1996. In addition, in April 1995, the Company
granted Mr. Baker a non-qualified option to purchase 20,000 shares of Common
Stock at an exercise price of $5.50 per share. These options vest and become
exercisable in three equal annual installments, commencing in April 1996.
STOCK OPTION PLAN
In June 1993, the Board of Directors approved the Company's 1993
Incentive Stock Option Plan (the "Option Plan"), which was subsequently
approved by the Company's shareholders. The Option Plan provides for the grant
of options to officers, directors and other key employees of the Company to
purchase up to an aggregate of 200,000 shares of Common Stock. The Option Plan
is administered by the Stock Option Committee of the Board of Directors, which
has complete discretion to select the optionee and to establish the terms and
conditions of each option, subject to the provisions of the Option Plan.
Options granted under the Option Plan may be "incentive stock options" as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonqualified options, and will be designated as such.
The exercise price of incentive stock options may not be less than
100% of the fair market value of the Company's Common Stock as of the date of
grant (110% of the fair market value if the grant is to an employee who owns
more than 10% of the total combined voting power of all classes of capital
stock of the Company).
6.
<PAGE> 7
The Code currently limits to $100,000 the aggregate value of common
stock that may be acquired in any one year pursuant to incentive stock options
under the Option Plan or any other option plan adopted by the Company.
Nonqualified options may be granted under the Option Plan at an exercise price
less than the fair market value of the common stock on the date of grant.
Nonqualified options also may be granted without regard to any restrictions on
the amount of common stock that may be acquired pursuant to such options in any
one year.
In general, upon termination of employment of an optionee, all options
granted to such person which were not exercisable on the date of such
termination would immediately terminate, and any options that are exercisable
would terminate 90 days (one year in the case of termination by reason of
disability) following termination of employment except in the event of
termination for cause. In the event of termination for cause, all unexercised
options would terminate 30 days after termination.
Options may not be exercised more than ten years after the grant (five
years after the grant if the grant is an incentive stock option to any employee
who owns more than 10% of the total combined voting power of all classes of
capital stock of the Company). Options granted under the Option Plan are not
transferable and may be exercised only by the respective grantees during their
lifetime or by their heirs, executors or administrators in the event of death.
Under the Option Plan, shares subject to cancelled or terminated options are
reserved for subsequently granted options. The number of options outstanding
and the exercise price thereof are subject to adjustment in the case of certain
transactions such as mergers, recapitalizations, stock splits or stock
dividends. The Option Plan is effective for ten years, unless sooner terminated
or suspended.
In addition to the options granted to certain of the Company's
directors in 1995 (see, "Director Compensation," above), the Company also
granted non-qualified options to purchase 200,000 shares and 100,000 shares to
Mr. Brennan and Mr. LaChapelle, respectively. The foregoing options are
exercisable at any time during the ten-year term of the options at an exercise
price of $6.00 per share, which price exceeded the market price of the Common
Stock on the date of grant. During fiscal 1995, the Company also granted
options under the Option Plan to purchase a total of 57,273 shares to two of
its employees. The options are exercisable at a price of $5.00 per share, the
market price of the Common Stock at the time of grant.
401(K) PLAN
The Company has adopted a tax-qualified savings plan (the "401(k)
Plan") which is intended to qualify under Section 401(k) of the Code. The
Company pays the administrative expenses of the 401(k) Plan and currently
matches 25% of an employee's contribution, up to 1% of an employee's salary, by
making additional contributions to the plan. Generally, an employee becomes
eligible for participation in the 401(k) Plan after six months of employment
with the Company. All employees may elect to contribute to the 401(k) Plan,
through payroll deductions, up to the statutory limitation. Salary reduction
contributions are immediately 100% vested. Company contributions vest 20%
after two years of service and 20% each service year thereafter. Under Section
401(k) of the Code, the employee's contributions to the 401(k) Plan are not
taxable to the employee until such amounts are distributed to the employee. As
of September 30, 1996, 22 of the 48 eligible employees were enrolled in the
401(k) Plan.
7.
<PAGE> 8
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
the beneficial ownership of the Company's Common Stock as of December 31, 1996
by (i) each person who is known by the Company to own beneficially more than 5%
of the Company's outstanding Common Stock, Series A Preferred Stock or Series B
Preferred Stock; (ii) each of the Company's directors; (iii) each of the Named
Executive Officers; and (iv) officers and directors of the Company as a group:
<TABLE>
<CAPTION>
Series A Series B
Common Stock(1) Preferred Stock(1) Preferred Stock(1)
----------------------------- --------------------------- ------------------------------
Number of Percentage of Number of Percentage of Number of Percentage of
Name and Address (2) Shares Outstanding Shares Outstanding Shares Outstanding
- --------------------------------- --------------- ------------- ----------- --------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Frank J. LaChapelle(3) . . . . 938,889(4) 35.5% -- -- -- --
Michael W. Brennan . . . . . . 552,444(5) 20.1% -- -- -- --
George O. Harmon . . . . . . . 11,667(6) * -- -- -- --
Joseph R. Mancuso . . . . . . . 11,667(6) * -- -- -- --
Norman Baker . . . . . . . . . 6,667(6) * -- -- -- --
Stephen W. Crosson . . . . . . 30,909 1.2% -- -- -- --
James Mitchelli . . . . . . . . 20,000 * -- -- -- --
Renaissance Capital Growth
& Income Fund III, Inc.(7) . . 680,000(8) 21.1% 36,000(8) 100% 4,000(8) 100%
8080 N. Central Expressway
Suite 210
Dallas, Texas 75206
All executive officers and
directors as a group
(7 persons). . . . . . . . . . 1,572,243(9) -- -- -- -- --
- -----------------------
* Less than one percent.
</TABLE>
(1) Nature of beneficial ownership of securities is direct and arises from
sole voting power and sole investment power, subject to community
property laws where applicable.
(2) The address of each person listed in the table without an address is
c/o the Company at 5171 Clareton Drive, Agoura Hills, California
91301.
(3) The LaChapelle Family Trust owns 838,889 shares, with respect to
which Frank J. LaChapelle exercises voting and investment power.
(4) Includes 100,000 shares subject to stock options currently exercisable
or exercisable within 60 days.
(5) Includes 200,000 shares subject to stock options currently exercisable
or exercisable within 60 days.
(6) Represents shares subject to stock options currently exercisable or
exercisable within 60 days.
(7) According to a Schedule 13D, dated September 23, 1994, filed with the
Commission, Renaissance Capital Group, Inc. is the investment advisor
of Renaissance Capital Growth & Income Fund III, Inc.
(8) The 36,000 shares of Series A Preferred Stock are currently
convertible into 600,000 shares of Common Stock and the 4,000 shares
of Series B Preferred Stock are currently convertible into 80,000
shares of Common Stock, for a total of 680,000 shares of Common Stock.
(9) Includes all stock options currently exercisable or exercisable within
60 days that are owned by the Company's officers and directors.
The Series A Preferred Stock is issued pursuant to a Certificate of
Determination that requires the Company to pay the holders of the Series A
Preferred Stock a cumulative dividend on a quarterly basis. If (i) the Company
fails to pay in whole or in part four or more cumulative quarterly dividends on
the Series A Preferred Stock, (ii) a default exists under the agreement
pursuant to which the Series A Preferred Stock was issued, and such default
remains uncured for 12 months, or (iii) the Company fails to redeem the shares
of the Series A Preferred Stock at such times, or in the manner specified in
the Certificate of Determination, the holders of the Series A Preferred Stock
shall have the right to elect the smallest number of directors constituting a
majority of the authorized number of directors of the Company, and the holders
of the Common Stock shall have the right to elect the remaining directors.
Such right to elect a majority of the Board of
8.
<PAGE> 9
Directors shall continue until all cumulative dividends for all past dividend
periods shall have been declared and paid, until the default under the stock
purchase agreement has been cured, or until the Series A Preferred Stock is
redeemed as required.
The Series B Preferred Stock is issued pursuant to a Certificate of
Determination that requires the Company to pay the holders of the Series B
Preferred Stock a cumulative dividend on a quarterly basis. If (i) the Company
fails to pay in whole or in part four or more cumulative quarterly dividends on
the Series B Preferred Stock, (ii) a default exists under the agreement
pursuant to which the Series B Preferred Stock was issued, and such default
remains uncured for 12 months, or (iii) the Company fails to redeem the shares
of the Series B Preferred Stock at such times, or in the manner specified in
the Certificate of Determination, the holders of the Series B Preferred Stock
shall have the right to elect the smallest number of directors constituting a
majority of the authorized number of directors of the Company, and the holders
of the Common Stock shall have the right to elect the remaining directors.
Such right to elect a majority of the Board of Directors shall continue until
all cumulative dividends for all past dividend periods shall have been declared
and paid, until the default under the stock purchase agreement has been cured,
or until the Series B Preferred Stock is redeemed as required. Notwithstanding
the foregoing, the Series B Preferred Stock voting rights upon default shall
not be operative if the holders of the Series A Preferred Stock are exercising
their default voting rights.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 9, 1996, the Company consummated the acquisition of all the
issued and outstanding common stock of Laser Support & Engineering, Inc., a
California corporation ("LSE"), pursuant to that certain Agreement of Purchase
and Sale of Shares, dated January 9, 1996 (the "Agreement"), by and between the
Company, LSE, and Barry N. Lynn, John G. Hively, Dennis Casey and John Greb,
LSE's four shareholders (collectively, the "Sellers"). Pursuant to the
Agreement, the purchase was effective as of June 30, 1995. The purchase price
for all of the common stock of LSE was $1,678,038 and was payable by the
Company delivering to the Sellers $800,000 in cash at the closing and by
delivering to each of the Sellers a promissory note in the amount of $219,509.
In connection with the acquisition, the Company elected John G. Hively as a
Vice President of the Company responsible for the western regional operations
of the Company. Mr. Hively received and will receive 25% of the consideration
paid and payable by the Company pursuant to the terms of the Agreement. Mr.
Hively's employment with the Company was terminated in July 1996. The
Company and the Sellers are currently in litigation regarding the Agreement.
See, "Item 3. Legal Proceedings."
On January 4, 1996, the Company sold substantially all of the assets,
consisting of inventory, spare parts, capital equipment and receivables,
subject to certain related liabilities, of its foreign subsidiary, Interscience
PLC, for a sale price of $250,000 to N.B. Sales Limited, an entity controlled
by Norman Baker, a director of the Company. In addition, during the year ended
September 30, 1995, the Company paid a management fee of $136,400 to N.B. Sales
Limited. In January 1996, a patent for the Company's fusing agent was issued
to the Company in the United Kingdom. Following the receipt of the patent, the
Company and N.B. Sales Limited agreed to reverse the sale.
On March 29, 1996, the Company issued 4,000 shares of Series B
Cumulative Convertible Preferred Stock, par value $100 ("Series B Preferred
Stock"), to Renaissance Growth and Income Fund III, Inc. ("Renaissance") in
exchange for $400,000. At the time, Renaissance owned approximately 24% of the
Common Stock and 100% of the Series A Cumulative Convertible Preferred Stock
("Series A Preferred Stock"). The holders of shares of Series B Preferred
Stock are entitled to receive, when, as and if declared by the Board of
Directors of the Company, cumulative dividends at an annual rate of 7.5%. The
holders of shares of Series B Preferred Stock shall vote with the holders of
Common Stock as a single class, except such holders shall not vote for the
election of directors absent a default, and shall have the number of votes
equal
9.
<PAGE> 10
to the number of shares of Common Stock into which such shares of Series B
Preferred Stock are convertible. The shares of Series B Preferred Stock are
convertible into shares of Common Stock at a conversion price of $5.00 per
share. If the Company is not listed on a national stock exchange or quoted on
the Nasdaq Small Cap System, the outstanding shares of Series B Preferred Stock
will be subject to mandatory redemption at $111 per share prior to March 31,
1997, with an increasing redemption price after that time. Also on March 29,
1996, the Company and Renaissance executed a Waiver Agreement by which the
parties agreed that the $5.00 conversion price of the Series B Preferred Stock
would not cause a decrease in the $6.00 conversion price of the Series A
Preferred Shares as would otherwise occur under the terms of the Certificate of
Determination for the Series A Preferred Stock.
10.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Amendment No. 1 to be signed on its behalf
by the undersigned, thereunto duly authorized.
INTERSCIENCE COMPUTER CORPORATION
Date: January 29, 1997 By:/s/ FRANK J. LaCHAPELLE Frank J.
---------------------------------
LaChapelle, Chief Executive
Officer
11.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 336,355
<SECURITIES> 0
<RECEIVABLES> 2,285,399
<ALLOWANCES> 265,000
<INVENTORY> 3,555,318
<CURRENT-ASSETS> 6,481,743
<PP&E> 434,086
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,230,581
<CURRENT-LIABILITIES> 5,276,694
<BONDS> 0
0
3,590,000
<COMMON> 4,241,748
<OTHER-SE> 495,168
<TOTAL-LIABILITY-AND-EQUITY> 14,230,581
<SALES> 11,253,383
<TOTAL-REVENUES> 11,253,383
<CGS> 6,927,149
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,997,071
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 227,695
<INCOME-PRETAX> (1,132,892)
<INCOME-TAX> (81,000)
<INCOME-CONTINUING> (1,051,892)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,051,892)
<EPS-PRIMARY> (.53)
<EPS-DILUTED> 0
</TABLE>
