<PAGE> 1
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-QSB
[ X ] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
[ ] Transition report pursuant to Section 13 of 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-15241
NYTEST ENVIRONMENTAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-2725582
(State of other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
60 Seaview Boulevard, Port Washington, New York 11050
(Address of principal executive offices) (Zip Code)
(516) 625-5500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant ( 1 ) has filed all reports
required to be filed by Section 13 of 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and ( 2 ) has been subject to
such filing requirements for the past 90 days.
YES X NO
------------ ---------
As of March 31, 1997, the Issuer had 6,705,230 shares outstanding of its $ .01
par value common stock.
Page 1 of 13 pages.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 35,688 $ 29,460
Accounts receivable, less allowance for doubtful
accounts of $117,587 - 1997 and $146,000 - 1996 2,968,877 3,574,004
Inventories - Laboratory supplies, at cost 58,143 58,143
Prepaid expenses and other current assets 197,833 407,762
----------- -----------
Total Current Assets 3,260,541 4,069,369
----------- -----------
Fixed Assets:
Plant and Equipment, at cost 8,107,448 8,107,448
Less: Accumulated depreciation 5,076,463 4,718,393
----------- -----------
Net Fixed Assets 3,030,985 3,389,055
----------- -----------
Other assets 400,550 435,003
----------- -----------
Total Assets $ 6,692,076 $ 7,893,427
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Loans payable (note 4) $ 1,901,831 $ 1,726,522
Term Loan - current maturity (note 4) 368,028 368,028
Notes payable - current maturity 25,227 29,933
Obligations under capital leases - current maturity 35,476 34,369
Accounts payable 2,540,520 2,408,197
Accrued liabilities 417,866 626,855
Accrued estimated laboratory closing costs (note 5) 35,334 75,000
----------- -----------
Total Current Liabilities 5,324,282 5,268,904
----------- -----------
Long Term Liabilities:
Term Loan (note 4) 1,134,733 1,285,074
Notes payable 0 2,587
Obligations under capital lease 83,934 93,229
Subordinated convertible debt 1,095,000 1,095,000
----------- -----------
Total Long Term Liabilities 2,313,667 2,475,890
----------- -----------
Total Liabilities 7,637,949 7,744,794
----------- -----------
STOCKHOLDERS' EQUITY
Common stock $.01 par; authorized 30,000,000 shares,
issued and outstanding 6,705,230 shares 67,052 67,052
Additional paid-in capital 3,068,255 3,068,255
Retained earnings (4,081,180) (2,986,674)
----------- -----------
Total Stockholders' Equity (945,873) 148,633
----------- -----------
Total Liabilities and Stockholders' Equity $ 6,692,076 $ 7,893,427
=========== ===========
</TABLE>
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<PAGE> 4
NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31
----------------------------
1997 1996
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 2,602,466 $ 3,558,630
----------- -----------
Cost and expenses:
Cost of operations 2,766,275 3,805,613
Selling, general and administrative expenses 788,574 1,213,764
----------- -----------
Total costs and expenses 3,554,849 5,019,377
----------- -----------
Operating (loss) (952,383) (1,460,747)
Interest expense 142,123 89,612
----------- -----------
(Loss) before taxes (1,094,506) (1,550,359)
Income tax provision (benefit) (note 6) 0 0
----------- -----------
Net (loss) (1,094,506) (1,550,359)
Retained Earnings-January 1 (2,986,674) 234,773
----------- -----------
Retained Earnings-March 31 $(4,081,180) $(1,315,586)
=========== ===========
(Loss) earnings per share : $ (0.16) $ (0.23)
=========== ===========
Average number of shares outstanding 6,705,230 6,705,230
=========== ===========
</TABLE>
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<PAGE> 5
NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31
-----------------------------
1997 1996
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(1,094,506) $(1,550,359)
----------- -----------
Adjustments to reconcile net (loss) to
net cash (used) provided by operating activities:
Depreciation and amortization 358,070 557,246
Net changes in assets and liabilities:
Accounts receivable - net 605,127 (1,240,597)
Laboratory supplies 0 1,262
Prepaid expenses and other current assets 209,929 132,914
Other assets 34,453 (110,412)
Accounts payable 132,323 1,162,066
Accrued liabilities (208,989) 278,672
Accrued estimated laboratory closing costs (39,666) 0
----------- -----------
Total adjustments 1,091,247 781,151
----------- -----------
Net cash (used) provided by operating activities (3,259) (769,208)
----------- -----------
Cash flows (used) for investing activities:
Acquisition of equipment 0 (33,320)
----------- -----------
Cash flows provided (used) by financing activities:
Net advances under Loans Payable 175,309 596,000
Net advances under Term Loan (150,341) (8,333)
Repayments of notes payable (7,293) (7,973)
Repayments of capitalized lease obligations (8,188) (66,209)
----------- -----------
Net cash provided (used) by financing activities 9,487 513,485
----------- -----------
Net increase (decrease) in cash 6,228 (289,043)
Cash at beginning of period 29,460 426,631
----------- -----------
Cash at end of period $ 35,688 $ 137,588
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest payments $ 83,599 $ 55,321
=========== ===========
Supplemental Disclosure of Non-Cash Financing Activities:
Assets acquired under capital leases $ 0 $ 0
=========== ===========
</TABLE>
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<PAGE> 6
NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (UNAUDITED)
NOTE 1. COMPANY'S OPINION ON UNAUDITED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited financial statements
contain all ordinary and necessary adjustments to present fairly the balance
sheet as of March 31, 1997, and the related statements of operations and cash
flows for each of the three month periods ended March 31, 1997 and March 31,
1996. The balance sheet as of December 31, 1996, is unaudited.
The Company's financial statements reflect all adjustments which are all of a
normal, recurring nature, and in the opinion of management , necessary for a
fair presentation. The Company has not filed its audited financial statements as
part of its Form 10-KSB for the twelve month period ended December 31, 1996,
because the Company's auditors have not completed their analysis of the
Company's ability to continue as a going concern which is necessary to render
their report on the Company's financial statements. This analysis was dependent,
in substantial part, on the favorable completion of negotiations with Smith
Environmental Technologies, Inc. ("Smith") concerning the payment of outstanding
accounts receivable and the satisfaction of lease obligations related to the
closing of the Company's Norristown, Pennsylvania laboratory, which were
completed April 11, 1997. See Note 5 below.
The statements of operations for the periods ended March 31, 1997 and March 31,
1996 are not necessarily indicative of the results for the entire year.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated financial statements at March 31, 1997, include
the effects of the Company's wholly owned subsidiary NEI/GTEL Environmental
Laboratories, Inc. ("NEI/GTEL"), since December 31, 1995. The Company's wholly
owned subsidiary, NEI of Pennsylvania, Inc ("NEIPA") commenced operations on
August 5, 1995 and ceased operations on September 1, 1996. The statement of
operations for the three month period ended March 31, 1996 include the results
of the Company's wholly owned subsidiaries, NEIPA and NEI/GTEL, since August 5,
1995 and December 31, 1995, respectively. See Note 3 and Note 5.
The accompanying consolidated financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has incurred losses
of $ 3,221,449 and $ 332,366, for the years ended December 31, 1996 and December
31, 1995 respectively, and $ 1,094,506 for the three months ended March 31,
1997. In addition, the Company's working capital deficiency has increased to
$2,063,741 at March 31, 1997 from $ 1,199,535 at December 31, 1996.
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NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (UNAUDITED)
NOTE 3. ACQUISITIONS
On July 17, 1995, the Company organized NEI of Pennsylvania, Inc., a Delaware
corporation (NEIPA), as a wholly owned subsidiary to acquire and operate a
testing laboratory in Norristown, Pennsylvania. Effective August 5, 1995, NEIPA
acquired from BCM Engineers, Inc., a wholly owned subsidiary of Smith, certain
assets comprising an environmental testing laboratory in Norristown,
Pennsylvania. The Company has ceased the operations in Norristown, Pennsylvania
on September 1, 1996. See Note 5 below.
Effective December 31, 1995, the Company organized NEI/GTEL Environmental
Laboratories, Inc., a Delaware corporation (NEI/GTEL), as a wholly owned
subsidiary of the Company, to acquire the business and substantially all of the
assets of GTEL Environmental Laboratories, Inc. ("GTEL"), a subsidiary of
Groundwater Technologies, Inc. In exchange for the assets acquired plus closing
costs, NEI/GTEL paid $3,200,000 in a combination of cash, assumption of
liabilities and the issuance of a secured convertible note in the amount of
$1,095,000. NEI/GTEL, as part of the transaction, hired all of the active
employees of GTEL. NEI/GTEL also entered into a long term lease for the use of
the GTEL Wichita, Kansas facility and assignment and assumption agreements for
the leases of GTEL facilities in Tampa, Florida and Milford, New Hampshire.
NOTE 4. LOANS PAYABLE
On April 23, 1996, the Company executed a loan and security agreement with a
finance company, for a three year term with $7,000,000 maximum borrowing which
includes a $2,606,000 term loan sublimit for equipment financing. Additional
advances under agreement are limited to no more than 80 % of eligible accounts
receivable, as defined.
The initial advance for equipment financing was $1,840,120. The agreement
provides for an additional $766,000 for equipment purchases during the term of
the agreement. All advances for equipment are being amortized in sixty
consecutive monthly installments until the expiration of the agreement when all
unpaid amounts will become payable.
The Company also has short term loan agreements with both Fluor Daniel GTI and
the Company's former lender for a total of $700,000. As of March 31, 1997, the
balance outstanding for the short term loans was $583,333. In April 1997, the
Company amended its agreement with its former lender such that it will pay the
balance due by the Company in eight monthly payments of $29,167 beginning July
1, 1997.
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<PAGE> 8
NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (UNAUDITED)
NOTE 5. CLOSING OF NORRISTOWN, PENNSYLVANIA LABORATORY
On August 6, 1996, the Company's Board of Directors approved the closing of the
Norristown, Pennsylvania laboratory. The laboratory ceased operations on
September 1, 1996. This decision was predicated on the continued losses
sustained at that laboratory due to the substantial slowdown in revenue and
testing requirements of the facilities principal customer.
As a result of this decision, the June 30, 1996 financial statements reflected
an accrual for estimated laboratory closing costs totaling $800,000. These
costs were primarily comprised of rent and related occupancy costs to the end of
the lease obligation through February, 2000. The September 30, 1996 financial
statements included a reduction of $50,000 in the accrual for estimated
laboratory closing costs. On April 11, 1997 the Company and Smith agreed to
terminate the leases and release the Company's wholly owned subsidiary, NEIPA,
from its obligations. As a result, the Company recouped $609,000 of this
accrual which was reflected in the December 31, 1996 financial statements.
NOTE 6. INCOME TAXES
The Company does not have any net operating loss carryback for income tax
purposes. As a result of its loss incurred during the three months ended March
31, 1997, the Company has net operating loss carryforwards for income tax
purposes which will be used to reduce future taxable income. The benefits of the
net operating loss carryforwards have not been recognized as the Company has
recorded a valuation allowance equal to such benefit.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated revenues for the three months ended March 31, 1997 totaled
$2,602,466 which were $956,164 lower than the $3,558,630 for the corresponding
period last year. The Company's subsidiaries accounted for $1,179,441 of this
shortfall, of which $286,309 was due to the NEIPA subsidiary which ceased
operations on September 1, 1996. This shortfall was partially offset by an
increase of $223,277 from the Company's Port Washington operation.
Overall, the current market conditions are still being characterized as having
excess capacity and aggressive price competition. Management has continued to
address this situation with aggressive sales and marketing programs inclusive of
the hiring of several additional sales and marketing personnel.
Consolidated cost of operations for the three months ended March 31, 1997
totaled $2,766,275. This was an decrease in cost of operations of $1,039,338
from the comparable period last year. The Company's subsidiaries accounted for
$941,681 of this variance, of which $604,481 was attributable to the NEIPA
subsidiary which ceased operations on September 1, 1996. The Company's Port
Washington operation accounted for $97,657 of this favorable variance.
Management is continuing its efforts to reduce its cost of operations by
headcount reductions and aggressively pursuing price concessions from key
vendors. Employment levels were reduced from 172 full time employees at December
31, 1996 to 151 full time employees at March 31, 1997.
Consolidated selling, general and administrative expenses for the three months
ended March 31, 1997, totaled $788,574, which was $425,190 lower than the
comparable period last year. The Company's subsidiaries accounted for $174,624
of this variance, of which $113,080 was attributable to the NEIPA subsidiary
which ceased operations on September 1, 1996. The Company's Port Washington
operation accounted for $250,566 of this favorable variance. This favorable
variance was principally due to a reduction in headcount coupled with continued
efforts to reduce fixed costs.
Consolidated interest expense reported for the three months ended March 31, 1997
totaled $142,123, which was $52,511 higher than the comparable period last
year. This variance was principally due to the new loan agreement the Company
executed on April 23, 1996 (see note 4).
The consolidated pre-tax loss for the three months ended March 31, 1997 totaled
$1,094,506, a decrease of $455,853 from the comparable period last year. The
Company's subsidiaries accounted for $50,322, and the Company's Port Washington
operation accounted for $405,531 of this variance. The loss was directly
attributed to the shortfall in revenue.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
The Company's operations for the three months ended March 31, 1997 used net cash
of $3,259 as compared to net cash used by operations of $769,208 in the
corresponding period one year ago. The decrease in cash used of $765,949 was
primarily due to the decrease in accounts receivable and other current assets
principally due to lower revenue, which was partially offset by a decrease in
current liabilities.
The Company is engaged in a business which at times requires substantial working
capital to fund investments of personnel and equipment by the Company before the
Company is permitted to invoice its client. Also, many of the Company's
contracts with consulting engineers allow the consulting engineers to defer
payment of the invoices until the consulting firm is paid by its customer. The
Company's working capital and cash have been significantly impacted by the debt
incurred in connection with the acquisition of the laboratory from Smith and the
acquisition of GTEL from Groundwater Technologies, Inc. and by the costs
associated with consolidating these operations into the Company. As a result of
matters and the market conditions in the environmental testing laboratory
industry, which have resulted in lower revenues and lower profit margins, the
Company has and continues to experience liquidity problems.
The Company has attempted to improve cash flow and working capital through cost
reduction measures and improved collection procedures. However, the Company does
have a sizable receivable from a single customer which is experiencing financial
stress. Management believes it will achieve higher revenues and that operating
results and cash flows will improve to a sufficient level in 1997 to allow the
Company to meet its financial demands. The Company is also pursuing identified
investment capital and merger opportunities, as well as the divestiture of a
portion of its business. These potential transactions may require an increase in
the common and preferred stock of the Company. Proceeds from such a capital
investment or divestiture would be used to reduce the Company's trade payables,
subject to the approval of the Company's lenders. In the event the Company fails
to collect this receivable, or achieve a capital infusion, merger, or sell a
portion of its business, its liquidity and financial position may be materially
adversely impacted.
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
The net cash provided by financing activities of $9,487 for the three months
ended March 31, 1997 was $503,998 lower than during the comparable period in
1996. This variance was a result of less borrowings.
MATERIAL COMMITMENTS
The Company had no material commitments for capital expenditures.
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS AND INFORMATION
This report and other reports and statements filed by the Company from time to
time with the Securities and Exchange Commission (collectively, "SEC Filings")
contain or may contain certain forward-looking statements and information that
are based on information available to the Company's management and various
estimates, assumptions and predictions made by the Company's management. When
used in SEC Filings, the words "anticipate", "contemplate", "estimate",
"expect", "future", "intend", "plan", "predict" and similar expressions are
intended to identify forward-looking statements.
Such statements are subject to inherent uncertainties, including, in addition to
any uncertainties specifically identified in text surrounding such statements,
uncertainties with respect to changes or developments in social, economic,
business, industry, market, legal and regulatory circumstances and conditions
and actions taken or omitted to be taken by third parties, including the
Company's stockholders, customers, suppliers, business partners and competitors,
and legislative, regulatory, judicial and other governmental authorities and
officials. Consequently, actual events, circumstances, consequences, effects and
results may vary significantly from those described in or contemplated by such
forward-looking statements or information.
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<PAGE> 12
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No change from the previous filing.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
In accordance with an intercreditor agreement among
GTEL, The CIT Group/Credit Finance, Inc. ("CIT"), the
Company and the Company's NEI/GTEL and NEIPA
subsidiaries dated April 22, 1996, NEI/GTEL has not
made interest payments in the aggregate amount of
$78,372, which would otherwise have been due to GTEL
pursuant to a Secured Convertible Subordinated
Promissory dated December 31, 1995 (the "Note"). The
Note is secured by the assets of NEI/GTEL acquired
from GTEL and is guaranteed by the Company. Pursuant
to the intercreditor agreement, NEI/GTEL may not
make, and GTEL may not accept, any payments of
interest while the Company has amounts outstanding
under its borrowing agreement with CIT, unless
certain financial conditions are met. In addition,
GTEL agreed not to take any action to enforce such
payments.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
The Company has not filed audited financial
statements for the year ended December 31, 1996 as
part of its Form 10-KSB. See Note 1 of Notes to
Financial Statements included as Item 1 of Part 1 of
this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) The following exhibits are filed as part of this
Form 10-QSB
10.1 Termination and waiver of claims agreement dated
April 22, 1997 between Nytest Environmental
Inc., NEI of Pennsylvania, Inc., BCM
Engineers, Inc. and Smith Environmental
Technologies, Inc.
(b) Reports on Form 8-K
None.
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<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NYTEST ENVIRONMENTAL INC.
By: /s/ John Gaspari
----------------------------------------
John Gaspari
President and Chief Executive Officer
By: /s/ Elliot J. Laitman
----------------------------------------
Elliot J. Laitman
Chief Financial Officer and Treasurer
Dated: June 13, 1997
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<PAGE> 1
Exhibit 10.1
TERMINATION AND WAIVER OF CLAIMS
WHEREAS, NEI of Pennsylvania, Inc., as Buyer ("NEI or Buyer") and NYTEST
Environmental Inc., its parent corporation ("NYTEST"), entered into a contract
with BCM Engineers Inc., a Pennsylvania corporation ("BCM") and Smith
Technology Corporation ("SMITH") to the extent set forth in Section 7, for the
purchase of certain assets and the assumption by NEI of certain leases and
liabilities dated August 3, 1995, (the "Asset Agreement"), and
WHEREAS, NEI, pursuant to the Asset Agreement, entered into a sublease dated
August 3, 1995, of a portion of the improved real property leased by BCM from
the Gravers Company at 1850 Gravers Road in Norristown, Pennsylvania, commonly
referred to as the Laboratory Site (the "Sublease"), and
WHEREAS, NEI entered into two subleases dated August 3, 1995, of personal
property wherein NEI assumed the obligations of the lease of personal property
supplied through Fidelcor Services Inc. (the "Fidelcor Sublease"), and for
personal property obtained through Tokai Financial Services, Inc. (the "Tokai
Sublease"), and
WHEREAS, various disputes as to the rights and obligations of BCM and Smith
Technology Corporation ("Smith"), NEI and NYTEST have arisen and the parties
desire to resolve such disputes, NOW THEREFORE, the parties enter into this
agreement (the "Termination Agreement") as follows:
1. Termination of Sublease
The parties agree that the Sublease is terminated effective February 28,
1997, and that NEI and NYTEST forego and waive all claims of any right,
title, or interest in and to all fixtures, equipment, improvements,
installations, and the appurtenances in each case attached to the sublet
premises at commencement of the Sublease or which may have been attached
during the term thereof. The costs, removal and disposal of regulated waste
will be deducted from the amount due under paragraph 5.
2. Termination of Fidelcor Sublease and Tokai Sublease
The parties agree that the Fidelcor Sublease and the Tokai Sublease
including all future sublease obligations are terminated effective February
28, 1997, with no continuing obligation as between the parties. NEI agrees
that it is, as of March 10, 1997, in possession of all personal property and
equipment to which it is entitled under the terms of the Asset Agreement.
NEI and NYTEST waive any right or interest in and to any other property or
equipment or proceeds of equipment leased or which may have been acquired
under the terms of the Fidelcor Sublease and Tokai Sublease.
3. NEI and NYTEST further agree that they waive all interest and any claim of
title in and to the assets described in paragraph 1.1c of the Asset
Agreement which remain at the Lab Site as of the date of this Agreement.
4. Credits and Offsets
BCM, NEI and NYTEST acknowledge that BCM has received laboratory services
from NEI and its affiliated laboratories and that BCM has offset amounts
owed by BCM and Smith for laboratory services and NEI, NYTEST and its
affiliates have received credit for the amount of such offsets
Page 1 of 4
<PAGE> 2
against amounts owed by NEI to BCM pursuant to the terms of the Asset
Agreement. The amount of such offset and credit is set forth as follows:
Invoices for Services through February 28, 1997
Hudson Chromate (the "Project") $692,847
Other Services 589,963
--------
Total for Services through February 28, 1997 $1,282,810
Less BCM Payments 108,466
----------
Balance for Services as of February 28, 1997 $1,174,344
Less Amounts due (offset) from NEI per
Asset Agreement through May 31, 1996 $ 493,262
Amount Due NEI $ 681,082
5. Survivability of Claim
Notwithstanding the reciprocal waiver and release of claims by the parties
contained herein, the parties acknowledge that NYTEST has continued to
perform laboratory services for BCM at its request related to the Hudson
County Chromate Chemical Production Waste Site project (the "Project"). BCM
agrees that it will continue to use NYTEST as NEI's successor for laboratory
services at the Project on the basis of the contract for Laboratory Services
dated September 14, 1995, between BCM, NYTEST and NEI, subject to the
continued approval of the New Jersey Department of Environmental Protection
(NJDEP) to use NEI or NYTEST.
The parties agree that NYTEST's and NEI's total amounts billed for services
identified in Section 4 above includes $692,847 relating to the Project and
performed prior to February 28, 1997. This obligation is subject to NJDEP's
approval and acceptance of NYTEST's analytical work, holding periods, and
acknowledgment that the laboratory services are in compliance with the
requirements of the NJDEP.
NYTEST accepts $681,082 as identified in Section 4 above in complete
satisfaction of amounts due for services rendered to February 28, 1997, and
acknowledges that NYTEST shall be subject to backcharge for the amount of any
services rejected by NJDEP due to actions or omissions by NYTEST and the cost
of resampling and reperformance incurred as a result of such rejection. Any
such backcharge shall be deducted from amounts due for future services and
the retainage.
BCM and SMITH shall pay the balance due in installments on the dates set
forth below:
Installment Payment
Amount Date
----------- -----------------------------
$681,082 a payment schedule to be
mutually agreed upon by both
parties is anticipated to be
completed by April 18, 1997
<PAGE> 3
6. Waiver of Claims
a. Waiver of NEI and NYTEST. For and in consideration of the promises
and covenants set forth in this Termination Agreement, NYTEST and
NEI, their successors, assigns and any and all persons claiming by,
through or under them, hereby release and forever discharge BCM and
its parent, subsidiaries, affiliates, predecessors, successors,
related entities, directors, employees, agents, attorneys, and all
persons acting by and through, under or in concert with them, or any
of them, of and from any and all claims, demands, claims for relief,
obligations, rights, and/or liabilities of any nature, whether
anticipated or unanticipated, known or unknown, fixed or contingent,
past or present (hereinafter referred to as "Claims"), which NYTEST
and NEI now have or may hereafter have against BCM and its parent,
subsidiaries, affiliates, predecessors, successors, related entities,
insurers and assigns, as well as its past and present officers,
directors, employees, agents, attorneys, and all persons acting by
and through, under or in concert with them, or any of them, by reason
of any matter, cause or thing arising out of, based upon, or relating
to the Asset Agreement and as amended by Smith letter dated August
22, 1996.
b. Waiver of BCM. For and in consideration of the promises and covenants
set forth in this Termination Agreement, BCM, its successors, assigns
and any and all persons claiming through or under it, hereby releases
and forever discharges NYTEST and NEI and its parents, subsidiaries,
affiliates, predecessors, successors, related entities, directors,
employees, agents, attorneys, and all persons acting by and through,
under or in concert with them, or any of them, of and from any and
all claims, demands, claims for relief, obligations, rights, and/or
liabilities of any nature, whether anticipated or unanticipated,
known or unknown, fixed or contingent, past or present (hereinafter
referred to as "Claims"), which BCM now has or may hereafter have
against NYTEST or NEI and its respective parent, subsidiaries,
affiliates, predecessors, successors, related entities, insurers and
assigns, as well as its past and present officers, directors,
employees, agents, attorneys, and all persons acting by and through,
under or in concert with them, or any of them, by reason of any
matter, cause or thing arising out of, based upon, or relating to the
Asset Agreement and as amended by Smith letter dated August 22, 1996.
c. Non-Admission of Liability. This Termination Agreement and the
releases and other terms provided for herein are made, executed,
given and accepted as a part of a compromise and resolution of
disputed claims. No provision(s) of the Termination Agreement, nor
the parties hereto, shall be construed or deemed to be evidence of an
admission of any fact, matter, thing or liability of any kind to any
other party. Each of the parties hereto denies any liability of any
kind to the other party for any purpose, and this Termination
Agreement is made solely and entirely as a compromise and for the
purpose of fully and finally resolving the disputed matters referred
to herein. Neither the Termination Agreement nor any term thereof
shall be offered or received as evidence in any proceeding in any
forum as an admission of any liability or wrongdoing on the part of
any of the parties hereto.
d. No Assignment. Each party represents and warrants that there has been
no assignment or other transfer to any other person, firm or
corporation in any manner, including by way of subrogation or
operation of law or otherwise, of all or any portion of any claim,
demand, right, action or claim for relief that it had, has or might
have arising out of the matters released in the Termination
Agreement, nor of all or any portion of any claim, suit, recovery or
settlement to which it may be entitled. In the event that any claim,
demand or suit should be made or instituted against a party because
of any such purported assignment, subrogation or transfer, each party
agrees to indemnify and hold the other party harmless against such
claims, demand, or suit, together with any costs,
Page 3 of 4
<PAGE> 4
expenses and attorneys' fees incurred by the other party as a result of
any person's assertion of any such assignment or transfer.
7. Smith Technology corporation has entered into this Agreement solely for the
purpose of participating as a party to the extent of the waiver of claims
provided the parties herein and for the purpose of acknowledging the offsets
and credits agreed to herein and to the extent of guarantee agreements as
provided in Article 5.16 of the Asset Agreement.
This Agreement is effective as of the date of the last party to sign.
Date: 4/19/97 NEI OF PENNSYLVANIA, INC.
By: /s/ John Gaspari
-----------------------------
Its: President
----------------------------
Date: 4/14/97 NYTEST ENVIRONMENTAL INC.
By: /s/ John Gaspari
-----------------------------
Its: President & CEO
----------------------------
Date: 4/11/97 BCM ENGINEERS INC.
By: /s/ Robert Swavely
-----------------------------
Its: Vice President
----------------------------
Date: 4/11/97 SMITH TECHNOLOGY CORPORATION
By: /s/ William Nelson
-----------------------------
Its: Vice President
----------------------------
Page 4 of 4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-QSB.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 36
<SECURITIES> 0
<RECEIVABLES> 3,086
<ALLOWANCES> (118)
<INVENTORY> 58
<CURRENT-ASSETS> 3,261
<PP&E> 8,107
<DEPRECIATION> 5,076
<TOTAL-ASSETS> 6,692
<CURRENT-LIABILITIES> 5,324
<BONDS> 0
0
0
<COMMON> 67
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<TOTAL-LIABILITY-AND-EQUITY> 6,692
<SALES> 2,602
<TOTAL-REVENUES> 2,602
<CGS> 2,766
<TOTAL-COSTS> 2,766
<OTHER-EXPENSES> 789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> (1,095)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,095)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,095)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
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