UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the quarterly period ended March 31, 1996
Transition Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the transition period from to
Commission file number 0-16152
Holometrix, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 04-2891557
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
25 Wiggins Avenue, Bedford, Massachusetts 01730-2323
(Address of Principal Executive Offices)
(617) 275-3300
(Issuers 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 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, 1996, 16,296,878 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format:
Yes No X
FORM 10-QSB
QUARTERLY REPORT
TABLE OF CONTENTS
Facing Page . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 1
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PART I. FINANCIAL INFORMATION (*)
Item 1. Condensed Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . .. 5
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Condensed Financial Statements. .. . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis or Plan of Operations .. . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . .. . . . 13
Item 3. Defaults upon Senior Securities . .. . . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of Security Holders .. . . . . . 13
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . .. . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 14
(*) The financial information at September 30, 1995 has been taken from the
audited financial statements at that date. All other financial statements
are unaudited.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
HOLOMETRIX, INC.
CONDENSED BALANCE SHEETS
ASSETS
(Unaudited)
March 31, September 30,
1996 1995
(*)
CURRENT ASSETS:
Cash and cash equivalents $ 1,044 $ 40,707
Accounts receivable, less allowance
for doubtful accounts of $20,000 528,794 407,633
Inventories 224,517 239,238
Other current assets 33,435 15,473
TOTAL CURRENT ASSETS 787,790 703,051
EQUIPMENT AND FIXTURES - net 304,131 350,146
OTHER ASSETS - net 17,806 20,020
TOTAL ASSETS $1,109,727 $1,073,217
See notes to condensed financial statements.
(*) Balance sheet at September 30, 1995 has been taken from the audited
financial statements at that date. All other financial statements are
unaudited.
HOLOMETRIX, INC.
CONDENSED BALANCE SHEETS - Continued
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
March 31, September 30,
1996 1995
(*)
CURRENT LIABILITIES:
Notes payable - stockholders $ 160,000 $ 55,000
Notes payable - line of credit 150,000 125,000
Accounts payable 193,566 214,743
Accrued payroll and related expenses 14,168 28,731
Accrued expenses - other 235,405 61,589
Due to stockholder 26,530 10,854
Current maturities of long-term obligations 4,612 4,673
TOTAL CURRENT LIABILITIES 784,281 500,590
LONG-TERM DEBT:
Notes payable-stockholders,
less current maturities 55,000 110,000
Long term obligations, less current maturities 22,331 24,571
COMMITMENTS AND CONTINGENCIES: - -
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 30,000,000 shares
authorized; issued 20,533,157;
outstanding 16,296,878. 205,332 205,332
Additional paid-in capital 2,219,009 2,219,009
Accumulated deficit (2,072,226) (1,882,285)
352,115 542,056
Less treasury stock (at cost) 104,000 104,000
TOTAL STOCKHOLDERS' EQUITY 248,115 438,056
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,109,727 $1,073,217
See notes to condensed financial statements.
(*) Balance sheet at September 30, 1995 has been taken from the audited
financial statements at that date. All other financial statements are
unaudited.
HOLOMETRIX, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three-Month Period Ended March 31,
1996 1995
NET REVENUES $353,246 $485,167
COST OF SALES 271,300 277,191
GROSS PROFIT 81,946 207,976
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 197,140 141,674
RESEARCH AND DEVELOPMENT 37,894 40,709
TOTAL OPERATING EXPENSES 235,034 182,383
INCOME (LOSS) FROM OPERATIONS (153,088) 25,593
INTEREST EXPENSE - net (8,618) (8,604)
NET INCOME (LOSS) ($161,706) $16,989
NET INCOME (LOSS) PER COMMON SHARE: ($0.01) $ -
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES USED IN CALCULATION OF 16,296,878 16,296,878
INCOME PER COMMON SHARE
See notes to condensed financial statements.
HOLOMETRIX, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Six-Month Period Ended March 31,
1996 1995
NET REVENUES $845,680 $902,902
COST OF SALES 612,818 573,755
GROSS PROFIT 232,862 329,147
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 335,354 311,745
RESEARCH AND DEVELOPMENT 70,707 87,784
TOTAL OPERATING EXPENSE 406,061 399,529
LOSS FROM OPERATIONS (173,199) (70,382)
INTEREST EXPENSE - net (16,742) (17,211)
NET LOSS ($189,941) ($87,593)
NET LOSS PER COMMON SHARE: ($0.01) ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES USED IN CALCULATION OF 16,296,878 15,382,610
INCOME PER COMMON SHARE
See notes to condensed financial statements.
HOLOMETRIX, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six-Month Period Ended March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($189,941) ($87,593)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Depreciation and amortization 65,766 71,674
Change in operating assets and liabilities:
Accounts receivable (121,161) 57,191
Inventories 14,721 (88,131)
Other current assets (17,962) 101
Accounts payable and accrued expenses 138,076 80,130
Net cash (used) provided by operating activities (110,501) 33,372
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment and fixtures additions (17,537) (37,766)
Net cash used for investing activities (17,537) (37,766)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable - stockholders and others 50,000 (15,000)
Due to stockholder, net 15,676 -
Increase in bank line of credit 25,000 -
Purchase of treasury stock - (3,000)
Decrease in long-term obligations (2,301) (4,419)
Net cash provided by (used for) financing activities 88,375 (22,419)
Net decrease in cash and cash equivalents (39,663) (26,813)
Cash and cash equivalents, beginning of period 40,707 108,503
Cash and cash equivalents, end of period $ 1,044 $ 81,690
Supplemental disclosure of non-cash transactions:
During the first quarter of fiscal year 1995, the Company converted its
outstanding Redeemable Preferred Stock Series A, Preferred Stock Series B, and
certain outstanding debt and accrued interest into an aggregate of 5,901,950
shares of the Company's Common stock. See also Liquidity and Capital Resources.
See notes to condensed financial statements.
HOLOMETRIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-QSB. Accordingly, they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statement presentation. For
further information refer to the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
September 30, 1995.
The results of operations for any interim periods reported are not
necessarily indicative of those that may be expected for the full year. The
accompanying financial information is unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring
adjustments) necessary to a fair presentation of the operating results of
the period have been included.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS - Holometrix, Inc. (the "Company") is a product
development, manufacturing and contract test services company which
specializes in manufacturing instruments ("Instruments") and providing
contract test services ("Testing Services") for measuring the thermophysical
properties of a wide variety of materials.
Three-Month Period Ended March 31, 1996 as Compared With
the Three-Month Period Ended March 31, 1995
Revenues in the second quarter of fiscal 1996 totaled $353,000 as compared
to $485,000 in the comparable quarter of 1995, a decrease of $132,000.
The most significant factor contributing to this 27% drop in revenues is the
loss of a major government contract representing approximately $110,000 in
revenue. Management is continuing to address the decrease in revenues through
new marketing, sales and product development efforts.
Cost of sales decreased by $6,000 from $277,000 (57% of sales) in the
second quarter of fiscal 1995 to $271,000 (77% of sales) in the same period
of fiscal 1996. The main reasons for the small decrease in cost of sales
were two-fold. First, certain labor and overhead expenses are relatively
fixed and were not reduced in proportion to sales. Second, Instruments, a
higher cost product, constituted a larger portion of sales in this quarter.
Selling, general and administrative expenses increased by $55,000,
or 39%, from $142,000 (29% of sales) to $197,000 (56% of sales). The
increase was due to two factors. The first is higher staffing costs,
resulting from the hiring of a Sales and Marketing Director in November of
1995. The second factor was increased marketing expenses for advertising,
mailings and exhibitions. Selling, general and administrative expenses
increased as a percentage of sales because total sales were significantly
lower for the period of fiscal 1996.
Research and development decreased $3,000, from $41,000 (8% of sales)
to $38,000 (11% of sales). The expense was lower due to increased
development efficiency and the partial completion of certain development
projects. Management anticipates that expenses in this area will be
maintained at the current level to support ongoing development activities.
Loss from operations was ($153,000) in the second quarter of fiscal 1996,
compared with income of $26,000 in the comparable period of fiscal 1995,
primarily due to lower sales, lower gross profit, and increases in operating
expenses. Interest expense remained relatively constant. Net loss was
$162,000 in the second quarter of fiscal 1996, compared with income of
$17,000 in the comparable period of fiscal 1995, again due to lower sales,
lower gross profit and higher operating expenses.
Six-Month Period Ended March 31, 1996 as Compared With
the Six-Month Period Ended March 31, 1995
Revenues during the first half of fiscal 1996 totaled $846,000 as compared
to $903,000 in the comparable half of 1995, a decrease of $57,000. The
billings decrease from the loss of a major government contract more than
exceeded this decrease.
Cost of sales increased by $39,000, from $574,000 (64% of sales) in the
first half of fiscal 1995 to $613,000 (72% of sales) in the same period of
fiscal 1996. The inability to decrease certain fixed labor and overhead
expenses, coupled with a higher mix of more expensive products to
manufacture, caused this increase to occur.
Selling, general and administrative expenses increased by $23,000, or 7%,
from $312,000 (35% of sales) to $335,000 (40% of sales). Increased sales and
marketing staffing and advertising contributed to this increase.
Research and development decreased $17,000, from $88,000 (10% of sales) to
$71,000 (8% of sales), due to increased development efficiencies and partial
completion of certain projects.
Loss from operations was $173,000 in the first half of fiscal 1996,
compared with loss of $70,000 in the comparable period of fiscal 1995,
primarily due to lower sales and lower gross profit. Interest expense
remained constant at $17,000. Net loss was $190,000 in the first half of
fiscal 1996, compared with a net loss of $88,000 in the comparable period of
fiscal 1995.
Total Assets increased by $37,000 during the first half of 1996,
from $1,073,000 to $1,109,000. Cash decreased by $40,000, and accounts
receivable increased by $121,000, due to a large letter of credit sale that
included a substantial international distributor's commission. Inventories
decreased $15,000, due to decreases in work in process. Fixed assets
decreased by $46,000, due primarily to depreciation.
Total Liabilities increased significantly, by $227,000, or 36%, during the
first half of fiscal year 1996. Notes payable-stockholders increased by
$50,000 in total (Current and Long-Term) as the result of a loan from
Tytronics Incorporated ("Tytronics"), a related entity which owns 54% of the
Company's common stock.. However, the major increase in liabilities resulted
from an increase in accrued expenses-other of $174,000; of this, $160,000 was
for commissions payable to international distributors. See liquidity and
Capital Resources section, below.
For additional discussion of management's analysis of the changes in the
categories reported for the six-month period ended March 31, 1996, see the
discussion for the three-month period ended March 31, 1996.
As of March 31, 1996, the Company had an outstanding order backlog for
products and services of approximately $120,000, as compared to a backlog of
approximately $402,000 as of March 31, 1995. The Company believes
the $120,000 backlog will be realized in fiscal 1996. The backlog was reduced
due to lower government contract bookings, and some slowness in Instruments
bookings. Management believes that this current backlog is only marginally
adequate to maintain stable Company operations.
In the fourth quarter of fiscal 1995, the Company received notification
from the United States Government that a large contract was being suspended,
at least temporarily. Approximately $483,600, or 23% of total sales in
fiscal year 1995 represented revenues under this contract. This contract is
terminable at will by the U.S. government. Due to changes in government
appropriations, government funding levels, and spending priorities, this
contract has been suspended effective September 30, 1995. Reinstatement, if it
occurs, will be determined by the funding and direction of the fiscal 1996
congressional budget and DOE executive decisions. Ultimately, this contract
could be canceled, and it appears that, at a minimum, it is being
substantially reduced. The loss of this contract is having a material effect
on the Company, substantially reducing both sales and profitability.
LIQUIDITY AND CAPITAL RESOURCES
The Company has sustained substantial losses to date in fiscal year
1996. In an effort to offset these losses and increase its marketing and
sales effectiveness, the Company hired a new Director of Sales, Marketing and
Engineering in November of 1995. If the Company's new marketing and sales
efforts meet with success, the Company's management believes that, over time,
increased revenues, combined with controlled expenses, could result in
reduced losses, and, ultimately, in a return to profitability. Although the
Company is making every effort to restore itself to profitability by
increasing its sales and marketing activities, there is no guarantee that it
will be able to do so.
As a result of its recent losses, the Company's working capital was
reduced to $3,509 at March 31, 1996, compared to $202,461 at September 30,
1995. Reduced cash and operating capital have caused substantial borrowings
from Tytronics. In order to maintain stable Company operations through fiscal
1996, Management believes that operating capital will need to be further
supplemented with additional funding from the Company's line of credit with
Silicon Valley Bank and additional borrowings from Tytronics. While the
Company believes that additional capital resources may be available from
Tytronics, there is no assurance that additional financing can be obtained
from Tytronics or other sources on acceptable terms.
The Company also intends to continue its exploration of additional
business opportunities through new product development and the development
of strategic relationships, including licensing, acquisitions or mergers, in
an effort to increase revenue and return to profitability. There can be no
guarantee, however, that these activities will be successful.
Note payable to a founder
In April 1992, the Company issued a $50,000 Unsecured Promissory Note to a
founder of the Company. Terms of the note required principal repayment of
$25,000 plus accrued interest at 6% on April 1, 1993 and April 1, 1994. In
August 1994, the terms of the note, with outstanding debt at $44,000, were
re-negotiated. The new agreement calls for 68 monthly payments of $500 each,
including interest at 6%, forgives $5,000 principal immediately, and forgives
an additional $5,000 at the end of the payment schedule if all payments are
made on time. At March 31, 1996, the outstanding balance was $26,943, of
which $22,331 is classified as a long-term liability, and $4,612 is classified
as a current liability.
Notes payable to stockholders
A $10,000 loan was advanced by Tytronics to the Company during the first
quarter of fiscal 1996. An additional $40,000 was loaned during the second
quarter of fiscal 1996, bringing that total loan to $50,000. The Company is
currently in default on the current $55,000 installment payment due on the
term note to Tytronics. However, Tytronics has expressed its agreement not
to accelerate payment on the term note. At March 31, 1996, the total
outstanding balance was $215,000, of which $160,000 is classified as current.
Notes payable line of credit
On December 22, 1994, Silicon Valley Bank provided the Company with a
line of credit in the amount of $350,000. This line of credit, which was
renewed on April 5, 1996, is secured by substantially all assets of the
Company. Advances under this line shall not exceed 65% of the
Company's eligible accounts receivable as defined. Outstanding amounts are
payable on demand and bear interest at the bank's prime rate plus 2%.
Advances are also contingent upon maintaining certain covenants relative to
profitability, liquidity, tangible net worth, and leverage. The Company was
not in compliance with certain of these covenants during part of the 1996
fiscal year. Pursuant to the terms and conditions of the renewal agreement
dated April 5, 1996, the bank modified its covenants. As of March 31, 1996,
the Company was in compliance with its new covenants; borrowings under
the line of credit were $150,000.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on March 14, 1996.
Two issues were submitted for vote: (a) To fix the number of directors at
five, and to elect five directors to hold office for the ensuing year; and
(b) To approve the selection by the Board of Directors of BDO Seidman as the
Company's independent auditors for the fiscal year ending September 30, 1996.
Fixing the number of directors at five received 12,655,840 votes for, 500
votes against, and 29,200 votes abstained. Each director received
12,672,540 votes for, no votes against, and 13,000 votes abstained. BDO
Seidman received 12,65,790 votes for, 6,250 votes against, and 23,500 votes
abstained. The Stockholders elected the five directors as proposed, and
approved the selection of the Company's independent auditors as proposed.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: The following exhibits are filed as a part of
this Form 10-QSB
Exhibit 27.0 Financial Data Schedule.
(b) Reports on Form 8-K
Not applicable.
SIGNATURE
Pursuant to the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly uthorized.
Holometrix, Inc.
By:/s/John E. Wolfe
John E. Wolfe
President and Treasurer
(Principal Executive Officer and Financial Officer)
Date: May 14, 1996
Page 1
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-QSB
MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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