SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
x Annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended September 30, 1996
(Fee Required)
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
(No Fee Required)
Commission file number 0-16152
Holometrix, Inc.
(Exact Name of Registrant 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) (Zip Code)
(617) 275-3300
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None Not applicable
Securities Registered Pursuant to Section 12(g) of the Act:
Title of class
Common Stock, $.01 par Value
Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such other 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
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will 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. x
Registrant's income for the fiscal year ended September 30, 1996 was
$4,041. The aggregate market value of shares of the Common Stock held
by non-affiliates, based upon the average of the bid and ask prices
for such stock on December 15, 1996 was approximately $20,660. As of
December 15, 1996, 22,296,878 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format Yes No x
PART I
ITEM 1. BUSINESS
Holometrix, Inc. (the "Company") is a product development,
manufacturing and contract test services company which specializes in
manufacturing instruments and providing contract test services for
measuring the thermophysical properties of a wide variety of
materials. The Company's Instruments Division currently designs,
manufactures and distributes five product lines, containing sixteen
models, which measure thermophysical properties. The Company's
Testing Services Division provides contract test and engineering
services to evaluate a number of temperature-related performance
factors of virtually any material. The Testing Services Division also
performs mechanical and physical properties testing. The Company's
principal offices are located at 25 Wiggins Avenue, Bedford,
Massachusetts 01730-2323; its telephone number is (617) 275-3300 and
its facsimile number is (617) 275-3705. The Company is a Delaware
corporation incorporated on October 23, 1985.
In 1996, the Company purchased a majority of the issued and
outstanding capital stock of National Metal Refining Company
("Nametre"). Nametre is a product development and manufacturing
company that specializes in manufacturing in-line and laboratory
viscosity analyzers. These analyzers are used to measure the
viscosity and viscoelasticity of a wide range of material; and are
sold into the polymer manufacturing, petrochemical, food, paints and
coatings and pulp and paper markets. Nametre is located at 101
Liberty Street, Metuchen, NJ 08840; its telephone number is (908) 494-
2422, and its facsimile number is (908)494-8916.
The Company markets its products and services in the U.S. and
internationally through the combination of a direct sales force and a
network of independent distributors and sales agents. The Company
actively advertises its products in industry trade journals and also
attends various U.S. and international trade shows to promote its
products and services. The customer base consists primarily of
materials development laboratories, large material manufacturing
facilities and government laboratories. Primary markets served
include electronics and semiconductors, aerospace, polymers,
automotive, building and construction materials, and petrochemical.
HOLOMETRIX INSTRUMENTS DIVISION
The Company engages in the development, production and distribution
of instruments under the trade name "Thermatest". The Instruments
Division currently designs, manufactures and markets instruments that
measure the thermophysical properties of a broad range of materials
for research, product development and quality-control applications.
Information about thermophysical properties is used to characterize
the performance, quality, and/or composition of various materials such
as insulation, composites, plastics, and ceramics. In addition to
their importance in advanced materials development, the Company's
instruments are used as research tools to address worldwide
environmental issues, including energy conservation, plastics
recycling and nuclear waste disposal.
Holometrix has over 30 years of experience in thermophysical
properties testing. The basic technology underlying the Company's
Thermatest instruments is the application of heat energy to a material
under test and the measurement of the results of such an application.
The precise measurements and the containment of heat, combined with
equally precise temperature measurement and control, are key elements
in the design of nearly all of the Division's products. Many
instruments encompass microprocessor-controlled data collection and
analysis, resulting in the fully automated determination of material
properties, such as thermal conductivity and specific heat. The
nature of heat transfer through a material, resulting from the
application of energy, varies depending on the material's type and
composition. Therefore, a different methodology is required to test
different types of material. The Company manufactures various
instruments incorporating these different methodologies.
The five Thermatest product lines consist of sixteen instrument
models, plus Holometrix' proprietary Q-LabTMautomation software.
Ongoing development efforts have resulted in new instrument products
that are fully automated, incorporating either PC interface, or
internal microprocessors. Revenues are also derived from service and
spare parts. No single instrument manufactured by the Holometrix
Instruments Division currently accounts for more than 25% of total
revenues.
HOLOMETRIX PRODUCTS
Heat Flow Meters (Lambda 2000 Series, Rapid-k VT-400)
The Heat Flow Meter technique is an easy and rapid method for
testing the thermal conductivity and R-value of thermal insulation.
This type of instrument is widely used in both the quality control
testing and the development of insulation products. Industry-wide
acceptance of this technique as a reliable and accurate procedure
has made it the most commonly used test method for both research
and development and quality control applications. Federal trade
rules require insulation manufacturers to measure the thermal
resistance (R Value) by the heat flow meter method, or similar
techniques, as part of the procedure for labeling their products.
Cellular foam insulation manufacturers, who are required to
eliminate ozone depleting chlorinated fluorocarbons from their
products, use these instruments to evaluate the effectiveness of
replacement blowing agents. In 1996 Holometrix introduced the
new Lambda 2000 Series of heat flow meter products. These
instruments contain an advanced instrumentation and control concept
for which a patent is pending.
Guarded Heat Flow Meters (TCA-200, TCA-200-LT and TCA-300)
The Guarded Heat Flow meter method permits the testing of moderate
conductivity materials. Customers use these instruments to
establish safe operating temperatures and thermal efficiency of
products ranging from electronic and semiconductor components to
adhesives, and for heat transfer modeling of many industrial
processes, including injection molding of polymers. Thermal
conductivity data from these instruments is important to the
plastics, electronics, automotive, aerospace and food processing
industries. The instruments can test solid and thin film
materials and special test cells are available for testing polymers
and highly viscous fluids through the melt. Test materials include
rubber, plastic, composites, epoxy, ceramics, paper products,
greases and pastes.
Guarded Hot Plates (GHP-200, GHP-300, GHP-450 and GHP-600)
These instruments are used primarily as research tools to measure
thermal conductivity in porous and solid materials over a wide
range of temperatures, environmental conditions and material types.
This technique is used to measure materials from cryogenic to very
high temperatures. The measuring process is reliable, simple and
accurate and requires no pre-test calibration by the user. Varying
degrees of automation are available to meet a range of budgets and
provide for unattended operation.
Comparative Instrument (COM-800)
The comparative technique utilizes known properties of reference
materials to measure heat flow. It is a convenient, flexible
system which measures the thermal conductivity of a variety of
solid materials over a broad range of temperatures and
environmental conditions. Materials which can be tested include
ceramics, composites, metals, metal alloys, filled plastics and
epoxies, geological materials, and carbon products. A special
sample holder is also available for testing liquids and pastes.
Laserflash Instruments (Thermaflash 2200, 1100 and Microflash, 300)
These instruments utilize a sophisticated, high-performance Laser
Flash Thermal Diffusivity (LFTD) technique to measure both thermal
diffusivity and specific heat from -170 degrees C to 2000 degrees C.
Test samples are irradiated uniformly on one surface by a laser beam
pulse, and the temperature rise of the opposite surface is measured
and used to calculate thermal diffusivity. Data from these instruments
are used by customers to determine safe operating temperatures, quality
assurance, design and process control for composition, molding,
heating or cooling rates, and thermal performance analysis. The
laserflash technique not only provides important information on
transient heat flow, but also allows testing of small samples at
high temperatures. Typical test materials include ceramics,
refractory materials, thermal barrier coatings, composites, carbon-
carbon composites, metals and alloys, and graphite.
The Thermaflash 2200 and 1100 operate up to 2000 degrees C and 1100 degrees
C, respectively. The Microflash, is used for applications with a lower
temperature requirement and for customers with limited capital
equipment budgets. Typical applications include the
characterization of materials for electronic and semiconductor
material design and manufacturing.
HOLOMETRIX TESTING SERVICES DIVISION
The Testing Services Division maintains a thermophysics laboratory,
which provides contract test and engineering services to evaluate
various temperature-related performance factors of virtually any
material. Testing is generally performed to ASTM (American Society of
Testing and Materials) standards. In addition, insulation testing is
provided under NVLAP accreditation. NVLAP, the National Voluntary
Laboratory Accreditation Program, is supported by the National
Institute of Standards and Technology. The Division also demonstrates
the capabilities of Thermatest instruments to potential customers,
provides significant input to outside technology steering groups which
establish the standards for industry instrument utilization, and
provides valuable technical and marketing input for product
development. The Division's experience and capabilities cover a broad
scope of temperature range, environmental conditions, sample size and
property magnitude.
The Division's testing capabilities complement customer research and
product development activities. Thermophysical testing of materials
is not a routine capability and competence for most material
development departments. Thus, testing service customers tend to be
repeat customers who use the Division as a complement to their
capabilities.
In addition to thermophysical testing of materials, the Division
also offers selected mechanical and moisture testing of materials.
The Division also maintains the capability to test entire wall
sections built to specification in support of the building and
construction industry. This type of testing helps evaluate the
performance, under simulated environmental conditions, of advanced
construction techniques, and new insulating and moisture barrier
materials.
The end result of most Division projects is a technical report,
usually containing experimental data resulting from work carried out
in a laboratory setting. Projects lacking a large engineering
component are termed standard testing programs when the work can be
performed on existing equipment using established techniques. Non-
standard testing programs (in some cases more appropriately termed
engineering development programs) differ in that they may involve the
creation of a special apparatus, modification of existing equipment,
or development of new procedures. The majority of programs conducted
in the Division are standard testing programs.
Research and development programs, on the other hand, go beyond the
generation of data to analyze results, draw conclusions and make
recommendations. Alternately, they may involve literature searches,
material assessments, engineering studies or special instrument
design. These programs are generally higher value and run longer than
testing programs. As an example, Holometrix has provided testing
services to the Department of Energy (DOE) for a number of years for
the purpose of evaluating the thermal characteristics of Yucca
Mountain, a proposed nuclear waste repository.
NAMETRE PRODUCTS
Nametre engages in the development, production and distribution of
viscosity analyzers under the trade names, "Viscoliner"R and
"Rheoliner"R. The analyzers measure the viscosity and viscoelasticity
of a wide range of materials. Products are developed and manufactured
for both on-line process monitoring and control, and laboratory use.
The vast majority of analyzers sold are for in-line process control.
Such analyzers are used to provide manufacturers with viscosity
information, which is often critical to ensuring proper material
formulation and material production. Applications and markets that
routinely use viscosity analyzers include the polymer, petrochemical,
food, paints and coatings, and pulp and paper industries.
Nametre has over thirty years experience in the viscosity
measurement business. The basic technology underlying the Nametre
analyzers is the use of an oscillating sensor that is inserted into a
stream of material in a process line (pipe or vessel). The sensor
oscillates at a constant amplitude. The viscosity of a product is
then determined on the basis of the electrical power needed to
maintain the oscillation amplitude in the presence of the viscous
material. The principles of measurement of the Viscoliner product are
currently covered by U.S. patents.
The Viscoliner product line consists of three different models: the
1810 for in-line process monitoring and control, the 300 for paints
and coatings and the 1710 for laboratory analysis. The 1810 is an on-
line viscometer that is applicable to a wide range of materials and
applications. It is microprocessor controlled. The model 1810 is
typically utilized in the polymer market. Ongoing developments
include PC based software, "Viscontrol" for analyzer control, data
acquisition and interface to factory control systems.
The Viscoliner model 300 is also an on-line analyzer. It is similar
to the model 1810 in its concept of operation; however, it is
configured primarily for paint, ink and coatings applications.
The Viscoliner model 1710 is a laboratory version of the model 1810.
This instrument is used primarily for research, product development
and quality assurance. Applications include the full range of markets
that Nametre serves.
MARKETS
Holometrix' Markets
Holometrix' thermophysical instruments are sold primarily to
materials laboratories engaged in the development and testing of
insulations, building materials, and advanced engineered materials, plastics
and packaging manufacturers, aerospace manufacturers and government
laboratories. A number of instruments are also sold to insulation manufacturing
facilities. Management believes current markets for thermal
conductivity instruments and testing services total approximately $10
- - $15 million annually. The Company has identified engineered
materials, electronics and specialty plastics industries as promising
markets for the instruments.
Current products and test services are sold in North America
directly from the Company's offices in Bedford, Massachusetts.
Domestic sales amounted to 71% of total revenue for fiscal year 1996.
Domestic sales and marketing are handled in-house by a staff of two
professionals and an administrator. Overseas sales (primarily to
Europe and the Far East) are made through independent distributors and
sales agents. In addition to the internal sales force, testing
services are sold by individual project managers responsible for
specific testing areas. Product visibility is maintained through
active participation in national and international trade
organizations, including the American Society of Testing and Materials
(ASTM). Additional visibility is maintained through advertising,
exhibitions, informational mailings, technical application notes and
customer demonstrations.
In fiscal 1996, overseas sales accounted for approximately 29% of
total sales, compared to 32% in fiscal 1995.
In order to expand its market presence and build revenue, the
Company is exploring a variety of alternatives, falling into four
primary categories:
1.) Enhanced Marketing and Sales Efforts. The Company is investing
additional resources, including new personnel, to expand its
worldwide marketing and selling effectiveness. Specific examples
include improved sales and marketing materials, broader trade show
and symposium participation, and expanded geographic coverage.
2.) Product Development. The Company is continuing to invest in the
development of new products, and in upgrading its existing products
to have more competitive features, be easier to manufacture, and
have improved margins.
3) Corporate Synergy. Holometrix, Nametre and Tytronics Incorporated
(majority owner of Holometrix) serve many common markets and
customers including the polymer, petro-chemical, paints and
coatings, and food markets. Complementary marketing and
distribution activities have begun.
4.) Strategic Relationships. These include companies and/or product
lines which the Company might acquire, companies that might have an
interest in licensing technology to the Company, and companies that
might have an interest in investing in the Company.
Nametre's Markets
Nametre's analyzers are sold primarily to product and material
manufacturers engaged in the production and use of plastics, chemical,
foods, paints, inks or coatings and paper and pulp. A number of
analyzers are also sold to government laboratories and universities.
Management believes the current market for process viscosity totals
approximately $20-25 million annually.
PATENTS AND PROPRIETARY TECHNOLOGY
Holometrix
The Company develops proprietary information and technology,
including software programs, in the course of its research and
development activities. Management believes that patent and copyright
protection are important, but less significant than the technical
competence and creative skills of the Company's personnel, the
performance and reliability of the Company's products and competitive
marketing, pricing and customer service.
The Company has filed for a patent which describes the unique
control of its new Lambda 2000 Series heat flow meter product line.
No determination has been made to date by the US Patent Office as to
the validity of this application.
The Company owns eight trademarks. Three of the trademarks are
registered, and the registrations expire in various years through
1998. These three trademarks are for the R-Matic, k-Matic, and C-
Matic (currently called the TCA) instruments. The Company does not
believe these trademarks are material to the conduct of the business.
Nametre
Nametre develops proprietary information and technology, including
software programs, in the course of its research and development
activities. Certain aspects of its product are patented; however,
management believes that patent and copyright protection are
important, but less significant than the technical competence and
creative skills of Nametre's personnel, the performance and
reliability of Nametre's products and competitive marketing, pricing
and customer service.
Nametre owns nine patents, including patents that cover the basic
transducer and electronics for viscosity measurement, the method and
apparatus for viscoelastic measurements, and the transducer for high
viscosity measurements in extruders. The patents expire in various
years from 1998 to 2011.
Nametre owns or has applied for four trademarks. Three trademarks are
ViscolinerR, RheolinerR, and the Nametre's logo, Absolute Eta in a
circle. These trademarks expire in various years, from 1999 to 2005.
Nametre has also applied for a trademark on VisControl.
CUSTOMERS
Holometrix
During fiscal 1996, the Company had total revenues of approximately
$2,201,000, compared to $2,105,000 in fiscal 1995. No customer
accounted for more than 10% of sales in fiscal 1996.
Nametre
On September 30, 1996, the Company acquired approximately 61.23% of
the outstanding shares of Nametre. The Consolidated Statements of
Income and Cash Flows of Holometrix and Subsidiary exclude any
activity of Nametre prior to the date of acquisition.
During fiscal 1996, which was a nine month year to allow Nametre to
change its fiscal year to coincide with the Company's fiscal year,
Nametre had total revenues of approximately $1,776,000, compared to
$2,671,000 for the 12 month year ended December 31, 1995. For
comparison purposes, for the period January 1 to September 30, 1995
Nametre had total revenues of $1,888,000. No customer accounted for
more than 10% of Nametre's sales in fiscal 1996.
BACKLOG
Holometrix
As of September 30, 1996, the Company's backlog for products and
services totaled $333,000, as compared to $244,000 in backlog as of
September 30, 1995. The fiscal 1996 backlog consisted of $202,000 for
the Instruments Division and $131,000 for the Testing Services
Division. All backlog at September 30, 1996 is expected to be
delivered before September 30, 1997.
Nametre
As of September 30, 1996, Nametre's backlog for products and
services totaled $342,513, as compared to $856,665 as of September 30,
1995 and $236,942 as of December 31, 1995. All backlog at September
30, 1996 is expected to be delivered before September 30, 1997.
COMPETITION
Holometrix
The Company's competitive advantage lies in its ability to develop
and produce a broad spectrum of products in several different market
niches. The Company's Instruments Division experiences direct
competition for its heat flow meters from Anter Corporation and
LaserComp Inc. Thermaflash has strong competition from Sinku Riko in
the Far East, Netzsch GmbH, Theta Industries and Anter Inc. in
Europe and North America. Competitive factors include product
performance, quality and reliability, ease of use, marketing
capability, service and support, and name recognition. Management
believes the Company competes favorably in each of these areas. The
Company can give no assurance that its current products will remain
competitive in these areas or that its future products will be
competitive in these areas.
The market for scientific measuring instrumentation is also
characterized by extensive research and development and rapid
technological change. Development by others of new or improved
products or technologies may make the Company's products or proposed
products obsolete or less competitive. The Company may be required to
devote substantial efforts and financial resources to increase its
existing product lines by developing new products and services.
The Testing Services Division competes as a broad-capability
independent laboratory performing thermal property studies. There are
no other known companies or laboratories that encompass the Division's
entire capabilities. However, many laboratories offer a subset of
the Division's services. Competitive contracts are awarded based on
price, testing capability and credibility of the test results. The
following sample laboratories compete in the market sectors
indicated: Engineered Materials - Thermophysical Properties Research
Laboratory, Inc., Anter Laboratories, Inc., The Edward Orton Jr. Ceramic
Foundation, Southern Research Institute, and Virginia Polytechnic
Institute; Insulations - Southern Research Institute, Sparrell
Engineering Research Corporation, and The Center for Applied
Engineering; Government - Oak Ridge National Laboratory and National
Institute of Standards and Technology.
Nametre
Nametre's competitive advantage lies in its ability to develop and
produce custom transducers, covering a wide range of viscosities,
designed for mounting directly into the customer's process. Nametre's
major competitors are Brookfield Engineering Laboratories, Solatron
Transducers, MicroMotion Division of Fisher Rosemount, Norcross
Corporation and Dynatrol Division of Automation Products, Inc.
Competitive factors include price, wide product lines, performance,
quality and reliability, ease of use, marketing capability, service
and support and name recognition. Management believes Nametre
competes favorably in most of these areas. Price and wide product
line competition is generally overcome by the instruments' performance
and installed cost.
The market for scientific measuring instrumentation is also
characterized by extensive research and development and rapid
technological change. Development by others of new or improved
products or technologies may make Nametre's products or proposed
products obsolete or less competitive. Nametre may be required to
devote substantial efforts and financial resources to increase its
existing product lines by developing new products and services.
RESEARCH AND DEVELOPMENT
Holometrix
The Company expended approximately $154,000, or 7% and $207,000 or
10% in fiscal 1996 and fiscal 1995, respectively, on research and
development. The Company expects that in fiscal 1997 its research and
development expenditures will remain close to 7% of sales.
Nametre
Nametre expended approximately $299,131, or 17% and $210,295, or 8%
in fiscal 1996 and fiscal 1995, respectively, on research and
development. Nametre expects that in fiscal 1997 its research and
development expenditures will decrease to 10% of sales.
GOVERNMENTAL REGULATIONS
There is presently no material government regulation with respect to
the Company's or Nametre's businesses and their development of
products. However, the extent to which future governmental
regulations may regulate the Company's and Nametre's activities cannot
be predicted, and the Company and Nametre may be subject to
restrictions on allowable costs and profits on U.S. government
contracts and the export of the technology to other countries as it
seeks to expand further into foreign markets.
EMPLOYEES
Holometrix
As of September 30, 1996, the Company had 17 employees, 13 of whom
are employed full- time. Most of the Company's employees are highly
skilled and the Company's continued success will depend, in part, upon
its ability to attract and retain such skilled employees. The Company
has never experienced a work stoppage, none of its employees are
represented by a labor organization, and the Company considers its
relations with its employees to be good.
Nametre
As of September 30, 1996, Nametre had 15 employees, 14 of whom are
employed full-time. Most of Nametre's employee's are highly skilled
and Nametre's continued success will depend, in part, upon its ability
to attract and retain such skilled employees. Nametre has never
experienced a work stoppage, none of its employees are represented by
a labor organization, and Nametre considers its relations with its
employees to be good.
ITEM 2. DESCRIPTION OF PROPERTIES
Holometrix
The Company occupies approximately 15,200 square feet of production,
research and development, engineering, administrative and service
facilities at 25 Wiggins Avenue in Bedford, Massachusetts. The
Company occupies this facility under a lease which expires September
30, 1999. Approximately 30% of this space is sublet to Tytronics
Incorporated, majority owner of Holometrix. The Company's rental expense
for fiscal 1996 was $65,355, excluding rental income of $30,801 from
Tytronics Incorporated.
The Company considers these facilities to be reasonably insured and
adequate for its foreseeable needs and believes that similar
facilities are available in the Boston metropolitan area at comparable
rental rates.
A significant amount of the machinery and equipment used by the
Company in its operations is owned by the Company and management
considers this equipment to be in good condition. As of November 29,
1994, all of the machinery and equipment owned by the Company was
subject to a security interest in favor of Tytronics Incorporated. As
of December 22, 1994, as part of a $350,000 credit agreement, all of
the machinery and equipment owned by the Company was subject to a
senior security interest in favor of Silicon Valley Bank, to which
Tytronics Incorporated's interest was subordinated.
Nametre
Nametre leases approximately 4,000 square feet of production,
research and development, engineering, administrative and service
facilities at 101 Liberty Street, Metuchen, New Jersey. Nametre
occupies this facility on a month to month basis under an operating
lease.
Nametre considers these facilities to be reasonably insured and
adequate for its foreseeable needs and believes that similar
facilities are available in the immediate area at comparable rental
rates.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company or
Nametre is a party or to which any of its properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders during the
fourth quarter of the Company's 1996 fiscal year.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is no longer quoted in the over-the-
counter market. The following table sets forth the range of high and
low bid quotations for the Company's Common Stock as reported by the
National Quotation Bureau of New Jersey.
Fiscal Year 1995 Low High
First Quarter Ended December 31, 1994 $0.001 $0.001
Second Quarter Ended March 31, 1995 0.001 0.001
Third Quarter Ended June 30, 1995 0.001 0.002
Fourth Quarter Ended September 30, 1995 0.001 0.002
Fiscal Year 1996 Low High
First Quarter Ended December 31, 1995 $0.001 $0.002
Second Quarter Ended March 31, 1996 0.002 0.005
Third Quarter Ended June 30, 1996 0.005 0.005
Fourth Quarter Ended September 30, 1996 0.002 0.005
These quotations represent prices between dealers and do not include
retail markups, markdowns or commissions and may not necessarily
represent actual transactions. There were 288 holders of record of
the Company's outstanding capital stock as of September 30, 1996.
Since its organization, the Company has not paid any cash dividends
on its capital stock. The Board of Directors does not contemplate
declaring any dividends in the near future. Any declarations of
dividends will be determined by the Board of Directors in light of the
conditions then existing, including the Company's earnings, its
financial condition and working capital needs, any agreements
restricting the payment of dividends, and other factors. Certain
agreements with the Company's financing sources include covenants
which currently restrict the Company from paying any cash dividends.
Recent Sales of Unregistered Securities:
On September 30, 1996, the Company sold Six Million (6,000,000)
shares (the "Shares") of its Common Stock, $.01 par value, to
Tytronics Incorporated ("Tytronics") at $.05 per share for an
aggregate purchase price of Three Hundred Thousand Dollars ($300,000).
At the time of the sale of the Shares in connection with a debt
restructuring agreement between the Company and Tytronics, the Company
also issued warrants to Tytronics to purchase One Million One Hundred
Thousand (1,1000,000) shares of Common Stock at a warrant exercise
price of $.05 per share and One Million (1,000,000) shares of Common
Stock at a warrant exercise price of $.10 per share.
The offer and sale of securities described above was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
The offer and sale involved an isolated transaction to an affiliated entity
which at the time of the transaction owned greater than fifty percent (50%)
of the issued and outstanding shares of Common Stock of the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA:
1996 1995
STATEMENT OF OPERATIONS DATA
Net revenues $2,200,603 $2,104,692
Net income $4,041 $12,195
Net income per Common share $0.00 $0.00
Weighted average Common
shares outstanding 16,313,316 15,846,006
CONSOLIDATED BALANCE SHEET DATA
Working capital 298,315 202,461
Total assets 2,548,723 1,073,217
Long-term debt, excluding current
portion 213,539 134,571
Minority Interest 66,634 -
Stockholders' Equity 682,097 438,056
OVERVIEW
The Company's revenues are derived from the sale of thermal
analytical instruments and testing services. These two business
segments complement each other because testing services are frequently
purchased by companies that cannot yet afford the purchase of their
own instruments. Conversely, there are instrument customers who
frequently have testing needs beyond what their instrumentation can
handle, or have need of an independent laboratory to certify their own
results.
During fiscal 1992 and 1993, the Company sustained significant
losses with resultant cash flow problems. In late fiscal 1993, the
Board of Directors appointed Joseph J. Caruso as Acting President. Mr.
Caruso initiated a 33% cut in the workforce, placed payments to
creditors on hold, and assigned new responsibilities to existing
management, in order to concentrate on stabilizing operations and
generating revenue. In fiscal 1994, the Company was profitable,
achieving net income of $89,617 on sales of $2,499,008. However, the
balance sheet remained weak. A working capital deficit of $421,135
was present at the end of fiscal 1994 and the deficit in stockholders'
equity was $494,388.
Commencing in fiscal year 1993, the Company made a decision to begin
exploring strategic relationships with other companies as a means of
creating shareholder value and achieving corporate stability through
reaching a critical mass in revenue. In connection with this
decision, the Company entered into discussions with Tytronics
Incorporated ("Tytronics"), which designs and manufactures on-line
analyzers for process control and environmental compliance monitoring.
As a result of these discussions, on November 29, 1994, Tytronics
acquired approximately 55% of the Company's outstanding Common Stock
from existing stockholders, and entered into other transactions with
the Company described below.
On September 30, 1996, the Company acquired a majority of the issued
and outstanding capital stock of the National Metal Refining Company
("Nametre"). Nametre, located in Metuchen, NJ, is a product
development and manufacturing company that specializes in
manufacturing in-line and laboratory viscosity analyzers. Since
Nametre was acquired on the last business day of the Company's fiscal
year, no Nametre revenues are included; however, Nametre's balance
sheet is consolidated into that of the Company as of September 30,
1996.
During fiscal 1996, as a result of continuing profitability,
additional sales of common stock to Tytronics increasing its
ownership to approximately 67%, and the investment in Nametre, the
balance sheet improved significantly, as compared to fiscal 1995. At
the end of fiscal 1996, the Company's working capital amounted to
$298,315, a positive change of $95,854. Stockholders' Equity amounted
to $682,097 at September 30, 1996, a positive change of $244,041 from
the previous year end.
The Company expects that it will continue to explore additional
business opportunities through enhanced sales and marketing efforts,
new product development, and the development of strategic
relationships, including licensing, acquisition, or merger. However,
there can be no guarantee that such activities will result in
continuing and sustained profitability.
Year Ended September 30, 1996 As Compared To Year Ended September 30,
1995
Revenues for the 1996 fiscal year totaled $2,200,603, as compared to
$2,104,692 in the comparable period of 1995, an increase of $95,911,
or 5%, largely due to increased instrument sales, a portion of which
came from the introduction of a new instrument, the Lambda 2000,
launched in the 3rd quarter of 1996.
Cost of sales totaled $1,338,466, or 61% of sales in fiscal 1996, as
compared to $1,298,023, or 62% in fiscal 1995. The increase in margin
is due to both operational cost reductions and the introduction of the
new, lower cost Lambda 2000 instrument.
Selling, general and administrative expenses increased from
$553,432, or 26% of sales in fiscal 1995, to $668,902, or 30% of sales
in fiscal 1996. The increase of $115,470 was attributable primarily
to the increase in selling and marketing activities and the addition
of a director of sales, marketing and engineering.
Research and development expenses decreased from $206,629, or 10% of
sales in fiscal 1995, to $153,984, or 7% of sales in fiscal 1996. The
decrease of $52,645 was primarily due to the completion of the new
Lambda 2000 instrument launched in the third quarter of fiscal year
1996, and the employment of certain engineering personnel in
manufacturing functions. Expenses are expected to rise above this
rate in fiscal 1997 due to increased engineering resources. Efforts
are being focused on the development of more competitively advantaged
products, and on upgrading the automation software, efforts which the
Company expects to continue in fiscal year 1997.
Income from operations decreased from $46,608, or 2.2% of sales, in
fiscal 1995 to $39,251, or 1.8% of sales, in fiscal 1996, a decrease
of $7,357. The decrease in income from operations is due primarily to
the increase in sales and marketing expenses, offset by increases in gross
profit.
Net income decreased from $12,195, or 0.6% of sales during fiscal
1995, to $4,041, or 0.2% of sales in fiscal 1996. Again, the decrease
in net income is primarily due to higher sales and marketing expenses,
offset by increases in gross profit. Interest expense remained
essentially constant at $35,210 in fiscal 1996, compared to $34,413
in fiscal 1995.
Total Assets at September 30, 1996, increased to $2,548,723 from
$1,073,217 on September 30, 1995, an increase of $1,475,506, or 137%.
The major part of the increase is due to the Company acquiring
approximately 61% of Nametre, a New Jersey manufacturer of viscosity
measuring instrumentation. The fair value of Nametre's assets, excluding
goodwill recorded by the Company in conjunction with the acquisition, were
$971,102, net of intercompany transactions. Excluding Nametre, the Company's
accounts receivable grew by $335,934 due to increased fourth quarter
sales. On the same basis, the Company's inventory decreased by
$16,921, to $222,316. On a consolidated basis, Equipment and Fixtures
increased by $1,510, including $51,763 of Nametre's small Equipment
and Fixtures. Additional combined investments of $80,468 in fixed
assets were more than offset by depreciation expense of $120,341.
Total Liabilities at September 30, 1996, increased to $1,799,992
from $635,161 on September 30, 1995, an increase of $1,164,831, or
183%. Again, the major part of this increase is due to the
acquisition of Nametre. Nametre's liabilities represent $874,233 of
the total consolidated liabilities. Included in Nametre's liabilities
were $155,000 of notes payable, $100,000 of which is in Current Liabilities.
Excluding Nametre, accounts payable increased by $328,019 to
$542,762 at the end of fiscal 1996, as compared to $214,743 at the end
of fiscal 1995. Of this increase, approximately $147,000 is due to
commissions payable for international sales, approximately $46,000 is
due to legal and audit billings associated with the acquisition of
Nametre, and most of the balance is due to heavier than normal
inventory purchases in support of fourth quarter sales. Approximately
$114,000 of the commissions payable is due to a single foreign
distributor. Accrued payroll and related expenses, excluding Nametre,
increased by $8,355 to $37,086 due primarily to increased internal
commissions due at the end of fiscal 1996. Accrued other expenses,
excluding Nametre, decreased by $21,454, primarily due to decreases
in accrued warranty of approximately $10,000, and decreases in accrued
interest and other expenses of approximately $11,000.
Long-term debt increased by $78,968 to $213,539, $100,000 of which
is held by Tytronics, a related party. On October 31, 1995, $55,000
of current debt due to Tytronics, of a total debt of $165,000, was in arrears.
Tytronics agreed not to demand accelerated payment of the entire loan
balance, at least until October 1, 1996. Subsequently, in connection with
additional investments by Tytronics of $300,000 to the Company,
Tytronics applied $65,000 of debt to this stock purchase and rewrote
the remaining $100,000 as long term debt, with payments of $50,000 due
November 23, 1997, and $50,000 due November 23, 1998, all in
conjunction with the issuance of certain warrants (see CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS).
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Operating cash flows were positive, amounting to $136,043 during fiscal
1996, compared to $69,759 in fiscal 1995. Operating cash flows approximated
the sum of net income plus depreciation and amortization, with increases in
accounts receivable of $335,934, being offset by increases in accounts payable
of $328,019. The effect of the purchase of Nametre in fiscal year 1996, net
of cash acquired, was a cash outflow of $266,514; this was funded by the
operating cash flows noted above, issuance of common stock amounting to
$175,000, increases in amounts owed to a major stockholder, Tytronics, of
$86,350, offset by repayments under the Company's line of credit of $41,000.
In addition, the Company funded increases in equipment and fixtures of $80,468.
The net affect of these transactions was a decrease in cash of $13,212,
providing cash at the end of fiscal 1996 of $27,495.
Future cash commitments are moderate, assuming continued profitability.
The combination of operating cash flows plus the Company's line of credit
should be adequate for immediate needs.
Series A Preferred Stock
On November 10, 1994, the Company entered into an agreement with
Corning Partners III, L.P. ("Corning") and with Mr. Bayard Henry, to
convert all of their then outstanding Series A Convertible stock into
Common Stock. Corning held 1,896,596 shares of Series A stock, which
was converted to 2,095,110 shares of Common Stock. Mr. Henry held
949,471 shares of Series A stock, which was converted to 1,048,851
shares of Common Stock (see DEBT CONVERSION AND TYTRONICS' STOCK
PURCHASE).
Series B Preferred Stock
As of September 30, 1994, all of the Company's outstanding shares of
Series B Preferred Stock were held by Corning. On November 10, 1994,
the Company entered into an agreement with Corning to convert all of
the Series B Convertible stock into Common Stock. Corning held
1,000,000 shares of Series B stock, which was converted to 1,057,989
shares of Common Stock (see DEBT CONVERSION AND TYTRONICS' STOCK
PURCHASE).
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 September 30, 1996, the outstanding balance was $24,572, of
which $19,572 is classified as a long-term liability, and $5,000 is
classified as a current liability.
Credit agreements
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 is
secured by substantially all assets of the Company. Advances under
this line shall not exceed 70% of the Company's eligible accounts
receivable as defined. These amounts are payable on demand and bear
interest at the bank's prime rate plus 1.5%. Advances are also
contingent upon maintaining certain covenants relative to
profitability, liquidity, tangible net worth and leverage. No
advances occurred until April, 1995, when an initial advance of
$75,000 was provided. Since then, this line of credit has been in use
to provide both working capital and support for various payments,
including payment of debt to Tytronics. As of September 30, 1996, and
September 30, 1995, borrowings under this line of credit were $84,000
and $125,000, respectively, and the Company was in compliance with all
covenants.
During the fiscal years ending September 30, 1996 and September 30,
1995, the Company and Tytronics were also parties to various informal
working capital agreements pursuant to which Tytronics provided
working capital financing to the Company on a short-term basis. Such
working capital advances are limited by the Company's agreement with
Silicon Valley Bank to $50,000 at any one time. These advances are
payable on demand with 10% interest and secured by a note. As of September
30, 1996, $20,000 was due to Tytronics by the Company under these
arrangements. During fiscal years 1996 and 1995, the Company borrowed
an aggregate of approximately $130,000 and $111,000, respectively, including
interest, from Tytronics under these arrangements.
Material Contracts
Approximately $65,600, or 3% of total sales in fiscal year 1996 and
$483,600, or 23% of total sales in fiscal year 1995 represented
revenues under a long term service contract with the United States
government. In the fourth quarter of fiscal 1995, the Company
received notification from the United States Government that this
contract was being suspended, at least temporarily. 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 was largely suspended throughout fiscal year
1996, and partially reinstated late in the year. This contract will
likely be further reduced or canceled, with some of the work being
transferred to existing government laboratories. Reinstatement, if
any, will be determined by the funding and direction of the future
Congressional budgets and Department of Energy executive decisions. The loss
of this contract has had and will continue to have a material effect on
the Company, reducing both sales and profitability.
DEBT CONVERSION AND TYTRONICS' STOCK PURCHASE
Pursuant to a Conversion of Debt and Contribution to Capital
Agreement dated November 10, 1994 between the Company and Corning
Partners, III, L.P., Corning Partners III, L.P. converted $315,000 of
existing promissory notes plus $59,205 of accrued interest on all such
outstanding notes, into 1,663,140 shares of the Company's Common
Stock. Also on November 10, 1994, the Company entered into an Accrued
Interest Conversion Agreement with Bayard Henry, pursuant to which Mr.
Henry converted interest on $50,000 of the 10% subordinated notes then
held by Mr. Henry, totaling $8,292, into 36,860 shares of the
Company's Common Stock.
Pursuant to a Purchase Agreement dated November 29, 1994 (the
"Purchase Agreement"), Tytronics acquired all of the Common Stock of
the Company owned by Corning Partners II, L.P., Corning Partners III,
L.P., Bayard Henry, and Edward J. Stewart, III, consisting of an
aggregate 8,960,244 shares of the Company's Common Stock and
representing 55% of the shares of the Company's outstanding voting
securities, at that time. In connection with the Purchase Agreement,
Tytronics also acquired $220,000 of the 10% Demand Subordinated Notes
then held by Corning Partners III, L.P. and Bayard Henry. In
addition, pursuant to a Loan Agreement dated November 29, 1994 (the
"Loan Agreement"), the Company paid $55,000 to Tytronics which was
used to retire a portion of the $220,000 10% Demand Subordinated Notes
acquired from previous holders, and the $165,000 balance of these
notes was converted into a 3-year note, with annual principal payments
of $55,000, plus interest at 10% per annum, due October 31 of each
year. As of October 31, 1995, the Company was in arrears on its
current payment on this note, and remained so until September 30, 1996
(see following paragraph). Pursuant to the Loan Agreement, Tytronics
also provided the Company with a $150,000 demand loan, the proceeds of
which were used to pay the remaining indebtedness owed Corning
Partners II, L.P., Corning Partners III, L.P. and Bayard Henry.
As noted above, $55,000 of current debt became due to Tytronics on
October 31, 1995. The Company was unable to make payment, and
Tytronics agreed not to demand accelerated payment of the entire loan
balance, at least until October 1, 1996. Subsequently, in connection
with additional investments by Tytronics of $300,000 to the Company,
Tytronics applied $65,000 of debt to this stock purchase and rewrote
the remaining $100,000 as long term debt, with payments of $50,000 due
November 23, 1997, and $50,000 due November 23, 1998, all in
conjunction with the issuance of certain warrants (see CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS).
As a result of the transaction described above, all previously
outstanding shares of the Company's Series A and B Preferred Stock
have been converted into Common Stock, and all of the Company's
indebtedness to the Corning partnerships and Mr. Henry have been
converted to Common Stock, paid in full, or purchased by Tytronics.
As of September 30, 1996, the Company held notes payable to Tytronics
totaling $100,000, all of which is a long term liability. Immediately
prior to the effectiveness of the Purchase Agreement with Tytronics,
the Corning partnerships and Messrs. Stewart and Henry effectively
held 8,960,244 shares of the Company's Common Stock, or 55% of the
Company's outstanding voting securities, which were then exchanged for
30,000 shares of Tytronics common stock, $.01 par value. In
connection with the transaction described above, Joseph J. Caruso,
Joaquim S. S. Ribeiro, and John E. Wolfe were also elected as
additional directors of the Company.
IMPACT OF INFLATION
Although no assurance can be given, increases in the inflation rate are
not expected to materially adversely affect the Company's business.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and the related auditors'
report are presented on pages F-1 through F-18. The financial
statements filed in this Item 7 are as follows:
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets - September 30, 1996 and 1995 F-2 to F-3
Consolidated Statements of Income for the years ended
September 30, 1996 and 1995 F-4
Consolidated Statements of Stockholders' Equity for
the years ended September 30, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1996 and 1995 F-6
Notes to Consolidated Financial Statements. F-7 to F-18
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the directors and executive officers of the
Company as of December 15, 1996:
Name Age Position
John E. Wolfe 58 President, Treasurer and Director
Richard Mannello 39 Vice President & General Manager
Joseph J. Caruso 53 Director
Joaquim S. S. Ribeiro 60 Director
Edward J. Stewart, III 50 Director
Salvatore J. Vinciguerra 58 Director
Each director is elected to hold office until the next annual
meeting of stockholders, and until his successor is elected and duly
qualified. Executive officers are elected by the Board of Directors
and hold office until their successors are chosen and qualified,
subject to earlier removal by the Board of Directors.
Mr. Wolfe joined the Company as a Director in November 1994 and was
elected President and Treasurer of the Company in February 1995.
Since 1987, Mr. Wolfe has also been President and Chief Executive
Officer and a director of Tytronics, Incorporated, a manufacturer and
marketer of on-line chemical analyzers for the process and
environmental markets. Previously, Mr. Wolfe was employed by EG&G's
Fluid Components Technology Group, serving as Senior Vice President,
Western Hemisphere Operations, and Vice President and General Manager,
Engineered Products Division. Mr. Wolfe is also a Director of
Colorado MEDTech, in Boulder, Colorado, a publicly held medical
products company. He is also Chairman of the Board of Trustees of
Bryant College in Smithfield, Rhode Island, and a member of the
Executive Committee of the M.I.T. Enterprise Forum. Mr. Wolfe holds a
B.S. in Electrical Engineering from Worcester Polytechnic Institute,
an S.M., as a Sloan Fellow, from the Massachusetts Institute of
Technology, and he has completed the Advanced Management Program at
the Harvard Business School.
Mr. Mannello joined the Company as Director, Marketing, Sales and
Engineering in November 1995. He was elected Vice President and
General Manager in November 1996. Previously Mr. Mannello was Manager
of Marketing at Loral Infrared and Imaging Systems from 1990 to 1995.
Prior to 1990, Mr. Mannello was Manager of Marketing for Honeywell
Electro-Optics Division. Mr. Mannello holds a Master of Business
Administration from Boston University and a B.S. in Optics from the University
of Rochester Institute of Optics.
Mr. Caruso joined the Company as a Director in 1994, and was engaged
by the Company as Acting President from June 1993 until January 1995.
Mr. Caruso is also President of Bantam Group, Inc. ("Bantam"), a
business advisory organization founded in 1986. He has twenty years of
general management, marketing, and financial experience in several
high technology companies, including marketing, manufacturing, and
financial roles at Teradyne, Inc., a manufacturer of automatic test
systems, corporate planning at Autex, Inc., a provider of block
trading information for brokers and institutions, and President and
CEO of Cyborg Corporation, a supplier of laboratory and factory
automation systems. In recent years, he has served as interim CEO for
companies in need of strategic change and has served as personal
advisor to numerous company presidents. Mr. Caruso is presently a
member of the board of directors of Haymarket Bank, Boston Restaurant
Associates, owner and operator of Italian restaurants and pizzerias,
and Tytronics, Incorporated, a manufacturer of process monitoring
instrumentation. Mr. Caruso holds a B.S. in Electrical Engineering
from Northeastern University and a Master of Business Administration
degree from the Harvard Business School.
Mr. Ribeiro joined the Company as a Director in 1994. Mr. Ribeiro
is a self-employed management consultant, and is a director of Health
Source ("CMHC") and the Bank of Boston - Worcester, Massachusetts,
regional board. From 1992 to 1993, he served as vice-chairman of
Multibank Financial Corp., a public bank holding company now part of
Bank of Boston, and as interim president of CMHC. From 1989 to 1992,
he served as general manager of the law firm of Bowditch and Dewey
and, prior to that engagement, was vice president and treasurer of the
Worcester Polytechnic Institute. Mr. Ribeiro holds a B.S. in
Aeromechanics from Worcester Polytechnic Institute, and a Master of
Business Administration in Economics and Finance from Clark
University.
Mr. Stewart has served as a Director of the Company since 1988.
Since 1994, Mr. Stewart has served as general partner of Kestrel
Venture Management, a venture capital firm, and from 1983 to 1994 Mr.
Stewart served as the President of Corning Capital Corporation, a
venture capital firm, and was formerly President of GWI Leasing
Corporation from 1980 to 1983. Mr. Stewart also serves on the board
of directors of approximately ten other companies, including Cambridge
Applied Systems, a competitor of the Company. Mr. Stewart holds a
Master of Business Administration degree from the Harvard Business
School and an Administrative Studies degree from Yale University.
Mr. Vinciguerra has been a Director of the Company since February of
1995. He has been President and Chief Operating Officer of
FerroFluidics Corporation since January of 1995; in June 1996 he was
appointed Chief Executive and director. From 1991 until
1994, Mr. Vinciguerra served as President and Chief Executive Officer
of Staveley, Inc., the U. S. operating arm of Staveley Industries,
plc. From 1985 until 1989, he served as President and Chief Operating
Officer of Instron Corporation, which he initially had joined in 1969.
Mr. Vinciguerra is also a member of the board of directors of Lytron
Corporation, the Japan Society of Boston and the Children's Museum of
Boston. Mr. Vinciguerra holds a B.S. in Engineering from Princeton
University and a Master of Business Administration degree from the
Harvard Business School.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's directors and officers,
and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they
file.
All requirements under Section 16(a) of the Exchange Act for
officers and directors of the Company and beneficial owners of more
than 10% of any class of the Company's equity securities have been met
for the fiscal year ended September 30, 1996.
The information set forth above is based solely on the Company's
review of the copies of such forms received by it or written
representations from certain reporting persons.
DIRECTORS' COMPENSATION
The Company does not pay directors for their Board or committee
services; however, non-employee directors of the Company are paid
$2,000.00 per year in lieu of reimbursement for reasonable expenses of
attending Board meetings. In addition, non-employee directors have,
in the past, been granted options to purchase shares of the Company's
Common Stock; no such options were granted during fiscal year 1996.
During the fiscal year ended September 30, 1995, each of
Joaquim S.S. Ribeiro and Salvatore J. Vinciguerra were granted options
to purchase 150,000 shares of the Company's Common Stock at an
exercise price of $.03 per share. Such options vest over a period of
four years and are exercisable for five years from the date of grant.
INDEMNIFICATION
The Company's Certificate of Incorporation includes a provision that
eliminates the personal financial liability of the Company's directors
to the Company or its stockholders for breach of duty as a director,
except in situations where there has been a breach of the duty of
loyalty, a failure to act in good faith, intentional misconduct or a
knowing violation of the law, an improper personal benefit derived by
a director from a transaction or a willful or negligent unlawful
payment of dividends or unlawful purchase or redemption of the
Company's stock. In addition, the Company's bylaws include provisions
to indemnify its officers and directors and other persons against
expenses, judgments, fines and amounts paid in settlement in
connection with threatened, pending or completed suits or proceedings
against such person by reason of serving or having served as officers,
directors or in other capacities, except in relation to matters with
respect to which such persons shall be determined to not have acted in
good faith, lawfully or in the best interests of the Company. With
respect to matters as to which the Company's officers and directors
and others are determined to be liable for misconduct or negligence in
their performance of their duties, the Company's bylaws provide for
indemnification only to the extent that the Company determines that
such person acted in good faith and in a manner not opposed to the
best interests of the Company. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the "Act") may
be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
the annual and long-term compensation for services in all capacities
to the Company for the fiscal years ended September 30, 1996,
September 30, 1995 and September 30, 1994, of those persons who were
(i) the Company's Chief Executive Officer during the fiscal year ended
September 30, 1996, and (ii) other executive officers of the Company
as of September 30, 1996, who received total cash and bonus
compensation in excess of $100,000 (the "Named Officers") during
fiscal year 1996.
Executive Compensation
Name and Other Restr- Securities Other
Principal Year Salary BONUS Compensation icted Underlying Compensa-
Position Stock All tion
($) ($) ($)(1) Award Options/SARs ($)
($) (#)(2)
John E. 1996 52,200 0 0 n/a n/a n/a
Wolfe
President,
CEO and
Treasurer
John E. 1995 33,333 0 0 n/a 200,000 n/a
Wolfe
President,
CEO and
Treasurer
Joseph J. 1995 0 0 36,000 n/a n/a n/a
Caruso
Acting
President
and CEO
Joseph J. 1994 0 0 60,000 n/a n/a n/a
Caruso
Acting
President
and CEO
(1) Includes consulting fees paid and accrued to Bantam. Mr. Caruso is
President of Bantam.
(2) Represents the grant of an option to purchase 200,000 shares of the
Company's common stock which vests over a period of four years
The Company did not grant any stock options or stock appreciation
rights to the executives named in the summary compensation above during
fiscal year 1996.
The following table sets forth information concerning option
exercises during fiscal 1996 and the value of unexercised options as
of September 30, 1996. No options were exercised during fiscal year
1996 by any of the Company's executive officers named in the
compensation table.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
# of Unexercised $ Value of
# Options Unexercised
Shares $ at Sept. 30, Options at Sept.
Name Acquired Value 1996 30, 1996
on Realized (Exercisable/ (Exercisable/
Exercise Unexercisable) Unexercisable)1
John E. 0 $0 200,000/200,000 $0
Wolfe
Joseph J. 0 $0 0 $0
Caruso
1 Value is based on the difference between option exercise price and
the fair market value at fiscal 1995 year end, multiplied by the
number of shares underlying the option.
CONSULTING AGREEMENT
The Company and Bantam are parties to a consulting agreement
effective June 6, 1993, which continues month-to-month unless
terminated by either party on thirty days' notice. Pursuant to this
agreement, Bantam was paid $1,500 per month during fiscal 1996. In
addition, the agreement calls for the issuance of 800,000 shares of
the Company's Common Stock plus the reimbursement of any tax liability
arising from the issuance of the stock. The shares were issued to
Bantam in December, 1993. Mr. Caruso, a director of the Company, is
also president of Bantam.
1991 STOCK PLAN
On March 26, 1991, the Board of Directors adopted the 1991 Stock
Plan (the "1991 Plan"), which was approved by the stockholders on
March 25, 1992. The purpose of the 1991 Plan is to provide incentives
to officers, directors, employees and consultants of the Company.
Under the 1991 Plan, officers and employees of the Company may be
granted "incentive stock options" ("ISO" or "ISOs"). Directors,
officers, employees and consultants of the Company may be granted
options which do not qualify as ISOs ("Non-Qualified Option" or "Non-
Qualified Options") and, in addition, such persons may be granted
awards of stock in the Company ("Awards") and opportunities to make
direct purchases of stock in the Company ("Purchases"). Options,
Awards and Purchases are referred to as "Stock Rights".
The 1991 Plan is administered by the Compensation Committee (the
"Committee"), currently consisting of Messrs. Stewart and Caruso. Mr.
Caruso is a former executive officer of the Company. Directors who
are members of the Committee are not eligible to participate in the
1991 Plan.
Subject to the terms of the 1991 Plan, the Committee has the
authority to determine the persons to whom Stock Rights shall be
granted (subject to certain eligibility requirements for grants of
ISOs), the number of shares covered by each such grant, the exercise
or purchase price per share, the time or times at which Stock Rights
shall be granted, and other terms and provisions governing the Stock
Rights, as well as the restrictions, if any, applicable to shares of
Common Stock issuable upon exercise of Stock Rights. The Committee
also has the authority to determine the duration and vesting rate of
each option and whether restrictions such as repurchase rights of the
Company are to be imposed on shares of stock subject to Stock Rights.
The Committee has the authority to interpret the 1991 Plan and to
prescribe and rescind regulations pertaining to it.
ISOs under the 1991 Plan may be granted to any employee of the
Company. As of September 30, 1996, the Company had 17 employees.
Only those officers and directors of the Company who are employees may
be granted ISOs under the 1991 Plan. In no event may the aggregate
fair market value (determined on the date of grant of an ISO) of
Common Stock for which ISOs granted to any employee are exercisable
for the first time by such employee during any calendar year (under
all stock option plans of the Company) exceed $100,000. Otherwise,
there is no restriction as to the maximum or minimum amount of options
an employee may receive. Non-Qualified Options, awards and purchases
may be granted to any director, officer, employee or consultant of the
Company, other than members of the Committee.
The exercise price per share of ISOs granted under the 1991 Plan
cannot be less than the fair market value per share of the Common
Stock on the date of grant, or, in the case of ISOs granted to
employees holding more than 10% of the total combined voting power of
all classes of stock of the Company, 110% of the fair market value per
share of the Common Stock on the date of grant. The exercise price
per share of Non-Qualified Options granted under the 1991 Plan cannot
be less than the lesser of the book value per share of Common Stock as
of the end of the preceding fiscal year, or 50% of the fair market
value per share of Common Stock on the date of grant.
The 1991 Plan requires that each option shall expire on the date
specified by the Committee, but not more than ten years from its date
of grant in the case of ISOs and ten years and one day in the case of
Non-Qualified Options. However, in the case of any ISO granted to an
employee owning more than 10% of the total combined voting power of
all classes of stock of the Company, such ISO shall expire on the date
specified by the Committee, but not more than five years from its date
of grant.
Stock Rights granted under the 1991 Plan provide for full payment of
the purchase price therefor either (a) in United States dollars in
cash or by check, or (b) at the discretion of the Committee, through
delivery of shares of Common Stock having a fair market value equal
to, as of the date of the exercise, the cash exercise price of the
Stock Right, or (c) at the discretion of the Committee, by delivery of
the grantee's personal recourse note bearing interest payable not less
than annually at no less than 100% of the lowest applicable Federal
rate, as defined in Section 1274(d) of the Code, or (d) at the
discretion of the Committee, by any combination of (a), (b) and (c)
above. By allowing at the discretion of the Committee, payment of the
exercise price by delivering shares of the Company, the 1991 Plan
permits the "pyramiding" of shares. Pyramiding occurs when the option
holder in a series of successive transactions uses the shares received
upon the prior exercise of an option to purchase additional shares
under further outstanding options. A participant can thereby
substantially increase his equity ownership in the Company without a
significant contribution.
The 1991 Plan authorizes the grant of Stock Rights to acquire
3,000,000 shares of Common Stock. Pursuant to the terms of the 1991
Plan, shares subject to options which for any reason expire or are
terminated unexercised as to such shares may again be the subject of a
grant under the 1991 Plan.
Options to purchase an aggregate of 100,000 shares of Common Stock
at an exercise price of $.03 per share were granted during fiscal year
1996 to Richard Mannello, Vice-President and General Manager of the
Company. No other options or rights were granted under the 1991 Plan
during the 1996 fiscal year. Options for 3,000 shares were canceled
during fiscal 1996. As of September 30, 1996, options to purchase
624,000 shares of Common Stock were issued and unexercised and had
been granted under the 1991 plan, and no options granted under the
1991 Plan had been exercised.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of December 15, 1996, to the
knowledge of the Company, the ownership of the Company's 22,296,878
outstanding shares of Common Stock by (i) each person who is known by
the Company to own of record or beneficially more than five percent
(5%) of the outstanding shares of the Company's Common Stock, (ii)
each of the Company's Directors, and (iii) all Directors and officers
as a group. Except as otherwise indicated, to the knowledge of the
Company, the stockholders listed below have sole voting and investment
power with respect to the shares indicated.
Number of Shares Percentage
Name and Address of Beneficial Beneficially Owned of Class 1
Owner
Tytronics Incorporated 2 14,960,244 67.1%
224 Calvary Street, P.O. Box 590
Waltham, MA 02254-0590
Bantam Group, Inc.3 1,435,000 6.4%
50 Bay Colony Drive
Westwood, MA 02090
John E. Wolfe 200,000 4 *
Richard Mannello 300,000 4 *
Joaquim S.S. Ribeiro 150,000 4 *
Salvatore J. Vinciguerra 150,000 4 *
All Officers and Directors as a 17,195,244 4 75.9%
group (4 persons)
*Less than 1%
1 Pursuant to the rules of the Securities and Exchange Commission,
shares of Common Stock which an individual or group has a right to
acquire within 60 days of this Report pursuant to the exercise of
presently exercisable or outstanding options, warrants or conversion
privileges are deemed to be outstanding for the purpose of computing
the percentage ownership of such individual or group, but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person shown in the table.
2 Joseph J. Caruso, Edward J. Stewart, and John E. Wolfe, Directors of
the Company, are also Directors of Tytronics Incorporated.
3 Mr. Caruso, as president of Bantam, has sole voting and investment
power with respect to the 1,435,000 shares of Common Stock owned by
Bantam.
4 Of the total shares reported 800,000 shares are issuable upon the
exercise of currently outstanding stock options.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and Bantam are parties to a consulting agreement
effective June 6, 1993, which continues month-to-month unless
terminated by either party on thirty days' notice. Pursuant to this
agreement, Bantam was paid $5,000 per month through January 1995,
$2,000 per month through October 1, 1995 and $1,500 per month
thereafter. Mr. Caruso, a Director of the Company, is president of
Bantam.
Pursuant to a Conversion of Debt and Contribution to Capital
Agreement dated November 10, 1994 between the Company and Corning
Partners, III, L.P., Corning Partners III, L.P. converted $315,000 of
existing promissory notes, plus $59,205 of accrued interest on all
such outstanding notes, into 1,663,140 shares of the Company's Common
Stock. Edward J. Stewart, III, a Director of the Company, was the
President and a director of Corning Capital Corporation, the
management company serving Corning Partners II, L.P., and a general
partner of Corning Partners II, L.P. Also on November 10, 1994, the
Company entered into an Accrued Interest Conversion Agreement with
Bayard Henry, a former 5% stockholder of the Company, pursuant to
which Mr. Henry converted interest on $50,000 of the 10% subordinated
notes then held by Mr. Henry, totaling $8,292, into 36,860 shares of
the Company's Common Stock.
Pursuant to a Purchase Agreement dated November 29, 1994 (the
"Purchase Agreement"), Tytronics Incorporated ("Tytronics") acquired
all of the Common Stock of the Company owned by Corning Partners II,
L.P., Corning Partners III, L.P., Bayard Henry, and Edward J. Stewart,
III, consisting of an aggregate 8,960,244 shares of the Company's
Common Stock at the time representing 55% of the shares of the
Company's outstanding voting securities. In connection with the
Purchase Agreement, Tytronics also acquired $220,000 of the 10% Demand
Subordinated Notes then held by Corning Partners III, L.P. and Bayard
Henry. In addition, pursuant to a Loan Agreement dated November 29,
1994 (the "Loan Agreement"), the Company paid $55,000 to Tytronics
which was used to retire a portion of the $220,000 10% Demand
Subordinated Notes acquired by Tytronics from previous holders, and
the $165,000 balance of these notes was converted into a 3-year note,
with annual principal payments of $55,000, plus interest at 10% per
annum, due October 31 of each year. Pursuant to the Loan Agreement,
Tytronics also provided the Company with a $150,000 demand loan, the
proceeds of which were used to pay the remaining indebtedness owed
Corning Partners II, L.P., Corning Partners III, L.P. and Mr. Henry.
As a result of the transaction described above, all previously
outstanding shares of the Company's Series A and B Preferred Stock
have been converted into Common Stock, and all of the Company's
indebtedness to the Corning partnerships and Mr. Henry have either
been converted to Common Stock, paid in full, or purchased by
Tytronics. As of September 30, 1995, the Company held notes payable
to Tytronics totaling $165,000, of which $55,000 was a current
liability, and $110,000 was a long-term liability on the Company's
balance sheet at September 30, 1995. Immediately prior to the
effectiveness of the Purchase Agreement with Tytronics, the Corning
partnerships and Messrs. Stewart and Henry effectively held 8,960,244
shares of the Company's Common Stock, or 55% of the Company's
outstanding voting securities, which were exchanged for 30,000 shares
of Tytronics common stock, $.01 par value. In connection with the
transaction described above, Joseph J. Caruso, Joaquim S. S. Ribeiro,
and John E. Wolfe were also elected as additional directors of the
Company.
Effective September 30, 1996, the Company acquired One Hundred
Twenty Thousand (120,000) shares (the "Shares") of common stock ,
$0.013 par value, of National Metal Refining Company ("Nametre") for
cash of $225,000, notes payable of $75,000, and acquisition costs.
The Company raised the funds to acquire the Shares from Nametre by issuing
Six Million (6,000,000) shares of the Company's common stock, $0.01 par value,
to Tytronics at a purchase price of Five Cents ($0.05) per share. Joseph J.
Caruso, a director of the Company, is also a director of Nametre. Messrs.
Caruso, Stewart and Wolfe, directors of the Company, are also
directors of Tytronics. In addition, Mr. Caruso is the president of
Bantam, which is a stockholder of the Company and Nametre and has
entered into consulting agreements with Nametre and the Company.
The Company and Tytronics share operating facilities at 25 Wiggins
Avenue, Bedford, Massachusetts. The Company and Tytronics allocate
rental expense associated with the facility based on the square
footage occupied by each company. This arrangement currently results
in the payment by Tytronics to the Company of approximately $3000 per
month for the occupancy by Tytronics of a portion of the Company's
leased facilities. The Company and Tytronics also share other
operating and administrative costs based on estimated usage. During
the fiscal years ended September 30, 1996, and 1995, this informal
agreement resulted in the payment of approximately $80,000 and
$68,000, respectively, by the Company to Tytronics for such operating
and administrative costs.
During the fiscal year ended September 30, 1996, the Company and
Tytronics were also parties to various informal working capital
agreements pursuant to which Tytronics provided working capital
financing to the Company on a short-term basis. Such working capital
advances are limited by the Silicon Valley Bank agreement to $50,000
at any one time. These advances are payable on demand with 10%
interest. As of fiscal year end, September 30, 1996, $20,000 was due
to Tytronics by the Company under these arrangements. During fiscal year
1996 and 1995, the Company borrowed an aggregate of $130,000 and $111,000,
including interest, from Tytronics under these arrangements. Also during
fiscal year 1996, the Company restructured its existing debt to Tytronics
by extending the due date for an aggregate of $155,000 of existing debt
in exchange for the issuance of warrants to Tytronics to purchase 1,000,000
and 1,100,000 shares of the Company's common stock at warrant exercise prices
of $.05 and $.10 per share, respectively.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits: The following exhibits are filed as a part
of this Annual Report on Form 10-KSB or incorporated by reference.
3.01 Certificate of Incorporation, as amended, including Certificates
of Designation for the terms of the Series A and Series B Preferred
Stock (filed as exhibit 3.01 to Form 10-K dated December 27, 1991 and
incorporated by reference).
3.02 Bylaws (filed as Exhibit 3d to Registration Statement No. 33-
13027-B on Form S-18 and incorporated by reference).
4.01 Agreement to Purchase 7% Exchangeable Subordinated Notes between
Holometrix, Inc. and the Purchasers named therein (the "Note Purchase
Agreement") (filed as Exhibit 4a to Form 8 dated July 14, 1988 and
incorporated by reference).
4.02 Exhibits A, B(1), B(2) and C to the Note Purchase Agreement
(filed as Exhibit 4b to Form 8 dated July 14, 1988 and incorporated by
reference).
10.01 1987 Stock Option Plan (filed as Exhibit 10f to Registration
Statement No. 33-13027-B on Form S-18 and incorporated by reference).
10.02 1991 Stock Plan, as amended (filed as exhibit 10.02 to Form 10-K
dated December 27, 1991 and incorporated by reference).
10.03 Form of Incentive Stock Option Agreement under 1991 Stock
Plan (filed as exhibit 10.03 to Form 10-K dated December 27, 1991 and
incorporated by reference).
10.04 Form of Non-qualified Stock Option Agreement under 1991
Stock Plan (filed as exhibit 10.04 to Form 10-K dated December 27, 1991 and
incorporated by reference).
10.05 Stock Repurchase Agreement with Douglas B. Flint (filed as
Exhibit 1Oh to Registration Statement No. 33-13027-B and incorporated
by reference).
10.06 Agreement for Purchase and Sale of Assets by and between
Holometrix, Inc. and Dynatech Scientific, Inc. dated October 2, 1987
(filed as Exhibit 2 to Form 8-K filed on October 17, 1987 and
incorporated by reference).
10.07 Agreement to Purchase Stock of Dynatech Scientific, Inc.
from Dynatech Corporation by Holometrix, Inc. (the "Dynatech
Scientific Stock Purchase Agreement") (filed as Exhibit 2a to Form 8
dated July 14, 1988 and incorporated by reference).
10.08 Exhibits A, B, & C to the Dynatech Scientific Stock Purchase
Agreement (filed as Exhibit 2b to Form 8 dated July 14, 1988 and
incorporated by reference).
10.09 Loan and Security Agreement between Shawmut Bank, N.A. and
Holometrix, Inc. (the "Loan and Security Agreement") (filed as Exhibit
10a to Form 8 dated July 14, 1988 and incorporated by reference).
10.10 Exhibits 1.1 and 2.4 to Loan and Security Agreement (filed
as Exhibit 10b to Form 8 dated July 14, 1988 and incorporated by
reference).
10.11 Lease dated October 1, 1991 between Holometrix, Inc. and
Springfield Institute for Savings (the "Lease") for the premises at 25
Wiggins Avenue, Bedford, Massachusetts (filed as exhibit 10.11 to Form
10-K dated December 27, 1991 and incorporated by reference).
10.12 First amendment of Lease dated August 19, 1993 between
Holometrix, Inc. and Opta Food Ingredients, Inc. (the successor in
interest to Springfield Institution for Savings), for the premises at
25 Wiggins Avenue, Bedford, Massachusetts (filed as exhibit 10.12 to Form
10-KSB dated December 27, 1995 and incorporated by reference).
10.13 Agreement to Purchase 10% Exchangeable Subordinated Notes
and Warrants between Holometrix, Inc. and the Purchasers named therein
(the "Note and Warrant Purchase Agreement") (filed as Exhibit 10.11 to
Form 10-K dated December 27, 1990 and incorporated herein by
reference)
10.14 Exhibits A and B to the Note and Warrant Purchase Agreement
(filed as Exhibit 10, 12 to Form 10-K dated December 27, 1990 and
incorporated herein by reference).
10.15 Agreement to Purchase Series B Preferred Stock between
Holometrix, Inc. and Norman Priebatsch dated April 26, 1991 (filed as
exhibit 10.14 to Form 10-K dated December 27, 1991 and incorporated by
reference).
10.16 Agreement for Purchase and Sale of Assets by and between
Holometrix, Inc. and Azimuth Corporation (formerly Precept
Corporation) (filed as exhibit 10.15 to Form 1OK dated December 27,
1991 and incorporated by reference).
10.17 Loan Agreement between Holometrix, Inc. and Shawmut Bank,
N.A. dated March 1, 1993 (filed as exhibit 10.16 to Form 10-KSB dated
September 8, 1994 and incorporated by reference).
10.18 Unsecured Promissory Note between Holometrix, Inc. and
Corning Partners III, L.P. dated February 24, 1993 (filed as exhibit
10.17 to Form 10-KSB dated September 8, 1994 and incorporated by
reference).
10.19 Unsecured Promissory Note between Holometrix, Inc. and
Corning Partners III, L.P. dated June 11, 1993 (filed as exhibit 10.18
to Form 10-KSB dated September 8, 1994 and incorporated by reference).
10.20 Unsecured Promissory Note between Holometrix, Inc. and
Corning Partners III, L.P. dated July 1, 1993 (filed as exhibit 10. 19
to Form 1O-KSB dated September 8, 1994 and incorporated by reference).
10.21 Unsecured Promissory Note between Holometrix, Inc. and
Bayard Henry dated March 3, 1993 (filed as exhibit 10.20 to Form 10-
KSB dated September 8, 1994 and incorporated by reference).
10.22 Consulting Agreement between Holometrix, Inc., Corning
Partners II, L.P., Corning Partners III, L.P., and Bantam, dated June
7, 1993 (filed as exhibit 10.21 to Form 10-KSB dated September 8, 1994
and incorporated by reference).
10.23 Stock Redemption Agreement between Holometrix, Inc. and
Dhananjay G. Wadekar dated September 30, 1994 (filed as exhibit 10.22
to Form 10-KSB dated December 27, 1994 and incorporated herein by
reference).
10.24 Stock Redemption Agreement between Holometrix, Inc. and
Douglas B. Flint and Susan M. Flint, as joint tenants, dated September
30, 1994 (filed as exhibit 10.23 to Form 10-KSB dated December 27,
1994 and incorporated herein by reference).
10.25 Preferred Stock Conversion Agreement by and among
Holometrix, Inc. and the shareholders named therein dated November 10,
1994 (filed as exhibit 10.24 to Form 10-KSB dated December 27, 1994
and incorporated herein by reference).
10.26 Conversion of Debt and Contribution to Capital Agreement by
and between Holometrix, Inc. and Corning Partners III, L.P. dated
November 10, 1994 (filed as exhibit 10.25 to Form 10-KSB dated
December 27, 1994, and incorporated herein by reference).
10.27 Accrued Interest Conversion Agreement by and between
Holometrix, Inc. and Bayard Henry dated November 10, 1994 (filed as
exhibit 10.26 to Form 10-KSB dated December 27, 1994 and incorporated
herein by reference).
10.28 Loan Agreement between Tytronics Incorporated and
Holometrix, Inc. dated November 29, 1994 (filed as exhibit 10.27 to
Form 10-KSB dated December 27, 1994 and incorporated herein by
reference).
10.29 Secured Demand Promissory Note in the aggregate principal
amount of $150,000 issued by Holometrix, Inc. to Tytronics
Incorporated dated November 29, 1994 (filed as exhibit 10.28 to Form
10-KSB dated December 27, 1994 and incorporated herein by reference).
10.30 Secured Term Promissory Note issued by Holometrix, Inc. to
Tytronics Incorporated in the aggregate principal amount of $165,000
dated November 29, 1994 (filed as exhibit 10.29 to Form 10-KSB dated
December 27, 1994 and incorporated herein by reference).
10.31 Security Agreement between Holometrix, Inc. and Tytronics
Incorporated dated November 29, 1994 (filed as exhibit 10.31 to Form 10-KSB
dated December 27, 1994, and incorporated herein by reference).
10.32 Purchasing Contract dated February 15, 1995 between Sandia
National Laboratories and Holometrix, Inc. and Amendment thereto dated
August 30, 1995 (filed as exhibit 10.32 to Form 10-KSB dated December 27, 1995
and incorporated herein by reference).
10.33 Letter Agreement between Silicon Valley Bank and Holometrix,
Inc. dated December 22, 1994 (filed as exhibit 10.33 to Form 10-KSB
dated December 27, 1995, and incorporated herein by reference).
10.34 Promissory Note dated December 22, 1994 in the original
principal amount of $350,000 executed by Holometrix, Inc. (filed as
exhibit 10.34 to Form 10-KSB dated December 27, 1995, and incorporated
herein by reference).
10.35 Loan Modification Agreement dated August 14, 1995 between
Holometrix, Inc. and Silicon Valley Bank (filed as exhibit 10.35 to
Form 10-KSB dated December 27, 1995, and incorporated herein by
reference).
10.36 Third Amendment of Lease between Opta Food Ingredients, Inc. and
Holometrix, dated September 30, 1996 (filed herewith).
27 Financial Data Schedule
(b) Reports on Form 8-K. The Company did not file any Current
Reports on Form 8-K during the Company's fiscal quarter ended
September 30, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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:
HOLOMETRIX, INC.
By: /s/John E. Wolfe DATE: December 27, 1996
John E. Wolfe, President and Treasurer
(principal executive, financial
and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of
the registrant and in the capacities and on the dates indicated.
Name Capacity Date
/s/Joseph J. Caruso Director December 27, 1996
Joseph J. Caruso
/s/Joaquim S. S. Ribeiro Director December 27, 1996
Joaquim S. S. Ribeiro
/s/Edward J. Stewart, III Director December 27, 1996
Edward J. Stewart, III
/s/Salvatore Vinciguerra Director December 27, 1996
Salvatore Vinciguerra
/s/John E. Wolfe Director December 27, 1996
John E. Wolfe
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Holometrix, Inc.
Bedford, Massachusetts
We have audited the accompanying consolidated balance sheets of
Holometrix, Inc. and subsidiary as of September 30, 1996 and 1995
and the related consolidated statements of income,
stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Holometrix, Inc. and subsidiary at September 30,
1996 and 1995, and the consolidated results of their operations
and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ BDO Seidman
BDO Seidman, LLP
Boston, Massachusetts
November 26 , 1996
HOLOMETRIX, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, 1996 AND 1995
(Notes B, G and H)
1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 27,495 $ 40,707
Accounts receivable, less
allowance for doubtful
accounts of $35,000 1,162,148 407,633
for 1996 and $20,000
for 1995 (Note L)
Inventories (Note D) 662,323 239,238
Other current assets 32,802 15,473
TOTAL CURRENT ASSETS 1,884,768 703,051
EQUIPMENT AND FIXTURES - net 351,656 350,146
(Note E)
OTHER ASSETS - net (Notes B and F) 312,299 20,020
TOTAL ASSETS $2,548,723 $1,073,217
See accompanying notes to consolidated financial statements
HOLOMETRIX, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1996 AND 1995
1996 1995
CURRENT LIABILITIES:
Notes payable - stockholders
(Notes B and G) $ 20,000 55,000
Notes payable -line of credit (Note G) 84,000 125,000
Accounts payable 1,204,028 214,743
Accrued payroll and related expenses 37,086 28,731
Accrued expenses - other 59,135 61,589
Due to stockholder (Note M) 77,204 10,854
Current maturities of long-term
obligations (Note H) 105,000 4,673
TOTAL CURRENT LIABILITIES 1,586,453 500,590
LONG-TERM DEBT:
Notes payable-stockholders,
less current maturities
(Notes B and G) 100,000 110,000
Long term obligations, less
current maturities (Note H) 113,539 24,571
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY (Note N) 66,634 -
COMMITMENTS AND CONTINGENCIES
(Notes G,H,J,K and M)
STOCKHOLDERS' EQUITY (Notes B and K):
Common Stock, $.01 par value, 30,000,000
shares authorized; issued 26,533,157
in 1996 and 20,533,157 in 1995;
outstanding 22,296,878 in 1996 and
16,296,878 in 1995 265,332 205,332
Additional paid-in capital 2,459,009 2,219,009
Accumulated deficit (1,878,244) (1,882,285)
___________ ___________
846,097 542,056
Less: Treasury stock (at cost) 104,000 104,000
Subscriptions Receivable 60,000 _
TOTAL STOCKHOLDERS' EQUITY 682,097 438,056
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,548,723 $1,073,217
See accompanying notes to consolidated financial statements
HOLOMETRIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
(Note B)
1996 1995
NET REVENUES (Note L) $2,200,603 $2,104,692
COST OF SALES 1,338,466 1,298,023
GROSS PROFIT 862,137 806,669
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 668,902 553,432
RESEARCH AND DEVELOPMENT 153,984 206,629
TOTAL OPERATING EXPENSES 822,886 760,061
INCOME FROM OPERATIONS 39,251 46,608
INTEREST EXPENSE 35,210 34,413
NET INCOME $ 4,041 $ 12,195
NET INCOME PER COMMON SHARE $0.00 $0.00
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES USED IN CALCULATION OF
INCOME PER COMMON SHARE
(Note B) 16,313,316 15,846,006
See accompanying notes to consolidated financial statements
HOLOMETRIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
(Note B)
<TABLE>
<S> <C> <C> <C> <C> <C>
Preferred Stock
Series B Common Stock Additional
Par Value $.01 Par Value $.01 Paid-in
Shares Amount Shares Amount Capital
BALANCE, September 30, 1994 1,250,000 $12,500 14,631,207 $146,312 $1,344,780
Conversion of debt to equity - - 1,663,140 16,631 357,573
Conversion of accrued interest
to equity - - 36,860 369 7,923
Common shares repurchased - - - - -
Conversion of Series "A" Preferred
Stock into Common Stock - - 3,143,961 31,440 509,313
Conversion of Series "B" Preferred
Stock into Common Stock (1,250,000) (12,500) 1,057,989 10,580 (580)
Net income for year - - - - -
BALANCE, September 30, 1995 - - 20,533,157 205,332 2,219,009
Common shares issued - - 6,000,000 60,000 240,000
Net income for year - - - - -
BALANCE, September 30, 1996 - $ - 26,533,157 $265,332 $2,459,009
Total
Accumulated Treasury Stock Subscriptions Stockholders'
Deficit Shares Amount Receivable Equity(Deficit)
BALANCE, September 30, 1994 $(1,894,480) (3,886,279) $(103,500) $ - $(494,388)
Conversion of debt to equity _ _ _ _ 374,204
Conversion of accrued interest
to equity _ _ _ _ 8,292
Common shares repurchased _ (600,000) (3,000) _ (3,000)
Conversion of Series "A" Preferred
Stock into Common Stock _ _ _ _ 540,753
Conversion of Series "B" Preferred
Stock into Common Stock _ 250,000 2,500 _ _
Net income for year 12,195 - - _ 12,195
BALANCE, September 30, 1995 (1,882,285) (4,236,279) (104,000) _ 438,056
Common shares issued _ _ _ (60,000) 240,000
Net income for year 4,041 _ _ _ 4,041
BALANCE, September 30, 1996 $(1,878,244) (4,236,279) $(104,000) ($60,000) $682,097
</TABLE>
See accompanying notes to consolidated financial statements.
HOLOMETRIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
(Note N)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,041 $ 12,195
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 125,125 182,292
Loss on disposal of equipment
and fixtures - 2,980
Changes in operating assets and
liabilities, net of effects of
acquisition:
Accounts receivable (335,934) (60,959)
Inventories 16,921 (40,333)
Other current assets 10,970 (2,818)
Accounts payable 328,019 62,585
Accrued expenses (13,099) (86,183)
Net cash provided by operating
activities 136,043 69,759
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment and fixtures additions (80,468) (59,344)
Purchase of Nametre, net of
cash acquired (266,514) -
(Increase) decrease in other assets (17,956) 650
Net cash used for investing
activities (364,938) (58,694)
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to stockholder, net 86,350 10,854
Borrowings (repayments) of notes -
stockholders & others - (205,000)
Purchase of treasury stock - (3,000)
Proceeds from issuance of common stock 175,000 -
Net borrowings (repayments) under
line of credit (41,000) 125,000
Repayments under long term obligations (4,667) (6,715)
Net cash provided (used) for
financing activities 215,683 (78,861)
Net increase (decrease) in cash and
cash equivalents (13,212) (67,796)
Cash and cash equivalents, beginning
of year 40,707 108,503
Cash and cash equivalents, end of year $27,495 $40,707
See accompanying notes to consolidated financial statements
HOLOMETRIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
A. Business Organization:
Holometrix, Inc. (the "Company"), a Delaware corporation
incorporated on October 23, 1985, is a product development,
manufacturing and contract test services company which specializes
in manufacturing instruments and providing contract test services
for measuring the thermophysical properties of a wide variety of
materials. The Company's Instruments Division currently designs,
manufactures and distributes five product lines containing a total of
seventeen instrument models which measure thermophysical properties
for research and quality control applications. The Company's
Testing Services Division provides contract test and engineering
services to evaluate various temperature-related performance factors
of virtually any material. The Testing Services Division also performs
mechanical and physical properties testing. The Company is located in Bedford,
MA.
In 1996, the Company purchased a majority of the issued and
outstanding capital stock of National Metal Refining Company, Inc.
("Nametre" or "Subsidiary"). Nametre is a product development and
manufacturing company that specializes in manufacturing in-line and
laboratory viscosity analyzers. These analyzers are used to measure
the viscosity and viscoelasticity of a wide range of materials that
are sold to the polymer manufacturing, petrochemical, food, paints
and coatings and pulp and paper markets. Nametre is located in
Metuchen, NJ.
B. Acquisition, Debt Conversion and Certain Capital Transactions (see Note G):
Acquisition
On September 30, 1996, the Company acquired approximately 61.23%
of the outstanding shares of National Metal Refining Company, Inc.,
(Nametre) a developer of instruments for the measurement of viscous
properties of materials, for $225,000 in cash and $75,000 in notes
payable, plus acquisition costs. The acquisition has been accounted
for under the purchase method of accounting, resulting in the cost of the
acquisition being preliminarily allocated on the basis of the estimated
fair value of the assets acquired and liabilities assumed. This allocation
has resulted in goodwill of approximately $245,000 which is being amortized
over 15 years. The purchase also provided for the acquisition by the
Company of warrants to purchase an additional 13,334 shares at $3 per share
and 10,000 shares at $6 per share. The Company raised the funds to acquire
Nametre by issuing 6,000,000 shares of the Company's common stock to Tytronics,
Incorporated ("Tytronics"), at a purchase price of $.05 per share. At the
time of this sale of shares, the Company entered into a debt restructuring
agreement with Tytronics; in conjunction with that agreement, the Company
also issued warrants to Tytronics to purchase one million, one hundred thousand
(1,100,000) shares of Common Stock at an exercise price of $0.05 per share
and one million (1,000,000) shares of Common Stock at an exercise price of
$0.10 per share, expiring February 1, 2006. Joseph J. Caruso, a director of
the Company, is also a director of Nametre. In addition, Mr. Caruso is the
president of Bantam, which is a stockholder of the Company and Nametre and
has entered into consulting agreements with Nametre and the Company. The
purchase did not have a material effect on the Consolidated Statement of
Income for the year ended September 30, 1996.
The unaudited pro forma consolidated results of the Company for
the years ended September 30, 1996 and 1995, assuming that the
acquisition had occurred at the beginning of each period presented,
and after giving effect to certain pro forma adjustments, are as
follows:
(Unaudited)
September 30,
1996 1995
Revenue $4,803,389 $4,775,711
Net loss (27,010) (159,131)
Net loss per share (0.00) (0.01)
Conversion of Debt
Pursuant to a Conversion of Debt and Contribution to Capital
Agreement dated November 10, 1994 between the Company and Corning
Partners, III, L.P., Corning Partners III, L.P. converted $315,000
of existing promissory notes plus $59,205 of accrued interest on all
such outstanding notes, into 1,663,140 shares of the Company's
Common Stock. Also on November 10, 1994, the Company entered into
an Accrued Interest Conversion Agreement with Bayard Henry, pursuant
to which Mr. Henry converted interest on $50,000 of the 10%
subordinated notes then held by Mr. Henry, totaling $8,292, into
36,860 shares of the Company's Common Stock.
Pursuant to a Purchase Agreement dated November 29, 1994 (the
"Purchase Agreement"), Tytronics acquired all of the Common Stock of
the Company owned by Corning Partners II, L.P., Corning Partners
III, L.P., Bayard Henry, and Edward J. Stewart, III, consisting of
an aggregate 8,960,244 shares of the Company's Common Stock and
representing 55% of the shares of the Company's outstanding voting
securities, at that time. In connection with the Purchase
Agreement, Tytronics also acquired $220,000 of the 10% Demand
Subordinated Notes then held by Corning Partners III, L.P. and
Bayard Henry. In addition, pursuant to a Loan Agreement dated
November 29, 1994 (the "Loan Agreement"), the Company paid $55,000
to Tytronics which was used to retire a portion of the $220,000 10%
Demand Subordinated Notes acquired from previous holders, and the
$165,000 balance of these notes was converted into a 3-year note,
with annual principal payments of $55,000, plus interest at 10% per
annum, due October 31 of each year. As of October 31, 1995, the
Company was in arrears on its then due payment on this note, and
remained so until September 30, 1996. Pursuant to the Loan Agreement,
Tytronics also provided the Company with a $150,000 demand loan, the
proceeds of which were used to pay the remaining indebtedness owed
Corning Partners II, L.P., Corning Partners III, L.P. and Bayard Henry.
As noted above, subsequent to year end September 30, 1995, the
Company failed to make its required October 31, 1995 installment and
was, therefore, in default under the provisions of the loan
agreement. Tytronics agreed not to demand accelerated payment of
the entire loan balance, at least until October 1, 1996.
Subsequently, in support of the Nametre acquisition, and in
connection with additional investments by Tytronics of $300,000 to
the Company, Tytronics applied $65,000 of debt to this stock
purchase and rewrote the remaining $100,000 as long term debt, with
payments of $50,000 due November 23, 1997, and $50,000 due November
23, 1998.
During the fiscal year ended September 30, 1996, the Company and Tytronics
were also parties to various informal working capital agreements pursuant to
which Tytronics provided working capital financing to the Company on a
short-term basis. Such working capital advances are limited by the Silicon
Valley Bank agreement to $50,000 at any one time. These advances are payable
on demand with 10% interest. During fiscal year 1996, the Company borrowed
an aggregate of $130,000, including interest, from Tytronics under these
arrangements. At September 30, 1996, $20,000 was due to Tytronics by the
Company under these same arrangements.
Series A Preferred Stock
On November 10, 1994, the Company entered into an agreement with Corning
Partners III, L.P. ("Corning") and with Mr. Bayard Henry, to convert all of
their then outstanding Series A Convertible stock into Common Stock. Corning
held 1,896,596 shares of Series A stock, which was converted to 2,095,110
shares of Common Stock. Mr. Henry held 949,471 shares of Series A stock,
which was converted to 1, 048,851 shares of Common Stock.
Series B Preferred Stock
As of September 30, 1994, all of the Company's outstanding shares of Series
B Preferred Stock were held by Corning. On November 10, 1994, the Company
entered into an agreement with Corning to convert all of the Series B
Convertible stock into Common Stock. Corning held 1,000,000 shares of
Series B stock, which was converted to 1,057,989 shares of Common Stock.
As a result of the transactions described above, all previously
outstanding shares of the Company's Series A and B Preferred Stock
have been converted into Common Stock, and all of the Company's
indebtedness to the Corning partnerships and Mr. Henry have been
converted to Common Stock, paid in full, or purchased by Tytronics.
Immediately prior to the effectiveness of the Purchase Agreement
with Tytronics, the Corning partnerships and Messrs. Stewart and
Henry effectively held 8,960,244 shares of the Company's Common
Stock, or 55% of the Company's outstanding voting securities, which
were then exchanged for 30,000 shares of Tytronics common stock,
$.01 par value. Additionally, the Company raised the funds to
acquire Nametre by issuing 6,000,000 shares of the Company's common
stock to Tytronics, at a purchase price of $0.05 per share. As of
September 30, 1996, the Company's common stock owned by Tytronics
represented 14,960,244 shares, or 67.1% of the total outstanding
shares.
C. Summary of Significant Accounting Policies:
Basis of presentation
The consolidated financial statements include the accounts of the
Company and its subsidiary. All intercompany accounts and
transactions have been eliminated. As discussed in Note B, the Company
acquired a majority interest in Nametre at September 30, 1996.
Accordingly, the Consolidated Statements of Income and
Consolidated Statements of Cash Flows exclude any activity of
Nametre prior to the date of acquisition.
Cash and cash equivalents
The Company considers all highly liquid debt instruments purchased
with maturities of three months or less to be cash equivalents.
Concentration of credit risk
Concentration of credit risk consists principally of trade
receivables. This risk is limited due to the large number of
customers comprising the Company's and the Subsidiary's customer
bases and their dispersion across different businesses and
geographic regions. Ongoing credit reviews of customers' financial
condition are performed, and collateral is not required. The
Company maintains reserves for potential credit losses and such
losses, in the aggregate, have not exceeded management's
expectations.
Inventories
Inventories are valued at the lower of cost or market using the
first-in, first-out (FIFO) method.
Equipment and fixtures
Equipment and fixtures are stated at cost. Depreciation is
computed using straight-line and accelerated methods over the
estimated useful lives, ranging between 5 and 10 years, of the
related asset. Leasehold improvements are amortized over the life
of the lease including expected renewal periods not to exceed the
maximum useful lives of the assets.
Goodwill
Goodwill resulting from the excess of cost over fair value of net
assets acquired is being amortized on a straight-line basis over 15
years. The Company evaluates the recoverability and remaining life
of its goodwill and determines whether the goodwill should be
completely or partially written-off or the amortization period
accelerated. The Company will recognize an impairment of goodwill
if undiscounted estimated future operating cash flows of the
acquired business are determined to be less than the carrying amount
of the goodwill. If the Company determines that the goodwill has
been impaired, the measurement of the impairment will be equal to
the excess of the carrying amount of the goodwill over the amount of
the undiscounted estimated future operating cash flows. If an
impairment of goodwill were to occur, the Company would reflect the
impairment through a reduction in the carrying value of goodwill.
Other assets
Other assets includes a licensing agreement, patent costs, and
various deposits for office equipment and utilities. Costs related
to the licensing agreement are amortized using the straight-line
method over the life of the agreement. Patent costs are amortized
over 8 years.
Revenue recognition
Revenue for instruments sales is recognized when instruments are
shipped. Revenue for testing services is recognized as services are
performed.
Research and development
Research and development costs are charged to expense as incurred.
Income taxes
Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under SFAS No. 109, deferred tax liabilities or
assets are recognized for the estimated tax effects of temporary
differences between financial reporting and income tax bases of
assets and liabilities and for loss carryforwards based on enacted
tax laws and rates.
Net income per common share
Net income per common share is computed using the weighted average
number of common and common equivalent shares outstanding during the
year. Common shares issuable upon exercise of outstanding warrants
and options, when dilutive, are included in the computation of
shares outstanding.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Financial Instruments
The estimated fair value of the Company's financial instruments, which
include account receivable, accounts payable, notes payable and long-term
debt approximate their carrying value.
New accounting pronouncements
Effective October 1, 1995, the Company adopted Statement of
Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" ("SFAS 121"). The new standard establishes new
guidelines regarding when impairment losses on long-lived assets,
which include property and equipment, certain identifiable
intangible assets and goodwill, should be recognized and how
impairment losses should be measured. It is of the opinion of the
Company's management that the effect of the implementation of SFAS
121 was not material to the Company's consolidated financial statements.
Statement of Financial Accounting Standard No. 123 ("SFAS 123")
"Accounting for Stock-Based Compensation", allows the Company to
account for its stock-based employee compensation plans based upon
either a fair value method or the intrinsic value method currently
followed by the Company. If the current method is retained, SFAS
123 requires certain additional disclosures regarding the impact
which the fair value method would have on the results of the
Company's operations. The Company expects to retain its current
method of accounting for stock-based compensation plans, and,
therefore, the adoption of SFAS 123 will have no impact on the
Company's financial position or results of operations. Adoption of
SFAS 123 is required for financial statements of fiscal years
beginning after December 15, 1995. The Company will implement the
disclosure requirements of SFAS 123 as required in fiscal 1997.
D. Inventories:
As of September 30, inventories consist of the following:
1996 1995
Raw materials $401,779 $186,849
Work in process 109,893 52,389
Finished goods 150,651 -
Total $662,323 $239,238
E. Equipment and Fixtures:
1996 1995
As of September 30, equipment
and fixtures
consist of the following:
Furniture and fixtures $ 80,795 $ 45,746
Leasehold improvements 70,471 53,770
Computer equipment 212,580 198,159
Laboratory and shop equipment 313,934 290,521
Demo equipment 265,253 232,986
Guarded hot box facility 250,061 250,061
1,193,094 1,071,243
Less accumulated depreciation
and amortization (841,438) (721,097)
Total $351,656 $350,146
F. Other Assets:
1996 1995
As of September 30, other assets
consist of the following:
Goodwill $244,788 $ -
Licensing agreement -
net of amortization 12,951 17,735
Patents 32,637 -
Deposits 21,923 2,285
Total $312,299 $20,020
The licensing agreement, for use of various laser technologies, is
net of related accumulated amortization, which aggregated $22,499
and $17,715 for the years ended September 30, 1996 and 1995
respectively.
G. Notes Payable - Stockholders and Line of Credit:
As of September 30, Notes payable - stockholders and line of credit
consist of the following:
1996 1995
Notes payable -
stockholder (See Note B):
10% Term subordinated note $100,000 $165,000
10% Demand subordinated note 20,000 -
Less current maturities (20,000) (55,000)
Long-term portion $100,000 $110,000
Notes payable - line of credit $84,000 $125,000
In fiscal 1995 the Company entered into a working capital line of
credit with a bank, which provides for borrowings up to $350,000. The
line of credit is secured by substantially all assets of the Company.
Advances under the line shall not exceed 70% of the Company's eligible accounts
receivable, as defined. These amounts are payable on demand and bear interest
at the banks prime rate plus 1.5%. The line of credit agreement
contains covenants which among various matters restricts further
borrowings and security interests, loans and advances to others, and
sales of assets, other than in the normal course of business.
The Company is also required to maintain certain financial
covenants. The Company was not in compliance with certain of these
covenants during part of the 1995 fiscal year. Subject to terms and
conditions of a modification agreement dated August 14, 1995, the
bank has waived the covenant violations and amended the requirements
for the four financial covenants; profitability, liquidity, tangible
net worth and leverage. At September 30, 1996, and September 30, 1995,
borrowings under this line of credit were $84,000 and $125,000 respectively,
and the Company was not in violation of any of these covenants. This line
expires February 4, 1997.
H. Long term obligations:
As of September 30, long-term obligations consist of the following:
1996 1995
10% Term Note Payable - collateralized $ 155,000 $ -
6% Term Note Payable - unsecured 24,572 29,244
Notes Payable - other 38,967 -
Less current maturities (105,000) (4,673)
$ 113,539 $ 24,571
The Note Payable - Collateralized consists of a 10% note payable to the
estate of the former owner of Nametre. Payments are due quarterly and
include principal and interest. The note is collateralized by substantially
all of the assets of Nametre.
In fiscal 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 note was
renegotiated, with the outstanding debt at $44,000. 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 September 30, 1996, the outstanding
balance was $24,572, of which $19,572 is classified as a long-term
liability, and $5,000 is classified as a current liability.
As of September 30, 1996, the aggregate annual payments on long-
term obligations are as follows:
Fiscal 1997 $105,000
Fiscal 1998 99,196
Fiscal 1999 5,592
Fiscal 2000 3,751
Total scheduled payments 213,539
Due Fiscal 2000 if
payments are late 5,000
$218,539
I. Income Taxes:
The Company has net operating loss carryforwards available for
financial reporting and federal income tax purposes of approximately
$1,481,000 expiring through 2011. Because of the transaction with
Tytronics described in note B and the resulting "change in
ownership", the future use of the carryforwards that existed at the
time of the change is restricted.
As of September 30, deferred taxes consist of the following:
1996 1995
Net operating loss carryforwards $592,000 $584,000
Accounts receivable reserve 14,000 8,000
Other temporary differences 24,000 23,000
Valuation allowance (630,000) (615,000)
Net deferred tax asset $ - $ -
The Company has provided a valuation allowance equal to 100% of
the gross deferred tax asset since it is more likely than not that
the deferred tax asset will not be realized.
A reconciliation of the federal statutory income tax rate and the
effective tax rate as a percentage of income before taxes on income
for the years ended September 30, is as follows:
1996 1995
Statutory rate 34.0% 34.0%
Utilization of federal net
operating loss carryforwards (34.0)% (34.0)%
Effective tax rate - % - %
J. Operating Leases:
The Company conducts its operations from leased facilities
consisting of office and production space. The lease was non-
cancelable with a five-year term effective October 1, 1991. In
August, 1993 a new lease was negotiated. During fiscal 1995, the
Company further amended its lease agreement in order to obtain
consent to jointly occupy its facility with Tytronics (see Note M).
As a result, the monthly rental was increased through the remaining
term of the lease. Future minimum annual payments under the amended
lease for the year ending September 30, 1997 are $68,400, excluding
any rental income from Tytronics. The Company's total rent expense in
fiscal 1996 and 1995 was approximately $65,355 and $69,613, respectively.
Rental income from Tytronics in those same years was approximately $30,801
and $23,801 respectively.
Nametre, the Company's subsidiary, conducts it operations from
leased facilities consisting of office and production space. Nametre
occupies this facility on a month to month basis under an operating
lease.
K. Stock Options
In March 1991, the stockholders approved the 1991 Stock Plan (the
"1991 Plan"). Under this plan, awards of, and options to purchase,
an aggregate of 3,000,000 shares may be issued to directors,
officers, employees and consultants of the Company. The exercise
price of incentive stock options (ISOs) granted under the 1991 Plan
may not be less than the fair market value of the Company's Common
Stock on the date of grant. The exercise price per share of non-
qualified options under the 1991 Plan cannot be less than the lesser
of the book value per share of Common Stock as of the end of the
preceding fiscal year, or 50% of the fair market value per share of
Common Stock on the date of grant. On April 20, 1995, the Company
issued to Mr. John E. Wolfe, an officer of the Company, an ISO under
the 1991 Plan to purchase 200,000 shares of common stock at $.03 per
common share exercisable to April 20, 2000. In addition, on April
20, 1995, the Company issued two directors of the Company, ISO's
under the 1991 Plan to purchase 150,000 shares each of common stock
at $.03 per common share exercisable to April 20, 2000. During
1993, an employee, David M. Haines, who was issued 100,000 ISOs,
became an officer of the Company. The options held by Mr. Haines
were canceled in March 1995, 90 days after his employment with the
Company terminated. Also during fiscal year 1995, ISOs to purchase
a total of 155,000 shares were canceled 90 days following
termination of certain employees, including David M. Haines. As of
September 30, 1996, options for 100,000 shares were issued to Mr.
Richard Mannello, who was not then an officer. Subsequent to year
end September 30, 1996, Mr. Mannello was named an officer of the
Company, and options for an additional 200,000 shares were issued to
Mr. Mannello.
During fiscal year 1994, 20,000 shares from the 1987 Plan and
233,000 shares from the 1991 Plan were canceled and returned to each
respective Plan. During fiscal year 1995, 10,000 shares from the
1987 Plan and 155,000 shares from the 1991 Plan were canceled and
returned to each respective Plan. During fiscal year 1996, 3,000
shares from the 1991 Plan were canceled and returned to its
respective Plan.
A summary of stock option activity under the Plans is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1987 Plan 1991 Plan Non-Qualified
Number Exercise Price Number Exercise Price Number Exercise Price
of Shares per Share of Shares per Share of Shares per Share
Outstanding at Sept. 30, 1994 10,000 $0.25 182,000 $0.02 209,000 $0.05
Granted...................... - - 500,000 $0.03 - -
Exercised................... - - - - - -
Canceled................ (10,000) $0.25 (155,000) $0.02 - -
Outstanding at Sept. 30, 1995 - $0.25 527,000 $0.03 209,000 $0.05
Granted...................... - - 100,000 $0.03 - -
Exercised................... - - - - - -
Canceled................ - $0.25 ( 3,000) $0.02 - -
Outstanding at Sept. 30, 1996 - $0.25 624,000 $0.03 209,000 $0.05
Exerciseable at Sept. 30, 1996 - 144,000 209,000
</TABLE>
Reserved Common Stock
In connection with the stock option plans, and outstanding warrants (see
Note B), the Company has reserved 6,809,000 shares of Common Stock as of
September 30, 1996.
L. Sales and Major Customers:
Export sales for the years ended September 30 are as follows:
1996 1995
Europe 9% 13%
Asia 2% 0%
Other 18% 19%
29% 32%
Sales to one customer, a U.S. governmental agency, were
approximately $65,600 and $483,600 in fiscal 1996 and 1995,
respectively. Accounts receivable from this customer at September
30, 1996 and 1995 approximated $20,000 and $70,000, respectively.
As of September 30, 1995 this contract was suspended, at least
temporarily. In late fiscal 1996, this contract was partially reinstated.
This contract is terminable at will by the U.S.
government. Full reinstatement, if any, will be determined by the funding
and direction of the fiscal 1996 Congressional budget and DOE
executive decisions. Ultimately, this contract could be
substantially reduced or canceled. Currently, it appears that this
will happen, with some of this work being transferred to existing
government laboratories.
M. Related Party Transactions (see Notes B, G, H, J and K):
The Company shares space in its operating facility with Tytronics
which is a 67.1% shareholder of the Company. The Companies allocate
rent expense based on the square footage each occupies. On this
basis, rental payments from Trytronics amounted to $30,801 in fiscal 1996,
and $23,801 in fiscal 1995. The Companies also share other operating and
administrative costs based on estimated usage. During the fiscal years
ended September 30, 1996 and 1995, this informal agreement resulted in
the payment of approximately $80,000 and $68,000, respectively by the
Company to Tytronics for such operating and administrative costs. At
September 30, 1996 and 1995, the Company had net amounts due to Tytronics
of $77,204 and $10,854, respectively.
The Company and Bantam Group, Inc. ("Bantam"), a business advisory
organization, are parties to a consulting agreement effective June
6, 1993, which continues month-to-month unless terminated by either
party on thirty days' notice. Pursuant to this agreement, Bantam
was issued a one-time bonus of $40,000 in fiscal 1993, paid $5,000
per month through January 1995, $2,000 per month until October 1,
1995, and $1,500 per month thereafter. In addition, the agreement
called for the issuance of 800,000 shares of the Company's Common
Stock plus the reimbursement of any tax liability arising from the
issuance of the stock. The shares were issued to Bantam in
December, 1993. Mr. Joseph J. Caruso, the Company's Chairman, is
also the president of Bantam.
In addition, Bantam has a consulting arrangement with Nametre, which
continues on a month to month basis unless terminated by either party
on thirty days' notice. Payments under this agreement are $1,250 per month.
N. Supplemental Disclosure of Cash Flow Information
1996 1995
Interest paid during the year $36,168 $32,308
Income taxes paid during the year 600 871
Supplemental Disclosure of Non-Cash Information:
Conversion of debt and accrued interest
into Common Stock 65,000 382,496
Conversion of Series "A" Preferred Stock
into Common Stock - 540,753
Conversion of Series "B" Preferred Stock
into Common Stock - 12,500
In September 1996, the Company acquired 61.23% of the outstanding
stock of Nametre in an acquisition (Note B). The estimated fair value of
assets acquired was $1,207,381, including goodwill of $244,788, with
liabilities assumed of $874,233, less minority interest of $66,634.
HOLOMETRIX, INC.
Exhibit Index
3.01 Certificate of Incorporation, as amended, including
Certificates of Designation for the terms of the Series A and
Series B Preferred Stock (filed as exhibit 10.15 to Form 10-K
dated December 27, 1991 and incorporated by reference).
3.02 Bylaws (filed as Exhibit 3d to Registration Statement No. 33-
13027-B on Form S-18 and incorporated by reference).
4.01 Agreement to Purchase 7% Exchangeable Subordinated Notes
between Holometrix, Inc. and the Purchasers named therein
(the "Note Purchase Agreement") (filed as Exhibit 4a to Form
8 dated July 14, 1988 and incorporated by reference).
4.02 Exhibits A, B(1), B(2) and C to the Note Purchase Agreement
(filed as Exhibit 4b to Form 8 dated July 14, 1988 and
incorporated by reference).
10.01 1987 Stock Option Plan (filed as Exhibit 10f to Registration
Statement No. 33-13027-B on Form S-18 and incorporated by
reference).
10.02 1991 Stock Plan (filed as exhibit 10.02 to Form 10-K dated
December 27, 1991 and incorporated by reference).
10.03 Form of Incentive Stock Option Agreement under 1991 Stock
Plan (filed as exhibit 10.03 to Form 10-K dated December 27,
1991 and incorporated by reference).
10.04 Form of Non-Qualified Stock Option Agreement under 1991 Stock
Plan (filed as exhibit 10.04 to Form 10-K dated December 27, 1991
and incorporated by reference).
10.05 Stock Repurchase Agreement with Douglas B. Flint (filed as
Exhibit 10h to Registration Statement No. 33-13027-B and
incorporated by reference).
10.06 Agreement for Purchase and Sale of Assets by and between
Holometrix, Inc. and Dynatech Scientific, Inc. dated October
2, 1987 (filed as Exhibit 2 to Form 8-K filed on October 17,
1987 and incorporated by reference).
10.07 Agreement to Purchase Stock of Dynatech Scientific, Inc. from
Dynatech Corporation by Holometrix, Inc. (the "Dynatech
Scientific Stock Purchase Agreement")(filed as Exhibit 2a to
Form 8 dated July 14, 1988 and incorporated by reference).
10.08 Exhibits A, B, & C to the Dynatech Scientific Stock Purchase
Agreement (filed as Exhibit 2b to Form 8 dated July 14, 1988
and incorporated by reference).
10.09 Loan and Security Agreement between Shawmut Bank, N.A. and
Holometrix, Inc. (the "Loan and Security Agreement") (filed
as Exhibit 10a to Form 8 dated July 14, 1988 and incorporated
by reference).
10.10 Exhibits 1.1 and 2.4 to Loan and Security Agreement (filed as
Exhibit 10b to Form 8 dated July 14, 1988 and incorporated by
reference).
10.11 Lease dated October 1, 1991 between Holometrix Inc. and
Springfield Institute for Savings for the premises at 25
Wiggins Avenue, Bedford, Massachusetts (filed as exhibit
10.11 to Form 10-K dated December 27, 1991 and incorporated
by reference).
10.12 First amendment of Lease dated August 19, 1993 between Holometrix,
Inc. and Opta Food Ingredients, Inc. (the successor in interest
to Springfield Institution for Savings), for the premises at 25
Wiggins Avenue, Bedford, Massachusetts (filed as exhibit 10.12 to Form
10-KSB dated December 27, 1995).
10.13 Agreement to Purchase 10% Exchangeable Subordinated Notes and
Warrants between Holometrix, Inc. and the Purchasers named
therein (the "Note and Warrant Purchase Agreement") (filed as
Exhibit 10.11 to Form 10-K dated December 27, 1990 and
incorporated herein by reference).
10.14 Exhibits A and B to the Note and Warrant Purchase Agreement
(filed as Exhibit 10.12 to Form 10-K dated December 27, 1990
and incorporated herein by reference).
10.15 Agreement to Purchase Series B Preferred Stock between
Holometrix, Inc. and Norman Priebatsch dated April 26, 1991
(filed as exhibit 10.14 to Form 10-K dated December 27, 1991
and incorporated by reference).
10.16 Agreement for Purchase and Sale of Assets by and between
Holometrix, Inc. and Azimuth Corporation (formerly Precept
Corporation) (filed as exhibit 10.15 to Form 10-K dated
December 27, 1991 and incorporated by reference).
10.17 Loan Agreement between Holometrix, Inc. and Shawmut Bank,
N.A. dated March 1, 1993 (filed as exhibit 10.16 to Form 10-
KSB dated September 8, 1994 and incorporated by reference).
10.18 Unsecured Promissory Note between Holometrix, Inc. and
Corning Partners III, L.P. dated February 24, 1993 (filed as
exhibit 10.17 to Form 10-KSB dated September 8, 1994 and
incorporated by reference).
10.19 Unsecured Promissory Note between Holometrix, Inc. and
Corning Partners III, L.P. dated June 11, 1993 (filed as
exhibit 10.18 to Form 10-KSB dated September 8, 1994 and
incorporated by reference).
10.20 Unsecured Promissory Note between Holometrix, Inc. and
Corning Partners III, L.P. dated July 1, 1993 (filed as
exhibit 10.19 to Form 10-KSB dated September 8, 1994 and
incorporated by reference).
10.21 Unsecured Promissory Note between Holometrix, Inc. and Bayard
Henry dated March 3, 1993 (filed as exhibit 10.20 to Form 10-
KSB dated September 8, 1994 and incorporated by reference).
10.22 Consulting Agreement between Holometrix, Inc., Corning
Partners II, L.P., Corning Partners III, L.P., and Bantam
Group, Inc., dated June 7, 1993 (filed as exhibit 10.21 to
Form 10-KSB dated September 8, 1994 and incorporated by
reference).
10.23 Stock Redemption Agreement between Holometrix, Inc. and
Dhananjay G. Wadekar dated September 30, 1994 (filed as exhibit
10.22 to Form 10-KSB dated December 27, 1994 and incorporated herein
by reference).
10.24 Stock Redemption Agreement between Holometrix, Inc. and
Douglas B. Flint and Susan M. Flint, as joint tenants, dated
September 30, 1994. (filed as exhibit 10.23 to Form 10-KSB dated
December 27, 1994 and incorporated herein by reference).
10.25 Preferred Stock Conversion Agreement by and among Holometrix,
Inc. and the shareholders named therein dated November 10,
1994. (filed as exhibit 10.24 to Form 10-KSB dated December 27, 1994
and incorporated herein by reference).
10.26 Conversion of Debt and Contribution to Capital Agreement by
and between Holometrix, Inc. and Corning Partners III, L.P.
dated November 10, 1994. (filed as exhibit 10.25 to Form 10-KSB
dated December 27, 1994, and incorporated herein by reference).
10.27 Accrued Interest Conversion Agreement by and between
Holometrix, Inc. and Bayard Henry dated November 10, 1994.
(filed as exhibit 10.26 to Form 10-KSB dated December 27, 1994
and incorporated herein by reference).
10.28 Loan Agreement between Tytronics Incorporated and Holometrix,
Inc. dated November 29, 1994 (filed as exhibit 10.27 to Form 10-KSB
dated December 27, 1994 and incorporated herein by reference).
10.29 Secured Demand Promissory Note in the aggregate principal
amount of $150,000 issued by Holometrix, Inc. to Tytronics
Incorporated dated November 29, 1994. (filed as exhibit 10.28 to Form
10-KSB dated December 27, 1994 and incorporated herein by reference).
10.30 Secured Term Promissory Note issued by Holometrix, Inc. to
Tytronics Incorporated in the aggregate principal amount of
$165,000 dated November 29, 1994. (filed as exhibit 10.29 to form 10-KSB
dated December 27, 1994 and incorporated herein by reference).
10.31 Security Agreement between Holometrix, Inc. and Tytronics
Incorporated dated November 29, 1994. (filed as exhibit 10.31 to Form
10-KSB dated December 27, 1994 and incorporated herein by reference).
10.32 Purchasing Contract dated February 15, 1995 between Sandia National
Laboratories and Holometrix, Inc. and Amendment thereto dated August 30,
1995 (filed as exhibit 10.32 to Form 10-KSB dated December 27, 1995
and incorporated herein by reference).
10.33 Letter Agreement between Silicon Valley Bank and Holometrix, Inc. dated
December 22, 1994 (filed as exhibit 10.33 to Form 10-KSB dated December
27, 1995 and incorporated herein by reference).
10.34 Promissory Note dated December 22, 1994 in the original principal
amount of $350,000 executed by Holometrix, Inc. (filed as exhibit 10.34
to Form 10-KSB dated December 27, 1995 and incorporated herein by
reference).
10.35 Loan Modification Agreement dated August 14, 1995 between Holometrix,
Inc. and Silicon Valley Bank (filed as exhibit 10.35 to Form 10-KSB
dated December 27, 1995 and incorporated herein by reference).
10.36 Third Amendment of Lease between Opta Food Ingredients, Inc. and
Holometrix, Inc. dated as of September 30, 1996 (filed herewith).
27 Financial Data Schedule (filed herewith).
THIRD AMENDMENT OF LEASE
THIS THIRD AMENDMENT OF LEASE is made as of the 30th day of
September, 1996, by and between OPTA FOOD INGREDIENTS, INC., a
Delaware corporation, with an address of 25 Wiggins Avenue,
Bedford, Massachusetts (the "Lessor"), successor in interest to
Springfield Institution for Savings, and HOLOMETRIX, INC., a
Delaware corporation having a principal office at 25 Wiggins
Avenue, Bedford, Massachusetts and Tytronics Incorporated, a
Massachusetts corporation having a principal place of business at
25 Wiggins Avenue, Bedford, Massachusetts, (together the
"Lessee").
R E C I T A L S:
A. Reference is hereby made to a certain Lease, dated
June 28, 1991, by and between Griffith Bedford Realty Trust,
predecessor in interest to Springfield Institution for Savings as
lessor and Lessee as lessee, demising certain premises (the
"Premises") located at 25 Wiggins Avenue, Bedford, Middlesex
County, Massachusetts, as amended by First Amendment of Lease
(the "First Amendment") dated August 19, 1993 and by Second
Amendment of Lease (the "Second Amendment") dated January 15,
1995 (together, the "Lease");
B. Lessor and Lessee are the current holders,
respectively, of the landlord and tenant interest under the
Lease.
C. Lessor and Lessee wish to amend the Lease upon such
terms and conditions as are hereinafter provided.
A G R E E M E N T S:
IN CONSIDERATION OF One ($1.00) Dollar, the mutual covenants
as hereinafter contained and other good and valuable
consideration, Lessor and Lessee agree to amend the Lease,
effective as of the date hereof, as follows:
1. The term of the Lease shall be extended for three (3)
years, commencing October 1, 1996 and expiring on September 30,
1999; provided, however, that from and after October 1, 1997,
Lessor and Lessee shall each have the right to terminate the
Lease, by 90 days written notice to the other.
2. Base Rent under Article III, Section 1 of the Lease is
revised as follows; Annually, for the period October 1, 1996
through September 30, 1997, the amount of Sixty Eight Thousand
Four Hundred ($68,400) Dollars payable in equal monthly
installments of Five Thousand Seven Hundred ($5,700) Dollars; for
the period October 1, 1997 through September 30, 1998, the amount
of Seventy Six Thousand ($76,000) Dollars, payable in equal<PAGE>
monthly installments of Six Thousand Three Hundred Thirty Three
and Thirty Three One Hundredths ($6,333.33) Dollars; and for the
period October 1, 1998 through September 30, 1999, the amount of
Eighty Three Thousand Six Hundred ($83,600) Dollars payable in
equal monthly installments of Six Thousand Nine Hundred Sixty-six
and Sixty-six One Hundredths ($6,966.66) Dollars.
3. Section 2 of the Second Amendment is hereby deleted.
4. Article XXII, Section 11 of the Lease is hereby deleted
and replaced by the following:
Assignment or Subletting. (a) Lessee shall not mortgage,
pledge, hypothecate, or assign this Lease or sublease the
Premises or any portion thereof (which term shall be deemed to
include any arrangement pursuant to which a third party is
permitted by Lessee to occupy all or any portion of the
Premises), without obtaining, an each occasion, the prior written
consent of Lessor, which consent may be given or withheld in
Lessor's sole discretion.
(b) If Lessee wishes to assign this Lease or sublease all or any
portion of the Premises, Lessee shall so notify Lessor in writing
and request Lessor's consent thereto. Such notice shall include
(i) the name of the proposed assignee or sublessee, (ii) a
general description of the types of business conducted by the
proposed assignee or sublessee and a reasonably detailed
description of the business operations proposed to be conducted
in the Premises by such person or entity, (iii) such financial
information concerning the proposed assignee or sublessee as
Lessor may reasonably require, and (iv) all terms and provisions
upon which such assignment or sublease is proposed to be made.
Lessor shall have twenty (20) days from the day on which it
receives Lessee's notice and such require information to give
notice to Lessee that either (i) Lessor consents to such
assignment or sublease, or (ii) Lessor withholds its consent to
such assignment or sublease, or (iii) where applicable, Lessor is
exercising its right of recapture pursuant to paragraph (e)
below.
(c) If Lessor consents to an assignment or sublease: (i) Lessee
shall promptly deliver to Lessor a fully executed copy of said
assignment or sublease; (ii) Lessee shall remain primarily liable
to Lessor hereunder (which liability shall be joint and several
with the assignee or sublessee); and (iii) if the aggregate rent
and other amounts payable to Lessee under or in connection with
such assignment or sublease, after deduction of the costs
reasonably incurred by Lessee in entering into such assignment or
sublease (including, without limitation, reasonable attorneys'
fees, brokerage commissions and alteration costs amortized on a
straight-line basis over the term of such sublease), exceeds the
rent and other amounts payable hereunder, Lessee shall pay to
Lessor, as Additional Rent, one-half (1/2) of the amount of such
excess immediately upon receipt thereof by Lessee.
- 2 -<PAGE>
(d) If Lessor withholds its consent to such assignment or
sublease, Lessee shall not enter into the proposed assignment or
sublease with such person or entity.
(e) If Lessor so elects, it shall have the right to consider
Lessee's request for Lessor's consent to any assignment of the
Lease, or a request for Lessor's consent to a sublease, as an
offer to Lessor to release from this Lease that portion of the
Premises which is proposed to be the subject of such sublease for
the term of such proposed sublease or, in the case of a proposed
assignment of this Lease, the entire Premises for the entire
Lease Term. If Lessor accepts such offer, then (i) in the case
of a proposed sublease, this Lease shall be deemed to be amended
as of the proposed effective date of such sublease so as to
delete the portion of the Premise which would have been subject
thereto from the Premises for purposes of this Lease (with a
commensurate adjustment in Rent and the percentage representing
Lessee's Proportionate Share) for the remaining term of the
Lease, or (ii) in the case of a proposed assignment, this Lease
shall terminate as of the proposed effective date of such
assignment as if such date was the last day of the Lease Term.
(f) Regardless of whether Lessor grants such consent, Lessee
shall reimburse Lessor on demand, as Additional Rent, for all out
of pocket costs and expenses (including, without limitation,
attorneys' fees) reasonably incurred by Lesser in responding to a
request for such consent,
(g) Lessee shall not be entitled to enter into any assignment or
sublease, or to request Lessor's consent thereto, during the
continuance of an Event of Default hereunder by Lessee.
(h) Any assignment or sublease entered into pursuant to this
Section shall be subject to all or the terms and provisions of
the Lease, including without limitation this Section. If Lessee
enters into any such assignment or sublease, Lessor may, at any
time and from time to time after the occurrence of a default
hereunder, collect rent from such assignee or sublessee, and
apply the net amount collected against Lessee's obligations
hereunder, but no such assignment or sublease or collection shall
be deemed an acceptance by Lessor of such assignee or sublessee
as a lessee hereunder or as a release of the original named
Lessee hereunder.
5. Section 4 of the Second Amendment is revised by adding
the following:
If Lessor requires use of the storage area shown on
Exhibit A to the Second Amendment, Lessee shall vacate the same
upon 90 days written notice by Lessor. Further, Lessor agrees to
maintain the storage area in a safe and neat condition. If
Lessee is notified by any authority that the storage area is in
violation of any law or regulation, Lessee shall immediately
notify Lessor of the same. If such violation is not cured within
- 3 -<PAGE>
forty-eight (48) hours of Lessee's receipt of notification
thereof, or such shorter time as set forth in the notice to
Lessee, all of Lessee's rights to the storage area shall
terminate immediately. Since Lessee's access to the storage area
is hereby limited, stored items should only be those needed on an
infrequent basis.
6. Lessee shall maintain the grounds outside in a neat and
orderly manner, keep the loading dock clear of all obstructions,
keep all trash in containers and retrain from feeding animals.
7. Except as hereinabove amended, the Lease shall remain
in full force and effect.
LESSOR:
OPTA FOOD INGREDIENTS, INC.
By: /s/ Scott A. Kumf, CFO
(Title)
LESSEE:
HOLOMETRIX, INC.
By:_/s/ Gary E. Coutard,
Manager, Finance and
Administration_____
(Title)
TYTRONICS INCORPORATED
By:_/s/ Gary E. Coutard,
Manager, Finance and
Administration________
(Title)
- 4 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from Consolidated
Balance Sheets, Consolidated Statements of Income, Consolidated Statements of
Stockholders' Equity, and Consolidated Statements of Cash Flows and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 27,495
<SECURITIES> 0
<RECEIVABLES> 1,197,148
<ALLOWANCES> (35,000)
<INVENTORY> 662,323
<CURRENT-ASSETS> 1,884,768
<PP&E> 1,365,724
<DEPRECIATION> (1,014,068)
<TOTAL-ASSETS> 2,548,723
<CURRENT-LIABILITIES> 1,586,453
<BONDS> 280,173
0
0
<COMMON> 265,332
<OTHER-SE> 416,765
<TOTAL-LIABILITY-AND-EQUITY> 2,548,723
<SALES> 2,200,603
<TOTAL-REVENUES> 2,200,603
<CGS> 1,338,466
<TOTAL-COSTS> 1,338,466
<OTHER-EXPENSES> 822,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (35,210)
<INCOME-PRETAX> 4,041
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,041
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
