Page 14
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996
Transition Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-16152
Holometrix, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 04-2891557
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
Number)
25 Wiggins Avenue, Bedford, Massachusetts 01730-2323
(Address of Principal Executive Offices)
(617) 275-3300
(Issuers Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No
As of June 30, 1996, 16,296,878 shares of Common Stock were
outstanding.
Transitional Small Business Disclosure Format:
Yes No
FORM 10-QSB
QUARTERLY REPORT
TABLE OF CONTENTS
Facing Page . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 1
Table of Contents . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 2
PART I. FINANCIAL INFORMATION (*)
Item 1. Condensed Financial Statements
Balance Sheets . . . . . . . . . . . . . 3
Statements of Income (loss) . . . . . . . 5
Statements of Cash Flows. . . . . . . . . 7
Notes to Condensed Financial Statements. 8
Item 2. Management's Discussion and Analysis or Plan of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . .. . . . . . . . . . . . . . 13
Item 2. Changes in Securities . . . . . . . . . . . . . . . 13
Item 3. Defaults upon Senior Securities . . . . . . . .. . . 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(*) The financial information at September 30, 1995 has been
taken from the audited financial statements at that date. All
other financial statements are unaudited.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
HOLOMETRIX, INC.
CONDENSED BALANCE SHEETS
ASSETS
(Unaudited)
June 30, September 30,
1996 1995
(*)
CURRENT ASSETS:
Cash and cash equivalents $ 57,927 $ 40,707
Accounts receivable, less allowance
for doubtful accounts of $20,000 437,364 407,633
Inventories 227,836 239,238
Other current assets 16,825 15,473
Notes receivable 50,000 -
TOTAL CURRENT ASSETS 789,952 703,051
EQUIPMENT AND FIXTURES - net 296,546 350,146
OTHER ASSETS - net 16,699 20,020
TOTAL ASSETS $1,103,197 $1,073,217
See notes to condensed financial statements.
(*)Balance sheet at September 30, 1995 has been taken from the
audited financial statements at that date. All other financial
statements are unaudited.
HOLOMETRIX, INC.
CONDENSED BALANCE SHEETS - Continued
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
June 30, September 30,
1996 1995
(*)
CURRENT LIABILITIES:
Notes payable - stockholders $ 150,000 $ 55,000
Notes payable - line of credit 150,000 125,000
Accounts payable 313,869 214,743
Accrued payroll and related expenses19,634 28,731
Accrued other expenses 82,950 61,589
Due to stockholder 52,506 10,854
Current maturities of
long-term obligations 4,606 4,673
TOTAL CURRENT LIABILITIES 773,565 500,590
LONG-TERM DEBT:
Notes payable-stockholders,
less current maturities 55,000 110,000
Long term obligations,
less current maturities 21,160 24,571
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 30,000,000 shares
authorized; 20,533,157 issued and
16,296,878 outstanding. 205,332 205,332
Additional paid-in capital 2,219,009 2,219,009
Accumulated deficiency (2,066,869) (1,882,285)
357,472 542,056
Less treasury stock (at cost) 104,000 104,000
TOTAL STOCKHOLDERS'
EQUITY 253,472 438,056
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,103,197 $1,073,217
See notes to condensed financial statements.
(*)Balance sheet at September 30, 1995 has been taken from the
audited financial statements at that date. All other financial
statements are unaudited.
HOLOMETRIX, INC.
CONDENSED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three-Month Period Ended June 30,
1996 1995
NET REVENUES $577,703 $674,958
COST OF SALES 317,862 392,422
GROSS PROFIT 259,841 282,536
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 202,689 135,491
RESEARCH AND DEVELOPMENT 42,349 47,979
TOTAL OPERATING EXPENSE 245,038 183,470
INCOME FROM OPERATIONS 14,803 99,066
INTEREST EXPENSE - net (9,445) (9,337)
NET INCOME $ 5,358 $ 89,729
NET INCOME (LOSS) PER COMMON SHARE: $0.00 $0.01
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 16,296,878 16,296,878
See notes to condensed financial statements.
HOLOMETRIX, INC.
CONDENSED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Nine-Month Period Ended June 30,
1996 1995
NET REVENUES $1,423,382 $1,577,861
COST OF SALES 930,680 966,178
GROSS PROFIT 492,702 611,683
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 538,048 462,041
RESEARCH AND DEVELOPMENT 113,051 135,763
TOTAL OPERATING EXPENSE 651,099 597,804
(LOSS) INCOME FROM OPERATIONS (158,397) 13,879
INTEREST EXPENSE - net (26,187) (11,743)
NET (LOSS) INCOME ($184,584) $ 2,136
NET (LOSS) PER COMMON SHARE: ($0.01) $0.00
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 16,296,878 15,694,063
See notes to condensed financial statements.
HOLOMETRIX, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine-Month Period Ended June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ($184,584) $2,136
Adjustments to reconcile
net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 93,555 107,983
Change in operating
assets and liabilities:
Accounts receivable (29,731) (106,876)
Inventories 11,402 (24,081)
Other current assets (1,352) (21,826)
Accounts payable and
accrued expenses 111,390 75,706
Net cash provided
by operating activities 680 33,042
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment and fixtures
(additions) disposals (36,634) (35,677)
Notes receivable (50,000) -
Net cash (used for)
investing activities (86,634) (35,677)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes
payable - stockholders and others 40,000 (215,112)
Due to stockholder, net 41,652 -
Increase in bank line of credit 25,000 75,000
Purchase of treasury stock - (3,000)
(Decrease) increase in
long-term obligations (3,478) 106,522
Net cash provided from (used)
for financing activities 103,174 (36,590)
Net increase (decrease)
in cash and cash equivalents 17,220 (39,225)
Cash and cash equivalents,
beginning of period 40,707 108,503
Cash and cash equivalents,
end of period $ 57,927 $ 69,278
Supplemental disclosure of non-cash transactions:
During the first quarter of fiscal year 1995, the Company
converted its outstanding Redeemable Preferred Stock Series A,
Preferred Stock Series B, and certain outstanding debt and
accrued interest into an aggregate of 5,901,950 shares of the
Company's Common stock. See also Liquidity and Capital
Resources.
See notes to condensed financial statements.
HOLOMETRIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions for Form 10-QSB. Accordingly, they do not include
all information and footnotes required by generally accepted
accounting principles for complete financial statement
presentation. For further information refer to the financial
statements and notes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 1995.
The results of operations for any interim periods reported are
not necessarily indicative of those that may be expected for the
full year. The accompanying financial information is unaudited;
however, in the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary to
a fair presentation of the operating results of the period have
been included.
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Holometrix, Inc. (the "Company") is a
product development, manufacturing and contract test services
company which specializes in manufacturing instruments
("Instruments") and providing contract test services ("Testing
Services") for measuring the thermophysical properties of a wide
variety of materials.
Three-Month Period Ended June 30, 1996 as Compared With
the Three-Month Period Ended June 30, 1995
Revenues in the third quarter of fiscal 1996 totaled $578,000
as compared to $675,000 in the comparable quarter of 1995, a
decrease of $97,000. One reason contributing to this 14% drop in
revenues is the loss of a large government contract for Testing
Services. Management is continuing to address the decrease in
revenues through new marketing, sales and product development
efforts.
Cost of sales decreased by $74,000 from $392,000 (58% of
sales) in the third quarter of fiscal 1995 to $318,000 (55% of
sales) in the same period of fiscal 1996. This decrease in cost
of sales was mainly due to the decrease in sales. The decrease in
the percentage of cost of sales to sales was due to the effect of
operating cost reductions.
Selling, general and administrative expenses increased by
$67,000, or 50%, from $135,000 (20% of sales) to $203,000 (35% of
sales). The increase was primarily due to higher staffing costs,
resulting from the hiring of a Sales, Marketing & Engineering
Director in November of 1995, coupled with higher promotional
expenses for trade shows and travel. Selling, general and
administrative expenses increased as a percentage of sales due to
both the growth in expenses (50%), and a reduction in sales (14%)
when compared to the same period in fiscal 1995.
Research and development decreased $6,000, from $48,000 (7% of
sales) to $42,000 (7% of sales). This change was due to
completion of certain development projects, and more efficient
use of research and development resources. Management
anticipates that expenses in this area will remain at current
levels to support ongoing development activities.
Income from operations was $15,000 in the third quarter of
fiscal 1996, compared with income of $99,000 in the comparable
period of fiscal 1995, a reduction of 85%, primarily due to lower
sales and increases in operating expenses. Interest expenses
remained relatively flat. Net income was $5,000 in the third
quarter of fiscal 1996, compared with net income of $90,000 in
the comparable period of fiscal 1995, again due to lower gross
profit and higher operating expenses.
Nine-Month Period Ended June 30, 1996 as Compared With
the Nine-Month Period Ended June 30, 1995
Revenues during the first nine months of fiscal 1996 totaled
$1,423,000 as compared to $1,578,000 in the comparable quarter of
1995, a decrease of $155,000 (10%). The billings decrease from
the loss of a major government contract, noted earlier, more than
exceeded this amount.
Cost of sales decreased by 4%, or $35,000, from $966,000 (61%
of sales) in the first nine months of fiscal 1995 to $931,000
(65% of sales) in the same period of fiscal 1996. During this
same period, revenues, as noted above, declined by 10%. The
primary reason for this disproportionate decrease is the
increased mix of Instruments sales to total sales in this period.
Instrument sales require a significantly higher material content.
Selling, general and administrative expenses increased by
$76,000, or 16%, from $462,000 (29% of sales) to $538,000 (38% of
sales). The increase was primarily due to higher staffing costs,
resulting from the hiring of a Sales, Marketing & Engineering
Director in November of 1995, coupled with higher promotional
expenses for trade shows and travel, and higher expenses for
temporary personnel. Selling, general and administrative
expenses increased as a percentage of sales due to both the
growth in expenses (16%), and a reduction in sales (10%) when
compared to the same period in fiscal 1995.
Research and development decreased $23,000, from $136,000 (9%
of sales) to $113,000 (8% of sales). This change was due to
completion of certain development projects, and more efficient
use of research and development resources.
Loss from operations was $158,000 in the first nine months of
fiscal 1996, compared with a income from operations of $14,000 in
the comparable period of fiscal 1995, primarily due to a
combination of lower revenues and higher operating expenses
during fiscal 1996. Net interest expense increased from $12,000
to $26,000; however, interest expense was actually flat at
$27,000, offset by a restructuring credit of $15,000 in fiscal
1995. Net loss was $185,000 in the first nine months of fiscal
1996, compared with a net income of $2,000 in the comparable
period of fiscal 1995. Management expects to continue strong
marketing efforts in response to low sales and profitability.
For additional discussion of management's analysis of the
changes in the categories reported for the nine-month period
ended June 30, 1996, see the discussion for the three-month
period ended June 30, 1996.
Total Assets increased by $30,000, or 3%, during the first
nine months of fiscal 1996, from $1,073,000 to $1,103,000. Cash
increased by $18,000. Accounts receivable increased by $30,000,
due to somewhat slower international collections. Inventories
decreased by $12,000, due to higher instrument sales. Fixed and
other assets decreased by $57,000, due primarily to depreciation
and amortization.
Total Liabilities increased significantly, by $215,000, or
34%, from $635,000 to $850,000 during the first nine months of
fiscal year 1996. Notes payable - stockholders increased by
$40,000 in total (Current and Long-Term) as a result of an
additional lending from Tytronics Incorporated ("Tytronics"), a
related entity which owns 55% of the Company's common stock.
Notes payable - line of credit increased by $25,000 as a result
of additional borrowings from a senior lender, Silicon Valley
Bank. Accounts payable increased by $99,000, from $215,000 at
September 30, 1995, to $314,000 at June 30, 1996, primarily due
to higher expenses and extending the age of payables to conserve
cash. All other liabilities increased by $55,000, or 52%, from
$105,000 to $160,000, primarily due to a $42,000 increase in
accrued expenses due to Tytronics. See Liquidity and Capital
Resources section, below.
As of June 30, 1996, the Company had an outstanding order
backlog for products and services of approximately $368,000, as
compared to a backlog of approximately $340,000 as of June 30,
1995. The Company believes that the $368,000 backlog will be
largely realized in fiscal 1996. Management believes that this
current backlog amount is only marginally appropriate to maintain
stable Company operations.
In the fourth quarter of fiscal 1995, the Company received
notification from the United States Government that a large
contract for Testing Services was being suspended, at least
temporarily. Revenues under this contract were approximately
$483,600, or 23% of total sales in fiscal 1995. 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 suspended effective
September 30, 1995. Reinstatement is determined by the funding
and direction of the fiscal 1996 (and beyond) Congressional
budget and DOE executive decisions. Ultimately, this contract
could be canceled, and it appears that, at a minimum, it is being
substantially reduced. In the period ending June 30, 1996, an
authorization for approximately $70,000 worth of testing and
administrative services was received by the Company under this
contract, representing the first such authorization in fiscal
1996. There is no guarantee that such funding will continue in
the future. The loss of this contract is having a material
effect on the Company, substantially reducing both sales and
profitability.
LIQUIDITY AND CAPITAL RESOURCES
The Company has sustained substantial losses to date in fiscal
year 1996. In an effort to offset these losses and increase its
marketing and sales effectiveness, the Company hired a new
Director of Sales, Marketing & Engineering in November of 1995
and significantly increased sales and marketing expenses since
then. In the three months ending June 30, 1996, the Company's
incoming order rate was substantially improved. If the Company's
new sales and marketing efforts continue to meet with success,
the Company's management believes that, over time, increased
revenues, combined with controlled expenses, could result in
reduced losses, and, hopefully, in a return to profitability.
Although the Company is making every effort to restore itself to
profitability by increasing its sales, marketing and product
development activities, there is no guarantee that it will be
able to do so.
As a result of its recent losses, the Company's working
capital was reduced to $16,000 at June 30, 1996, compared to
$202,000 at September 30, 1995. Reduced cash and working capital
have caused substantial borrowings from both Tytronics and
Silicon Valley Bank. In order to maintain stable Company
operations through fiscal 1996, Management believes that working
capital will need to be somewhat supplemented with additional
funding from the Company's line of credit with Silicon Valley
Bank and additional borrowings from Tytronics. While the Company
believes that additional capital resources may be available from
Tytronics, there is no assurance that additional financing can be
obtained from Tytronics or other sources on acceptable terms.
The Company also intends to continue its exploration of
additional business opportunities through further product
development and the development of strategic relationships,
including licensing, acquisitions or mergers, in an effort to
increase revenue and return to profitability. There can be no
guarantee, however, that these activities will be successful.
Note payable to a founder
In April 1992, the Company issued a $50,000 Unsecured
Promissory Note to a founder of the Company. Terms of the note
required principal repayment of $25,000 plus accrued interest at
6% on April 1, 1993 and April 1, 1994. In August 1994, the terms
of the note, with outstanding debt at $44,000, were renegotiated.
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 June 30, 1996, the
outstanding balance was $25,766, of which $21,160 is classified
as a long-term liability, and $4,606 is classified as a current
liability.
Notes payable - stockholders
During the first nine months of fical 1996, Tytronics loaned
an additional $40,000 to the Company. The Company is currently in
default on the current $55,000 installment payment due on its
earlier term note to Tytronics. However, Tytronics has expressed
its agreement not to accelerate payment on the term note, through
September 30, 1996. At June 30, 1996, the total outstanding
balance was $205,000, of which $150,000 is classified as current.
Notes payable - line of credit
On December 22, 1994, Silicon Valley Bank provided the Company
with a line of credit in the amount of $350,000. This line of
credit, which was renewed on April 5, 1996, is secured by
substantially all the assets of the Company. Advances under
this line shall not exceed 65% of the Company's eligible
accounts receivable as defined. Outstanding amounts are payable
on demand and bear interest at the bank's prime rate plus 2%.
Advances are also contingent upon maintaining certain covenants
relative to profitability, liquidity, tangible net worth, and
leverage. The Company was not in compliance with certain of
these covenants during part of the 1996 fiscal year. Pursuant to
the terms and conditions of the renewal agreement dated April 5,
1996, the bank modified its covenants. As of June 30, 1996, the
Company was in compliance with its new covenants; borrowings
under the line of credit were $150,000.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: The following exibits are filed as a
part of this Form 10-QSB
Financial Data Schedule.
(b) Reports on Form 8-K
Not applicable.
SIGNATURE
Pursuant to the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Holometrix, Inc.
By:/s/John E. Wolfe
John E. Wolfe
President and Treasurer
(Principal Executive Officer and Financial Officer)
Date: August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-QSB
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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