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, 1997
Transition Report Pursuant To 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.
(Name of Registrant as Specified in Its Charter)
_____________
Delaware 04-2891557
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
25 Wiggins Avenue, Bedford, Massachusetts 01730-2323
(Address of Principal Executive Offices) (Zip Code)
_____________
(781) 275-3300
(Registrant's Telephone Number, Including Area Code)
_____________
Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of Each Exchange on
Title of Each Class Which Registered
None Not applicable
Securities Registered Pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of Class)
Check whether the Registrant: (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 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 in this form, and no disclosure
will be contained, to the best of Registrant's knowledge, in
definitive proxy or information<PAGE>
statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. x
The Registrant's consolidated revenues for its fiscal year ended
September 30, 1997 were $4,528,636. 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 1, 1997
was approximately $219,520. As of December 1, 1997, 23,861,878
shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format Yes No x <PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS OF HOLOMETRIX, INC.
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 (temperature) 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 (781) 275-
3300 and its facsimile number is (781) 275-3705. The Company is a
Delaware corporation which was incorporated on October 23, 1985.
The Company intends to enter into a reorganization (the
"Reorganization") pursuant to which Tytronics Incorporated, the
majority owner of the Company, and National Metal Refining Company
("Nametre"), the majority owned subsidiary of the Company, will be
merged into Holometrix Acquisition Corp. ("Holometrix Acquisition"),
a wholly-owned subsidiary of the Company, with the result that
Holometrix Acquisition will be the surviving entity. Following the
Reorganization, Holometrix Acquisition will be merged into the
Company. In connection with the Reorganization, each issued and
outstanding share of Tytronics Preferred Stock and Common Stock will
be exchanged for 254.542 and 231.402 shares, respectively, of the
Common Stock of Holometrix (rounded up to the nearest whole share),
for a total of approximately 39,000,000 shares of Holometrix Common
Stock. In addition, each issued and outstanding share of Nametre
Common Stock, currently, approximately 76,000 shares (excluding
shares owned by Holometrix) will be exchanged for 79.807 shares of
Holometrix Common Stock (rounded up to the nearest whole share) for a
total of approximately 6,065,000 shares. Based on the value of the
equity of the Company, Tytronics and Nametre determined by the
Company's financial advisor, Fechtor, Detwiler & Co., Inc. ("Fechtor
Detwiler"), the aggregate value of the shares of the Company's Common
Stock to be exchanged in connection with the Reorganization will be
approximately $4,680,000. In addition, based on the Fechtor Detwiler
valuation, the value of the Company's Common Stock is currently $.082
per share, the value of Tytronics Common Stock and Preferred Stock is
$24.44 per share (assuming the conversion of all Preferred Stock to
Common Stock), and the value of Nametre Common Stock is $7.31 per
share. The exchange ratios and the aggregate values of the shares of
Holometrix Common Stock to be exchanged in connection with the
Reorganization will change if Fechtor Detwiler determines there has
been a material change in the valuation of the Company, Tytronics or
Nametre during the period from the initial valuation to a date prior
to the effectiveness of the Reorganization. The Reorganization is
expected to be effective during the second fiscal quarter of the
Company ended March 31, 1998.
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Holometrix Instruments Division
The Company engages in the development, production and
distribution of instruments under the tradename "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 quantify 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
(temperature) 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 calculation 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-Lab automation 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 thermal resistance (R-
value) of 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
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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 (GBP-200, GBP-300, GBP-450 and GBP-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 (very cold) 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 (speed of heat through
material) (LFTD) technique to measure both thermal diffusivity
and specific heat from -170 C to 2000 C. Test samples are
illuminated 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
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samples at high temperatures. Typical test materials include
ceramics, coatings, composites, polymers, metals and alloys.
The Thermaflash 2200 and 1100 operate up to 2000 C and 1100 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
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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.
Holometrix' Markets
Holometrix' thermophysical instruments are sold primarily to
materials laboratories engaged in the development and testing of
insulations, building materials, 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 (based on
its internal calculations of the sales of companies that it has
identified as competitors) that 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. 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.
Current products and test services are sold in North America
directly from the Company's offices in Bedford, Massachusetts.
Domestic sales amounted to 69% of total revenue for fiscal year 1997.
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 1997, overseas sales accounted for approximately 31%
of total sales, compared to 29% in fiscal 1996.
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.
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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,
petrochemical, 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.
Holometrix Patents and Proprietary Technology
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.
Holometrix Customers
During fiscal 1997, the Company had total revenues of
approximately $2,077,000, compared to $2,201,000 in fiscal 1996. No
customer accounted for more than 10% of sales in fiscal 1997.
Holometrix Backlog
As of September 30, 1997, the Company's backlog for products
and services totaled $131,000, as compared to $333,000 in backlog as
of September 30, 1996. The fiscal 1997 backlog consisted of $26,000
for the Instruments Division and $105,000 for the Testing Services
Division. All backlog at September 30, 1997 is expected to be
delivered before September 30, 1998.
Holometrix Competition
The Company's competitive advantage lies in its ability to
develop and produce a broad spectrum of products in several different
market niches. The
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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.
Holometrix Research and Development
The Company expended approximately $170,000, or 8% of sales and
$154,000 or 7% of sales in fiscal 1997 and fiscal 1996, respectively,
on research and development. The Company expects that in fiscal 1998
its research and development expenditures will be approximately 5% of
sales.
Governmental Regulations
There is presently no material government regulation with
respect to the Company's businesses and its development of products.
However, the extent to which future governmental regulations may
regulate the Company's activities cannot be predicted, and the
Company 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.
Holometrix Employees
As of September 30, 1997, the Company had 22 employees, 17 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
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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.
BUSINESS OF NATIONAL METAL REFINING COMPANY
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 (thickness and density) and viscoelasticity (pliability) 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 a New Jersey corporation which was organized in 1956.
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.
Nametre Products
Nametre engages in the development, production and distribution
of viscosity analyzers under the trade names, "Viscoliner " and
"Rheoliner ". 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.
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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.
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 (based on its internal
calculations of the sales of companies that it has identified as
competitors) that the current market for process viscosity totals
approximately $20-25 million annually.
Nametre Patents and Proprietary Technology
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 Viscoliner, Rheoliner , 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.
Nametre Customers
On September 30, 1996, the Company acquired approximately
61.23% of the outstanding shares of Nametre. The consolidated
statements of operations and cash flows of Holometrix and subsidiary
exclude any activity of Nametre prior to the date of acquisition.
For Fiscal 1997, Nametre's total revenues were approximately
$2,452,000. 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.
For comparison purposes, for the period September 30, 1995 to
December 31, 1995, Nametre had total revenues of $783,000. One
customer accounted for approximately 17% of Nametre's revenues in
fiscal 1997.
Nametre Backlog
As of September 30, 1997, Nametre's backlog for products and
services totaled approximately $687,000, as compared to approximately
$343,000 as of
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September 30, 1996. All backlog at September 30, 1997 is expected to
be delivered before September 30, 1998.
Nametre Competition
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.
Nametre Research and Development
Nametre expended approximately $195,000, or 8% of sales and
$299,000, or 17% of sales in fiscal 1997 and fiscal 1996,
respectively, on research and development. Nametre expects that in
fiscal 1998 its research and development expenditures will be
approximately 7% of sales.
Governmental Regulations
There is presently no material government regulation with
respect to Nametre's businesses and its development of products.
However, the extent to which future governmental regulations may
regulate Nametre's activities cannot be predicted, 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.
Nametre Employees
As of September 30, 1997, Nametre had 14 employees, 13 of whom
are employed full-time. Most of Nametre's employees 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.
- 10 -<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY.
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 1997 was $69,720, excluding rental income
of $41,105 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.
Substantially all 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. All of the
machinery and equipment owned by the Company is subject to a security
interest in favor of Tytronics Incorporated and is subject to a
senior security interest in favor of Silicon Valley Bank, to which
Tytronics' interest is 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. As of July 28, 1997, all of the machinery and equipment owned
by Nametre was subject to a senior security interest in favor of
Silicon Valley Bank.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Company or Nametre is a party or to which any of their properties are
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 1997 fiscal year.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is no longer quoted in the over-the-
counter market. There currently does not exist an active trading
market for the Company's securities. The following table sets forth
the range of high and
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low bid quotations for the Company's Common Stock as reported by the
National Quotation Bureau of New Jersey.
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
Fiscal Year 1997 Low High
First Quarter Ended December 31, 1996 $0.002 $0.002
Second Quarter Ended March 31, 1997 0.002 0.04
Third Quarter Ended June 30, 1997 0.005 0.02
Fourth Quarter Ended September 30, 1997 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 approximately
480 holders of record of the Company's outstanding capital stock as
of September 30, 1997.
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
SELECTED FINANCIAL DATA:
1997 1996
STATEMENT OF OPERATIONS DATA
Net revenues $4,528,636 $2,200,603
Net income (loss) ($211,771) $4,041
Net income (loss) per
Common share ($.01) $0.00
Weighted average Common
shares outstanding 22,309,316 16,313,316
CONSOLIDATED BALANCE SHEET DATA
Working capital $ 259,198 $ 298,315
Total assets $ 2,710,505 $ 2,548,723
Long-term obligations,
excluding current
portion $ 224,674 $ 213,539
Minority Interest $ 103,536 $ 66,634
Stockholders' Equity $ 631,376 $ 682,097
- 12 -<PAGE>
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 revenues or expenses of Nametre are included in the
Company's fiscal 1996 statement of operations; 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.
During fiscal 1997, as a result of losses at Holometrix, the
balance sheet deteriorated slightly as compared to fiscal 1996. At
the end of fiscal 1997, the Company's working capital amounted to
$259,198, a decrease of $39,117. Stockholders' equity amounted to
$631,376 at September 30, 1997, a
- 13 -<PAGE>
decrease of $50,721 from the previous year. This decrease included
the exercise of 1,550,000 warrants by Tytronics for an aggregate
exercise price of $100,000 through the extinguishment of debt.
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 with
related businesses. However, there can be no guarantee that such
activities will materialize or result in sustained profitability. In
this regard, the Company has proposed to enter into a Reorganization
pursuant to which Tytronics and Nametre will be merged into the
wholly-owned subsidiary of the Company, Holometrix Acquisition Corp.,
with the result that Holometrix Acquisition Corp. will be the
surviving entity. Following the Reorganization, Holometrix
Acquisition Corp. will be merged into the Company. See Item 1.
Description of Business - Business of Holometrix, Inc.
Year Ended September 30, 1997 As Compared To Year Ended September 30,
1996.
Revenues for the 1997 fiscal year totaled $4,528,636 as
compared to $2,200,603 in the comparable period of 1996, an increase
of $2,328,033. This 106% increase is primarily due to the
acquisition of a majority ownership in Nametre at the end of fiscal
year 1996. The revenues for Nametre alone totaled $2,451,575 and
revenues for Holometrix alone totaled $2,077,061, a 6% decrease over
the comparable period of fiscal 1996, due primarily to decreased
instrument sales.
Cost of sales increased by $998,394, or 75%, from $1,338,466
(61% of sales) for fiscal 1996 to $2,336,860 (52% of sales) in the
same period of fiscal 1997. This 75% increase is primarily due to
the Nametre acquisition. Cost of sales for Holometrix alone totaled
$1,391,392, a 4% increase. This increase is primarily due to the
higher costs associated with the introduction of the newly developed
Lambda instrument.
Selling, general and administrative expenses increased by
$1,250,664, or 187%, from $668,902 (30% of sales) to $1,919,566 (42%
of sales). The difference was primarily the result of the
acquisition of Nametre. Holometrix expenses alone totaled $736,629,
an increase of 10%. The Holometrix increase was primarily due to
increased legal and audit expenses incurred in connection with the
consolidation and reporting of Nametre.
Research and development increased $211,348, from $153,984 (7%
of sales) to $365,332 (8% of sales). The increase was again due to
the acquisition of Nametre. Holometrix R&D alone increased $16,396,
an increase of 11%. This increase was due to the addition of a
development engineer and ongoing development of new instrument
products.
Loss from operations was $93,122 for fiscal 1997, compared with
income of $39,251 in fiscal 1996. Holometrix' loss from operations
alone was $221,340. Consolidated Net loss was $211,771 for fiscal
1997. Holometrix net loss alone was $270,050 compared with a net
income of $4,041 for fiscal 1996. These losses are primarily due to
increased manufacturing, selling and administrative costs, partially
offset by income derived from the consolidation of Nametre.
- 14 -<PAGE>
Total Assets at September 30, 1997 increased to $2,710,505 from
$2,548,723 on September 30, 1996, an increase of $161,782 or 6%.
Cash increased by $156,928 primarily as a result of increased
borrowing from the Company's bank line of credit and to increased
collections activity, resulting in a decrease in accounts receivable
of $232,668 for the year. Inventories increased by $182,933 due to
manufacturing plans for increased sales volume and the introduction
of a new product. Equipment and fixtures increased by $43,337, net
of depreciation, due to purchase of additional equipment.
Total Liabilities at September 30, 1997 increased to $1,975,593
from $1,799,992 on September 30, 1996, an increase of $175,601, or
10%. This increase was primarily due to an increase of $52,015 due
to a stockholder and an increase of $233,112 in accounts payable and
accrued expenses, and an increase in long-term notes payable to a
stockholder of $110,043. This was offset by a decrease of $84,000 in
the Company's line of credit debt and a decrease of $98,908 in other
long-term obligations and a decrease of $11,033 in current maturities
of long-term obligations. Accounts payable increased to $1,266,795
at September 30, 1997 from $1,204,028 on September 30, 1996, an
increase of $62,767 primarily due to increase in operational
expenditures and sales commissions.
As of September 30, 1997, the Company had an outstanding order
backlog for products and services of approximately $818,000 as
compared to a backlog of $676,000 at September 30, 1996. The Company
believes the $818,000 backlog will largely be realized in fiscal
1998. The outstanding backlog for Holometrix alone at September 30,
1997, was approximately $131,000, a decrease of $202,000 (66%). This
decrease is due primarily to the decrease of revenue from a
government contract and a decline in certain instruments sales.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Operating cash flows were positive, amounting to $255,663
during fiscal 1997 compared to $136,043 during fiscal 1996.
Operating cash flows approximated the sum of net loss plus
depreciation and amortization, with decreases in accounts receivable
of $232,668 and an increase in accounts payable and other accrued
expenses of $233,112 being offset by an increase in inventory of
$182,933.
The Company funded increases in equipment and fixtures of
$178,396 and patents of $31,082. In conjunction with the rewriting
of the Silicon Valley line of credit to Tytronics, the bank debt was
eliminated resulting in an increase of Notes Payable to Stockholder
along with the exercise of $100,000 of warrants by Tytronics.
The net affect of these transactions was an increase in cash of
$156,928 providing cash at the end of fiscal 1997 of $184,423. The
combination of operating cash flows plus the Company's line of credit
should be adequate for immediate needs.
- 15 -<PAGE>
Acquisition & Debt Conversion
On September 30, 1996, the Company acquired approximately
61.23% of the outstanding shares of 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 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, 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. On September 29, 1997 Tytronics exercised
warrants for 1,550,000 shares in exchange for debt of $100,000.
Notes Payable to Stockholders
As of December 31, 1995, the Company was in default on the then
current $55,000 installment payment due on the original $165,000 term
note to Tytronics. However, Tytronics had expressed its agreement
not to accelerate payment on this term note. Subsequently, as of
September 30, 1996, in connection with additional common stock sold
to Tytronics, $65,000 of the note was converted to equity as payment
and the note was re-written for $100,000 payable in two installments
due in November 1997 and November 1998. As of September 29, 1997,
this debt was extinguished with the exercise of the 1,550,000
warrants noted above.
Notes Payable Line of Credit
As of June 30, 1997, the Company, in concert with its
subsidiary Nametre and its parent company Tytronics obtained new
terms from Silicon Valley Bank for a combined line of credit and term
loan of $1,500,000, secured by substantially all assets of the
Company, its subsidiary Nametre and Tytronics. This new line was in
effect on July 24, 1997. Advances under this line through September
1, 1997, can not exceed the lesser of 70% of the Company's eligible
accounts receivable, as defined, or the consolidated Tangible Net
Worth, as defined, plus the minority interest. Thereafter,
borrowings can not exceed the lesser of 70% of the Company's eligible
accounts receivable, as defined, or 110% of the consolidated Tangible
Net Worth, as defined. These outstanding amounts are payable on
demand and advances are contingent upon maintaining certain covenants
relative to profitability, liquidity and tangible net worth. As of
September 30, 1997, the Company was in compliance with all covenants
and ratios of the new line of credit.
In the second half of fiscal 1996 the Company introduced a new
instrument product line, namely the Lambda 2000 Series. The Company
will continue to invest in enhanced sales and marketing efforts, new
product development, and the development of strategic relationships,
including licensing, acquisition, or mergers. Management believes
that operating
- 16 -<PAGE>
capital and the line of credit from Silicon Valley Bank will provide
sufficient capital to maintain stable Company operations throughout
fiscal 1998. As indicated, the Company has proposed to enter into a
Reorganization pursuant to which Tytronics and Nametre will be merged
into the wholly-owned subsidiary of the Company, Holometrix
Acquisition Corp., with the result that Holometrix Acquisition Corp.
will be the surviving entity. Following the Reorganization,
Holometrix Acquisition Corp. will be merged into the Company.
Management believes that the Reorganization will result in increased
operating capital for the Company and more stable Company operations
since Tytronics and Nametre have a recent history of profitable
operations. See Item 1. Description of Business - Business of
Holometrix, Inc. However, there can be no guarantees that adequate
operating funds will be generated as a result of the Reorganization
or through revenue increases, or that strategic relationships will
materialize, or that additional funding can be obtained on acceptable
terms.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 128 ("SFAS
128") "Earnings Per Share", issued by the Financial Standards Board
is effective for financial statements for fiscal years ending after
December 15, 1997. The new standard establishes standards for
computing and presenting earnings per share. The effect of adopting
SFAS 128 is not expected to be material. The Company is required to
adopt the disclosure requirements of SFAS 128 during the year ending
September 30, 1998.
In June 1997, the Financial Accounting Standards Board issued
two new disclosure standards. Results of operations and financial
position will be unaffected by implementation of these new standards.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), establishes standards for
reporting and display of comprehensive income, its components, and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners
and distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise," establishes
standards for the way that public enterprises report information
about operating segments in annual financial statements and requires
reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes
standards for disclosures regarding products and services, geographic
areas, and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance.
- 17 -<PAGE>
Both of these new standards are effective for financial statements
for periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. Due to the recent
issuance of these standards, management has been unable to fully
evaluate the impact, if any, they may have on future financial
statement disclosures.
ITEM 7. FINANCIAL STATEMENTS.
The Company's consolidated financial statements and the related
auditors' report are presented on pages F-1 through F-26. The
financial statements filed in this Item 7 are as follows:
Item Page
Reports of Independent Certified Public Accountants F-1
Consolidated Balance Sheets - September 30, 1997 and 1996 F-3
Consolidated Statements of Operations for the years ended
September 30, 1997 and 1996 F-5
Consolidated Statements of Stockholders' Equity for
the years ended September 30, 1997 and 1996 F-6
Consolidated Statements of Cash Flows for the years ended F-7
September 30, 1997 and 1996
Notes to Consolidated Financial Statements F-8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT.
The following is a list of the directors and executive officers
of the Company as of December 15, 1997:
Name Age Position
John E. Wolfe 59 President and Director
John A. Hanna, Jr. 56 Treasurer & Chief Financial Officer
Richard Mannello 40 Vice President & General Manager
Joseph J. Caruso 54 Director
Joaquim S. S. Ribeiro 61 Director
Salvatore J. Vinciguerra 59 Director
- 18 -<PAGE>
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. Hanna joined the Company as Chief Financial Officer in
August, 1997. He was elected Treasurer in December 1997.
Previously, Mr. Hanna was Chief Financial Officer for the Danis Group
from 1996 to 1997. Prior to 1996, Mr. Hanna was Treasurer of Alpha
Industries, Inc. from 1978 to 1996. Mr. Hanna holds a B.S. in
Electrical Engineering from Tufts University, an M.ENG. in Electrical
Engineering from Yale University, and an MBA in Finance from Boston
University.
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
- 19 -<PAGE>
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. 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 for officers and directors of the Company to
file Section 16(a) reports have been met for the fiscal year ended
September 30, 1997. 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 1997. During the fiscal year ended September 30, 1995, each of
Joaquim S.S. Ribeiro and Salvatore J. Vinciguerra
- 20 -<PAGE>
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,
1997, September 30, 1996 and September 30, 1995, of those persons who
were (i) the Company's Chief Executive Officer during the fiscal year
ended September 30, 1997, and (ii) other executive officers of the
Company as of September 30, 1997, who received total cash and bonus
compensation in excess of $100,000 (the "Named Officers") during
fiscal year 1997.
- 21 -<PAGE>
<TABLE>
Executive Compensation
<CAPTION>
Name and Other Restr- Securities Other
Principal Year Salary BONUS Compen- icted Underlying Compensa-
Position sation Stock All tion
($) ($) ($)<F1> Award Options/SARs ($)
($) (#)
<S> <C> <C> <C> <C> <C> <C> <C>
John E. 1997 36,000 0 0 n/a n/a n/a
Wolfe
President,
CEO and
Treasurer
Richard 1997 111,478 500 0 n/a 300,000<F2> n/a
Mannello
Vice Pres-
ident and
General
Manager
John E. 1996 52,200 0 0 n/a n/a
Wolfe
President,
CEO and
Treasurer
John E. 1995 33,333 0 0 n/a 200,000<F2> 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
<FN>
<F1> Includes consulting fees paid and accrued to Bantam. Mr. Caruso
is President of Bantam.
<F2> Represents the grant of options to purchase shares of the
Company's common stock which vest over a period of four years from
the date of grant.
</FN>
</TABLE>
- 22 -<PAGE>
Option Grants In Last Fiscal Year
Number of Percent of
Securities Total
Underlying Options/ Exercise
Options/ SARs Granted Or Base
SARs To Employees Price Expiration
Granted (#) in Fiscal Yr. ($/Share) Date
John E. Wolfe 0
Richard Mannello 200,000 42.5% $.05 11/7/2001
The following table sets forth information concerning option
exercises during fiscal 1997 and the value of unexercised options as
of September 30, 1997. No options were exercised during fiscal year
1997 by any of the Named Officers in the compensation table.
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
<CAPTION>
# of Unexercised $ Value of
Options Unexercised
# Shares $ at Sept. 30, Options at Sept.
Name Acquired Value 1997 30, 1997
on Realized (Exercisable/ (Exercisable/
Exercise Unexercisable) Unexercisable)<F1>
<S> <C> <C> <C> <C>
John E. 0 $0 200,000/200,000 $0
Wolfe
Joseph J. 0 $0 0 $0
Caruso
Richard 0 $0 300,000/300,000 $0
Mannello
<FN>
<F1>
Value is based on the difference between option exercise price and
the fair market value at fiscal 1997 year end, multiplied by the
number of shares underlying the option.
</FN>
</TABLE>
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 1997. Mr.
Caruso, a director of the Company, is also president of Bantam.
- 23 -<PAGE>
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 "NonQualified 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, 1997, the Company had 22 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.
- 24 -<PAGE>
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 470,000 shares of Common
Stock at an exercise price of $.05 per share were granted during
fiscal 1997 to various employees of the Company of which 200,000
shares were granted to Richard Mannello, Vice President and General
Manager of the Company. No other options or rights were granted
under the 1991 Plan during the 1997 fiscal year. No options were
canceled during fiscal 1997. As of September 30, 1997, options to
purchase 1,094,000 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 November 1, 1997, to the
knowledge of the Company, the ownership of the Company's 23,861,878
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 executive officers, 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.
- 25 -<PAGE>
Name and Address Number of Shares Percentage
of Beneficial Owner Beneficially Owned of Class1
Tytronics Incorporated2 17,060,244 69.9%
25 Wiggins Avenue
Bedford, MA 01730-2323
Bantam Group, Inc.3 1,435,000 6.0%
50 Bay Colony Drive
Westwood, MA 02090
John E. Wolfe 200,0004 *
Richard Mannello 300,0004 *
Joaquim S. S. Ribeiro 150,0004 *
Salvatore J. Vinciguerra 150,0004 *
All Officers and Directors 2,235,000 9.4%
as a group (6 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 statement 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 Includes warrants exercisable by Tytronics Incorporated to
purchase 550,000 shares of the Company's Common Stock at an exercise
price of $.10 per share. Joseph J. Caruso and John E. Wolfe,
Directors of the Company are also Directors of Tytronics
Incorporated.
3 Joseph J. Caruso, a Director of the Company, is also President
of Bantam Group, Inc., and has sole voting and investment power with
respect to the 1,435,000 shares of Common Stock owned by Bantam
Group, Inc.
4 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 has been paid $1,500 per
month thereafter. Mr. Caruso, a Director of the Company, is
president of Bantam.
- 26 -<PAGE>
As of September 30, 1997, the Company held notes payable to
Tytronics totaling $282,056, of which $72,014 was a current
liability, and $210,042 was a long-term liability on the Company's
balance sheet at September 30, 1997.
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
$3400 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, 1997, and 1996, this
informal agreement resulted in the payment of approximately $86,000
and $80,000, respectively, by the Company to Tytronics for such
operating and administrative costs.
During the fiscal year ended September 30, 1997, 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. These advances are
payable on demand with 10% interest. As of fiscal year end,
September 30, 1997, $51,576 was due to Tytronics by the Company under
these arrangements. During fiscal year 1997 and 1996, the Company
borrowed an aggregate of $235,412 and $130,000, including interest,
from Tytronics under these arrangements. 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 $.10 and $.05 per share, respectively. On
September 29, 1997 Tytronics exercised warrants for 1,550,000 shares
of the Company's Common Stock in exchange for debt of $100,000.
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.
- 27 -<PAGE>
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).
- 28 -<PAGE>
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 1O-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 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).
- 29 -<PAGE>
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).
- 30 -<PAGE>
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 as exhibit 10.36 to
Form 10-KSB dated December 29, 1996, and incorporated herein by
reference).
10.37 Unconditional Guaranty dated July 24, 1997 issued by the
Company to Silicon Valley Bank (filed herewith).
27 Financial Data Schedule (filed herewith).
(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, 1997.
- 31 -<PAGE>
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 19, 1997
John E. Wolfe, President,
Chief Executive Officer
(principal executive officer)
By:/s/JOHN A. HANNA, JR. Date: December 19, 1997
John A. Hanna, Jr.,
Treasurer and Chief
Financial Officer
(principal financial
and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Name Capacity Date
/s/JOSEPH J. CARUSO Director December 19, 1997
Joseph J. Caruso
/s/JOAQUIM S.S. RIBEIRO Director December 29, 1997
Joaquim S.S. Ribeiro
/s/SALVATORE J. VINCIGUERRA Director December 20, 1997
Salvatore J. Vinciguerra
/s/JOHN E. WOLFE Director December 19, 1997
John E. Wolfe
- 32 -
Holometrix, Inc. and
Subsidiary
Consolidated Financial Statements
September 30, 1997 and 1996
Holometrix, Inc. and Subsidiary
Contents
Reports of independent certified accountants F-1 to F-2
Consolidated financial statements:
Consolidated balance sheets F-3 to F-4
Consolidated statements of operations F-5
Consolidated statements of stockholders' equity F-6
Consolidated statements of cash flows F-7
Notes to consolidated financial statements F-8 to F-25
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, 1997 and
1996, and the related consolidated statements of operations,
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
did not audit the 1997 financial statements of National Metal
Refining Company, Inc. ("Nametre"), which statements reflect
total assets of $1,245,027 as of September 30, 1997 and total
revenues of $2,451,575 for the year ended September 30, 1997.
Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to
the 1997 amounts included for such subsidiary, is based solely
on the report of the other auditors.
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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Holometrix, Inc. and subsidiary at September 30,
1997 and 1996, and the results of their operations and their
cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Boston, Massachusetts
November 26, 1997
Holometrix, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, 1997 1996
Assets (Notes G and H)
Current:
Cash and cash equivalents $ 184 423 $ 27 495
Accounts receivable, less allowance for doubtful
accounts of $35,000 in 1997 and 1996 929 480 1 162 148
Inventories (Note D) 845 256 662 323
Other current assets 50 958 32 802
--------------------------------------------------------------------
Total current assets 2 010 117 1 884 768
Equipment and fixtures, net (Note E) 394 993 351 656
Other assets, net (Note F) 305 395 312 299
- ---------------------------------------------------------------------
Total assets $2 710 505 $2 548 723
See accompanying notes to consolidated financial statements.
Holometrix, Inc. and Subsidiary
Consolidated Balance Sheets
(Continued)
September 30, 1997 1996
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable - stockholder (Note G) $ 72 015 $ 20 000
Notes payable - line of credit (Note G) - 84 000
Accounts payable 1 266 795 1 204 028
Accrued payroll and related expenses 107 850 37 086
Accrued expenses - other 158 716 59 135
Due to stockholder (Note M) 51 576 77 204
Current maturities of long-term obligations
(Note H) 93 967 105 000
- ----------------------------------------------------------------
Total current liabilities 1 750 919 1 586 453
Long-term obligations:
Notes payable - stockholder, less current
maturities (Note G) 210 043 100 000
Long-term obligations, less current
maturities (Note H) 14 631 113 539
Minority interest in consolidated subsidiary
(Note B) 103 536 66 634
Commitments and contingencies
(Notes C, G, H, J, K and M)
Stockholders' equity (Notes B and K):
Common stock, $.01 par value, 30,000,000
shares authorized; issued 28,098,157 in 1997
and 26,533,157 in 1996; outstanding
23,861,878 in 1997 and 22,296,878 in 1996 280 982 265 332
Additional paid-in capital 2 544 409 2 459 009
Accumulated deficit (2 090 015)(1 878 244)
- ----------------------------------------------------------------
735 376 846 097
Less: Treasury stock, at cost (104 000) (104 000)
Subscriptions receivable - (60 000)
- ----------------------------------------------------------------
Total stockholders' equity 631 376 682 097
- ----------------------------------------------------------------
Total liabilities and
stockholders' equity $2 710 505 $2 548 723
See accompanying notes to consolidated financial statements.
Holometrix, Inc. and Subsidiary
Consolidated Statements of Operations
September 30, 1997 1996
- -----------------------------------------------------------------
Net revenues (Note L) $4 528 636 $2 200 603
Cost of revenues 2 336 860 1 338 466
- -----------------------------------------------------------------
Gross profit 2 191 776 862 137
- -----------------------------------------------------------------
Selling, general and administrative expenses 1 919 566 668 902
Research and development expenses 365 332 153 984
- -----------------------------------------------------------------
Total operating expenses 2 284 898 822 886
- -----------------------------------------------------------------
Income (loss) from operations (93 122) 39 251
Interest expense 56 747 35 210
- -----------------------------------------------------------------
Income (loss) before taxes on income
and minority interest (149 869) 4 041
Taxes on income (Note I) 25 000 -
Income (loss) before minority interest (174 869) 4 041
Minority interest in net income of subsidiary 36 902 -
- -----------------------------------------------------------------
Net income (loss) $ (211 771) $ 4 041
- -----------------------------------------------------------------
Net income (loss) per common share $ (0.01) $ 0.00
- -----------------------------------------------------------------
Weighted average number of common and
common equivalent shares used in calculation
of income (loss) per common share
(Note C) 22 309 316 16 313 316
See accompanying notes to consolidated financial statements.
<TABLE>
Holometrix, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
<CAPTION>
Preferred
Stock
Series B Common Stock Additional Total
For the years ended Par Value $.01 Par Value $.01 Paid-in Accumulated Treasury Stock Subscriptions Stockholders'
September 30, 1997 Shares Amount Shares Amount Capital Deficit Shares Amount Receivable Equity
and 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1995 - $ - 20 533 157 $205 332 $2 219 009 $(1 882 285) 4 236 279 $(104 000) $ - $ 438 056
Common shares issued
(Note B) - - 6 000 000 60 000 240 000 - - - (60 000) 240 000
Net income for year - - - - - 4 041 - - - 4 041
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1996 - - 26 533 157 265 332 2 459 009 (1 878 244) 4 236 279 (104 000) (60 000) 682 097
Payments received on
subscriptions receivable - - - - - - - - 60 000 60 000
Common shares issued
(Notes B and G) - - 1 550 000 15 500 84 500 - - - - 100 000
Issuance of common stock
to employees 15 000 150 900 - - - - 1 050
Net loss for year - - - - - (211 771) - - - (211 771)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1997 - $ - 28 098 157 $280 982 $2 544 409 $(2 090 015) 4 236 279 $(104 000) $ - $ 631 376
See accompanying notes to consolidated financial statements.
</TABLE>
Holometrix, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Note N)
Years ended September 30, 1997 1996
Cash flows from operating activities:
Net income (loss) $(211 771) $ 4 041
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 164 791 125 125
Issuance of common stock to employees 1 050 -
Minority interest 36 902 -
Changes in operating assets and liabilities,
net of effects of acquisition in 1996:
Accounts receivable 232 668 (335 934)
Inventories (182 933) 16 921
Other current assets (18 156) 10 970
Accounts payable 62 767 328 019
Accrued expenses 170 345 (13 099)
- ------------------------------------------------------------------------
Net cash provided by operating activities 255 663 136 043
- ------------------------------------------------------------------------
Cash flows from investing activities:
Equipment and fixtures additions (178 396) (80 468)
Purchase of Nametre, net of cash acquired - (266 514)
Increase in other assets (22 828) (17 956)
- -------------------------------------------------------------------------
Net cash used for investing activities (201 224) (364 938)
- -------------------------------------------------------------------------
Cash flows from financing activities:
Due to stockholder, net (25 628) 86 350
Borrowings - stockholder & others 262 058 -
Proceeds from subscriptions receivable 60 000 -
Proceeds from issuance of common stock - 175 000
Net repayments on line of credit (84 000) (41 000)
Repayments on long-term obligations (109 941) (4 667)
- -------------------------------------------------------------------------
Net cash provided by financing activities 102 489 215 683
- -------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 156 928 (13 212)
Cash and cash equivalents, beginning of year 27 495 40 707
- -------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 184 423 $ 27 495
See accompanying notes to consolidated financial statements.
Holometrix, Inc. and Subsidiary
Notes to Consolidated Financial Statements
A. Business Organization
Holometrix, Inc. ("Holometrix"), 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. Holometrix's Instruments Division
currently designs, manufactures, and distributes five product
lines containing a total of sixteen instrument models which
measure thermophysical properties for research and quality
control applications. Holometrix'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. Holometrix is located in
Bedford, MA.
In 1996, Holometrix 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
On September 30, 1996, Holometrix acquired approximately
61.23% of the outstanding shares of National Metal Refining
Company, Inc., 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 allocated on the
basis of the estimated fair value of the assets acquired and
liabilities assumed. This allocation resulted in goodwill of
approximately $245,000 which is being amortized over 15 years.
The purchase also provided for the acquisition by Holometrix of
warrants to purchase an additional 13,334 shares at $3 per share
and 10,000 shares at $6 per share. Holometrix raised the funds
to acquire Nametre by issuing 6,000,000 shares of its' common
stock to Tytronics, Incorporated ("Tytronics"), at a purchase
price of $.05 per share. At the time of this
B. Acquisition (Continued)
sale of shares, Holometrix entered into a debt restructuring
agreement with Tytronics. In conjunction with that agreement,
Holometrix 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 Holometrix, is also a director of Nametre. In
addition, Mr. Caruso is the president of Bantam Group, Inc.,
which is a stockholder of Holometrix and Nametre and has entered
into consulting agreements with Holometrix and Nametre. The
purchase did not have a material effect on the Consolidated
Statement of Operation for the year ended September 30, 1996.
During 1997, Tytronics exercised 1,100,000 shares at $.05 per
share and 450,000 shares at $.10 per share.
The unaudited pro forma consolidated results of Holometrix and
Nametre for the year ended September 30, 1996, assuming that the
acquisition had occurred at October 1, 1995, and after giving
effect to certain pro forma adjustments, is as follows:
September 30, 1996
(Unaudited)
Revenue $4 803 389
Net loss $ (27 010)
Net loss per share $ (0.00)
C. Summary of
Significant
Accounting
Policies
Basis of Presentation
The consolidated financial statements include the accounts of
Holometrix and Nametre, its majority-owned subsidiary (the
"Company"). All intercompany accounts and transactions have been
eliminated. As discussed in Note B, Holometrix acquired a
majority interest in Nametre at September 30, 1996. Accordingly,
the Consolidated Statements of Income and Consolidated Statements
of Cash Flows for the year ended September 30, 1996, 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 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.
C. Summary of
Significant
Accounting
Policies
(Continued)
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 include goodwill, 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
The Company utilizes the liability method of accounting for
income taxes, as set forth in 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.
C. Summary of
Significant
Accounting
Policies
(Continued)
Net Income (Loss) Per Share
Net income (loss) 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 accounts receivable, accounts payable, notes
payable, and long-term debt, approximate their carrying value.
New Accounting Standards
Effective October 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation." The Company has elected to
continue to account for stock options at their intrinsic value
with disclosure of the effects of fair value accounting on net
earnings (loss) and earnings (loss) per share on a pro forma
basis.
Statement of Financial Accounting Standards No. 128, "Earnings
per Share," ("SFAS No. 128") issued by the Financial Accounting
Standards Board is effective for financial statements for fiscal
years ending after December 15, 1997. The new standard
establishes standards for computing and presenting earnings per
share.
C. Summary of
Significant
Accounting
Policies
(Continued)
New Accounting
Standards (Continued)
The effect of adopting Statement of Financial Accounting
Standards No. 128 is not expected to be material. The Company is
required to adopt the disclosure requirements of SFAS No. 128
during the year ended September 30, 1998.
In June 1997, the Financial Accounting Standards Board issued
two new disclosure standards. Results of operations and
financial position will be unaffected by implementation of these
new standards.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("SFAS No. 130") establishes standards for
reporting and display of comprehensive income, its components,
and accumulated balances. Comprehensive income is defined to
include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements.
SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise," establishes
standards for the way that public enterprises report information
about operating segments in annual financial statements and
requires reporting of selected information about operating
segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products
and services, geographic areas, and major customers. SFAS No.
131 defines operating segments as components of an enterprise
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
C. Summary of
Significant
Accounting
Policies
(Continued)
New Accounting
Standards (Continued)
Both of these new standards are effective for
financial statements for periods beginning after
December 15, 1997 and require comparative
information for earlier years to be restated.
Due to the recent issuance of these standards,
management has been unable to fully evaluate the
impact, if any, they may have on future financial
statement disclosures.
D. Inventories As of September 30, inventories
consist of the following:
1997 1996
Raw materials $494 926 $401 779
Work in process 122 992 109 893
Finished goods 227 338 150 651
-----------------------------------------------
Total $845 256 $662 323
E. Equipment and Fixtures
As of September 30, equipment and fixtures
consist of the following:
1997 1996
Furniture and fixtures $ 80 123 $ 80 795
Leasehold improvements 73 771 70 471
Computer equipment 238 693 212 580
Laboratory and shop
equipment 462 924 313 934
Demo equipment 265 918 265 253
Guarded hot box facility 250 061 250 061
-----------------------------------------------
1 371 490 1 193 094
Less accumulated
depreciation
and amortization 976 497 841 438
-----------------------------------------------
Net $ 394 993 $ 351 656
F. Other Assets As of September 30, other assets
consist of the following:
1997 1996
Goodwill $244 788 $244 788
Licensing agreement 35 450 35 450
Patents 113 561 82 479
Deposits 13 669 21 923
-----------------------------------------------
407 468 384 640
Less accumulated amortization102 073 72 341
-----------------------------------------------
Net $305 395 $312 299
G. Notes Payable -
Stockholder and
Line of Credit
As of September 30, Notes payable -
stockholder and line of credit consist of the
following:
1997 1996
Notes payable - stockholder:
10.5% term loan $282 058 $ -
10% term subordinated note - 100 000
10% demand subordinated note - 20 000
Less current maturities (72 015) (20 000)
---------------------------------------------------
Long-term portion $210 043 $100 000
----------------------------------------------------
Notes payable -
line of credit $ - $ 84 000
G. Notes Payable -
Stockholder and
Line of Credit (Continued)
During 1997, the Company renegotiated its working
capital line of credit. Under the new terms, the
Company and its majority stockholder, Tytronics,
as a consolidated group (the "Group") entered
into a $1,000,000 working capital line of credit
and a $500,000 term loan agreement (the
"Financing"). The Financing is secured by
substantially all assets of the Group and is
guaranteed by Holometrix, Tytronics, and Nametre.
Advances are contingent upon maintaining certain
covenants relative to profitability, liquidity,
and tangible net worth. Advances under the line
of credit after September 1, 1997 are limited to
70% of the Group's eligible accounts receivable,
as defined, or 110% of the Group's consolidated
tangible net worth, as defined. Borrowings are
payable on demand, and bear interest at the
bank's prime rate plus 2% (10.5% at September 30,
1997). The line of credit expires in July 1998.
The term loan is due in July 2001, payable in
monthly installments of $10,417 plus interest at
the bank's prime rate plus 1.25% (9.75% at
September 30, 1997). Advances under the term
loan were made to Tytronics. Total borrowings of
Tytronics outstanding under the Financing at
September 30, 1997 amounted to $607,387 of which
$107,387 is current.
In connection with the above bank financing,
Tytronics advanced to the Company certain funds
under an informal agreement. At September 30,
1997, $282,058 is payable to Tytronics under the
agreement. The Company has recorded $72,015 as a
current liability based on its informal agreement
with Tytronics.
During 1996, in support of the Nametre
acquisition, and in connection with additional
investments by Tytronics of $300,000 in the
Company, Tytronics applied $65,000 of debt to the
purchase of common stock 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 1997,
Tytronics applied the remaining $100,000 of this
debt to the purchase of common stock.
H. Long-Term Obligations
As of September 30, long-term obligations consist
of the following:
1997 1996
10% term note payable -
collateralized $ 50 000 $ 155 000
6% term note payable -
unsecured 19 631 24 572
Note payable - other 38 967 38 967
Less current maturities (93 967) (105 000)
---------------------------------------------------
Long-term portion $ 14 631 $ 113 539
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,
1997, the outstanding balance was $19,631, of
which $14,631 is classified as a long-term
liability, and $5,000 is classified as a current
liability.
H. Long-Term
Obligations (Continued)
As of September 30, 1997, the aggregate annual
payments on long-term obligations are as follows:
1998 $ 93 967
1999 5 592
2000 4 039
-------------------------------------------------
Total scheduled payments 103 598
Due fiscal 2000 if payments are late 5 000
-------------------------------------------------
Total $108 598
I. Taxes on Income Years ended September 30, 1997 1996
Current:
Federal $16 200 $ -
State 8 800 -
---------------------------------------------
25 000 -
---------------------------------------------
Deferred:
Federal - -
---------------------------------------------
$25 000 $ -
The Company has net operating loss carryforwards
available for financial reporting and federal
income tax purposes of approximately $1,780,000
expiring through 2012. Because of prior years
transactions with Tytronics and the resulting
"change in ownership," the future use of the
carryforward that existed at the time of the
change is restricted.
I. Taxes on Income (Continued)
Deferred taxes consist of the following:
September 30, 1997 1996
Deferred tax assets:
Net operating loss carryforwards $ 721 000 $ 592 000
Account receivable reserve 14 000 14 000
Other temporary differences 29 000 24 000
Valuation allowance (724 000) (630 000)
------------------------------------------------------------
40 000 -
Deferred tax liability:
Basis difference of property and
equipment 40 000 -
------------------------------------------------------------
Net deferred tax asset $ - $ -
The Company has provided a valuation allowance
equal to 100% of the net 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 (loss) before taxes on
income and minority interest for the years ended
September 30 is as follows:
1997 1996
Statutory rate (34.0)% 34.0%
Utilization of federal net
operating loss carryforwards - (34.0)
Operating loss generating no
current tax benefit 34.0 -
Federal and state taxes of
subsidiary not consolidated
for tax purposes 17.0 -
Effective tax rate 17.0% -%
J. Operating Leases
Holometrix conducts its
operations from leased facilities consisting of
office and production space cancelable upon 90
days written notice by either party. Nametre
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. The
Company's total rent expense in fiscal years 1997
and 1996 was approximately $99,000 and $65,000,
respectively, net of rental income from
Tytronics. Rental income from Tytronics in those
same years was approximately $41,000 and $31,000,
respectively.
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. During 1996,
options for 100,000 shares were issued to Mr.
Richard Mannello, who was not then an officer.
During 1997, Mr. Mannello was named an officer of
the Company, and options for an additional
200,000 shares were issued to Mr. Mannello.
K. Stock Options (Continued)
During fiscal year 1996, options to purchase
3,000 shares from the 1991 Plan were cancelled
and returned to its respective Plan.
A summary of stock option activity under the
Plans is as follows:
1991 Plan Non-Qualified
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
Outstanding at
September 30, 1995 527 000 $0.03 209 000 $0.05
Granted 100 000 0.03 - -
Exercised - - - -
Canceled (3 000) 0.02 - -
---------------------------------------------------------------------
Outstanding at
September 30, 1996 624 000 0.03 209 000 0.05
Granted 470 000 .05 - -
Exercised - - - -
Canceled - - (209 000) .05
-----------------------------------------------------------------------
Outstanding at
September 30,
1997 1 094 000 $0.04 - $ -
K. Stock Options(Continued)
The following tables summarize
information about stock options outstanding at
September 30, 1997:
Options Outstanding
-------------------
Weighted-
Average Weighted-
Range of Number Remaining Average
Exercise Outstanding at Contractual Exercise
Prices September 30, 1997 Life (years) Price
-----------------------------------------------------------
$.05 470 000 9.3 $.05
.03 600 000 5.1 .03
.02 24 000 3.5 .02
----------------------------------------------------------------
$.02 - $.05 1 094 000 6.8 $.04
Options Exercisable
-------------------
Weighted-
Average Weighted-
Range of Number Remaining Average
Exercise Exercisable at Contractual Exercise
Prices September 30, 1997 Life (years) Price
--------------------------------------------------------------
$.05 90 000 9.3 $.05
.03 540 000 4.8 .03
.02 24 000 3.5 .02
---------------------------------------------------------------
$.02 - $.05 654 000 6.2 $.03
K. Stock Options (Continued)
The Company accounts for its stock-based
compensation plan using the intrinsic value
method. Accordingly, no compensation cost has
been recognized for its stock option plan. Had
compensation cost for the Company's stock option
plan been determined based on the fair value at
the grant dates for awards under the plan
consistent with the method of Statement of
Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the
Company's net income (loss) and earnings (loss)
per share would have been adjusted to the pro
forma amounts indicated below:
Years ended September 30, 1997 1996
Net income (loss) As reported $(211 771) $4 041
Pro forma $(217 271) $2 841
Earnings (loss) As reported $ (.01) $ .00
per share Pro forma $ (.01) $ .00
In determining the pro forma amounts above, the
Company estimated the fair value of each option
granted using the Black-Scholes option pricing
model with the following weighted-average
assumptions used for grants in 1997 and 1996:
dividend yield of 0% for both years and expected
volatility of 46.5% for both years, risk-free
rates ranging from 6.07% to 6.92% for 1997 and
6.14% to 6.33% for 1996, and expected lives of 10
years for 1997 and 1996. The weighted average
fair value of options granted in fiscal 1997 and
1996 was $22,500 and $5,000, respectively.
Reserved Common Stock
In connection with the stock option plans and
outstanding warrants (see Note B), the Company
has reserved 5,050,000 shares of Common Stock as
of September 30, 1997.
L. Export SalesExport sales for the years ended
September 30 are as follows:
1997 1996
Europe 10 % 9 %
Asia 12 % 2 %
Other 9 % 18 %
31 % 29 %
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 69.2%
shareholder of the total outstanding shares of
the Company. The companies allocate rent expense
based on the square footage each occupies. On
this basis, rental payments from Tytronics
amounted to $41,105 in fiscal 1997 and $30,801 in
fiscal 1996. The companies also share other
operating and administrative costs based on
estimated usage. During the fiscal years ended
September 30, 1997 and 1996, this informal
agreement resulted in the payments of
approximately $86,000 and $80,000, respectively,
by the Company to Tytronics for such operating
and administrative costs. At September 30, 1997
and 1996, the Company had net amounts due to
Tytronics of $51,576 and $77,204, respectively.
Holometrix and Bantam Group, Inc. ("Bantam"),
a business advisory organization, are parties to
a consulting agreement which provides for payment
of a consulting fee of $1,500 per month and
continues month-to-month unless terminated by
either party on thirty days' notice. Pursuant to
this agreement, Bantam was issued in December,
1993 800,000 shares of the Company's Common Stock
plus the reimbursement of any tax liability
arising from the issuance of the stock. Mr.
Joseph J. Caruso, Holometrix'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
1997 1996
Interest paid during the year $ 62 000 $36 168
Income taxes paid during the year $ 800 $ 600
Supplemental Disclosure of Non-Cash Information:
Conversion of debt and accrued interest
into Common Stock $100 000 $65,000
In September 1996, Holometrix 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.
O. Proposed Reorganization
On August 28, 1997, the Boards of Directors of
Holometrix, Tytronics, and Nametre approved a
proposed reorganization of Holometrix subject to
shareholder approval pursuant to which Tytronics,
the majority owner of Holometrix, and Nametre,
the majority owned subsidiary of Holometrix will
be merged into Holometrix Acquisition Corp., a
Delaware Corporation and the wholly-owned
subsidiary of Holometrix, with the result that
Holometrix Acquisition will be the surviving
entity. Following the reorganization, Holometrix
Acquisition will be merged into Holometrix. The
Company anticipates that the reorganization will
be approved by the shareholders of each company
and that the proposed mergers will occur in the
second quarter of fiscal 1998.
TO THE STOCKHOLDERS AND DIRECTORS OF
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
We have audited the accompanying balance sheets of National
Metal Refining (Nametre) Company, Inc. as of September 30,
1997 and September 30, 1996 and the related statements of
changes in stockholders' equity, revenues and expenses, and
cash flows for the twelve months and nine months,
respectively, 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 audit.
We conducted our audit 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
principals used and significant estimates made by management,
as well as evaluating the overall financial statements
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
presents fairly, in all material respects, the financial
position of National Metal Refining (Nametre) Company, Inc. as
of September 30, 1997 and September 30, 1996, and the results
of its operations and cash flows for the twelve months and
nine months, respectively then ended in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
supplementary information shown on pages 12 and 13 is
presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such
information has been summarized from Company records and,
except as labeled otherwise, has been subjected to the audit
procedures applied in the examination of the basic financial
statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial
statements taken as a whole.
/s/WILKIN & GUTTENPLAN, P.C.
WILKIN & GUTTENPLAN, P.C.
Certified Public Accountants
East Brunswick, New Jersey
November 20, 1997
EXHIBIT 10.37
UNCONDITIONAL GUARANTY
For and in consideration of the loan by SILICON VALLEY
BANK ("Bank") to TYTRONICS INCORPORATED ("Borrower"), which
loan is made pursuant to a Loan and Security Agreement of even
date herewith between Borrower and Bank (the "Agreement"), the
undersigned guarantor ("Guarantor") hereby unconditionally and
irrevocably guarantees the prompt and complete payment of all
amounts that Borrower owes to Bank and performance by Borrower
of the Agreement and any other agreements between Borrower and
Bank, as amended from time to time (collectively referred to
as the "Agreements"), in strict accordance with their
respective terms.
1. If Borrower does not perform its obligations in
strict accordance with the Agreements, Guarantor shall
immediately pay all amounts due thereunder (including, without
limitation, all principal, interest, and fees) and otherwise
to proceed to complete the same and satisfy all of Borrower's
obligations under the Agreements.
2. The obligations hereunder are independent of the
obligations of Borrower, and a separate action or actions may
be brought and prosecuted against Guarantor whether action is
brought against Borrower or whether Borrower be joined in any
such action or actions. Guarantor waives the benefit of any
statute of limitations affecting its liability hereunder or
the enforcement thereof, to the extent permitted by law.
Guarantor's liability under this Guaranty is not conditioned
or contingent upon the genuineness, validity, regularity or
enforceability of the Agreements.
3. Guarantor authorizes Bank, without notice or demand
and without affecting its liability hereunder, from time to
time to (a) renew, extend, or otherwise change the terms of
the Agreements or any part thereof; (b) take and hold security
for the payment of this Guaranty or the Agreements, and
exchange, enforce, waive and release any such security; and
(c) apply such security and direct the order or manner of sale
thereof as Bank in its sole discretion may determine.
4. Guarantor waives any right to require Bank to (a)
proceed against Borrower or any other person; (b) proceed
against or exhaust any security held from Borrower; or (c)
pursue any other remedy in Bank's power whatsoever. Bank may,
at its election, exercise or decline or fail to exercise any
right or remedy it may have against Borrower or any security
held by Bank, including without limitation the right to
foreclose upon any such security by judicial or nonjudicial
sale, without affecting or impairing in any way the liability
of Guarantor hereunder. Guarantor waives any defense arising
by reason of any disability<PAGE>
or other defense of Borrower or by reason of the cessation
from any cause whatsoever of the liability of Borrower.
Guarantor waives any setoff, defense or counterclaim that
Borrower may have against Bank. Guarantor waives any defense
arising out of the absence, impairment or loss of any right of
reimbursement or subrogation or any other rights against
Borrower. Until all of the amounts that Borrower owes to Bank
have been paid in full, Guarantor shall have no right of
subrogation or reimbursement for claims arising out of or in
connection with this Guaranty, contribution or other rights
against Borrower, and Guarantor waives any right to enforce
any remedy that Bank now has or may hereafter have against
Borrower. Guarantor waives all rights to participate in any
security now or hereafter held by Bank. Guarantor waives all
presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of
dishonor, and notices of acceptance of this Guaranty and of
the existence, creation, or incurring of new or additional
indebtedness. Guarantor assumes the responsibility for being
and keeping itself informed of the financial condition of
Borrower and of all other circumstances bearing upon the risk
of nonpayment of any indebtedness or nonperformance of any
obligation of Borrower, warrants to Bank that it will keep so
informed, and agrees that absent a request for particular
information by Guarantor, Bank shall have no duty to advise
Guarantor of information known to Bank regarding such
condition or any such circumstances.
5. Guarantor acknowledges that, to the extent Guarantor
has or may have certain rights of subrogation or reimbursement
against Borrower for claims arising out of this Guaranty,
those rights may be impaired or destroyed if Bank elects to
proceed against any real property security of Borrower by non-
judicial foreclosure. That impairment or destruction could,
under certain judicial cases and based on equitable principles
of estoppel, give rise to a defense by Guarantor against its
obligations under this Guaranty. Guarantor waives that
defense and any others arising from Bank's election to pursue
non-judicial foreclosure.
6. If Borrower becomes insolvent or is adjudicated
bankrupt or files a petition for reorganization, arrangement,
composition or similar relief under any present or future
provision of the United States Bankruptcy Code, or if such a
petition is filed against Borrower, and in any such proceeding
some or all of any indebtedness or obligations under the
Agreements are terminated or rejected or any obligation of
Borrower is modified or abrogated, or if Borrower's
obligations are otherwise avoided for any reason, Guarantor
agrees that Guarantor's liability hereunder shall not thereby
be affected or modified and such liability shall continue in
full force and effect as if no such action or proceeding had
occurred. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if any payment must be
returned by Bank upon the insolvency, bankruptcy or
reorganization of Borrower, Guarantor, any other guarantor, or
otherwise, as though such payment had not been made.
- 2 -<PAGE>
7. Any indebtedness of Borrower now or hereafter held
by Guarantor is hereby subordinated to any indebtedness of
Borrower to Bank; and such indebtedness of Borrower to
Guarantor shall be collected, enforced and received by
Guarantor as trustee for Bank and be paid over to Bank on
account of the indebtedness of Borrower to Bank but without
reducing or affecting in any manner the liability of Guarantor
under the other provisions of this Guaranty.
8. Guarantor agrees to pay a reasonable attorneys' fee
and all other costs and expenses which may be incurred by Bank
in the enforcement of this Guaranty. No terms or provisions
of this Guaranty may be changed, waived, revoked or amended
without Lender's prior written consent. Should any provision
of this Guaranty be determined by a court of competent
jurisdiction to be unenforceable, all of the other provisions
shall remain effective. This Guaranty embodies the entire
agreement among the parties hereto with respect to the matters
set forth herein, and supersedes all prior agreements among
the parties with respect to the matters set forth herein. No
course of prior dealing among the parties, no usage of trade,
and no parol or extrinsic evidence of any nature shall be used
to supplement, modify or vary any of the terms hereof. There
are no conditions to the full effectiveness of this Guaranty.
Bank may assign this Guaranty without in any way affecting
Guarantor's liability under it. This Guaranty shall inure to
the benefit of Bank and its successors and assigns. This
Guaranty is in addition to the guaranties of any other
guarantors and any and all other guaranties of Borrower's
indebtedness or liabilities to Bank.
9. Guarantor represents and warrants to Bank that (i)
Guarantor has taken all necessary and appropriate action to
authorize the execution, delivery and performance of this
guaranty, (ii) execution, delivery and performance of this
Guaranty do not conflict with or result in a breach of or
constitute a default under Guarantor's Articles of
Incorporation or Bylaws or other organizational documents or
agreements to which it is party or by which it is bound, and
(iii) this Guaranty constitutes a valid and binding
obligation, enforceable against Guarantor in accordance with
its terms.
10. Guarantor covenants and agrees that Guarantor shall
do all of the following:
10.1 Guarantor shall maintain its corporate
existence, remain in good standing in _______________, and
continue to qualify in each jurisdiction in which the failure
to so qualify could have a material adverse effect on the
financial condition, operations or business of Guarantor.
Guarantor shall maintain in force all licenses, approvals and
agreement, the loss of which could have a material adverse
effect on its financial condition, operations or business.
- 3 -<PAGE>
10.2 Guarantor shall comply with all statutes, laws,
ordinances, directives, orders, and government rules and
regulations to which it is subject if non-compliance with such
laws could adversely affect the financial condition,
operations or business of Guarantor.
10.3 At any time and from time to time Guarantor
shall execute and deliver such further instruments and take
such further action as may reasonably be requested by Bank to
effect the purposes of this Agreement.
11. This Guaranty shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to conflicts of
laws principles. GUARANTOR WAIVES ANY RIGHT TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS,
AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. Guarantor
submits to the exclusive jurisdiction of the state and federal
courts of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the undersigned Guarantor has
executed this Guaranty as of this ____ day of July, 1997.
HOLOMETRIX, INC.
By: //JOHN E. WOLFE//
Name: John E. Wolfe
Title: President
- 4 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets as of September 30, 1997 and 1996, and the
Consolidated Statements of Operations, Stockholders Equity and Cash Flows for
the years ended September 30, 1997 and 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 184,423
<SECURITIES> 0
<RECEIVABLES> 964,480
<ALLOWANCES> (35,000)
<INVENTORY> 845,256
<CURRENT-ASSETS> 2,010,117
<PP&E> 1,371,490
<DEPRECIATION> (976,497)
<TOTAL-ASSETS> 2,710,505
<CURRENT-LIABILITIES> 1,750,919
<BONDS> 328,210
0
0
<COMMON> 280,982
<OTHER-SE> 350,394
<TOTAL-LIABILITY-AND-EQUITY> 2,710,505
<SALES> 4,528,636
<TOTAL-REVENUES> 4,528,636
<CGS> 2,336,860
<TOTAL-COSTS> 2,336,860
<OTHER-EXPENSES> 2,284,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,747
<INCOME-PRETAX> (149,869)
<INCOME-TAX> 25,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (36,902)
<CHANGES> 0
<NET-INCOME> (211,771)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
