Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997
Transition Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-16152
Holometrix, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 04-2891557
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
Number)
25 Wiggins Avenue, Bedford, Massachusetts 01730-2323
(Address of Principal Executive Offices)
(617) 275-3300
(Issuers Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No
As of March 31, 1997, 22,296,878 shares of Common Stock were
outstanding.
Transitional Small Business Disclosure Format:
Yes No
FORM 10-QSB
QUARTERLY REPORT
TABLE OF CONTENTS
Facing Page . . . . . . . . . . . . . . . . . . . . . . .. . . .1
Table of Contents . . . . . . . . . . . . . . . . . . . . . . .2
PART I. FINANCIAL INFORMATION (*)
Item 1. Condensed Consolidated Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . .3
Statements of Loss . . . . . . . . . . . . . . . . . .5
Statements of Cash Flows. . . . . . . . . . . . . . .7
Notes to Condensed Consolidated Financial Statements..8
Item 2. Management's Discussion and Analysis or Plan of
operations . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . .13
Item 2. Changes in Securities . . . . . . . . . . . . .13
Item 3. Defaults upon Senior Securities . . . . . . . .13
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . 13
Item 5. Other Information . . . . . . . . . . . . . . .13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . .13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . .14
(*) The financial information at September 30, 1996 has been
taken from the audited financial statements at that date. All
other financial statements are unaudited.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
HOLOMETRIX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
March 31, September 30,
1997 1996
(*)
CURRENT ASSETS:
Cash and cash equivalents $189,736 $ 27,495
Accounts receivable, less allowance
for doubtful accounts of $35,000 1,127,420 1,162,148
Inventories 745,461 662,323
Due from stockholder 12,379 -
Other current assets 20,331 32,802
TOTAL CURRENT ASSETS 2,095,327 1,884,768
EQUIPMENT AND FIXTURES - net 318,081 351,656
OTHER ASSETS - net 301,731 312,299
TOTAL ASSETS $2,715,139 $2,548,723
See notes to condensed consolidated financial statements.
(*)Balance sheet at September 30, 1996 has been taken from the
audited financial statements at that date. All other financial
statements are unaudited.
HOLOMETRIX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
March 31, September 30,
1997 1996
(*)
CURRENT LIABILITIES:
Notes payable - stockholders $ 50,000 $ 20,000
Notes payable -line of credit 284,000 84,000
Accounts payable 1,308,509 1,204,028
Accrued payroll and related expenses 40,244 37,086
Accrued other expenses 153,525 59,135
Due to stockholder - 77,204
Current maturities of
long-term obligations 110,010 105,000
TOTAL CURRENT LIABILITIES 1,946,288 1,586,453
LONG-TERM DEBT, .
Notes payable-stockholders,
less current maturities 50,000 100,000
Long term obligations,
less current maturities 56,095 113,539
TOTAL LIABILITIES 2,052,383 1,799,992
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 106,436 66,634
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 30,000,000 shares
authorized; issued 26,533,157 265,332 265,332
Additional paid-in capital 2,459,009 2,459,009
Accumulated deficit (2,044,021) (1,878,244)
680,320 846,097
Less: Treasury stock (at cost) 104,000 104,000
Subscriptions Receivable 20,000 60,000
TOTAL STOCKHOLDERS'
EQUITY 556,320 682,097
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,715,139 $2,548,723
See notes to condensed consolidated financial statements.
(*)Balance sheet at September 30, 1996 has been taken from the
audited financial statements at that date. All other financial
statements are unaudited.
HOLOMETRIX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Unaudited)
Three-Month Period Ended March 31,
1997 1996
NET REVENUES $1,232,418 $353,246
COST OF SALES 658,074 271,300
GROSS PROFIT 574,344 81,946
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 561,614 197,140
RESEARCH AND DEVELOPMENT 89,679 37,894
TOTAL OPERATING EXPENSES 651,293 235,034
LOSS FROM OPERATIONS (76,949) (153,088)
INTEREST EXPENSE - net (18,635) (8,618)
LOSS BEFORE MINORITY INTEREST (95,584) (161,706)
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED SUBSIDIARY (36,192) -
NET LOSS ($131,776) ($161,706)
NET LOSS PER COMMON SHARE: ($0.01) ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES USED IN CALCULATION OF 22,296,878 16,296,878
INCOME PER COMMON SHARE
See notes to condensed financial statements.
HOLOMETRIX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Unaudited)
Six-Month Period Ended March 31,
1997 1996
NET REVENUES $2,315,040 $845,680
COST OF SALES 1,226,613 612,818
GROSS PROFIT 1,088,427 232,862
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,024,886 335,354
RESEARCH AND DEVELOPMENT 164,644 70,707
TOTAL OPERATING EXPENSE 1,189,530 406,061
LOSS FROM OPERATIONS (101,103) (173,199)
INTEREST EXPENSE - net (24,872) (16,742)
LOSS BEFORE MINORITY INTEREST (125,975) (189,941)
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED SUBSIDIARY (39,802) -
NET LOSS ($165,777) ($189,941)
NET LOSS PER COMMON SHARE: ($0.01) ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES USED IN CALCULATION OF 22,296,878 16,296,878
LOSS PER COMMON SHARE
See notes to condensed financial statements.
HOLOMETRIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six-Month Period Ended March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($165,777) ($189,941)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Depreciation and amortization 71,963 65,766
Minority interest 39,802 -
Change in operating assets and liabilities:
Accounts receivable 34,728 (121,161)
Inventories (83,138) 14,721
Other current assets 9,223 (17,962)
Accounts payable and accrued expenses 202,029 138,076
Net cash provided (used)
by operating activities 108,830 (110,501)
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment and fixtures additions (24,572) (17,537)
Net cash used for investing activities (24,572) (17,537)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in notes payable to:
stockholders and others (20,000) 50,000
Due to stockholder, net (89,583) 15,676
Increase in bank line of credit 200,000 25,000
Subscription receivable payments 40,000 -
Decrease in long-term obligations (52,434) (2,301)
Net cash provided by
financing activities 77,983 88,375
Net increase (decrease)
in cash and cash equivalents 162,241 (39,663)
Cash and cash equivalents,
beginning of period 27,495 40,707
Cash and cash equivalents, end of period $189,736 $ 1,044
See notes to condensed consolidated financial statements.
HOLOMETRIX, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions for Form 10-QSB. Accordingly, they do not include
all information and footnotes required by generally accepted
accounting principles for complete financial statement
presentation. For further information refer to the financial
statements and notes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 1996.
The results of operations for any interim periods reported are
not necessarily indicative of those that may be expected for the
full year. The accompanying financial information is unaudited;
however, in the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary to
a fair presentation of the operating results of the period have
been included.
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Holometrix, Inc. (the "Company") is a
product development, manufacturing and contract test services
company which specializes in manufacturing instruments
("Instruments") and providing contract test services ("Testing
Services") for measuring the thermophysical properties of a wide
variety of materials. National Metal Refining Company, Inc.,
("Nametre"), in which Holometrix holds a majority ownership
position, manufactures on-line sensors and laboratory instruments
for measuring the viscosity of a wide range of materials.
Three-Month Period Ended March 31, 1997 as Compared With
the Three-Month Period Ended March 31, 1996
Revenues in the second quarter of fiscal 1997 totaled
$1,232,000 as compared to $353,000 in the comparable quarter of
1996, an increase of $879,000. This 249% increase is primarily
due to the acquisition of a majority ownership in National Metal
Refining Company, Inc., ("Nametre") during fiscal year 1996. The
revenues for Nametre alone totaled $770,000 and Revenues for
Holometrix alone totaled $462,000, a 31% increase over the
comparable quarter of fiscal 1996, due primarily to increased
sales and marketing activity and the introduction of the
Company's new Lambda instrument.
Cost of sales increased by $387,000, or 143%, from $271,000
(77% of sales) in the first quarter of fiscal 1996 to $658,000
(53% of sales) in the same period of fiscal 1997. This 143%
increase is attributable primarily to the Nametre acquisition.
Cost of sales for Holometrix alone totaled $359,000, a 32%
increase. This increase is primarily due to the comparable
increase in sales.
Selling, general and administrative expenses increased by
$364,000, or 185%, from $197,000 (56% of sales) to $562,000 (46%
of sales). The difference was primarily the result of the
acquisition of Nametre. Holometrix expenses alone totaled
$233,000, an increase of 18%. The Holometrix increase was
primarily due to professional expenses incurred in connection
with the consolidation of Nametre, and increased marketing and
sales activities.
Research and development increased $52,000, from $38,000 (11%
of sales) to $90,000 (7% of sales). The increase was again
primarily due to the acquisition of Nametre. Holometrix R&D
alone increased $13,000, an increase of 34%. This increase was
due to the addition of a development engineer and the ongoing
development of new instrument products.
Loss from operations was $77,000 in the first quarter of
fiscal 1997, compared with a loss of $153,000 in the comparable
period of fiscal 1996. Holometrix' loss from operation alone was
$182,000. Consolidated Net loss was $132,000 in the first
quarter of fiscal 1997. Holometrix net loss alone was $189,000
compared with a net loss of $162,000 in the comparable period of
fiscal 1996. These losses are primarily due to increased selling
and administrative costs, partially offset by improved cost of
goods sold, and income derived from the consolidation of Nametre.
Six-Month Period Ended March 31, 1997 as Compared With
the Six-Month Period Ended March 31, 1996
Revenues in the first half of fiscal 1997 totaled $2,315,000
as compared to $846,000 in the comparable period of 1996, an
increase of $1,469,000. This 174% increase is primarily due to
the acquisition of a majority ownership in Nametre during fiscal
year 1996. The revenues for Nametre alone totaled $1,347,000 and
Revenues for Holometrix alone totaled $968,000, a 14% increase
over the comparable period of fiscal 1996, due primarily to
increased sales and marketing activity and the introduction of
the Company's new Lambda instrument.
.
Cost of sales increased by $614,000, or 100%, from $613,000
(72% of sales) in the first half of fiscal 1996 to $1,227,000
(53% of sales) in the same period of fiscal 1997. This 100%
increase is attributable primarily to the Nametre acquisition.
Cost of sales for Holometrix alone totaled $685,000, a 12%
increase. This increase is primarily due to the comparable
increase in sales.
Selling, general and administrative expenses increased by
$690,000, or 206%, from $335,000 (40% of sales) to $1,025,000
(44% of sales). The difference was primarily the result of the
acquisition of Nametre. Holometrix expenses alone totaled
$411,000, an increase of 23%. The Holometrix increase was
primarily due to professional expenses incurred in connection
with the consolidation of Nametre, and increased marketing and
sales activities.
Research and development increased $94,000, from $71,000 (8%
of sales) to $165,000 (7% of sales). The increase was again due
to the acquisition of Nametre. Holometrix R&D alone increased
$16,000, an increase of 23%. This increase was due to the
addition of a development engineer and ongoing development of new
instrument products.
Loss from operations was $101,000 in the first half of fiscal
1997, compared with a loss of $173,000 in the comparable period
of fiscal 1996. Holometrix' loss from operation alone was
$215,000. Consolidated Net loss was $166,000 in the first half
of fiscal 1997. Holometrix net loss alone was $229,000 compared
with a net loss of $190,000 in the comparable period of fiscal
1996. These losses are primarily due to increased selling and
administrative costs, partially offset by improved cost of goods
sold, and income derived from the consolidation of Nametre.
Total Assets increased by $166,000 (7%) in the first half,
from $2,548,723 to $2,715,139. Cash increased by $162,000,
primarily as a result of increased borrowing from the Company's
bank line of credit and due to increased collections activity,
accounts receivable decreased by $35,000 in the first half.
Inventories increased by $83,000, due to manufacturing plans for
increased sales volume. Other assets decreased by $11,000, due
primarily to $14,000 for amortization of goodwill and patents,
offset by $3,000 increase in deposits to a foreign entity.
Equipment and fixtures decreased by $33,000, due primarily to
depreciation and amortization.
Total Liabilities increased by $252,000, primarily due to a
$200,000 increase in the Company's line of credit, and increases
of $97,000 in accrued payroll and other expenses. This was
offset by decreases due to repayment of $77,000 to a stockholder,
decreases of $107,000 in long-term debt, and increases of $35,000
in notes payable to stockholders and other current maturities.
Accounts payable increased by $104,000, from $1,204,000 at
September 30, 1996, to $1,308,000 at March 31, 1997, primarily
due to increases in operational expenditures.
As of March 31, 1997, the Company had an outstanding order
backlog for products and services of approximately $485,000 as
compared to a backlog of $120,000 at March 31, 1996. The Company
believes the $485,000 backlog will be realized in fiscal 1997.
The outstanding backlog for Holometrix alone at March 31, 1997,
was approximately $335,000, an increase of $215,000 (179%).
Management believes this is due to increased marketing and sales
activities, combined with the introduction of the Lambda 2000
series of instruments.
LIQUIDITY AND CAPITAL RESOURCES
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 acquisition has been accounted for
under the purchase method of accounting, resulting in the cost of
the acquisition being preliminarily allocated on the basis of the
estimated fair value of the assets acquired and liabilities
assumed. This allocation has resulted in goodwill of
approximately $245,000 which is being amortized over 15 years.
The purchase also provided for the acquisition by the Company of
warrants to purchase an additional 13,334 shares at $3 per share
and 10,000 shares at $6 per share. The Company raised the funds
to acquire Nametre by issuing 6,000,000 shares of the Company's
common stock to Tytronics, Incorporated ("Tytronics"), at a
purchase price of $.05 per share. At the time of this sale of
shares, the Company entered into a debt restructuring agreement
with Tytronics; in conjunction with that agreement, the Company
also issued warrants to Tytronics to purchase one million, one
hundred thousand (1,100,000) shares of Common Stock at an
exercise price of $0.05 per share and one million (1,000,000)
shares of Common Stock at an exercise price of $0.10 per share,
expiring February 1, 2006. The purchase did not have a material
effect on the Consolidated Statement of Income for the year ended
September 30, 1996.
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 oiginal $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. At March 31, 1997, the total outstanding balance
was $100,000, of which $50,000 is classified as current.
Notes payable line of credit
On December 22, 1994, Silicon Valley Bank provided the Company
with a line of credit in the amount of $350,000. This line of
credit is secured by substantially all assets of the Company.
Advances under this line are not permitted to exceed 70% of the
Company's eligible accounts receivable as defined. These
outstanding amounts are payable on demand and advances are
contingent upon maintaining certain covenants relative to
profitability, liquidity, tangible net worth, and leverage. As
of March 31, 1997, the Company was not in compliance with the
leverage covenant. This was due to the $300,000 invested in
Nametre. These investments are excluded from the tangible net
worth calculation. The bank subsequently provided the Company
with a waiver of that covenant. As of March 31, 1997, borrowings
under the line of credit were $284,000. On December 31, 1996,
the Silicon Valley Bank approved the inclusion of the Nametre
accounts receivables in the Company's borrowing base, thereby
increasing the Company's borrowing capacity.
In the second half of fiscal 1996 the Company introduced 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. If the Company's new instrument product line, combined
with new marketing efforts meet with success, the Company's
management believes that increased revenues could result in a
return to profitability before the end of fiscal 1997. Under
these conditions, management believes that operating capital and
the line of credit from Silicon Valley Bank will provide
sufficient capital to maintain stable Company operations
throughout fiscal 1997. Management also believes that additional
capital resources will be available from Tytronics. However,
there can be no assurance that the Company will become profitable
in fiscal 1997, that adequate operating funds will be generated
through revenue increases, 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 "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 Statement of Financial Accounting
Standards No. 128 ("FAS No. 128") has not been estimated. The
Company is required to adopt the disclosure requirements of FAS
No. 128 during the period ended December 31, 1997.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on
Marc 13, 1997. Two issues were submitted for vote: (a) To fix
the number of directors at four, and to elect four directors to
hold office for the ensuing year; and (b) To approve the
selection by the Board of Directors of BDO Seidman as the
Company's independent auditors for the fiscal year ending
September 30, 1997. Fixing the number of directors at four
received 18,780,463 votes for, -0- votes against, and 176,596
votes abstained. Each director received 18,780,463 votes for, no
votes against, and 176,596 votes abstained. BDO Seidman received
18,923,725 votes for, 30,000 votes against, and 3,334 votes
abstained. The Stockholders elected the four directors as
proposed, and approved the selection of the Company's independent
auditors as proposed.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: The following exhibits are filed as
a part of this Form 10-QSB
Exhibit 27.0 Financial Data Schedule.
(b) Reports on Form 8-K
Not applicable.
SIGNATURE
Pursuant to the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Holometrix, Inc.
By:/s/John E. Wolfe
John E. Wolfe
President and Treasurer
(Principal Executive Officer and
Financial Officer)
Date: May 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-QSB March
31, 1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 189,736
<SECURITIES> 0
<RECEIVABLES> 1,162,420
<ALLOWANCES> (35,000)
<INVENTORY> 745,461
<CURRENT-ASSETS> 2,095,327
<PP&E> 1,390,296
<DEPRECIATION> (1,072,215)
<TOTAL-ASSETS> 2,715,139
<CURRENT-LIABILITIES> 1,946,288
<BONDS> 212,531
0
0
<COMMON> 265,332
<OTHER-SE> 290,988
<TOTAL-LIABILITY-AND-EQUITY> 2,715,139
<SALES> 2,315,040
<TOTAL-REVENUES> 2,315,040
<CGS> 1,226,613
<TOTAL-COSTS> 1,226,613
<OTHER-EXPENSES> 1,189,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,872
<INCOME-PRETAX> (165,777)
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<DISCONTINUED> 0
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<NET-INCOME> (165,777)
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