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 June 30, 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 June 30, 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 ofOperations 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)
June 30, September 30,
1997 1996
(*)
CURRENT ASSETS:
Cash and cash equivalents $189,294 $ 27,495
Accounts receivable, less allowance
for doubtful accounts of $35,000 1,071,674 1,162,148
Inventories 792,196 662,323
Due from stockholder 1,830 -
Other current assets 23,837 32,802
TOTAL CURRENT ASSETS 2,078,831 1,884,768
EQUIPMENT AND FIXTURES - net 363,889 351,656
OTHER ASSETS - net 292,700 312,299
TOTAL ASSETS $2,735,420 $2,548,723
See notes to condensed consolidated financial statements.
(*)Balance sheet at September 30, 1996 has been taken from the
audited financial statements at that date. All other financial
statements are unaudited.
HOLOMETRIX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
June 30, September 30,
1997 1996
(*)
CURRENT LIABILITIES:
Notes payable - stockholders$ 50,000 $ 20,000
Notes payable -line of credit 284,000 84,000
Accounts payable 1,267,282 1,204,028
Accrued payroll and related expenses41,805 37,086
Accrued other expenses 254,794 59,135
Due to stockholder 4,340 77,204
Current maturities
of long-term obligations 85,020 105,000
TOTAL CURRENT LIABILITIES 1,987,241 1,586,453
LONG-TERM DEBT:
Notes payable-stockholders,
less current maturities 50,000 100,000
Long term obligations,
less current maturities 54,846 113,539
TOTAL LIABILITIES 2,092,087 1,799,992
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 120,137 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 (2,097,145) (1,878,244)
627,196 846,097
Less: Treasury stock (at cost) 104,000 104,000
Subscriptions Receivable - 60,000
TOTAL STOCKHOLDERS'
EQUITY 523,196 682,097
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,735,420 $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 June
30,
1997 1996
NET REVENUES $1,019,677 $577,703
COST OF SALES 534,982 318,014
GROSS PROFIT 484,695 259,689
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 401,764 202,689
RESEARCH AND DEVELOPMENT 105,150 42,349
TOTAL OPERATING EXPENSES 506,914 245,038
(LOSS) INCOME FROM OPERATIONS (22,219) 14,651
INTEREST EXPENSE - net (17,201) (9,445)
(LOSS) INCOME BEFORE
MINORITY INTEREST (39,420) 5,206
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED SUBSIDIARY (13,702) -
NET (LOSS) INCOME ($53,122) $ 5,206
NET LOSS PER COMMON SHARE: ($0.00) $0.00
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES USED IN CALCULATION OF
INCOME PER COMMON SHARE 22,296,878 16,296,878
See notes to condensed financial statements.
HOLOMETRIX, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Unaudited)
Nine-Month Period EndedJune
30,
1997 1996
NET REVENUES $3,334,717 $1,423,382
COST OF SALES 1,761,595 930,832
GROSS PROFIT 1,573,122 492,550
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,426,655 538,048
RESEARCH AND DEVELOPMENT 269,794 113,051
TOTAL OPERATING EXPENSE 1,696,449 651,099
LOSS FROM OPERATIONS (123,327) (158,549)
INTEREST EXPENSE - net (42,071) (26,187)
LOSS BEFORE MINORITY INTEREST (165,398) (184,736)
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED SUBSIDIARY (53,503) -
NET LOSS ($218,901) ($184,736)
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)
Nine-Month Period Ended June
30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($218,901) ($184,736)
Adjustments to reconcile net loss
to net cash provided by (used for)
operating activities:
Depreciation and amortization 110,619 93,555
Minority interest 53,503 -
Change in operating assets and liabilities:
Accounts receivable 90,474 (29,731)
Inventories (129,873) 11,744
Other current assets 7,841 (1,354)
Accounts payable and
accrued expenses 263,632 109,035
Net cash provided (used)
by operating activities 177,295 (1,487)
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment and fixtures additions (102,129) (36,572)
Notes receivable - (50,000)
Net cash used for
investing activities (102,129) (86,572)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in notes payable to:
stockholders and others (20,000) 39,933
Due to stockholder, net (74,694) 43,757
Increase in bank line of credit 200,000 25,000
Subscription receivable payments 60,000 -
Decrease in long-term obligations (78,673) (3,411)
Net cash provided
by financing activities 86,633 105,279
Net increase (decrease) in cash
and cash equivalents 161,799 17,220
Cash and cash equivalents,
beginning of period 27,495 40,707
Cash and cash equivalents,
end of period $ 189,294 $ 57,927
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 June 30, 1997 as Compared With
the Three-Month Period Ended June 30, 1996
Revenues in the third quarter of fiscal 1997 totaled
$1,020,000 as compared to $578,000 in the comparable quarter of
1996, an increase of $442,000. This 76% 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 $492,000 and Revenues for Holometrix alone totaled $528,000,
a 9% decrease over the comparable quarter of fiscal 1996.
This decrease is due primarily to the decrease of revenue from
a government contract and certain instruments, offset by increased
sales generated from the introduction of the Company's new Lambda
instrument.
Cost of sales increased by $217,000, or 68%, from $318,000
(55% of sales) in the third quarter of fiscal 1996 to $535,000
(52% of sales) in the same period of fiscal 1997. This 68%
increase is attributable primarily to the Nametre acquisition.
Cost of sales for Holometrix alone totaled $350,000, a 10%
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
$199,000, or 98%, from $203,000 (35% of sales) to $402,000 (39%
of sales). The difference was primarily the result of the
acquisition of Nametre. Holometrix expenses alone totaled
$201,000, a decrease of 1%.
Research and development increased $63,000, from $42,000 (7%
of sales) to $105,000 (10% of sales). The increase was again
primarily due to the acquisition of Nametre. Holometrix R&D
alone decreased $2,000, a decrease of 5%.
Loss from operations was $22,000 in the third quarter of
fiscal 1997, compared with an income of $15,000 in the comparable
period of fiscal 1996. Holometrix' loss from operation alone was
$63,000. Consolidated Net loss was $53,000 in the third quarter
of fiscal 1997. Holometrix net loss alone was $75,000 compared
with a net income of $5,000 in the comparable period of fiscal
1996. These losses are primarily due to lower sales and increased
costs of sales, partially offset by income derived from the
consolidation of Nametre.
Nine-Month Period Ended June 30, 1997 as Compared With
the Nine-Month Period Ended June 30, 1996
Revenues for the nine months of fiscal 1997 totaled $3,335,000
as compared to $1,423,000 in the comparable period of 1996, an
increase of $1,912,000. This 134% 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
$1,839,000 and revenues for Holometrix alone totaled $1,496,000,
a 5% 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 $831,000, or 89%, from $931,000
(65% of sales) for the nine months of fiscal 1996 to $1,762,000
(53% of sales) in the same period of fiscal 1997. This 89%
increase is primarily due to the Nametre acquisition. Cost of
sales for Holometrix alone totaled $1,034,000, an 11% 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
$889,000, or 165%, from $538,000 (38% of sales) to $1,427,000
(43% of sales). The difference was primarily the result of the
acquisition of Nametre. Holometrix expenses alone totaled
$612,000, an increase of 14%.
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 $157,000, from $113,000 (8%
of sales) to $270,000 (8% of sales). The increase was again due
to the acquisition of Nametre. Holometrix R&D alone increased
$14,000, an increase of 12%. This increase was due to the
addition of a development engineer and ongoing development of new
instrument products.
Loss from operations was $123,000 for the nine months of
fiscal 1997, compared with a loss of $159,000 in the comparable
period of fiscal 1996. Holometrix' loss from operations alone
was $278,000. Consolidated Net loss was $219,000 for the nine
months of fiscal 1997. Holometrix net loss alone was $303,000
compared with a net loss of $185,000 in the comparable period of
fiscal 1996. These losses are primarily due to increased
manufacturing, selling and administrative costs, partially offset
by income derived from the consolidation of Nametre.
Total Assets increased by $187,000 (7%) in the nine months of
fiscal 1997, from $2,549,000 to $2,735,000. Cash increased by
$162,000, 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
$90,000 in the nine months. Inventories increased by $130,000,
due to manufacturing plans for increased sales volume and the
introduction of a new product. Other current assets decreased by
$9,000, due to the expensing of incurred but unbilled insurance
premiums. Other assets decreased by $20,000, due primarily to
$21,000 for amortization of goodwill and patents, offset by
a $1,000 increase in deposits. Equipment and fixtures increased
by $12,000, due to purchase of additional equipment.
Total Liabilities increased by $292,000, primarily due to a
$200,000 increase in the Company's line of credit, and increases
of $263,000 in accounts payable and accrued expenses. This was
offset by decreases due to net payment of $74,000 to a
stockholder, decreases of $78,000 in long-term debt, and
decreases of $20,000 in notes payable to stockholders and other
current maturities. Accounts payable increased by $63,000, from
$1,204,000 at September 30, 1996, to $1,267,000 at June 30, 1997,
primarily due to increases in operational expenditures and, and sales
commissions.
As of June 30, 1997, the Company had an outstanding order
backlog for products and services of approximately $825,000 as
compared to a backlog of $368,000 at June 30, 1996. this increase
is primarily due to the inclusion of Nametre's backlog. The Company
believes the $ 825,000 backlog will largely be realized in fiscal
1997. The outstanding backlog for Holometrix alone at June 30, 1997
was approximately $ 278,000, a decrease of $ 90,000 (24%). This
decrease is due primarily to the decrease of revenue from a
government contract and certain 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, 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 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. At June 30, 1997, the total outstanding balance
was $100,000, of which $50,000 is classified as current.
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 June 30,
1997, the Company was in compliance with all covenants and ratios
of the new line of credit. At June 30, 1997, the Companys'
borrowings under its prior line of credit were $284,000.
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 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, it is unlikely that
the Company will become profitable in fiscal 1997, and 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
Not applicable.
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: August 13, 1997
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-QSB
JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<CURRENT-ASSETS> 2,078,831
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