______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
__________
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ x ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
HOLOMETRIX, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the
Registrant)
Payment of Filing Fee (Check Appropriate Box)
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee
was paid previously. Identify the previous filing
by registration statement number, or the Form or
Schedule and the date of its filing.<PAGE>
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
_______________________________________________________________________
HOLOMETRIX, INC.
25 Wiggins Avenue, Bedford, Massachusetts 01730-2323
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On October 28, 1997
Notice is hereby given that a Special Meeting of Stockholders
of Holometrix, Inc. (the "Company" or "Holometrix") will be held
on Tuesday, October 28, 1997, at 10:00 a.m. at the offices of the
Company, 25 Wiggins Avenue, Bedford, Massachusetts, to consider
and act upon the following matters:
1. To consider and act upon an amendment to the Company's
Certificate of Incorporation, as amended, to increase
the number of authorized shares of Common Stock, $.01
par value, from 30,000,000 to 100,000,000 shares.
2. To consider and act upon an amendment to the Company's
Certificate of Incorporation, as amended, effective
following the reorganization of the Company, Tytronics
Incorporated ("Tytronics") and National Metal Refining
Company ("Nametre") described in the accompanying Proxy
Statement, providing (a) for a reduction in the number
of authorized shares of Common Stock for the Company
from 100,000,000 shares to 2,000,000 shares with $.50
par value (such new shares of Common Stock to be
referred to herein as the "New Common Stock"); and (b)
for a 50 to 1 reverse stock split of the Company's
Common Stock (items (a) and (b) will be considered one
proposal and will be referred to herein as the "Reverse
Stock Split"), all as described more fully in the
accompanying Proxy Statement.
3. To consider and act upon an amendment to the Company's
Certificate of Incorporation, as amended, to change the
name of the Company from Holometrix, Inc. to
Metrisa, Inc.
4. To transact such other business as may properly come
before the meeting or any adjournments of the meeting.
Stockholders of record of the Company as of the close of
business on September 5, 1997 are entitled to notice of and to
vote at the meeting and any adjournment thereof. The text of the
proposed Amendments to the Company's Certificate of Incorporation
are set forth in Exhibit A to the accompanying Proxy Statement.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors
David J. Brown, Secretary<PAGE>
Bedford, Massachusetts
October 9, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR
SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES.
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HOLOMETRIX, INC.
25 Wiggins Avenue, Bedford, Massachusetts 01730-2323
PROXY STATEMENT
for
Special Meeting of Stockholders to be held October 28, 1997
A Special Meeting of Stockholders of Holometrix, Inc., a
Delaware corporation (the "Company" or "Holometrix"), will be held
Tuesday, October 28, 1997, for the purposes set forth in the
accompanying Notice of Special Meeting. This statement is
furnished in connection with the solicitation of proxies by the
Board of Directors to be used at such meeting and at any and all
adjournments thereof and is first being sent to stockholders on or
about October 9, 1997. Any stockholder executing and returning a
proxy in the enclosed form has the power to revoke such proxy at
any time prior to the voting thereof by written notice to the
Company, by executing a later dated proxy or by appearing and
voting at the meeting.
At the Special Meeting, action is to be taken on (a) the
amendment to the Company's Certificate of Incorporation, as
amended, to increase the number of shares of authorized Common
Stock from 30,000,000 to 100,000,000 shares, (b) an amendment to
the Company's Certificate of Incorporation, as amended, effective
following the reorganization of the Company, Tytronics
Incorporated ("Tytronics") and National Metal Refining Company
("Nametre") described in this Proxy Statement, providing (i) for a
reduction in the number of authorized shares of Common Stock for
the Company from 100,000,000 shares to 2,000,000 shares with $.50
par value (such new shares of Common Stock to be referred to
herein as the "New Common Stock"); and (ii) for a 50 to 1 reverse
stock split of the Company's Common Stock (items (i) and (ii) will
be considered one proposal and will be referred to herein as the
"Reverse Stock Split"); (c) the amendment to the Company's
Certificate of Incorporation, as amended, to change the name of
the Company from Holometrix, Inc. to Metrisa, Inc. and (d) the
transaction of such other business as may properly come before the
meeting. The text of the proposed Amendments to the Company's
Certificate of Incorporation are set forth in Exhibit A to this
Proxy Statement.
All shares represented at the meeting by proxies in the
accompanying form will be voted provided that such proxies are
properly signed. In cases where a choice is indicated, the shares
represented will be voted in accordance with the specifications so
made. In cases where no specifications are made, the shares
represented will be voted for the amendments of the Company's
Certificate of Incorporation, as amended, to increase the
authorized number of shares of the Company's Common Stock, to
effect the Reverse Stock Split and to change the name of the
Company to Metrisa, Inc.
The Company will pay all costs of soliciting proxies in the
accompanying form. Solicitation will be made by mail, and
officers and regular employees of the Company may also solicit
proxies by telephone or personal interview. The Company expects
to request brokers and nominees who hold stock in their names to
furnish this proxy material to their customers and to solicit
proxies from them, and will reimburse such brokers and nominees
for their out-of-pocket and reasonable clerical expenses in
connection therewith.
VOTING RIGHTS
The Board of Directors has fixed September 5, 1997 as the
record date for determination of stockholders entitled to vote at
the Special Meeting. At the close of business on September 5,
1997 there were outstanding and entitled to vote 22,296,878 shares
of Common Stock of the Company. Each share of Common Stock is
entitled to one vote. A majority of the outstanding shares of
Common Stock entitled to vote will constitute a quorum for the
transaction of business at the Special Meeting. The affirmative
vote of a majority of the shares of Common Stock present or
represented at the meeting is required for the approval of the
amendments of the Company's Certificate of Incorporation, as
amended, to increase the authorized number of shares of the
Company's Common Stock, to effect the Reverse Stock Split and to
change the name of the Company. Abstentions and broker non-votes
will be counted for purposes of determining whether a quorum is
present at the meeting, however, an abstention from voting or a
broker non-vote has no effect on the votes to amend the Company's
Certificate of Incorporation, as amended or to adopt the Reverse
Stock Split.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of September 5, 1997, to the
knowledge of the Company, the ownership of the Company's
22,296,878 outstanding shares of Common Stock by (i) each person
who is known by the Company to own of record or beneficially more
than five percent (5%) of the outstanding shares of the Company's
Common Stock, (ii) each of the Company's Directors and 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.
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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 6.4%
50 Bay Colony Drive
Westwood, MA 02090
John E. Wolfe 200,0004 *
*Less than 1%
Richard Mannello 300,0004 *
Joaquim S. S. Ribeiro 150,0004 *
Salvatore J. Vinciguerra 150,0004 *
All Officers and Directors 2,235,000 10.2%
as a group (5 persons)
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
______________________
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 1,000,000 and 1,100,000 shares of the Company's Common
Stock at respective exercise prices of $.05 and $.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.
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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, 1996. The information
set forth above is based solely on the Company's review of the
copies of such forms received by it or written representations
from certain reporting persons.
AMENDMENT OF COMPANY'S CHARTER TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK (PROPOSAL 1)
The Board of Directors of the Company has determined that it is in
the best interests of the Company and its stockholders to increase
the authorized number of shares of Common Stock from 30,000,000 to
100,000,000 shares. The Board recommends that the stockholders
approve the amendment to the Company's Certificate of
Incorporation, as amended (the "Charter") to effect the proposed
increase. The purposes of the amendment are: (1) to authorize
additional shares of Common Stock that can be issued in exchange
for the currently outstanding shares of Common Stock and Preferred
Stock of Tytronics Incorporated, a Massachusetts corporation
("Tytronics"), and National Metal Refining Company, a New Jersey
corporation ("Nametre"), in connection with the Reorganization
(described below); and (2) to authorize additional shares of
Common Stock for issuance upon exercise of current and future
employee stock options and for other corporate purposes.
Proposed Reorganization
On August 28, 1997, the Boards of Directors of the Company,
Tytronics and Nametre approved a reorganization (the
"Reorganization") of the Company pursuant to which Tytronics, the
majority owner of the Company, and Nametre, the majority owned
subsidiary of the Company, will be merged into Holometrix
Acquisition Corp. ("Holometrix Acquisition"), a Delaware
corporation and the 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 Preferred
Stock and Common Stock of Tytronics, approximately 16,800 shares
and 150,000 shares, respectively, 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. In addition, in
connection with the Reorganization, all of the outstanding options
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and warrants to purchase Nametre and Tytronics capital stock will
be converted into options and warrants to purchase approximately
27,000,000 shares of Holometrix Common Stock at exercise prices
ranging from $.026 to $.097 with an average exercise price of
$.07 per share. As a result following the Reorganization, there
will be approximately 52,000,000 issued and outstanding shares of
Holometrix Common Stock of which approximately 45,000,000 shares
(or 87%) will be owned of record by former Tytronics and Nametre
stockholders.
Valuation and Opinion
The investment banking firm of Fechtor, Detwiler & Co., Inc.
("Fechtor Detwiler") was retained by Holometrix for purposes of
determining the fair market value of the equity of the Company,
Tytronics and Nametre and to opine on the fairness of the exchange
ratios of the capital stock of the Company, Tytronics and Nametre
to be used in connection with the Reorganization. A committee,
chaired by an outside advisor and also consisting of a member of
each of the Boards of Directors of Holometrix, Tytronics and
Nametre was appointed to work with representatives of Fechtor
Detwiler to insure that Fechtor Detwiler had sufficient
information to determine the relative valuations of Holometrix,
Tytronics and Nametre. Fechtor Detwiler is a Boston-based
investment banking firm which has been in existence for over
thirty years and specializes in private placements, public
offerings, mergers and acquisitions and corporate valuations.
Fechtor Detwiler was chosen by Holometrix to undertake the
valuations as a result of the Company's previous valuation
engagement of Fechtor Detwiler in connection with a September 1996
sale of shares of Holometrix Common Stock to Tytronics. Fechtor
Detwiler was paid approximately $15,000 for its previous
engagement by Holometrix and was reimbursed for its related
expenses. Fechtor Detwiler's valuations in connection with the
Reorganization were based on a discounted cash flow analysis and
the average market capitalization of certain comparable companies.
Fechtor Detwiler determined that the fair market value of the
consolidated equity of Tytronics, Holometrix and Nametre was
$4,124,000, $1,839,000 and $1,432,000, respectively. It was also
Fechtor Detwiler's opinion that an exchange ratio of Holometrix
Common Stock for Nametre Common Stock of 79.807, an exchange ratio
of Holometrix Common Stock for Tytronics Common Stock of 231.402
and an exchange ratio of Holometrix Common Stock for Tytronics
Preferred Stock of 254.542 were fair from a financial point of
view. The Fechtor Detwiler valuation letter is available for
inspection and copying at the Company's principal executive
offices during regular business hours by any interested equity
security holder of the Company or its representative who has been
so designated in writing.
Reasons for the Reorganization
The Board of Directors believes that the Reorganization of
Holometrix, its majority owned subsidiary Nametre, and its
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majority owner Tytronics will lead to greater economies of scale
and to increased management and operating efficiencies by
combining certain operating and management functions previously
conducted separately. The Company also believes that the
Reorganization may lead to greater recognition by the Company's
customers and the business community.
Accounting Treatment
For accounting purposes, Tytronics is deemed to be the acquiring
entity. Accordingly, the Reorganization will be accounted for as
a recapitalization of Tytronics and the acquisition by Tytronics
of the minority interests of Holometrix and Nametre under the
purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16 Business Combinations. At the
closing date, the financial statements will reflect the
acquisition by Tytronics of the minority interests of Holometrix
and Nametre through the issuance of approximately 45,000,000
common shares based on an independent valuation of Tytronics,
Nametre and Holometrix by Fechtor Detwiler investment
bankers.
Representatives of the Company's principal accountants, BDO
Seidman, LLP are not expected to be present at the Stockholders'
meeting.
Certain Federal Income Tax Consequences.
The Reorganization will have no federal income tax consequences
for the Company's Stockholders. The Company does not believe
there will be any material adverse tax consequences to the Company
from the Reorganization.
Regulatory Requirements
There are no federal or state regulatory requirements or approvals
which must be obtained by the Company, Nametre or Tytronics in
connection with the proposed Reorganization.
Interests of Officers and Directors in Connection With the
Reorganization
John E. Wolfe and Joseph J. Caruso, Directors of the Company are
also Directors of Nametre. Mr. Wolfe is also President of the
Company and Tytronics. In addition, Edward J. Stewart, a former
Director of the Company, and Messrs. Caruso and Wolfe are
Directors of Tytronics. Mr. Caruso, as President of Bantam Group,
Inc. ("Bantam") has sole voting and investment power with respect
to the 1,435,000 shares of Common Stock of the Company and the
2,500 shares of Common Stock of Nametre owned by Bantam and is the
beneficial owner of 5,000 shares of the Common Stock of Tytronics.
Joaquim S.S. Ribeiro, a Director of the Company, is the beneficial
owner of 1,708 shares of Tytronics Preferred Stock and 3,000
shares of Common Stock. Mr. Wolfe has an option to purchase
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200,000 shares of the Company's Common Stock at an exercise price
of $.03 per share and is the beneficial owner of 28,500 shares of
the Common Stock and 1,708 shares of the Preferred Stock of
Tytronics. Mr. Stewart is the beneficial owner of 25,000 shares
of Tytronics Common Stock.
Existing Agreements and Arrangements between the Company,
Tytronics and Nametre
Effective September 30, 1996, the Company acquired 120,000 shares
of Nametre Common Stock for cash of $225,000, notes payable of
$75,000 and acquisition costs. The Company raised the funds
necessary to acquire its interest in Nametre by issuing 6,000,000
shares of the Company's Common Stock to Tytronics at a purchase
price of $.05 per share.
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 $3,000 per month for the occupancy by Tytronics of a
portion of the Company's leased facilities. The Company and
Tytronics also share operating and administrative costs based on
estimated usage. During the fiscal years ended September 30, 1996
and 1995 and for the nine month period ended June 30, 1997, this
informal agreement resulted in the payment of approximately
$80,000, $68,000 and $43,000, respectively, by the Company to
Tytronics for such operating and administrative costs.
During the current fiscal year and the fiscal year ended September
30, 1996, the Company and Tytronics were also parties to various
informal working capital agreements pursuant to which Tytronics
provided working capital financing to the Company on a short-term
basis. These advances are payable on demand with 10% interest.
As of June 30, 1997, $100,000 was due to Tytronics by the Company
under these arrangements. During fiscal year 1996 and 1995, the
Company borrowed an aggregate of $130,000 and $111,000, including
interest, from Tytronics under these arrangements. Also during
fiscal year 1996, the Company restructured its existing debt to
Tytronics by extending the due date for an aggregate of $155,000
of existing debt in exchange for the issuance of warrants to
Tytronics to purchase 1,000,000 and 1,100,000 shares of the
Company's Common Stock at warrant exercise price of $.10 and $.05
per share, respectively.
In July of 1997, Tytronics entered into a $1,000,000 Line of
Credit Agreement and a $500,000 Term Loan Agreement with Silicon
Valley Bank secured by substantially all of the assets of the
Company, Nametre and Tytronics. As of June 30, 1997, Tytronics'
borrowings under its prior loan agreements with Silicon Valley
Bank were $284,000.00.
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Effective Date
The effective date for the Reorganization, assuming the approval
of the Nametre and Tytronics stockholders and the approval of the
proposed amendment to the Company's Certificate of Incorporation,
as amended, will be October 30, 1997.
Current Tytronics Offering
During September of 1997, an aggregate of approximately 39,000
shares of Tytronics Common Stock at a purchase price per share of
$17.50, together with a warrant to purchase one additional share
of Common Stock for each share so purchased at a warrant exercise
price of $22.50 per share was offered and sold by Tytronics
independently of the Reorganization in accordance with Regulation
D promulgated under the Securities Act of 1933, as amended. The
relative valuation of Tytronics and the exchange ratios for
Tytronics Common Stock and Preferred Stock calculated in
connection with the Reorganization took into account the closing
of the offering prior to the effective date of the Reorganization.
The effective conversion price for Tytronics Common Stock in
connection with the Reorganization (approximately $17.72 per share,
calculated on a fully diluted basis without taking into account
ownership of minority interests) is approximately the same as
the $17.50 offering price for the shares of Tytronics Common Stock
in the offering.
Other Corporate Purposes
The Board of Directors also recommends increasing the number of
authorized shares of Common Stock to 100,000,000 to provide
additional shares for other corporate purposes in addition to
those shares which will be issued in connection with the
Reorganization. These additional shares would be available for
issuance at the discretion of the Board of Directors in connection
with acquisitions, efforts to raise capital for the Company,
employee stock options and other corporate purposes. Increasing
the number of authorized shares will provide the Company with
additional flexibility to pursue acquisitions which the Board
believes provide the potential for growth and scale without the
delay and uncertainties occasioned by the need to obtain
stockholder approval prior to the consummation of the transaction.
Although the Board has no current plans to effect such actions,
the additional authorized shares also would be available to raise
cash assets through sales of stock to public and private
investors. Furthermore, having such additional shares authorized
and available for issuance or reservation will provide the Company
with greater flexibility in implementing potential future actions
involving the issuance of stock. The ability to issue shares, as
deemed in the best interests of the Company by the Board, will
also permit the Company to avoid the expenses which are incurred
in holding special stockholders' meetings in the future.
Increasing the number of authorized shares will not materially
affect any substantive rights, powers or privileges of current
Company stockholders. Additional shares of Common Stock will be
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issued only upon a determination of the Board of Directors that a
proposed issuance is in the best interests of the Company.
Business of the Company, Tytronics and Nametre
Business of Holometrix
Holometrix, Inc. (the "Company") is a product development,
manufacturing and contract test services company which specializes
in manufacturing instruments and providing contract test services
for measuring the thermophysical properties of a wide variety of
materials. The Company's Instruments Division currently designs,
manufactures and distributes five product lines, containing
sixteen models, which measure thermophysical properties. The
Company's Testing Services Division provides contract test and
engineering services to evaluate a number of temperature-related
performance factors of virtually any material. The Testing
Services Division also performs mechanical and physical properties
testing. The Company's principal offices are located at 25
Wiggins Avenue, Bedford, Massachusetts 01730-2323; its telephone
number is (781) 275-3300 and its facsimile number is (781) 275-
3705. The Company is a Delaware corporation incorporated which
was on October 23, 1985.
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 and viscoelasticity of a wide range of material and are
sold into the polymer manufacturing, petrochemical, food, paints
and coatings and pulp and paper markets. Nametre is 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.
Business of Tytronics Incorporated
Tytronics Incorporated ("Tytronics") designs, manufactures and
markets on-line liquid and gas chemical analyzers for specific
applications in worldwide process and environmental markets.
These devices measure the concentrations of specific chemicals and
are used in both process control and environmental monitoring.
Examples are the measurement of acid and iron in steel pickling
lines, the measurement of caustic in gas scrubbers, the
measurement of coagulants, such as aluminum and iron, in potable
water treatment and the measurement of ammonia and nitrate in
waste water treatment. Using the technologies of titration,
colorimetry and spectrophotometry, coupled with patented fluidics,
Tytronics focuses on providing simple, reliable and cost-effective
analytical instrumentation to its markets worldwide. Tytronics is
a Massachusetts corporation which was incorporated on May 18,
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1984. In late 1994, Tytronics acquired a majority interest in
Holometrix. Tytronics' principal offices are located along with
those of Holometrix at 25 Wiggins Avenue, Bedford, Massachusetts
01730-2323; Tytronics' telephone number is (781) 275-9660 and its
facsimile number is (781) 275-9665.
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 characterize the performance, quality, and/or
composition of various materials such as insulation, composites,
plastics, and ceramics. In addition to their importance in
advanced materials development, the Company's instruments are used
as research tools to address worldwide environmental issues,
including energy conservation, plastics recycling and nuclear
waste disposal.
Holometrix has over 30 years of experience in thermophysical
properties testing. The basic technology underlying the Company's
Thermatest instruments is the application of heat energy to a
material under test and the measurement of the results of such an
application. The precise measurements and the containment of
heat, combined with equally precise temperature measurement and
control, are key elements in the design of nearly all of the
Division's products. Many instruments encompass microprocessor-
controlled data collection and analysis, resulting in the fully
automated determination of material properties, such as thermal
conductivity and specific heat. The nature of heat transfer
through a material, resulting from the application of energy,
varies depending on the material's type and composition.
Therefore, a different methodology is required to test different
types of material. The Company manufactures various instruments
incorporating these different methodologies.
The five Thermatest product lines consist of sixteen instrument
models, plus Holometrix' proprietary Q-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 R-value of thermal
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insulation. This type of instrument is widely used in both
the quality control testing and the development of insulation
products. Industry-wide acceptance of this technique as a
reliable and accurate procedure has made it the most commonly
used test method for both research and development and
quality control applications. Federal trade rules require
insulation manufacturers to measure the thermal resistance (R
Value) by the heat flow meter method, or similar techniques,
as part of the procedure for labeling their products.
Cellular foam insulation manufacturers, who are required to
eliminate ozone depleting chlorinated fluorocarbons from
their products, use these instruments to evaluate the
effectiveness of replacement blowing agents. In 1996
Holometrix introduced the new Lambda 2000 Series of heat flow
meter products. These instruments contain an advanced
instrumentation and control concept for which a patent is
pending.
Guarded Heat Flow Meters (TCA-200, TCA-200-LT and TCA-300)
The Guarded Heat Flow meter method permits the testing of
moderate conductivity materials. Customers use these
instruments to establish safe operating temperatures and
thermal efficiency of products ranging from electronic and
semiconductor components to adhesives, and for heat transfer
modeling of many industrial processes, including injection
molding of polymers. Thermal conductivity data from these
instruments is important to the plastics, electronics,
automotive, aerospace and food processing industries. The
instruments can test solid and thin film materials and
special test cells are available for testing polymers and
highly viscous fluids through the melt. Test materials
include rubber, plastic, composites, epoxy, ceramics, paper
products, greases and pastes.
Guarded Hot Plates (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 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.
- 11 -<PAGE>
Materials which can be tested include ceramics, composites,
metals, metal alloys, filled plastics and epoxies, geological
materials, and carbon products. A special sample holder is
also available for testing liquids and pastes.
Laserflash Instruments (Thermaflash 2200, 1100 and
Microflash, 300)
These instruments utilize a sophisticated, high-performance
Laser Flash Thermal Diffusivity (LFTD) technique to measure
both thermal diffusivity and specific heat from -170 C to
2000 C. Test samples are irradiated uniformly on one surface
by a laser beam pulse, and the temperature rise of the
opposite surface is measured and used to calculate thermal
diffusivity. Data from these instruments are used by
customers to determine safe operating temperatures, quality
assurance, design and process control for composition,
molding, heating or cooling rates, and thermal performance
analysis. The laserflash technique not only provides
important information on transient heat flow, but also allows
testing of small samples at high temperatures. Typical test
materials include ceramics, refractory materials, thermal
bander coatings, composites, carbon-carbon composites, metals
and alloys, and graphite.
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
- 12 -<PAGE>
materials is not a routine capability and competence for most
material development departments. Thus, testing service customers
tend to be repeat customers who use the Division as a complement
to their capabilities.
In addition to thermophysical testing of materials, the Division
also offers selected mechanical and moisture testing of materials.
The Division also maintains the capability to test entire wall
sections built to specification in support of the building and
construction industry. This type of testing helps evaluate the
performance, under simulated environmental conditions, of advanced
construction techniques, and new insulating and moisture barrier
materials.
The end result of most Division projects is a technical report,
usually containing experimental data resulting from work carried
out in a laboratory setting. Projects lacking a large engineering
component are termed standard testing programs when the work can
be performed on existing equipment using established techniques.
Non-standard testing programs (in some cases more appropriately
termed engineering development programs) differ in that they may
involve the creation of a special apparatus, modification of
existing equipment, or development of new procedures. The
majority of programs conducted in the Division are standard
testing programs.
Research and development programs, on the other hand, go beyond
the generation of data to analyze results, draw conclusions and
make recommendations. Alternately, they may involve literature
searches, material assessments, engineering studies or special
instrument design. These programs are generally higher value and
run longer than testing programs. As an example, Holometrix has
provided testing services to the Department of Energy (DOE) for a
number of years for the purpose of evaluating the thermal
characteristics of Yucca Mountain, a proposed nuclear waste
repository.
Tytronics' Instruments
Tytronics' analyzers are available to monitor many liquids and
some gasses, all done on-line. Typical constituents measured are
aluminum, ammonia, chlorine, chromium, copper, cyanide, fluoride,
iron, phosphate, manganese, nitrite, nitrate and zinc. Many of
the water analysis measurements are made using the AWWA, ASTM or
ISO methods. Lower limits of measurement are at ppb levels, and
upper limits are often at percent levels. Methods are based upon
published literature methods and are adapted for use on Tytronics'
family of analyzers. Over 1400 analyzers have been sold for a
wide variety of applications. They operate in a wide variety of
difficult, and sometimes hazardous, process and environmental
conditions.
Tytronics' products deliver on-line analysis for process and
environmental monitoring reliably, simply and cost-effectively.
- 13 -<PAGE>
On-line analysis is readily justified; benefits include improved
yield, reduced chemical consumption, reduced labor and increased
sensitivity to environmental concerns. The equipment provides
accurate readings even with background interference of sample
color and turbidity. Little or no filtering is used for most
applications and the equipment measures both low and high
concentrations of chemicals. The interface is user-friendly, with
menu-driven software, and the units may be PC-linked to
communicate to a host computer.
Tytronics' family of analyzers employs a patented sample capture
methodology. This methodology is similar to use of an overflow
cup, except that siphon action drains the sample to a final
repeatable level (volume). This sampling method uses the reaction
cell to both capture the sample and accomplish the appropriate
chemical reaction, a significant reduction in complexity. Only a
single highly reliable Teflon valve connects to the process
stream. Analyses are fully automatic in all cases. Through menu-
driven programming, the user can easily change the frequency of
analysis and calibration, and the outputs, as well as most default
values.
Tytronics' Products
Ion Selective Electrode Analyzers (FPA 200)
The FPA 200 Series delivers reliable selective ion
measurements. Ion selective electrodes, which are the
sensing technology employed, are measurement devices
sensitive to the presence of a particular ion. The FPA 200
employes a patented sampling method which uses the reaction
cell to capture the sample, thus reducing complexity. After
the sample is captured, the instrument automatically adds a
reagent to condition the sample to avoid interferences or to
adjust the ionic strength of the sample. The analyzers
utilize software which provides for two analytical methods,
direct measurement and known addition. The first is the
simplest and fastest, but the accuracy of this method is more
dependent upon the electrode. Periodic, automatic
calibration is used to determine, calculate and automatically
adjust the parameters of the electrode to keep the
measurement correct. The second method is the known addition
measurement technique. This provides more consistent results
than direct electrode measurement; with this method,
instrument results are not affected by electrode drift or
sample matrix effects. The on-board computer operates the
components, takes readings from the sensor, calculates and
transmits sample concentration over any of a variety of
analog and digital outputs (e.g., 4-20mA, RS-232).
- 14 -<PAGE>
Titrators (FPA 300 and FPA 400)
The FPA 300 series delivers reliable on-line titration.
Acid-base, redox and other analyses are common methods
employed. The FPA 300 series titrates using a variety of
potentiometric electrodes, which sense the maximum rate of
microvoltage change in a particular chemical reaction. The
FPA 400 series adds the capacity to titrate to a color
endpoint, sensing the maximum rate of change of color in a
chemical solution. The colorimetric endpoint is sensed with
light which is carried from and returned to the source/
detector by fiber optics. Colorimetric titration offers on-
line analytical capability at trace levels in applications
such as monitoring plant effluent and municipal water, and
environmental analysis in general. Both series of
instruments capture a fresh sample, condition it and titrate
to a fixed endpoint. Siphon action drains the sample to a
final repeatable level (volume). The on-board computer
operates the components, takes readings from the sensor, and
calculates and transmits sample concentration over any of a
variety of analog and digital outputs (e.g., 4-20mA, RS-232).
Colorimeters (FPA 800)
The FPA 800 series delivers reliable on-line colorimetric
analysis. These analyzers are configured to make precise
reagent additions which, in combination with the chemical
being measured, develop a characteristic color. The color is
developed by reaction following well-established techniques.
Direct colorimetry offers on-line analytical capability at
trace levels in applications such as monitoring plant
effluent and municipal water, and environmental analysis in
general. Color is measured using a light source and
detectors, coupled with fiber-optics, to transmit and receive
a beam to and from the sample in the reaction cell. The
concentration of the solution being measured is proportional
to the color developed, and thus the amount of light
absorbed. The instrument has a simple and patented liquids
handling and sample capture system, coupled with a fiber-
optics probe. The on-board computer operates the components,
takes readings from the sensor, calculates and transmits
sample concentration over any of a variety of analog and
digital outputs (e.g., 4-20mA, RS-232).
Spectrophotometers (FPA 1000 and FPA 1100)
The FPA 1000 and 1100 series delivers reliable on-line
photometric analysis, offering on-line analytical capability
at both trace and higher levels. These spectrophotometers
are applicable to both process and environmental
applications, and use well-established spectrophotometric
techniques of analysis. With the FPA 1000, a light source in
the visible, and very-near-infrared region is passed through
the sample, then through optical filters; the absorbance of
- 15 -<PAGE>
the returning energy is measured at the selected wavelengths.
The concentration of the solution is proportional to the
absorbance measured. The technique used is a dual-wavelength
technique, which compensates for sample turbidity and color,
allowing a true measurement of the constituent in question.
With the FPA 1100, a similar dual-wavelength approach is
employed in the ultraviolet range, using stabilized arc
sources. This provides a reliable measurement for lower
detection levels and greater analytical stability. The
instruments can use fiber-optics to remotely sense
concentrations in a pipeline cell; depending on the sample
pipe diameter, the non-intrusive measurement is made with a
cell installed directly into the line. Alternatively, a
bypass line of selected pipe diameter can be installed to
select the diameter for a more appropriate pathlength.
Conventional liquid and gas cells are also available. Once
again, the on-board computer operates the components, takes
readings from the sensor, and calculates and transmits sample
concentration over any of a variety of analog and digital
outputs (e.g., 4-20mA, RS-232).
Tytronics' Sentinel
The Tytronics' Sentinel series delivers simple, reliable
and cost-effective on-line colorimetric analysis, directed
primarily at the potable and waste water markets.
Colorimetric analyzers are configured to make precision
reagent additions to develop a characteristic color. Color is
developed by reaction following well-established techniques,
including procedures from the Standard Methods for the
Examination of Water and Wastewater, APHA, AWWA, and WEF. The
colorimetric system uses dual wavelength optical
configuration and auto blank features that provide stable,
accurate and reproducible measurements even at concentrations
below 50 ppb, and in the presence of sample background color
and turbidity. The instrument is highly tolerant of solids
and particulates, using wide bore tubing (0.25") for sample
intake and transport. In many applications, it can be used
without any further external filtering, a significant
advantage. Tytronics' Sentinel offers multi-streaming;
analyzers can be expanded to analyze up to 6 separate sample
streams. Industrial enclosures and modular design of the
fluidic and electronic components provide high reliability
and ease of maintenance. The on-board computer operates the
components, takes readings from the sensor, and calculates
and transmits sample concentration over any of a variety of
analog and digital outputs (e.g., 4-20mA, RS-232).
Nametre Products
Nametre engages in the development, production and distribution of
viscosity analyzers under the trade names, "Viscoliner " and
- 16 -<PAGE>
"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.
The Viscoliner model 1710 is a laboratory version of the model
1810. This instrument is used primarily for research, product
development and quality assurance. Applications include the full
range of markets that Nametre serves.
Markets
Holometrix' Markets
Holometrix' thermophysical instruments are sold primarily to
materials laboratories engaged in the development and testing of
insulations, building materials, advanced engineered materials,
plastics and packaging manufacturers, aerospace manufacturers and
government laboratories. A number of instruments are also sold to
insulation manufacturing facilities. Management believes current
markets for thermal conductivity instruments and testing services
total approximately $10 - $15 million annually. The Company has
identified engineered materials, electronics and specialty
plastics industries as promising markets for the instruments. The
- 17 -<PAGE>
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 71% of total revenue for fiscal year
1996. Domestic sales and marketing are handled in-house by a
staff of two professionals and an administrator. Overseas sales
(primarily to Europe and the Far East) are made through
independent distributors and sales agents. In addition to the
internal sales force, testing services are sold by individual
project managers responsible for specific testing areas. Product
visibility is maintained through active participation in national
and international trade organizations, including the American
Society of Testing and Materials (ASTM). Additional visibility is
maintained through advertising, exhibitions, informational
mailings, technical application notes and customer demonstrations.
In fiscal 1996, overseas sales accounted for approximately 29% of
total sales, compared to 32% in fiscal 1995.
In order to expand its market presence and build revenue, the
Company is exploring a variety of alternatives, falling into four
primary categories:
1.) Enhanced Marketing and Sales Efforts. The Company is
investing additional resources, including new personnel, to
expand its worldwide marketing and selling effectiveness.
Specific examples include improved sales and marketing
materials, broader trade show and symposium participation,
and expanded geographic coverage.
2.) Product Development. The Company is continuing to invest in
the development of new products, and in upgrading its
existing products to have more competitive features, be
easier to manufacture, and have improved margins.
3.) Corporate Synergy. Holometrix, Nametre and Tytronics
Incorporated (majority owner of Holometrix) serve many common
markets and customers including the polymer, 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.
- 18 -<PAGE>
Tytronics' Markets
Tytronics' chemical analyzers are primarily sold to two major
markets. The first is the chemical/petrochemical/refinery
industry; within this industry, Tytronics' instruments are used
for both process control and effluent monitoring. The second major
market is the water treatment industry; in this case, Tytronics'
products are used for the control and monitoring of both potable
water and waste water treatment. A number of instruments are also
sold to the food, beverage and textile industries. Management
believes that current markets for process chemical analyzers total
approximately one billion dollars annually.
Tytronics markets its products in the U.S. and internationally
through the combination of direct sales force and a network of
independent manufacturer's representatives and distributors.
Tytronics actively advertises its products in industry trade
journals, attends various U.S. and international trade shows and
maintains a home page on the World Wide Web to promote its
products and services.
Current products are sold in North America directly from the
company's offices in Bedford, Massachusetts. Domestic sales
amounted to approximately 40% of total revenue for fiscal year
1996, with international sales accounting for the balance of 60%.
Domestic sales and marketing are handled in-house by a staff of
three professionals, supporting independent manufacturers'
representatives. Overseas sales (primarily to Africa, Europe, the
Far East and Latin America) are made through independent
distributors and sales agents, managed by two sales and marketing
professionals. In addition to the in-house sales managers, a
Director and Assistant Director of Sales and Marketing for
Tytronics and Nametre are responsible for the sales and marketing
activities of both companies. Product visibility is maintained
through active participation in regional, national and
international trade organizations including Instrument Society of
America, American Water Works, Water Environment Federation and
the New England Water Works Association.
Nametre's Markets
Nametre's analyzers are sold primarily to product and material
manufacturers engaged in the production and use of plastics,
chemical, foods, paints, inks or coatings and paper and pulp. A
number of analyzers are also sold to government laboratories and
universities. Management believes the current market for process
viscosity totals approximately $20-25 million annually.
Patents and Proprietary Technology
Holometrix
The Company develops proprietary information and technology,
including software programs, in the course of its research and
- 19 -<PAGE>
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.
Tytronics
Tytronics 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 Tytronics' personnel,
the performance and reliability of the Tytronics' products and
competitive marketing, pricing and customer service. Tytronics
holds three patents, two in the area of sample capture
methodologies, and one for a particular form of spectrophotometric
calibration. Tytronics holds a broad variety of worldwide
trademarks, and has copyrighted certain selected information.
Nametre
Nametre develops proprietary information and technology, including
software programs, in the course of its research and development
activities. Certain aspects of its product are patented; however,
management believes that patent and copyright protection are
important, but less significant than the technical competence and
creative skills of Nametre's personnel, the performance and
reliability of Nametre's products, and competitive marketing,
pricing and customer service.
Nametre owns nine patents, including patents that cover the basic
transducer and electronics for viscosity measurement, the method
and apparatus for viscoelastic measurements, and the transducer
for high viscosity measurements in extruders. The patents expire
in various years from 1998 to 2011.
Nametre owns or has applied for four trademarks. Three trademarks
are 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.
- 20 -<PAGE>
Customers
Holometrix
During fiscal 1996, the Company had total revenues of
approximately $2,201,000, compared to $2,105,000 in fiscal 1995.
No customer accounted for more than 10% of sales in fiscal 1996.
Tytronics
During fiscal 1996, Tytronics' consolidated revenues were
approximately $5,613,000, compared to $4,780,000 in fiscal 1995.
No customer accounted for more than 10% of consolidated sales in
fiscal 1996.
Nametre
On September 30, 1996, the Company acquired approximately 61.23%
of the outstanding shares of Nametre. The consolidated statements
of operations and cash flows of Holometrix and subsidiary exclude
any activity of Nametre prior to the date of acquisition. During
fiscal 1996, which was a nine month year to allow Nametre to
change its fiscal year to coincide with the Company's fiscal year,
Nametre had total revenues of approximately $1,776,000, compared
to $2,671,000 for the 12 month year ended December 31, 1995. For
comparison purposes, for the period January 1 to September 30,
1995 Nametre had total revenues of $1,888,000. No customer
accounted for more than 10% of Nametre's sales in fiscal 1996.
Backlog
Holometrix
As of September 30, 1996, the Company's backlog for products and
services totaled $333,000, as compared to $244,000 in backlog as
of September 30, 1995. The fiscal 1996 backlog consisted of
$202,000 for the Instruments Division and $131,000 for the Testing
Services Division. All backlog at September 30, 1996 is expected
to be delivered before September 30, 1997.
Tytronics
As of September 30, 1996, Tytronics' consolidated backlog for
products and services approximated $1,254,000, as compared to
approximately $893,000 in backlog as of September 30, 1995.
Included in the September 30, 1996 backlog is $343,000 of
Nametre's products; since the majority of Nametre's stock was
acquired on September 30, 1996, no backlog for Nametre's products
is included in the September 30, 1995 totals. All backlog at
September 30, 1996 is expected to be delivered before September
30, 1997.
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Nametre
As of September 30, 1996, Nametre's backlog for products and
services totaled $342,513, as compared to $856,665 as of September
30, 1995. All backlog at September 30, 1996 is expected to be
delivered before September 30, 1997.
Competition
Holometrix
The Company's competitive advantage lies in its ability to develop
and produce a broad spectrum of products in several different
market niches. The Company's Instruments Division experiences
direct competition for its heat flow meters from Anter Corporation
and LaserComp Inc. Thermaflash has strong competition from Sinku
Riko in the Far East, Netzsch GmbH, Theta Industries and Anter
Inc. in Europe and North America. Competitive factors include
product performance, quality and reliability, ease of use,
marketing capability, service and support, and name recognition.
Management believes the Company competes favorably in each of
these areas. The Company can give no assurance that its current
products will remain competitive in these areas or that its future
products will be competitive in these areas.
The market for scientific measuring instrumentation is also
characterized by extensive research and development and rapid
technological change. Development by others of new or improved
products or technologies may make the Company's products or
proposed products obsolete or less competitive. The Company may
be required to devote substantial efforts and financial resources
to increase its existing product lines by developing new products
and services.
The Testing Services Division competes as a broad-capability
independent laboratory performing thermal property studies. There
are no other known companies or laboratories that encompass the
Division's entire capabilities. However, many laboratories offer
a subset of the Division's services. Competitive contracts are
awarded based on price, testing capability and credibility of the
test results. The following sample laboratories compete in the
market sectors indicated: Engineered Materials - Thermophysical
Properties Research Laboratory Inc., Anter Laboratories, Inc., The
Edward Orton Jr. Ceramic Foundation, Southern Research Institute,
and Virginia Polytechnic Institute; Insulations - Southern
Research Institute, Sparrell Engineering Research Corporation, and
The Center for Applied Engineering; Government - Oak Ridge
National Laboratory and National Institute of Standards and
Technology.
- 22 -<PAGE>
Tytronics
Tytronics' competitive advantage lies in its ability to develop
and produce simple, reliable and cost-effective instrumentation
that can be used to measure a wide variety of constituents in a
broad spectrum of industries. However, competition is intense.
Tytronics' process analyzers experience direct competition from
Applicon Instruments BV, FPM Analytics Inc., Ionics Inc.,
Polymetron and Seres. Tytronics' potable water and waste water
analyzers experience direct competition from ABB Kent-Taylor Ltd.,
Aztec, Bran & Luebbe Inc., Dr. Bruno Lange GmbH, Hach Company,
pHox, Polymetron, Skalar Inc. and Seres.
Nametre
Nametre's competitive advantage lies in its ability to develop and
produce custom transducers, covering a wide range of viscosities,
designed for mounting directly into the customer's process.
Nametre's major competitors are Brookfield Engineering
Laboratories, Solatron Transducers, MicroMotion Division of Fisher
Rosemount, Norcross Corporation and Dynatrol Division of
Automation Products, Inc. Competitive factors include price, wide
product lines, performance, quality and reliability, ease of use,
marketing capability, service and support and name recognition.
Management believes Nametre competes favorably in most of these
areas. Price and wide product line competition is generally
overcome by the instruments' performance and installed cost.
The market for scientific measuring instrumentation is also
characterized by extensive research and development and rapid
technological change. Development by others of new or improved
products or technologies may make Nametre's products or proposed
products obsolete or less competitive. Nametre may be required to
devote substantial efforts and financial resources to increase its
existing product lines by developing new products and services.
Research and Development
Holometrix
The Company expended approximately $154,000, or 7% of sales and
$207,000 or 10% of sales in fiscal 1996 and fiscal 1995, respectively,
on research and development. The Company expects that in fiscal 1997
its research and development expenditures will remain close to 7% of
sales.
Tytronics
Tytronics' consolidated research and development expenditures were
approximately $456,000, or 8% of sales, and $454,000, or 9% of
sales, in fiscal 1996 and fiscal 1995, respectively. Tytronics
expects that, in fiscal 1997, its research and development
expenditures will remain roughly constant, approximating 8% of
sales.
- 23 -<PAGE>
Nametre
Nametre expended approximately $299,131, or 17% of sales and $210,295,
or 8% of sales in fiscal 1996 and fiscal 1995, respectively, on
research and development. Nametre expects that in fiscal 1997 its
research and development expenditures will decrease to 10% of sales.
Governmental Regulations
There is presently no material government regulation with respect
to the Company's, Tytronics' or Nametre's businesses and their
development of products. However, the extent to which future
governmental regulations may regulate the Company's, Tytronics'
and Nametre's activities cannot be predicted, and the Company,
Tytronics' and Nametre may be subject to restrictions on allowable
costs and profits on U.S. government contracts and the export of
the technology to other countries as it seeks to expand further
into foreign markets.
Employees
Holometrix
As of September 30, 1996, the Company had 24 employees, 16 of whom
are employed full-time. Most of the Company's employees are
highly skilled and the Company's continued success will depend, in
part, upon its ability to attract and retain such skilled
employees. The Company has never experienced a work stoppage,
none of its employees are represented by a labor organization, and
the Company considers its relations with its employees to be good.
Tytronics
As of both June 30, 1997 and September 30, 1996, Tytronics had 20
employees, 12 of whom are employed full-time. Most of Tytronics'
employees are highly skilled and Tytronics' continued success will
depend, in part, upon its ability to attract and retain such
skilled employees. Tytronics has never experienced a work
stoppage, none of its employees are represented by a labor
organization, and Tytronics considers its relations with its
employees to be good.
Nametre
As of September 30, 1996, Nametre had 15 employees, 14 of whom are
employed full-time. Most of Nametre's 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.
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Description of Properties
Holometrix
The Company occupies approximately 15,200 square feet of
production, research and development, engineering, administrative
and service facilities at 25 Wiggins Avenue in Bedford,
Massachusetts. The Company occupies this facility under a lease
which expires September 30, 1999. Approximately 30% of this space
is sublet to Tytronics Incorporated, majority owner of Holometrix.
The Company's rental expense for fiscal 1996 was $65,355,
excluding rental income of $30,801 from Tytronics Incorporated.
The Company considers these facilities to be reasonably insured
and adequate for its foreseeable needs and believes that similar
facilities are available in the Boston metropolitan area at
comparable rental rates.
A significant amount of the machinery and equipment used by the
Company in its operations is owned by the Company and management
considers this equipment to be in good condition. 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' Incorporated interest was subordinated.
Tytronics
Tytronics occupies approximately 30% of 15,200 square feet of
production, research and development, engineering, administrative
and service facilities from the Company (see above). Tytronics
considers these facilities to be reasonably insured and adequate
for its foreseeable needs and believes that similar facilities are
available in the Boston metropolitan area at comparable rental
rates.
A significant amount of the machinery and equipment used by
Tytronics in its operations is owned by Tytronics and management
considers this equipment to be in good condition. As of July 24,
1997, all of the machinery and equipment owned by Tytronics was
subject to a senior security interest in favor of Silicon Valley
Bank.
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
- 25 -<PAGE>
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.
Legal Proceedings
There are no material pending legal proceedings to which the
Company, Tytronics or Nametre is a party or to which any of its
properties is subject.
Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock is no longer quoted in the over-the-
counter market. There currently does not exist an active trading
market for the Company's securities. The following table sets
forth the range of high and low bid quotations for the Company's
Common Stock as reported by the National Quotation Bureau of New
Jersey.
Fiscal Year 1995 Low High
First Quarter Ended December 31, 1994 $0.001 $0.001
Second Quarter Ended March 31, 1995 0.001 0.001
Third Quarter Ended June 30, 1995 0.001 0.002
Fourth Quarter Ended September 30, 1995 0.001 0.002
Fiscal Year 1996 Low High
First Quarter Ended December 31, 1995 $0.001 $0.002
Second Quarter Ended March 31, 1996 0.002 0.005
Third Quarter Ended June 30, 1996 0.005 0.005
Fourth Quarter Ended September 30, 1996 0.002 0.005
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
These quotations represent prices between dealers and do not
include retail markups, markdowns or commissions and may not
necessarily represent actual transactions. There were 483 holders
of record of the Company's outstanding capital stock as of
September 5, 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.
- 26 -<PAGE>
Financial Information
A copy of the following financial statements and information of
the Company (consolidated with Nametre) and Tytronics is included
with this proxy statement as Exhibit B:
Holometrix
1. Management's discussion and analysis for the nine-months
ended June 30, 1997 and 1996.
2. Consolidated condensed financial statements for the nine-
months ended June 30, 1997 and 1996.
3. Management's discussion and analysis for the year ended
September 30, 1996.
4. Consolidated financial statements for the year ended
September 30, 1996.
Nametre
1. Financial statements for the year ended
September 30, 1996.
Tytronics
1. Management's discussion and analysis for the nine-months
ended June 30, 1997 and 1996.
2. Consolidated condensed financial statements for the nine-
months ended June 30, 1997 and 1996.
3. Management's discussion and analysis for the year ended
September 30, 1996.
4. Consolidated financial statements for the year ended
September 30, 1996.
Pro Forma Financial Information
1. Pro forma combined condensed balance sheet as of
June 30, 1997.
2. Pro forma combined condensed statement of operations for the
nine-months ended June 30, 1997.
3. Pro forma combined condensed statement of operations for the year
ended September 30, 1996.
Votes Required
Approval of the amendment to the Charter to increase the
authorized number of shares of the Company's Common Stock will
require the affirmative vote of the holders of a majority of the
outstanding shares of the Company's Common Stock. Abstentions and
broker non-votes will be equivalent to a vote against the
amendment.
- 27 -<PAGE>
Board of Directors Recommendations
The Board of Directors recommends that you vote FOR the amendment
to the Company's Certificate of Incorporation to increase the
authorized number of shares of the Company's Common Stock.
THE REVERSE STOCK SPLIT (PROPOSAL 2)
General
The Board of Directors has determined that it would be advisable
to amend the Company's Certificate of Incorporation effective
following the Reorganization to effect a 1 for 50 reverse stock
split (the "Reverse Stock Split") of the Company's Common Stock.
A copy of the proposed amendment to the Certificate of
Incorporation is attached hereto as Exhibit A. If the Reverse
Stock Split is approved by the shareholders, each 50 shares of the
Company's Common Stock (the "Old Common Stock") outstanding on the
effective date of the Reverse Stock Split will be converted
automatically into 1 share of New Common Stock, par value $.50 per
share (the "New Common Stock"). To avoid the existence of
fractional shares of New Common Stock, shareholders who would
otherwise be entitled to receive fractional shares of New Common
Stock shall receive one additional whole share of Common Stock.
See "Exchange of Stock Certificates". The effective date of the
Reverse Stock Split will be the date on which the amendment to the
Company's Certificate of Incorporation is filed with the Secretary
of State of the State of Delaware, which is anticipated to be as
soon as practicable following the effectiveness of the
Reorganization.
Background and Reasons for the Reverse Stock Split
The Reverse Stock Split would reduce the number of outstanding
shares of Common Stock to approximately 2,000,000 shares following
the Reorganization, or approximately 2% the number of shares
outstanding prior to the Reverse Stock Split. The Reverse Stock
Split would also proportionally reduce the number of shares of
Common Stock reserved for issuance pursuant to options and
warrants of the Company outstanding as of the effective date of
the Reverse Stock Split. The Reverse Stock Split will not affect
any stockholder's proportionate equity interest in the Company,
subject to the provisions for the elimination of fractional shares
and rounding up to the nearest whole share in every instance. If
the proposal for amendment of the Company's Certificate of
Incorporation to effect the Reverse Stock Split is approved, each
outstanding share of Common Stock will be entitled to one vote at
each meeting of stockholders, as is the case with each presently
outstanding share. While a reduced number of outstanding shares
of Common Stock could adversely affect the liquidity of the Common
Stock, management of the Company does not believe this is likely
to happen. Because the par value of the Common Stock will be
increased, to $.50 per share from $0.01 per share, by the same
proportion that the number of outstanding shares will be
- 28 -<PAGE>
decreased, there will be no change in the stockholders' equity,
stated capital or paid-in capital of the Company, or the amount
that could lawfully be distributed to stockholders. The Reverse
Stock Split is not intended as an anti-takeover device and is not
expected to function unintentionally as one.
The Company's Common Stock is not quoted in the over-the-counter
market and there currently exists no active trading market in the
Company's securities. Information reported by the National
Quotation Bureau of New Jersey, indicates that the high and low
bid quotations for the Company's Common Stock for the nine month
period ended June 30, 1997 were $.02 and $.005, respectively. The
Board of Directors of the Company believes that the low bid
quotations for the Company's Common Stock has impaired the
acceptability of the Company's Common Stock by the financial
community and the investing public.
The Board of Directors believes that the decrease in the number of
shares of the Company's Common Stock outstanding as a consequence
of the Reverse Stock Split and the resulting anticipated
corresponding increased price level will result in greater
interest in the Company's Common Stock by the financial community
and the investing public than if the Reverse Stock Split were not
effected.
There can be no assurance, however, that the foregoing will occur
or that the market prices of the Company's Common Stock
immediately after implementation of the Reverse Stock Split will
increase, and if they increase, there can be no assurance that
such increases can be maintained for any period of time, or that
such market prices will approximate 50 times the market prices
before the Reverse Stock Split.
Exchange of Stock Certificates; No Fractional Share Interests
The Reverse Stock Split will be effective on the Effective Date of
the filing with the Secretary of State of Delaware of the
Certificate of Amendment with respect to this proposal which is
expected to take place immediately following the Reorganization.
Stockholders of the Company on and as of the Effective Date will
then be furnished the necessary materials and instructions to
effect the exchange of their certificates representing Old Common
Stock for new certificates representing the New Common Stock of
the Company outstanding after the Reverse Stock Split.
Certificates representing Old Common Stock presented for transfer
subsequent to the Effective Date may be transferred by the
Company's Transfer Agent, but certificates representing the
reissued shares will represent only the number of New Common Stock
to which the holder of the shares of Old Common Stock presented
for transfer was entitled on and as of the Effective Date.
STOCKHOLDERS SHOULD NOT SUBMIT ANY CERTIFICATES FOR EXCHANGE UNTIL
AFTER THE EFFECTIVE DATE AND RECEIPT OF NOTIFICATION AND
INSTRUCTIONS FROM THE COMPANY.
- 29 -<PAGE>
No fractional shares will be issued and all fractional shares, no
matter how small, will be rounded up to the nearest whole share.
Accordingly, no stockholder will receive less than one share as a
result of this proposal.
Federal Income Tax Consequences
This discussion is for general information only and does not
discuss consequences which may apply to special classes of
taxpayers as, for example, non-resident aliens, broker-dealers or
insurance companies. Stockholders are urged to consult their own
tax advisors to determine the particular consequences to them of
the Reverse Stock Split.
The exchange of Old Common Stock for New Common Stock should not
result in recognition of gain or loss for federal income tax
purposes. Provided that a stockholder held the Old Common Stock
as a capital asset, the New Common Stock received in exchange
therefor will also be held as a capital asset and the holding
period of the New Common Stock will include the stockholder's
holding period for the Old Common Stock. The tax basis of the New
Common Stock will be the same as the tax basis of the Old Common
Stock exchanged therefor.
Although not free from doubt, the above treatment should also
apply with respect to additional shares received for fractional
shares. However, it is possible that the receipt of additional
shares could be wholly or partly taxable. Holders should consult
with their own tax advisors.
No Dissenter's Rights
Under Delaware law, stockholders are not entitled to dissenter's
rights of appraisal with respect to the Reverse Stock Split.
Votes Required
Amendment of the Company's Certificate of Incorporation to provide
for the Reverse Stock Split requires the favorable vote of a
majority of the outstanding shares of Common Stock of the Company,
pursuant to the requirements of the Delaware General Corporation
Law. If the proposed amendment is approved by the Stockholders,
the amendment will become effective the date of its filing with
the Secretary of State of Delaware.
Board of Director Recommendation
The Board of Directors recommends a vote FOR amendment of the
Company's Certificate of Incorporation to effect the Reverse Stock
Split.
- 30 -<PAGE>
AMENDMENT OF COMPANY'S CHARTER TO CHANGE THE NAME OF THE COMPANY
FROM HOLOMETRIX, INC. TO METRISA, INC. (PROPOSAL 3)
The Board of Directors of the Company has determined that it is in
the best interests of the Company and its stockholders to change
the name of the Company from Holometrix, Inc. to Metrisa, Inc.
The Board recommends that the stockholders approve the amendment
to the Company's Charter to effect the proposed name change. The
Board of Directors believes that the name of the Company should be
changed following the Reorganization to better describe the
business which will be conducted by the Company following the
Reorganization.
Votes Required
Approval of the amendment to the Charter to change the name of the
Company will require the affirmative vote of the holders of a
majority of the outstanding shares of the Company's Common Stock.
Abstentions and broker non-votes will be equivalent to a vote
against the amendment.
Board of Director Recommendation
The Board of Directors recommends that you vote FOR the amendment
to the Company's Certificate of Incorporation to change the name
of the Company.
OTHER MATTERS
The Board of Directors does not know of any other matters which
may come before the meeting. However, if any other matters are
properly presented to the meeting, it is the intention of the
persons named in the accompanying proxy to vote, or otherwise to
act, in accordance with their judgment on such matters.
Proposals of Stockholders intended to be presented at the 1997
Annual Meeting of Stockholders must be received by the Company at
its principal office in Bedford, Massachusetts, not later than
September 18, 1997, for inclusion in the proxy statement for that
meeting.
ADDITIONAL INFORMATION
The following additional information is attached to this Proxy
Statement:
Exhibit A: Proposed Amendments to the Company's Certificate
of Incorporation, as amended.
Exhibit B: Financial Information
- 31 -<PAGE>
Holometrix
1. Management's discussion and analysis for the nine-months
ended June 30, 1997 and 1996.
2. Consolidated condensed financial statements for the
nine-months ended June 30, 1997 and 1996.
3. Management's discussion and analysis for the year ended
September 30, 1996.
4. Consolidated financial statements for the year ended
September 30, 1996.
Nametre
1. Financial statements for the year ended
September 30, 1996.
Tytronics
1. Management's discussion and analysis for the nine-months
ended June 30, 1997 and 1996.
2. Consolidated condensed financial statements for the
nine-months ended June 30, 1997 and 1996.
3. Management's discussion and analysis for the year ended
September 30, 1996.
4. Consolidated financial statements for the year ended
September 30, 1996.
Pro Forma Financial Information
1. Pro forma combined condensed balance sheet as of
June 30, 1997.
2. Pro forma combined condensed statement of
operations for the nine-months ended June 30, 1997.
3. Pro forma combined condensed statement of operations for the
year ended September 30, 1996.
- 32 -
HOLOMETRIX, INC.
25 WIGGINS AVENUE, BEDFORD, MA 01730-2323
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HOLOMETRIX, INC.
The undersigned stockholder of Holometrix, Inc. (the "Company")
hereby appoints John E. Wolfe and David J. Brown, and each of
them, with full power of substitution, proxies for the undersigned
and authorizes them to represent and vote, as designated, all of
the shares of stock of the Company which the undersigned may be
entitled to vote at the special meeting of the stockholders of the
Company to be held at the offices of the Company, 25 Wiggins
Avenue, Bedford, Massachusetts on Tuesday, October 28, 1997, and
at any adjournment or postponement of such meeting, for the
following purposes and with discretionary authority as to any
other matter that may properly come before the meeting, all in
accordance with and as described in the Notice and accompanying
Proxy Statement. If no direction is given, this proxy will be
voted FOR proposals 1, 2 and 3.
Proposal (1): To approve an amendment to the Company's
Certificate of Incorporation, as amended,
to increase the number of authorized
shares of Common Stock, $.01 par value,
from 30,000,000 to 100,000,000 shares.
FOR ___ AGAINST ___ ABSTAIN ___
Proposal (2): To approve an amendment to the Company's
Certificate of Incorporation, as amended,
to be effective following the
reorganization of the Company, Tytronics
Incorporated and National Metal Refining
Company, Inc., to reduce the number of
authorized shares of Common Stock of the
Company from 100,000,000 to 2,000,000
with $.50 par value; and to effect a
reverse stock split of the Company's
Common Stock (such split to combine fifty
outstanding shares of Common Stock into
one share of Common Stock).
FOR ___ AGAINST ___ ABSTAIN ___
Proposal (3): To approve an amendment to the Company's
Certificate of Incorporation, as amended,
to change the name of the Company from
Holometrix, Inc. to Metrisa, Inc.
FOR ___ AGAINST ___ ABSTAIN ___
Date:_____________________________, 1997
________________________________________
________________________________________
(Signature of Stockholder)
Please sign exactly as your name appears.
If acting as attorney, executor, trustee
or in other representative capacity, sign
name and title.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
of
Holometrix, Inc.
Holometrix, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by
unanimous vote of the Board of Directors taken at a meeting of the
Board of Directors held on August 28, 1997, in accordance with the
provisions of the General Corporation Law of the State of Delaware
and the By-laws of the Corporation, duly adopted the following
resolution authorizing a proposed amendment to the Certificate of
Incorporation of said Corporation declaring said amendment to be
advisable and recommending said amendment to the stockholders of
the Corporation for approval thereby:
RESOLVED: That the Corporation amend its Certificate of
Incorporation to increase the number of authorized
shares of Common Stock, $.01 par value, from
30,000,000 to 100,000,000.
SECOND: That the stockholders of said Corporation at a
Special Meeting of Stockholders held on October 28, 1997, in
accordance with the provisions of Sections 211 and 222 of the
General Corporation Law of the State of Delaware, duly adopted the
aforementioned amendment.
THIRD: That the aforementioned amendment was duly adopted
in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.<PAGE>
FOURTH: That in accordance with the aforementioned
resolution, the Certificate of Incorporation of this Corporation
is hereby amended by deleting the first paragraph of Article 4
thereof in its entirety and replacing it with a new paragraph so
that, as amended, the first paragraph of Article 4 shall read as
follows:
"4. The total number of shares of stock which the
Corporation shall have authority to issue is one
hundred ten million (110,000,000) shares, of which
one hundred million (100,000,000) shares shall be
common stock, with a par value of one cent ($.01)
per share (the "Common Stock") and ten million
(10,000,000) shares shall be preferred stock, with
a par value of one cent ($.01) per share (the
"Preferred Stock")."
IN WITNESS WHEREOF, Holometrix, Inc., has caused this
Certificate to be signed by John E. Wolfe, President, and attested
by David J. Brown, Secretary, this ____ day of October, 1997.
Attest HOLOMETRIX, INC.
____________________________ ____________________________
David J. Brown John E. Wolfe
Its Secretary Its President<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
of
Holometrix, Inc.
Holometrix, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by
unanimous vote of the Board of Directors taken at a meeting of the
Board of Directors held on August 28, 1997, in accordance with the
provisions of the General Corporation Law of the State of Delaware
and the By-laws of the Corporation, duly adopted the following
resolution authorizing a proposed amendment to the Certificate of
Incorporation, said Corporation, declaring said amendment to be
advisable and recommending said amendment to the stockholders of
the Corporation for approval thereby:
RESOLVED: That the Corporation amend its Certificate of
Incorporation to effect a one for fifty reverse
stock split of the Corporation's issued and
outstanding common stock, $.01 par value,
decreasing the number of authorized shares of
common stock, $.01 par value, from 100,000,000
shares to 2,000,000 shares and increasing the par
value of the Corporation's Common Stock to $.50 per
share.
SECOND: That the stockholders of said Corporation, at a
Special Meeting of Stockholders held on October 28, 1997, in
accordance with the provisions of Sections 211 and 212 of the
General Corporation Law of the State of Delaware, duly adopted the
aforementioned amendment.<PAGE>
THIRD: That the aforementioned amendment was duly adopted
in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
FOURTH: That in accordance with the aforementioned
resolution, the Certificate of Incorporation of this Corporation
is hereby amended by deleting the first paragraph of Article 4
thereof in its entirety and replacing it with a new paragraph so
that, as amended, the first paragraph of Article 4 shall read as
follows:
"4. The total number of shares of stock which the
Corporation shall have authority to issue is twelve
million (12,000,000) shares, of which two million
(2,000,000) shares shall be common stock, with a
par value of fifty cents ($.50) per share (the
"Common Stock"), and ten million (10,000,000)
shares shall be preferred stock, with a par value
of one cent ($.01) per share (the "Preferred
Stock")."
FIFTH: That the Board of Directors of the Corporation, by
unanimous vote of the Board of Directors taken at a meeting of the
Board of Directors held on August 28, 1997, in accordance with the
provisions of the General Corporation Law of the State of Delaware
and the By-laws of the Corporation, duly adopted the following
resolution authorizing a proposed amendment to the Certificate of
Incorporation of the Corporation, declaring the amendment to be
advisable and recommending said amendment to the stockholders of
the Corporation for approval thereby:
RESOLVED: That the Corporation amend its Certificate of
Incorporation to change its name from
Holometrix, Inc. to Metrisa, Inc.
SIXTH: That the stockholders of the Corporation, at a
Special Meeting of Stockholders held on October 28, 1997, in<PAGE>
accordance with the provisions of Sections 211 and 222 of the
General Corporation Law of the State of Delaware, duly adopted the
aforementioned amendment.
SEVENTH: That the aforementioned amendment was duly adopted
in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
EIGHTH: That in accordance with the aforementioned
resolution, the Certificate of Incorporation of this Corporation
is hereby amended by deleting Article 1 thereof in its entirety
and replacing it with a new Article 1 so that, as amended
Article 1 shall read as follows:
"1. The name of the Corporation is
Metrisa, Inc."
IN WITNESS WHEREOF, Holometrix, Inc., has caused this
Certificate to be signed by John E. Wolfe, President and attested
by David J. Brown, Secretary this ____ day of October, 1997.
Attest HOLOMETRIX, INC.
____________________________ ____________________________
David J. Brown John E. Wolfe
Its Secretary Its President
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 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. 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 there can be no guarantees 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.
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 expenses 41,805 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
Ended June 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
LOSS PER COMMON SHARE
22,296,878 16,296,878
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Year ended September 30, 1996 as compared to year ended September 30, 1995)
SELECTED FINANCIAL DATA:
1996 1995
STATEMENT OF OPERATIONS DATA
Net revenues $2,200,603 $2,104,692
Net income $4,041 $12,195
Net income per Common share $0.00 $0.00
Weighted average Common
shares outstanding 16,313,316 15,846,006
CONSOLIDATED BALANCE SHEET DATA
Working capital 298,315 202,461
Total assets 2,548,723 1,073,217
Long-term debt, excluding current
portion 213,539 134,571
Minority Interest 66,634 -
Stockholders' Equity 682,097 438,056
OVERVIEW
The Company's revenues are derived from the sale of thermal
analytical instruments and testing services. These two business
segments complement each other because testing services are frequently
purchased by companies that cannot yet afford the purchase of their
own instruments. Conversely, there are instrument customers who
frequently have testing needs beyond what their instrumentation can
handle, or have need of an independent laboratory to certify their own
results.
During fiscal 1992 and 1993, the Company sustained significant
losses with resultant cash flow problems. In late fiscal 1993, the
Board of Directors appointed Joseph J. Caruso as Acting President. Mr.
Caruso initiated a 33% cut in the workforce, placed payments to
creditors on hold, and assigned new responsibilities to existing
management, in order to concentrate on stabilizing operations and
generating revenue. In fiscal 1994, the Company was profitable,
achieving net income of $89,617 on sales of $2,499,008. However, the
balance sheet remained weak. A working capital deficit of $421,135
was present at the end of fiscal 1994 and the deficit in stockholders'
equity was $494,388.
Commencing in fiscal year 1993, the Company made a decision to begin
exploring strategic relationships with other companies as a means of
creating shareholder value and achieving corporate stability through
reaching a critical mass in revenue. In connection with this
decision, the Company entered into discussions with Tytronics
Incorporated ("Tytronics"), which designs and manufactures on-line
analyzers for process control and environmental compliance monitoring.
As a result of these discussions, on November 29, 1994, Tytronics
acquired approximately 55% of the Company's outstanding Common Stock
from existing stockholders, and entered into other transactions with
the Company described below.
On September 30, 1996, the Company acquired a majority of the issued
and outstanding capital stock of the National Metal Refining Company
("Nametre"). Nametre, located in Metuchen, NJ, is a product
development and manufacturing company that specializes in
manufacturing in-line and laboratory viscosity analyzers. Since
Nametre was acquired on the last business day of the Company's fiscal
year, no Nametre revenues are included; however, Nametre's balance
sheet is consolidated into that of the Company as of September 30,
1996.
During fiscal 1996, as a result of continuing profitability,
additional sales of common stock to Tytronics increasing its
ownership to approximately 67%, and the investment in Nametre, the
balance sheet improved significantly, as compared to fiscal 1995. At
the end of fiscal 1996, the Company's working capital amounted to
$298,315, a positive change of $95,854. Stockholders' Equity amounted
to $682,097 at September 30, 1996, a positive change of $244,041 from
the previous year end.
The Company expects that it will continue to explore additional
business opportunities through enhanced sales and marketing efforts,
new product development, and the development of strategic
relationships, including licensing, acquisition, or merger. However,
there can be no guarantee that such activities will result in
continuing and sustained profitability.
Year Ended September 30, 1996 As Compared To Year Ended September 30,
1995
Revenues for the 1996 fiscal year totaled $2,200,603, as compared to
$2,104,692 in the comparable period of 1995, an increase of $95,911,
or 5%, largely due to increased instrument sales, a portion of which
came from the introduction of a new instrument, the Lambda 2000,
launched in the 3rd quarter of 1996.
Cost of sales totaled $1,338,466, or 61% of sales in fiscal 1996, as
compared to $1,298,023, or 62% in fiscal 1995. The increase in margin
is due to both operational cost reductions and the introduction of the
new, lower cost Lambda 2000 instrument.
Selling, general and administrative expenses increased from
$553,432, or 26% of sales in fiscal 1995, to $668,902, or 30% of sales
in fiscal 1996. The increase of $115,470 was attributable primarily
to the increase in selling and marketing activities and the addition
of a director of sales, marketing and engineering.
Research and development expenses decreased from $206,629, or 10% of
sales in fiscal 1995, to $153,984, or 7% of sales in fiscal 1996. The
decrease of $52,645 was primarily due to the completion of the new
Lambda 2000 instrument launched in the third quarter of fiscal year
1996, and the employment of certain engineering personnel in
manufacturing functions. Expenses are expected to rise above this
rate in fiscal 1997 due to increased engineering resources. Efforts
are being focused on the development of more competitively advantaged
products, and on upgrading the automation software, efforts which the
Company expects to continue in fiscal year 1997.
Income from operations decreased from $46,608, or 2.2% of sales, in
fiscal 1995 to $39,251, or 1.8% of sales, in fiscal 1996, a decrease
of $7,357. The decrease in income from operations is due primarily to
the increase in sales and marketing expenses, offset by increases in gross
profit.
Net income decreased from $12,195, or 0.6% of sales during fiscal
1995, to $4,041, or 0.2% of sales in fiscal 1996. Again, the decrease
in net income is primarily due to higher sales and marketing expenses,
offset by increases in gross profit. Interest expense remained
essentially constant at $35,210 in fiscal 1996, compared to $34,413
in fiscal 1995.
Total Assets at September 30, 1996, increased to $2,548,723 from
$1,073,217 on September 30, 1995, an increase of $1,475,506, or 137%.
The major part of the increase is due to the Company acquiring
approximately 61% of Nametre, a New Jersey manufacturer of viscosity
measuring instrumentation. The fair value of Nametre's assets, excluding
goodwill recorded by the Company in conjunction with the acquisition, were
$971,102, net of intercompany transactions. Excluding Nametre, the Company's
accounts receivable grew by $335,934 due to increased fourth quarter
sales. On the same basis, the Company's inventory decreased by
$16,921, to $222,316. On a consolidated basis, Equipment and Fixtures
increased by $1,510, including $51,763 of Nametre's small Equipment
and Fixtures. Additional combined investments of $80,468 in fixed
assets were more than offset by depreciation expense of $120,341.
Total Liabilities at September 30, 1996, increased to $1,799,992
from $635,161 on September 30, 1995, an increase of $1,164,831, or
183%. Again, the major part of this increase is due to the
acquisition of Nametre. Nametre's liabilities represent $874,233 of
the total consolidated liabilities. Included in Nametre's liabilities
were $155,000 of notes payable, $100,000 of which is in Current Liabilities.
Excluding Nametre, accounts payable increased by $328,019 to
$542,762 at the end of fiscal 1996, as compared to $214,743 at the end
of fiscal 1995. Of this increase, approximately $147,000 is due to
commissions payable for international sales, approximately $46,000 is
due to legal and audit billings associated with the acquisition of
Nametre, and most of the balance is due to heavier than normal
inventory purchases in support of fourth quarter sales. Approximately
$114,000 of the commissions payable is due to a single foreign
distributor. Accrued payroll and related expenses, excluding Nametre,
increased by $8,355 to $37,086 due primarily to increased internal
commissions due at the end of fiscal 1996. Accrued other expenses,
excluding Nametre, decreased by $21,454, primarily due to decreases
in accrued warranty of approximately $10,000, and decreases in accrued
interest and other expenses of approximately $11,000.
Long-term debt increased by $78,968 to $213,539, $100,000 of which
is held by Tytronics, a related party. On October 31, 1995, $55,000
of current debt due to Tytronics, of a total debt of $165,000, was in arrears.
Tytronics agreed not to demand accelerated payment of the entire loan
balance, at least until October 1, 1996. Subsequently, in connection with
additional investments by Tytronics of $300,000 to the Company,
Tytronics applied $65,000 of debt to this stock purchase and rewrote
the remaining $100,000 as long term debt, with payments of $50,000 due
November 23, 1997, and $50,000 due November 23, 1998, all in
conjunction with the issuance of certain warrants (see CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS).
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Operating cash flows were positive, amounting to $136,043 during fiscal
1996, compared to $69,759 in fiscal 1995. Operating cash flows approximated
the sum of net income plus depreciation and amortization, with increases in
accounts receivable of $335,934, being offset by increases in accounts payable
of $328,019. The effect of the purchase of Nametre in fiscal year 1996, net
of cash acquired, was a cash outflow of $266,514; this was funded by the
operating cash flows noted above, issuance of common stock amounting to
$175,000, increases in amounts owed to a major stockholder, Tytronics, of
$86,350, offset by repayments under the Company's line of credit of $41,000.
In addition, the Company funded increases in equipment and fixtures of $80,468.
The net affect of these transactions was a decrease in cash of $13,212,
providing cash at the end of fiscal 1996 of $27,495.
Future cash commitments are moderate, assuming continued profitability.
The combination of operating cash flows plus the Company's line of credit
should be adequate for immediate needs.
Series A Preferred Stock
On November 10, 1994, the Company entered into an agreement with
Corning Partners III, L.P. ("Corning") and with Mr. Bayard Henry, to
convert all of their then outstanding Series A Convertible stock into
Common Stock. Corning held 1,896,596 shares of Series A stock, which
was converted to 2,095,110 shares of Common Stock. Mr. Henry held
949,471 shares of Series A stock, which was converted to 1,048,851
shares of Common Stock (see DEBT CONVERSION AND TYTRONICS' STOCK
PURCHASE).
Series B Preferred Stock
As of September 30, 1994, all of the Company's outstanding shares of
Series B Preferred Stock were held by Corning. On November 10, 1994,
the Company entered into an agreement with Corning to convert all of
the Series B Convertible stock into Common Stock. Corning held
1,000,000 shares of Series B stock, which was converted to 1,057,989
shares of Common Stock (see DEBT CONVERSION AND TYTRONICS' STOCK
PURCHASE).
Note payable to a founder
In April 1992, the Company issued a $50,000 Unsecured Promissory
Note to a founder of the Company. Terms of the note required
principal repayment of $25,000 plus accrued interest at 6% on April 1,
1993 and April 1, 1994. In August, 1994, the terms of the note, with
outstanding debt at $44,000, were re-negotiated. The new agreement
calls for 68 monthly payments of $500 each, including interest at 6%,
forgives $5,000 principal immediately, and forgives an additional
$5,000 at the end of the payment schedule if all payments are made on
time. At September 30, 1996, the outstanding balance was $24,572, of
which $19,572 is classified as a long-term liability, and $5,000 is
classified as a current liability.
Credit agreements
On December 22, 1994, Silicon Valley Bank provided the Company with
a line of credit in the amount of $350,000. This line of credit is
secured by substantially all assets of the Company. Advances under
this line shall not exceed 70% of the Company's eligible accounts
receivable as defined. These amounts are payable on demand and bear
interest at the bank's prime rate plus 1.5%. Advances are also
contingent upon maintaining certain covenants relative to
profitability, liquidity, tangible net worth and leverage. No
advances occurred until April, 1995, when an initial advance of
$75,000 was provided. Since then, this line of credit has been in use
to provide both working capital and support for various payments,
including payment of debt to Tytronics. As of September 30, 1996, and
September 30, 1995, borrowings under this line of credit were $84,000
and $125,000, respectively, and the Company was in compliance with all
covenants.
During the fiscal years ending September 30, 1996 and September 30,
1995, the Company and Tytronics were also parties to various informal
working capital agreements pursuant to which Tytronics provided
working capital financing to the Company on a short-term basis. Such
working capital advances are limited by the Company's agreement with
Silicon Valley Bank to $50,000 at any one time. These advances are
payable on demand with 10% interest and secured by a note. As of September
30, 1996, $20,000 was due to Tytronics by the Company under these
arrangements. During fiscal years 1996 and 1995, the Company borrowed
an aggregate of approximately $130,000 and $111,000, respectively, including
interest, from Tytronics under these arrangements.
Material Contracts
Approximately $65,600, or 3% of total sales in fiscal year 1996 and
$483,600, or 23% of total sales in fiscal year 1995 represented
revenues under a long term service contract with the United States
government. In the fourth quarter of fiscal 1995, the Company
received notification from the United States Government that this
contract was being suspended, at least temporarily. This contract is
terminable at will by the U.S. government. Due to changes in
government appropriations, government funding levels, and spending
priorities, this contract was largely suspended throughout fiscal year
1996, and partially reinstated late in the year. This contract will
likely be further reduced or canceled, with some of the work being
transferred to existing government laboratories. Reinstatement, if
any, will be determined by the funding and direction of the future
Congressional budgets and Department of Energy executive decisions. The loss
of this contract has had and will continue to have a material effect on
the Company, reducing both sales and profitability.
DEBT CONVERSION AND TYTRONICS' STOCK PURCHASE
Pursuant to a Conversion of Debt and Contribution to Capital
Agreement dated November 10, 1994 between the Company and Corning
Partners, III, L.P., Corning Partners III, L.P. converted $315,000 of
existing promissory notes plus $59,205 of accrued interest on all such
outstanding notes, into 1,663,140 shares of the Company's Common
Stock. Also on November 10, 1994, the Company entered into an Accrued
Interest Conversion Agreement with Bayard Henry, pursuant to which Mr.
Henry converted interest on $50,000 of the 10% subordinated notes then
held by Mr. Henry, totaling $8,292, into 36,860 shares of the
Company's Common Stock.
Pursuant to a Purchase Agreement dated November 29, 1994 (the
"Purchase Agreement"), Tytronics acquired all of the Common Stock of
the Company owned by Corning Partners II, L.P., Corning Partners III,
L.P., Bayard Henry, and Edward J. Stewart, III, consisting of an
aggregate 8,960,244 shares of the Company's Common Stock and
representing 55% of the shares of the Company's outstanding voting
securities, at that time. In connection with the Purchase Agreement,
Tytronics also acquired $220,000 of the 10% Demand Subordinated Notes
then held by Corning Partners III, L.P. and Bayard Henry. In
addition, pursuant to a Loan Agreement dated November 29, 1994 (the
"Loan Agreement"), the Company paid $55,000 to Tytronics which was
used to retire a portion of the $220,000 10% Demand Subordinated Notes
acquired from previous holders, and the $165,000 balance of these
notes was converted into a 3-year note, with annual principal payments
of $55,000, plus interest at 10% per annum, due October 31 of each
year. As of October 31, 1995, the Company was in arrears on its
current payment on this note, and remained so until September 30, 1996
(see following paragraph). Pursuant to the Loan Agreement, Tytronics
also provided the Company with a $150,000 demand loan, the proceeds of
which were used to pay the remaining indebtedness owed Corning
Partners II, L.P., Corning Partners III, L.P. and Bayard Henry.
As noted above, $55,000 of current debt became due to Tytronics on
October 31, 1995. The Company was unable to make payment, and
Tytronics agreed not to demand accelerated payment of the entire loan
balance, at least until October 1, 1996. Subsequently, in connection
with additional investments by Tytronics of $300,000 to the Company,
Tytronics applied $65,000 of debt to this stock purchase and rewrote
the remaining $100,000 as long term debt, with payments of $50,000 due
November 23, 1997, and $50,000 due November 23, 1998, all in
conjunction with the issuance of certain warrants (see CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS).
As a result of the transaction described above, all previously
outstanding shares of the Company's Series A and B Preferred Stock
have been converted into Common Stock, and all of the Company's
indebtedness to the Corning partnerships and Mr. Henry have been
converted to Common Stock, paid in full, or purchased by Tytronics.
As of September 30, 1996, the Company held notes payable to Tytronics
totaling $100,000, all of which is a long term liability. Immediately
prior to the effectiveness of the Purchase Agreement with Tytronics,
the Corning partnerships and Messrs. Stewart and Henry effectively
held 8,960,244 shares of the Company's Common Stock, or 55% of the
Company's outstanding voting securities, which were then exchanged for
30,000 shares of Tytronics common stock, $.01 par value. In
connection with the transaction described above, Joseph J. Caruso,
Joaquim S. S. Ribeiro, and John E. Wolfe were also elected as
additional directors of the Company.
IMPACT OF INFLATION
Although no assurance can be given, increases in the inflation rate are
not expected to materially adversely affect the Company's business.
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Holometrix, Inc.
Bedford, Massachusetts
We have audited the accompanying consolidated balance sheets of
Holometrix, Inc. and subsidiary as of September 30, 1996 and 1995
and the related consolidated statements of income,
stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Holometrix, Inc. and subsidiary at September 30,
1996 and 1995, and the consolidated results of their operations
and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ BDO Seidman
BDO Seidman, LLP
Boston, Massachusetts
November 26 , 1996
HOLOMETRIX, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, 1996 AND 1995
(Notes B, G and H)
1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 27,495 $ 40,707
Accounts receivable, less
allowance for doubtful
accounts of $35,000 1,162,148 407,633
for 1996 and $20,000
for 1995 (Note L)
Inventories (Note D) 662,323 239,238
Other current assets 32,802 15,473
TOTAL CURRENT ASSETS 1,884,768 703,051
EQUIPMENT AND FIXTURES - net 351,656 350,146
(Note E)
OTHER ASSETS - net (Notes B and F) 312,299 20,020
TOTAL ASSETS $2,548,723 $1,073,217
See accompanying notes to consolidated financial statements
HOLOMETRIX, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1996 AND 1995
1996 1995
CURRENT LIABILITIES:
Notes payable - stockholders
(Notes B and G) $ 20,000 55,000
Notes payable -line of credit (Note G) 84,000 125,000
Accounts payable 1,204,028 214,743
Accrued payroll and related expenses 37,086 28,731
Accrued expenses - other 59,135 61,589
Due to stockholder (Note M) 77,204 10,854
Current maturities of long-term
obligations (Note H) 105,000 4,673
TOTAL CURRENT LIABILITIES 1,586,453 500,590
LONG-TERM DEBT:
Notes payable-stockholders,
less current maturities
(Notes B and G) 100,000 110,000
Long term obligations, less
current maturities (Note H) 113,539 24,571
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY (Note N) 66,634 -
COMMITMENTS AND CONTINGENCIES
(Notes G,H,J,K and M)
STOCKHOLDERS' EQUITY (Notes B and K):
Common Stock, $.01 par value, 30,000,000
shares authorized; issued 26,533,157
in 1996 and 20,533,157 in 1995;
outstanding 22,296,878 in 1996 and
16,296,878 in 1995 265,332 205,332
Additional paid-in capital 2,459,009 2,219,009
Accumulated deficit (1,878,244) (1,882,285)
___________ ___________
846,097 542,056
Less: Treasury stock (at cost) 104,000 104,000
Subscriptions Receivable 60,000 _
TOTAL STOCKHOLDERS' EQUITY 682,097 438,056
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,548,723 $1,073,217
See accompanying notes to consolidated financial statements
HOLOMETRIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
(Note B)
1996 1995
NET REVENUES (Note L) $2,200,603 $2,104,692
COST OF SALES 1,338,466 1,298,023
GROSS PROFIT 862,137 806,669
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 668,902 553,432
RESEARCH AND DEVELOPMENT 153,984 206,629
TOTAL OPERATING EXPENSES 822,886 760,061
INCOME FROM OPERATIONS 39,251 46,608
INTEREST EXPENSE 35,210 34,413
NET INCOME $ 4,041 $ 12,195
NET INCOME PER COMMON SHARE $0.00 $0.00
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES USED IN CALCULATION OF
INCOME PER COMMON SHARE
(Note B) 16,313,316 15,846,006
See accompanying notes to consolidated financial statements
HOLOMETRIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
(Note B)
<TABLE>
<S> <C> <C> <C> <C> <C>
Preferred Stock
Series B Common Stock Additional
Par Value $.01 Par Value $.01 Paid-in
Shares Amount Shares Amount Capital
BALANCE, September 30, 1994 1,250,000 $12,500 14,631,207 $146,312 $1,344,780
Conversion of debt to equity - - 1,663,140 16,631 357,573
Conversion of accrued interest
to equity - - 36,860 369 7,923
Common shares repurchased - - - - -
Conversion of Series "A" Preferred
Stock into Common Stock - - 3,143,961 31,440 509,313
Conversion of Series "B" Preferred
Stock into Common Stock (1,250,000) (12,500) 1,057,989 10,580 (580)
Net income for year - - - - -
BALANCE, September 30, 1995 - - 20,533,157 205,332 2,219,009
Common shares issued - - 6,000,000 60,000 240,000
Net income for year - - - - -
BALANCE, September 30, 1996 - $ - 26,533,157 $265,332 $2,459,009
Total
Accumulated Treasury Stock Subscriptions Stockholders'
Deficit Shares Amount Receivable Equity(Deficit)
BALANCE, September 30, 1994 $(1,894,480) (3,886,279) $(103,500) $ - $(494,388)
Conversion of debt to equity _ _ _ _ 374,204
Conversion of accrued interest
to equity _ _ _ _ 8,292
Common shares repurchased _ (600,000) (3,000) _ (3,000)
Conversion of Series "A" Preferred
Stock into Common Stock _ _ _ _ 540,753
Conversion of Series "B" Preferred
Stock into Common Stock _ 250,000 2,500 _ _
Net income for year 12,195 - - _ 12,195
BALANCE, September 30, 1995 (1,882,285) (4,236,279) (104,000) _ 438,056
Common shares issued _ _ _ (60,000) 240,000
Net income for year 4,041 _ _ _ 4,041
BALANCE, September 30, 1996 $(1,878,244) (4,236,279) $(104,000) ($60,000) $682,097
</TABLE>
See accompanying notes to consolidated financial statements.
HOLOMETRIX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
(Note N)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,041 $ 12,195
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 125,125 182,292
Loss on disposal of equipment
and fixtures - 2,980
Changes in operating assets and
liabilities, net of effects of
acquisition:
Accounts receivable (335,934) (60,959)
Inventories 16,921 (40,333)
Other current assets 10,970 (2,818)
Accounts payable 328,019 62,585
Accrued expenses (13,099) (86,183)
Net cash provided by operating
activities 136,043 69,759
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment and fixtures additions (80,468) (59,344)
Purchase of Nametre, net of
cash acquired (266,514) -
(Increase) decrease in other assets (17,956) 650
Net cash used for investing
activities (364,938) (58,694)
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to stockholder, net 86,350 10,854
Borrowings (repayments) of notes -
stockholders & others - (205,000)
Purchase of treasury stock - (3,000)
Proceeds from issuance of common stock 175,000 -
Net borrowings (repayments) under
line of credit (41,000) 125,000
Repayments under long term obligations (4,667) (6,715)
Net cash provided (used) for
financing activities 215,683 (78,861)
Net increase (decrease) in cash and
cash equivalents (13,212) (67,796)
Cash and cash equivalents, beginning
of year 40,707 108,503
Cash and cash equivalents, end of year $27,495 $40,707
See accompanying notes to consolidated financial statements
HOLOMETRIX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
A. Business Organization:
Holometrix, Inc. (the "Company"), a Delaware corporation
incorporated on October 23, 1985, is a product development,
manufacturing and contract test services company which specializes
in manufacturing instruments and providing contract test services
for measuring the thermophysical properties of a wide variety of
materials. The Company's Instruments Division currently designs,
manufactures and distributes five product lines containing a total of
seventeen instrument models which measure thermophysical properties
for research and quality control applications. The Company's
Testing Services Division provides contract test and engineering
services to evaluate various temperature-related performance factors
of virtually any material. The Testing Services Division also performs
mechanical and physical properties testing. The Company is located in Bedford,
MA.
In 1996, the Company purchased a majority of the issued and
outstanding capital stock of National Metal Refining Company, Inc.
("Nametre" or "Subsidiary"). Nametre is a product development and
manufacturing company that specializes in manufacturing in-line and
laboratory viscosity analyzers. These analyzers are used to measure
the viscosity and viscoelasticity of a wide range of materials that
are sold to the polymer manufacturing, petrochemical, food, paints
and coatings and pulp and paper markets. Nametre is located in
Metuchen, NJ.
B. Acquisition, Debt Conversion and Certain Capital Transactions (see Note G):
Acquisition
On September 30, 1996, the Company acquired approximately 61.23%
of the outstanding shares of National Metal Refining Company, Inc.,
(Nametre) a developer of instruments for the measurement of viscous
properties of materials, for $225,000 in cash and $75,000 in notes
payable, plus acquisition costs. The acquisition has been accounted
for under the purchase method of accounting, resulting in the cost of the
acquisition being preliminarily allocated on the basis of the estimated
fair value of the assets acquired and liabilities assumed. This allocation
has resulted in goodwill of approximately $245,000 which is being amortized
over 15 years. The purchase also provided for the acquisition by the
Company of warrants to purchase an additional 13,334 shares at $3 per share
and 10,000 shares at $6 per share. The Company raised the funds to acquire
Nametre by issuing 6,000,000 shares of the Company's common stock to Tytronics,
Incorporated ("Tytronics"), at a purchase price of $.05 per share. At the
time of this sale of shares, the Company entered into a debt restructuring
agreement with Tytronics; in conjunction with that agreement, the Company
also issued warrants to Tytronics to purchase one million, one hundred thousand
(1,100,000) shares of Common Stock at an exercise price of $0.05 per share
and one million (1,000,000) shares of Common Stock at an exercise price of
$0.10 per share, expiring February 1, 2006. Joseph J. Caruso, a director of
the Company, is also a director of Nametre. In addition, Mr. Caruso is the
president of Bantam, which is a stockholder of the Company and Nametre and
has entered into consulting agreements with Nametre and the Company. The
purchase did not have a material effect on the Consolidated Statement of
Income for the year ended September 30, 1996.
The unaudited pro forma consolidated results of the Company for
the years ended September 30, 1996 and 1995, assuming that the
acquisition had occurred at the beginning of each period presented,
and after giving effect to certain pro forma adjustments, are as
follows:
(Unaudited)
September 30,
1996 1995
Revenue $4,803,389 $4,775,711
Net loss (27,010) (159,131)
Net loss per share (0.00) (0.01)
Conversion of Debt
Pursuant to a Conversion of Debt and Contribution to Capital
Agreement dated November 10, 1994 between the Company and Corning
Partners, III, L.P., Corning Partners III, L.P. converted $315,000
of existing promissory notes plus $59,205 of accrued interest on all
such outstanding notes, into 1,663,140 shares of the Company's
Common Stock. Also on November 10, 1994, the Company entered into
an Accrued Interest Conversion Agreement with Bayard Henry, pursuant
to which Mr. Henry converted interest on $50,000 of the 10%
subordinated notes then held by Mr. Henry, totaling $8,292, into
36,860 shares of the Company's Common Stock.
Pursuant to a Purchase Agreement dated November 29, 1994 (the
"Purchase Agreement"), Tytronics acquired all of the Common Stock of
the Company owned by Corning Partners II, L.P., Corning Partners
III, L.P., Bayard Henry, and Edward J. Stewart, III, consisting of
an aggregate 8,960,244 shares of the Company's Common Stock and
representing 55% of the shares of the Company's outstanding voting
securities, at that time. In connection with the Purchase
Agreement, Tytronics also acquired $220,000 of the 10% Demand
Subordinated Notes then held by Corning Partners III, L.P. and
Bayard Henry. In addition, pursuant to a Loan Agreement dated
November 29, 1994 (the "Loan Agreement"), the Company paid $55,000
to Tytronics which was used to retire a portion of the $220,000 10%
Demand Subordinated Notes acquired from previous holders, and the
$165,000 balance of these notes was converted into a 3-year note,
with annual principal payments of $55,000, plus interest at 10% per
annum, due October 31 of each year. As of October 31, 1995, the
Company was in arrears on its then due payment on this note, and
remained so until September 30, 1996. Pursuant to the Loan Agreement,
Tytronics also provided the Company with a $150,000 demand loan, the
proceeds of which were used to pay the remaining indebtedness owed
Corning Partners II, L.P., Corning Partners III, L.P. and Bayard Henry.
As noted above, subsequent to year end September 30, 1995, the
Company failed to make its required October 31, 1995 installment and
was, therefore, in default under the provisions of the loan
agreement. Tytronics agreed not to demand accelerated payment of
the entire loan balance, at least until October 1, 1996.
Subsequently, in support of the Nametre acquisition, and in
connection with additional investments by Tytronics of $300,000 to
the Company, Tytronics applied $65,000 of debt to this stock
purchase and rewrote the remaining $100,000 as long term debt, with
payments of $50,000 due November 23, 1997, and $50,000 due November
23, 1998.
During the fiscal year ended September 30, 1996, the Company and Tytronics
were also parties to various informal working capital agreements pursuant to
which Tytronics provided working capital financing to the Company on a
short-term basis. Such working capital advances are limited by the Silicon
Valley Bank agreement to $50,000 at any one time. These advances are payable
on demand with 10% interest. During fiscal year 1996, the Company borrowed
an aggregate of $130,000, including interest, from Tytronics under these
arrangements. At September 30, 1996, $20,000 was due to Tytronics by the
Company under these same arrangements.
Series A Preferred Stock
On November 10, 1994, the Company entered into an agreement with Corning
Partners III, L.P. ("Corning") and with Mr. Bayard Henry, to convert all of
their then outstanding Series A Convertible stock into Common Stock. Corning
held 1,896,596 shares of Series A stock, which was converted to 2,095,110
shares of Common Stock. Mr. Henry held 949,471 shares of Series A stock,
which was converted to 1, 048,851 shares of Common Stock.
Series B Preferred Stock
As of September 30, 1994, all of the Company's outstanding shares of Series
B Preferred Stock were held by Corning. On November 10, 1994, the Company
entered into an agreement with Corning to convert all of the Series B
Convertible stock into Common Stock. Corning held 1,000,000 shares of
Series B stock, which was converted to 1,057,989 shares of Common Stock.
As a result of the transactions described above, all previously
outstanding shares of the Company's Series A and B Preferred Stock
have been converted into Common Stock, and all of the Company's
indebtedness to the Corning partnerships and Mr. Henry have been
converted to Common Stock, paid in full, or purchased by Tytronics.
Immediately prior to the effectiveness of the Purchase Agreement
with Tytronics, the Corning partnerships and Messrs. Stewart and
Henry effectively held 8,960,244 shares of the Company's Common
Stock, or 55% of the Company's outstanding voting securities, which
were then exchanged for 30,000 shares of Tytronics common stock,
$.01 par value. Additionally, the Company raised the funds to
acquire Nametre by issuing 6,000,000 shares of the Company's common
stock to Tytronics, at a purchase price of $0.05 per share. As of
September 30, 1996, the Company's common stock owned by Tytronics
represented 14,960,244 shares, or 67.1% of the total outstanding
shares.
C. Summary of Significant Accounting Policies:
Basis of presentation
The consolidated financial statements include the accounts of the
Company and its subsidiary. All intercompany accounts and
transactions have been eliminated. As discussed in Note B, the Company
acquired a majority interest in Nametre at September 30, 1996.
Accordingly, the Consolidated Statements of Income and
Consolidated Statements of Cash Flows exclude any activity of
Nametre prior to the date of acquisition.
Cash and cash equivalents
The Company considers all highly liquid debt instruments purchased
with maturities of three months or less to be cash equivalents.
Concentration of credit risk
Concentration of credit risk consists principally of trade
receivables. This risk is limited due to the large number of
customers comprising the Company's and the Subsidiary's customer
bases and their dispersion across different businesses and
geographic regions. Ongoing credit reviews of customers' financial
condition are performed, and collateral is not required. The
Company maintains reserves for potential credit losses and such
losses, in the aggregate, have not exceeded management's
expectations.
Inventories
Inventories are valued at the lower of cost or market using the
first-in, first-out (FIFO) method.
Equipment and fixtures
Equipment and fixtures are stated at cost. Depreciation is
computed using straight-line and accelerated methods over the
estimated useful lives, ranging between 5 and 10 years, of the
related asset. Leasehold improvements are amortized over the life
of the lease including expected renewal periods not to exceed the
maximum useful lives of the assets.
Goodwill
Goodwill resulting from the excess of cost over fair value of net
assets acquired is being amortized on a straight-line basis over 15
years. The Company evaluates the recoverability and remaining life
of its goodwill and determines whether the goodwill should be
completely or partially written-off or the amortization period
accelerated. The Company will recognize an impairment of goodwill
if undiscounted estimated future operating cash flows of the
acquired business are determined to be less than the carrying amount
of the goodwill. If the Company determines that the goodwill has
been impaired, the measurement of the impairment will be equal to
the excess of the carrying amount of the goodwill over the amount of
the undiscounted estimated future operating cash flows. If an
impairment of goodwill were to occur, the Company would reflect the
impairment through a reduction in the carrying value of goodwill.
Other assets
Other assets includes a licensing agreement, patent costs, and
various deposits for office equipment and utilities. Costs related
to the licensing agreement are amortized using the straight-line
method over the life of the agreement. Patent costs are amortized
over 8 years.
Revenue recognition
Revenue for instruments sales is recognized when instruments are
shipped. Revenue for testing services is recognized as services are
performed.
Research and development
Research and development costs are charged to expense as incurred.
Income taxes
Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under SFAS No. 109, deferred tax liabilities or
assets are recognized for the estimated tax effects of temporary
differences between financial reporting and income tax bases of
assets and liabilities and for loss carryforwards based on enacted
tax laws and rates.
Net income per common share
Net income per common share is computed using the weighted average
number of common and common equivalent shares outstanding during the
year. Common shares issuable upon exercise of outstanding warrants
and options, when dilutive, are included in the computation of
shares outstanding.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Financial Instruments
The estimated fair value of the Company's financial instruments, which
include account receivable, accounts payable, notes payable and long-term
debt approximate their carrying value.
New accounting pronouncements
Effective October 1, 1995, the Company adopted Statement of
Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" ("SFAS 121"). The new standard establishes new
guidelines regarding when impairment losses on long-lived assets,
which include property and equipment, certain identifiable
intangible assets and goodwill, should be recognized and how
impairment losses should be measured. It is of the opinion of the
Company's management that the effect of the implementation of SFAS
121 was not material to the Company's consolidated financial statements.
Statement of Financial Accounting Standard No. 123 ("SFAS 123")
"Accounting for Stock-Based Compensation", allows the Company to
account for its stock-based employee compensation plans based upon
either a fair value method or the intrinsic value method currently
followed by the Company. If the current method is retained, SFAS
123 requires certain additional disclosures regarding the impact
which the fair value method would have on the results of the
Company's operations. The Company expects to retain its current
method of accounting for stock-based compensation plans, and,
therefore, the adoption of SFAS 123 will have no impact on the
Company's financial position or results of operations. Adoption of
SFAS 123 is required for financial statements of fiscal years
beginning after December 15, 1995. The Company will implement the
disclosure requirements of SFAS 123 as required in fiscal 1997.
D. Inventories:
As of September 30, inventories consist of the following:
1996 1995
Raw materials $401,779 $186,849
Work in process 109,893 52,389
Finished goods 150,651 -
Total $662,323 $239,238
E. Equipment and Fixtures:
1996 1995
As of September 30, equipment
and fixtures
consist of the following:
Furniture and fixtures $ 80,795 $ 45,746
Leasehold improvements 70,471 53,770
Computer equipment 212,580 198,159
Laboratory and shop equipment 313,934 290,521
Demo equipment 265,253 232,986
Guarded hot box facility 250,061 250,061
1,193,094 1,071,243
Less accumulated depreciation
and amortization (841,438) (721,097)
Total $351,656 $350,146
F. Other Assets:
1996 1995
As of September 30, other assets
consist of the following:
Goodwill $244,788 $ -
Licensing agreement -
net of amortization 12,951 17,735
Patents 32,637 -
Deposits 21,923 2,285
Total $312,299 $20,020
The licensing agreement, for use of various laser technologies, is
net of related accumulated amortization, which aggregated $22,499
and $17,715 for the years ended September 30, 1996 and 1995
respectively.
G. Notes Payable - Stockholders and Line of Credit:
As of September 30, Notes payable - stockholders and line of credit
consist of the following:
1996 1995
Notes payable -
stockholder (See Note B):
10% Term subordinated note $100,000 $165,000
10% Demand subordinated note 20,000 -
Less current maturities (20,000) (55,000)
Long-term portion $100,000 $110,000
Notes payable - line of credit $84,000 $125,000
In fiscal 1995 the Company entered into a working capital line of
credit with a bank, which provides for borrowings up to $350,000. The
line of credit is secured by substantially all assets of the Company.
Advances under the line shall not exceed 70% of the Company's eligible accounts
receivable, as defined. These amounts are payable on demand and bear interest
at the banks prime rate plus 1.5%. The line of credit agreement
contains covenants which among various matters restricts further
borrowings and security interests, loans and advances to others, and
sales of assets, other than in the normal course of business.
The Company is also required to maintain certain financial
covenants. The Company was not in compliance with certain of these
covenants during part of the 1995 fiscal year. Subject to terms and
conditions of a modification agreement dated August 14, 1995, the
bank has waived the covenant violations and amended the requirements
for the four financial covenants; profitability, liquidity, tangible
net worth and leverage. At September 30, 1996, and September 30, 1995,
borrowings under this line of credit were $84,000 and $125,000 respectively,
and the Company was not in violation of any of these covenants. This line
expires February 4, 1997.
H. Long term obligations:
As of September 30, long-term obligations consist of the following:
1996 1995
10% Term Note Payable - collateralized $ 155,000 $ -
6% Term Note Payable - unsecured 24,572 29,244
Notes Payable - other 38,967 -
Less current maturities (105,000) (4,673)
$ 113,539 $ 24,571
The Note Payable - Collateralized consists of a 10% note payable to the
estate of the former owner of Nametre. Payments are due quarterly and
include principal and interest. The note is collateralized by substantially
all of the assets of Nametre.
In fiscal 1992, the Company issued a $50,000 Unsecured Promissory
Note to a founder of the Company. Terms of the note required
principal repayment of $25,000 plus accrued interest at 6% on April
1, 1993 and April 1, 1994. In August, 1994, the note was
renegotiated, with the outstanding debt at $44,000. The new
agreement calls for 68 monthly payments of $500 each, including
interest at 6%, forgives $5,000 principal immediately, and forgives
an additional $5,000 at the end of the payment schedule if all
payments are made on time. At September 30, 1996, the outstanding
balance was $24,572, of which $19,572 is classified as a long-term
liability, and $5,000 is classified as a current liability.
As of September 30, 1996, the aggregate annual payments on long-
term obligations are as follows:
Fiscal 1997 $105,000
Fiscal 1998 99,196
Fiscal 1999 5,592
Fiscal 2000 3,751
Total scheduled payments 213,539
Due Fiscal 2000 if
payments are late 5,000
$218,539
I. Income Taxes:
The Company has net operating loss carryforwards available for
financial reporting and federal income tax purposes of approximately
$1,481,000 expiring through 2011. Because of the transaction with
Tytronics described in note B and the resulting "change in
ownership", the future use of the carryforwards that existed at the
time of the change is restricted.
As of September 30, deferred taxes consist of the following:
1996 1995
Net operating loss carryforwards $592,000 $584,000
Accounts receivable reserve 14,000 8,000
Other temporary differences 24,000 23,000
Valuation allowance (630,000) (615,000)
Net deferred tax asset $ - $ -
The Company has provided a valuation allowance equal to 100% of
the gross deferred tax asset since it is more likely than not that
the deferred tax asset will not be realized.
A reconciliation of the federal statutory income tax rate and the
effective tax rate as a percentage of income before taxes on income
for the years ended September 30, is as follows:
1996 1995
Statutory rate 34.0% 34.0%
Utilization of federal net
operating loss carryforwards (34.0)% (34.0)%
Effective tax rate - % - %
J. Operating Leases:
The Company conducts its operations from leased facilities
consisting of office and production space. The lease was non-
cancelable with a five-year term effective October 1, 1991. In
August, 1993 a new lease was negotiated. During fiscal 1995, the
Company further amended its lease agreement in order to obtain
consent to jointly occupy its facility with Tytronics (see Note M).
As a result, the monthly rental was increased through the remaining
term of the lease. Future minimum annual payments under the amended
lease for the year ending September 30, 1997 are $68,400, excluding
any rental income from Tytronics. The Company's total rent expense in
fiscal 1996 and 1995 was approximately $65,355 and $69,613, respectively.
Rental income from Tytronics in those same years was approximately $30,801
and $23,801 respectively.
Nametre, the Company's subsidiary, conducts it operations from
leased facilities consisting of office and production space. Nametre
occupies this facility on a month to month basis under an operating
lease.
K. Stock Options
In March 1991, the stockholders approved the 1991 Stock Plan (the
"1991 Plan"). Under this plan, awards of, and options to purchase,
an aggregate of 3,000,000 shares may be issued to directors,
officers, employees and consultants of the Company. The exercise
price of incentive stock options (ISOs) granted under the 1991 Plan
may not be less than the fair market value of the Company's Common
Stock on the date of grant. The exercise price per share of non-
qualified options under the 1991 Plan cannot be less than the lesser
of the book value per share of Common Stock as of the end of the
preceding fiscal year, or 50% of the fair market value per share of
Common Stock on the date of grant. On April 20, 1995, the Company
issued to Mr. John E. Wolfe, an officer of the Company, an ISO under
the 1991 Plan to purchase 200,000 shares of common stock at $.03 per
common share exercisable to April 20, 2000. In addition, on April
20, 1995, the Company issued two directors of the Company, ISO's
under the 1991 Plan to purchase 150,000 shares each of common stock
at $.03 per common share exercisable to April 20, 2000. During
1993, an employee, David M. Haines, who was issued 100,000 ISOs,
became an officer of the Company. The options held by Mr. Haines
were canceled in March 1995, 90 days after his employment with the
Company terminated. Also during fiscal year 1995, ISOs to purchase
a total of 155,000 shares were canceled 90 days following
termination of certain employees, including David M. Haines. As of
September 30, 1996, options for 100,000 shares were issued to Mr.
Richard Mannello, who was not then an officer. Subsequent to year
end September 30, 1996, Mr. Mannello was named an officer of the
Company, and options for an additional 200,000 shares were issued to
Mr. Mannello.
During fiscal year 1994, 20,000 shares from the 1987 Plan and
233,000 shares from the 1991 Plan were canceled and returned to each
respective Plan. During fiscal year 1995, 10,000 shares from the
1987 Plan and 155,000 shares from the 1991 Plan were canceled and
returned to each respective Plan. During fiscal year 1996, 3,000
shares from the 1991 Plan were canceled and returned to its
respective Plan.
A summary of stock option activity under the Plans is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1987 Plan 1991 Plan Non-Qualified
Number Exercise Price Number Exercise Price Number Exercise Price
of Shares per Share of Shares per Share of Shares per Share
Outstanding at Sept. 30, 1994 10,000 $0.25 182,000 $0.02 209,000 $0.05
Granted...................... - - 500,000 $0.03 - -
Exercised................... - - - - - -
Canceled................ (10,000) $0.25 (155,000) $0.02 - -
Outstanding at Sept. 30, 1995 - $0.25 527,000 $0.03 209,000 $0.05
Granted...................... - - 100,000 $0.03 - -
Exercised................... - - - - - -
Canceled................ - $0.25 ( 3,000) $0.02 - -
Outstanding at Sept. 30, 1996 - $0.25 624,000 $0.03 209,000 $0.05
Exerciseable at Sept. 30, 1996 - 144,000 209,000
</TABLE>
Reserved Common Stock
In connection with the stock option plans, and outstanding warrants (see
Note B), the Company has reserved 6,809,000 shares of Common Stock as of
September 30, 1996.
L. Sales and Major Customers:
Export sales for the years ended September 30 are as follows:
1996 1995
Europe 9% 13%
Asia 2% 0%
Other 18% 19%
29% 32%
Sales to one customer, a U.S. governmental agency, were
approximately $65,600 and $483,600 in fiscal 1996 and 1995,
respectively. Accounts receivable from this customer at September
30, 1996 and 1995 approximated $20,000 and $70,000, respectively.
As of September 30, 1995 this contract was suspended, at least
temporarily. In late fiscal 1996, this contract was partially reinstated.
This contract is terminable at will by the U.S.
government. Full reinstatement, if any, will be determined by the funding
and direction of the fiscal 1996 Congressional budget and DOE
executive decisions. Ultimately, this contract could be
substantially reduced or canceled. Currently, it appears that this
will happen, with some of this work being transferred to existing
government laboratories.
M. Related Party Transactions (see Notes B, G, H, J and K):
The Company shares space in its operating facility with Tytronics
which is a 67.1% shareholder of the Company. The Companies allocate
rent expense based on the square footage each occupies. On this
basis, rental payments from Trytronics amounted to $30,801 in fiscal 1996,
and $23,801 in fiscal 1995. The Companies also share other operating and
administrative costs based on estimated usage. During the fiscal years
ended September 30, 1996 and 1995, this informal agreement resulted in
the payment of approximately $80,000 and $68,000, respectively by the
Company to Tytronics for such operating and administrative costs. At
September 30, 1996 and 1995, the Company had net amounts due to Tytronics
of $77,204 and $10,854, respectively.
The Company and Bantam Group, Inc. ("Bantam"), a business advisory
organization, are parties to a consulting agreement effective June
6, 1993, which continues month-to-month unless terminated by either
party on thirty days' notice. Pursuant to this agreement, Bantam
was issued a one-time bonus of $40,000 in fiscal 1993, paid $5,000
per month through January 1995, $2,000 per month until October 1,
1995, and $1,500 per month thereafter. In addition, the agreement
called for the issuance of 800,000 shares of the Company's Common
Stock plus the reimbursement of any tax liability arising from the
issuance of the stock. The shares were issued to Bantam in
December, 1993. Mr. Joseph J. Caruso, the Company's Chairman, is
also the president of Bantam.
In addition, Bantam has a consulting arrangement with Nametre, which
continues on a month to month basis unless terminated by either party
on thirty days' notice. Payments under this agreement are $1,250 per month.
N. Supplemental Disclosure of Cash Flow Information
1996 1995
Interest paid during the year $36,168 $32,308
Income taxes paid during the year 600 871
Supplemental Disclosure of Non-Cash Information:
Conversion of debt and accrued interest
into Common Stock 65,000 382,496
Conversion of Series "A" Preferred Stock
into Common Stock - 540,753
Conversion of Series "B" Preferred Stock
into Common Stock - 12,500
In September 1996, the Company acquired 61.23% of the outstanding
stock of Nametre in an acquisition (Note B). The estimated fair value of
assets acquired was $1,207,381, including goodwill of $244,788, with
liabilities assumed of $874,233, less minority interest of $66,634.
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,
1996 and December 31, 1995 and the related statements of
changes in stockholders' equity, revenues and expenses, and
cash flows for the nine months and twelve months 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 principles 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, 1996 and December 31, 1995, and the
results of its operations and cash flows for the nine months
and twelve months then ended in conformity with generally
accepted accounting principles.
/s/ Wilkin & Guttenplan
WILKIN & GUTTENPLAN, P.C.
Certified Public Accountants
East Brunswick, New Jersey
December 2, 1996
Page 1
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
ASSETS
CURRENT ASSETS
Cash $ 8,510 $ 236,217
Accounts receivable, less allowance
for doubtful accounts of $15,000 418,583 485,467
Inventories - Notes 1 and 2 440,007 402,578
Prepaid expenses 11,278 13,455
Federal income tax refund receivable 17,021 14,281
Note receivable - Note 12 75,000 -
TOTAL CURRENT ASSETS 970,399 1,151,998
PROPERTY AND EQUIPMENT, net of
accumulated depreciation -
Notes 1 and 3 51,763 63,526
PATENTS, at cost, less accumulated amortization
of $49,842 and $45,624,
respectively - Note 1 21,556 22,983
OTHER ASSETS
Deposits 2,384 2,384
TOTAL ASSETS $1,046,102 $1,240,891
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 661,266 $ 343,874
Accrued product claims and warranties 19,000 13,000
Notes payable - current portion -
Notes 4 and 6 100,000 472,135
TOTAL CURRENT LIABILITIES 780,266 829,009
DEBENTURES - Notes 5 and 6 38,967 38,967
NOTES PAYABLE, net of current portion -
Note 4 55,000 130,000
TOTAL LIABILITIES 874,233 997,976
STOCKHOLDERS' EQUITY
Common stock, 770,000 shares authorized,
512,000 shares issued; 193,489 and
73,489, shares outstanding respectively
and 436,011 and 438,511, shares held
in treasury respectively 18,213 16,653
Paid in capital 404,352 108,237
Retained earnings (deficit) (143,508) 229,038
Treasury stock - Note 6 (107,188) (111,013)
TOTAL STOCKHOLDERS' EQUITY 171,869 242,915
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,046,102 $1,240,891
The accompanying notes are an integral
part of these financial statements.
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
RETAINED
COMMON PAID IN EARNINGS TREASURY
STOCK CAPITAL (DEFICIT) STOCK TOTAL
BALANCE AT
DECEMBER 31, 1994 $16,653 $108,237 $ 269,562 $ (69,384) $325,068
NET LOSS FOR THE
YEAR ENDED
DECEMBER 31, 1995 - - (40,524) - (40,524)
TREASURY STOCK
PURCHASE - NOTE 6 - - - (41,629) (41,629)
BALANCE AT
DECEMBER 31, 1995 16,653 108,237 229,038 (111,013) 242,915
NET LOSS FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, 1996 - - (372,546) - (372,546)
TREASURY STOCK
SOLD - (2,325) - 3,825 1,500
COMMON STOCK
ISSUANCE - NOTE 12 1,560 298,440 - - 300,000
BALANCE AT
SEPTEMBER 30, 1996 $18,213 $404,352 $(143,508) $(107,188) $171,869
The accompanying notes are an integral
part of these financial statements.
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
STATEMENTS OF REVENUES AND EXPENSES
FOR THE NINE FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995
NET SALES $1,776,540 $2,671,019
COSTS OF GOODS SOLD 851,538 1,087,938
GROSS PROFIT 925,002 1,583,081
RESEARCH AND DEVELOPMENT COSTS 299,131 210,295
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,007,534 1,379,142
LOSS FROM OPERATIONS (381,663) (6,356)
OTHER INCOME AND (EXPENSES)
Interest on debentures (7,306) (36,950)
Other interest expense (26,839) (38,915)
Interest and dividend income 3,418 11,853
Royalty income 39,844 39,844
TOTAL OTHER INCOME (EXPENSES) 9,117 (24,168)
INCOME (LOSS) BEFORE PROVISION
FOR (BENEFIT FROM) INCOME TAXES (372,546) (30,524)
PROVISION FOR INCOME TAXES - Note 8 - (10,000)
NET INCOME (LOSS) $ (372,546) $ (40,524)
The accompanying notes are an integral
part of these financial statements.
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(372,546) $(40,524)
Adjustments to reconcile loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 21,122 24,210
Allowance for doubtful accounts - 15,000
Provision for obsolete inventory 1,088 12,199
Increase in debt due to restructuring - 126,388
Accrued product claims and warranties 6,000 13,000
Change in assets and liabilities:
Decrease (increase) in accounts receivable 66,884 (113,796)
(Increase) in inventories (38,518) (85,677)
Decrease in prepaid expenses 2,177 5,580
Decrease (increase) in federal income
tax refund receivable (2,740) 30,719
Increase in accounts payable and
accrued expenses 317,392 121,614
TOTAL ADJUSTMENTS 373,405 149,237
NET CASH PROVIDED BY
OPERATING ACTIVITIES 859 108,713
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed assets and
capitalized patent costs (7,931) (19,949)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (2,607) -
Sale of treasury stock 4,107 -
Payments on notes payable (447,135) -
Proceeds from notes receivable 225,000 -
NET CASH USED IN FINANCING ACTIVITIES (220,635) -
NET INCREASE (DECREASE) IN CASH (227,707) 88,764
CASH - BEGINNING OF PERIOD 236,217 147,453
CASH - END OF PERIOD $ 8,510 $236,217
Cash paid during the year for:
Interest $ 26,839 $ -
Income taxes $ - $ 11,775
See Note 6 for supplemental disclosure of non-cash transactions.
The accompanying notes are an integral
part of these financial statements.
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business - The Company National Metal Refining
Company (Nametre) was incorporated in 1956 in New Jersey.
Since 1961 the Company has concentrated on the development
of instruments for the measurement of viscous properties of
materials. Nametre's customers are mostly Fortune 500
Companies in the polymer, petro-chemical and petroleum
industry. Nametre's products are widely used in laboratory
and industrial environments. Several of the products are
covered by U.S. patents.
Inventories - Inventories are valued at the lower of cost
(determined on a first-in, first-out basis) or market.
Property - Depreciation is computed on a straight-line and
an accelerated basis over the estimated useful lives of the
assets which range from 5 to 7 years. Leasehold
improvements are amortized over a period of 31.5 years.
Patents - Patents are being amortized over a period of 8
years.
Research and Development Costs - Research and development
costs are charged to operations as incurred.
Provision for Warranty Claims - Estimated warranty costs
are provided at the time of sale of the warranted products.
Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts 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.
Fiscal Year Change - The Board of Directors approved a
change in the Company's fiscal year end from December 31 to
September 30, effective the calendar year beginning January
1, 1996. This change was the result of the sale of the
Company's stock to a publicly traded company (see Note 13)
whose fiscal year end is September 30.
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 2 - INVENTORIES:
Inventories are comprised of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
Raw materials $220,653 $173,161
Work in process 81,990 107,549
Finished goods 150,651 134,067
453,294 414,777
Less: Provision for
obsolete inventory (13,287) (12,199)
$440,007 $402,578
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
Furniture and fixtures $ 29,803 $ 29,083
Equipment 151,980 153,010
Demo equipment 32,268 32,268
Leasehold improvements 10,342 10,342
224,393 224,703
Less: accumulated depreciation (172,630) (161,177)
$ 51,763 $ 63,526
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 4 - NOTES PAYABLE:
Notes payable consist of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
6% note payable to Mary Elizabeth
Fitzgerald due September 30, 1996.
Quarterly payments include principal
and interest. The note is collateralized
by a pledge and security agreement. $ - $225,000
10% note payable to the Estate of
J. Vincent Fitzgerald due March 31,
1998. Quarterly payments include
principal and interest. The note is
collateralized by a pledge and security
agreement. 155,000 377,135
TOTAL NOTES PAYABLE 155,000 602,135
Less: Current portion (100,000) (472,135)
Notes payable, net of current portion $ 55,000 $130,000
Principal repayments are as follows:
SEPTEMBER 30,
1997 $100,000
1998 55,000
$155,000
NOTE 5 - DEBENTURES:
The debentures bear interest at 25% per annum payable
semi-annually and mature in 1997. The Company has the
right to repay principal in whole or in part at any time
without premium or penalty.
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 6 - SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Treasury Stock Acquisition and Refinancing:
On January 29, 1996 the Company entered into a settlement
and redemption agreement with Mary Elizabeth Fitzgerald,
the deceased majority stockholder's spouse who has had a
guardian appointed by the court to control her financial
affairs. The agreement calls for a payment to Mrs.
Fitzgerald in the amount of $225,000 for the (i) purchase
of 385,333 shares of stock of the Company owned by Mrs.
Fitzgerald and (ii) for debentures, where the Company is
the obligor, having a face value of $106,218 plus accrued
interest to date.
On January 29, 1996 the Company entered into a settlement
and redemption agreement with the Estate of J. Vincent
Fitzgerald. The agreement calls for a payment to the
Estate in the amount of $377,135 for the (i) purchase of
7,822 shares of stock of the Company presently owned by the
Estate, (ii) for debentures, where the Company is the
obligor, having a face value of $3,613 plus accrued
interest to date, (iii) notes payable held by the decedent
in the amount of $324,288, plus accrued interest and (iv)
certain reimbursable expenses.
The above agreements are the result of the death of the
majority stockholder on September 27, 1994. Accordingly,
the terms of the agreement have been reflected in the
accompanying financial statements as of December 31, 1995.
The non-cash financing and investing activities are as
follows:
Refinanced debt as of December 31, 1995 as follows:
Note payable to Estate of J. Vincent Fitzgerald $ 377,135
Note payable to Mary E. Fitzgerald 225,000
Subtotal 602,135
Previous debt repaid:
Original loan payable due to Estate of J. Vincent
Fitzgerald (324,288)
Original debenture due to Estate of J. Vincent
Fitzgerald (3,613)
Original debenture due to Mary E. Fitzgerald (106,218)
(434,119)
Subtotal 168,016
Less: Acquisition of treasury stock (41,629)
INCREASE IN DEBT DUE TO RESTRUCTURING $126,387
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 7 - INCOME TAXES:
The provision for income taxes consists of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
Current provision $ - 9,850
Federal provision _ 150
State provision _ 10,000
The Company has research and development credits totalling
$57,183 which are available to offset future Federal
taxable income and tax liabilities. The credits are due to
expire as follows:
Credits
2005 $15,170
2006 13,526
2007 8,440
2008 13,603
2009 5,863
2010 581
TOTAL $57,183
Total income taxes for 1995 differs from the amount
computed by applying the U.S. federal income tax rate as a
result of the surtax exemption, research and development
tax credits and state taxes.
The State of New Jersey allows the carry forward (but not
carry back) of losses to future years which will offset
future New Jersey State taxable income. As of September
30, 1996 and December 31, 1995, the Company has a net
operating loss carry forwards of approximately $450,000 and
$98,000 respectively, available for New Jersey State tax
purposes.
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 8 - COMMITMENTS:
EMPLOYMENT AGREEMENT:
During 1996, the Company entered into a one year employment
agreement with the President of the Company. The terms of
the agreement stipulate that, should the Company terminate
the agreement without cause or in case of death, the
severance benefit will be equivalent to the rate of pay in
effect on the date of termination for the period of six
months with one-half the rate of pay for the second six
months if new employment has not been found.
NOTE 9 - CONCENTRATIONS:
Certain components of inventory are supplied by two to
three vendors. Together, the above vendors represent
approximately 54% and 66%, respectively, of the total
purchases for the periods ended September 30, 1996 and
December 31, 1995.
The Company maintained its cash with a few high quality
financial institutions. At December 31, 1995 the Company
had included in one of its cash accounts amounts exceeding
federally insured limits by $132,838.
NOTE 10 - SARSEP PLAN PAYABLE:
The Company has a salary deferral simplified employee
pension plan. Employer contributions are discretionary and
can vary from year to year. For the periods ended
September 30, 1996 and December 31, 1995, the Company has
elected not to contribute to the plan.
NOTE 11 - OPERATING FACILITIES:
The Company leases manufacturing and office space on a
month by month basis under an operating lease. Rental
expenses under the operating lease for the periods ending
September 30, 1996 and December 31, 1995 were $23,808 and
$31,744, respectively.
NATIONAL METAL REFINING (NAMETRE) COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 12 - OTHER MATTERS:
On September 30, 1996 the Company sold approximately 61.23%
of the issued and outstanding shares of common stock to
Holometrix, Inc., a publicly traded company, for a sales
price of $300,000. The terms of the agreement included
warrants to acquire 13,334 shares of common stock at an
exercise price of $3.00, as well as warrants to acquire
10,000 shares of common stock at an exercise price of
$6.00. Proceeds in the amount of $225,000 from the sale of
the stock were used to pay the amount due to Mrs.
Fitzgerald as a result of the settlement and redemption
agreement (see Note 6). The balance of $75,000 is
reflected as a note receivable. The terms of the note
includes interest at 2% above prime with principal due in
two installments as follows:
PAYMENT
DATE AMOUNT
February 28, 1997 $25,000
May 31, 1997 50,000
It is expected that Nametre's business of developing,
manufacturing, marketing and selling certain viscosity
measurement equipment will compliment the thermal property
measuring business activities conducted by Holometrix,
Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA FOR THE FISCAL YEARS ENDING:
Sept. 30, 1996 Sept. 30, 1995
STATEMENT OF OPERATIONS DATA
Net revenues $5,613,000 $4,780,000
Net income (loss) 168,000 155,000
CONSOLIDATED BALANCE SHEET DATA
Working capital 574,000 678,000
Total assets 3,998,000 2,409,000
Long-term debt, excluding current 748,000 536,000
portion
Minority Interest 264,000 195,000
Stockholders' Equity 451,000 558,000
OVERVIEW
Tytronics' consolidated revenues are derived from the sale of
analytical and thermal instrumentation products and testing services,
sold worldwide. Tytronics, consolidated, is comprised of three
companies. Tytronics alone provides on-line chemical analyzers to the
process and environmental industries. Holometrix provides instruments
and testing services for thermophysical measurements. Nametre provides
on-line viscosity analyzers primarily to the chemical, petrochemical and
refining industries.
Before December of 1994, Tytronics existed alone. At that time, it
acquired a majority interest in Holometrix, changed its fiscal year end,
and reported as a consolidated entity for the first time on September
30, 1995. On September 30, 1996, Holometrix acquired a majority
interest in Nametre, and consolidated reporting for all three companies
ensued on that date. Since then, consolidated reporting for all three
companies has continued.
Tytronics' growth strategy has four components. The first is to
acquire similar businesses in a fragmented and consolidating
instrumentation market. The second is to consolidate sales, marketing
and distribution activities to lower costs and increase sales. The
third is to consolidate selected operational functions such as
purchasing, finance and administration, for further cost reduction. The
fourth is to create value through continued growth and profitability,
thus creating capital for a continuation of the acquisition strategy.
Although Tytronics is working to accomplish this strategy, there can be
no guarantee that the strategy will be successful, or that such value
will be created.<PAGE>
Year Ended September 30, 1996 As Compared To Year Ended September 30,
1995
Revenues for the 1996 fiscal year totaled $5,613,000, compared to
$4,780,000, an increase of $833,000, or 17%. The primary reason for
this increase was the inclusion of Holometrix revenues for the full 1996
fiscal year, as compared to an approximate 10-month period in the 1995
fiscal year.
Cost of sales totaled $2,784,000, or 50% in fiscal 1996, as
compared to $2,306,000, or 48% in fiscal 1995. The absolute increase in
cost of sales was due to the inclusion of Holometrix' cost of sales for
the full 1996 fiscal year, as compared to an approximate 10-month period
in the 1995 fiscal year. The percentage increase in cost of sales was
primarily due to an increase in the amount of Holometrix' products,
which tend to have higher cost of sales.
Selling, general and administrative expenses totaled $2,073,000, or
37% of sales in fiscal 1996 compared to $1,737,000, or 36% of sales in
fiscal 1995. This increase was primarily attributable to the inclusion
of Holometrix' selling, general and administrative expenses for the full
1996 fiscal year, as compared to an approximate 10-month period in the
1995 fiscal year.
Research and development expenses totaled $456,000, or 8% of sales
in fiscal 1996, as compared to $454,000, or 9% of sales in fiscal 1995.
The inclusion of Holometrix' research and development expenses for the
full 1996 fiscal year was offset by a reduction in Tytronics' research
and development expenses, as a result of largely completing a major
program.
Income from operations totaled $299,000, or 5% of sales, in fiscal
1996, as compared to $283,000, or 6% of sales, in fiscal 1995. The
increase in gross profit was offset by increased expenses, leaving
income from operations roughly constant.
Net income totaled $168,000, or 3% of sales in fiscal 1996, as
compared to $155,000, also 3% of sales, in fiscal 1995. Again, the
increase in gross profit was offset by higher selling, general and
administrative expenses, leaving net income only slightly increased.
Other income and expense totaled ($78,000) in fiscal 1996, as compared
to ($71,000) in fiscal 1995, largely due to an increase in interest
expense. Minority interest decreased to $2,000 in fiscal 1996, from
$24,000 in fiscal 1995, due to the reduction in profitability at
Holometrix.
Total Assets at September 30, 1996 were $3,998,000 as compared to
$2,409,000 at September 30, 1995, an increase of $1,589,000, or 66%.
The primary source of this increase was due to Holometrix' acquisition
of Nametre on September 30, 1996.
Cash decreased from $289,000 on September 30, 1995 to $124,000 on
September 30, 1996, primarily due to an equity investment by Tytronics
in Holometrix, and the subsequent use of those funds for the purchase of
Nametre. Accounts receivable increased to $1,749,000 on September 30,
- 2 -<PAGE>
1996, from $948,000 on September 30, 1995, due to the inclusion of
Nametre's accounts receivable, higher year-end shipments, and somewhat
slower collections. Inventory increased to $1,167,000 on September 30,
1996, from $504,000 on September 30, 1995, again due to the inclusion of
Nametre and an increased rate of sales. Equipment and fixtures, net,
was $447,000 on September 30, 1996, as compared to $446,000 on September
30, 1995. Nametre's equipment and fixtures were modest, and other
capital expenditures were offset by increased depreciation. Other
assets, including good will, increased to $442,000 on September 30, 1996
from $165,000 on September 30, 1995, primarily due to the inclusion of
$245,000 of good will due to the purchase of Nametre.
Total Liabilities increased to $3,284,000 on September 30, 1996,
from $1,656,000, an increase of $1,628,000, or 98%, primarily due to the
inclusion of Nametre's liabilities and an increase in long term debt,
again attributable to Nametre.
Notes payable to banks decreased from $325,000 on September 30,
1995, to $284,000 on September 30, 1996, primarily due to decreased bank
borrowings on the part of Holometrix. Accounts payable increased from
$552,000 on September 30, 1995 to $1,649,000 on September 30, 1996 due
to the inclusion of Nametre's accounts payable, and increased
commissions payable. Accrued expenses increased from $186,000 on
September 30, 1995, to $419,000 on September 30, 1996, primarily due to
the inclusion of Nametre's accrued expenses and increased reserve
positions at Tytronics and Nametre. The current portion of long term
debt increased to $184,000 on September 30, 1996 from $57,000 on
September 30, 1995, primarily due to the debt associated with Nametre's
acquisition.
Long-term debt increased to $748,000 on September 30, 1996 from
$536,000 on September 30, 1995, due both to the long term portion of the
debt associated with Nametre's acquisition, and the repurchase of
$275,000 of Tytronics' equity from a major stockholder (see below),
offset by a $100,000 payment on same.
Stockholders' Equity decreased to $451,000 on September 30, 1996
from $558,000 on September 30, 1995. This decrease was caused by the
repurchase of $275,000 of Tytronics' equity from a major shareholder,
offset by fiscal 1996's net income. Minority interest increased to
$264,000 from $195,000 during this same period, due to the increased
equity of Holometrix.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Operating cash flows were substantially positive, totaling $455,000
during fiscal 1996, compared to $138,000 in fiscal 1995. Operating cash
flows approximated the sum of net income plus depreciation and
amortization; increases in accounts receivable and inventories were
offset by increases in accounts payable and accrued expenses. Accounts
receivable increased by $380,000, offset by increases in accounts
- 3 -<PAGE>
payable of $433,000. Inventories increased $223,000 while accrued
expenses increased $216,000.
Fixed and other assets increased by $183,000 in fiscal 1996, as
compared to $175,000 in fiscal 1995.
The effect of the purchase of Nametre in fiscal year 1996, net of
cash acquired, was a cash outflow of $266,514; this was funded by the
operating cash flows noted above, offset by repayments under Holometrix'
line of credit of $41,000, and repayments on Tytronics' long term debt
of $30,000. In addition, a $100,000 payment was made on the repurchase
of $275,000 of Tytronics' equity from a major stockholder. The net
affect of these transactions, with minor changes in certain other areas,
was a decrease in cash of $166,000, resulting in cash and cash
equivalents, at the end of fiscal 1996 of $124,000.
Credit agreements
On December 22, 1994, Silicon Valley Bank provided the Company with
a line of credit in the amount of $350,000. This line of credit is
secured by substantially all assets of the Company. Advances under this
line shall not exceed 70% of the Company's eligible accounts receivable
as defined. These amounts are payable on demand and bear interest at
the bank's prime rate plus 1.5%. Advances are also contingent upon
maintaining certain covenants relative to profitability, liquidity,
tangible net worth and leverage. No advances occurred until April,
1995, when an initial advance of $75,000 was provided. Since then, this
line of credit has been in use to provide both working capital and
support for various payments, including payment of debt to Tytronics.
As of September 30, 1996, and September 30, 1995, borrowings under this
line of credit were $84,000 and $125,000, respectively, and the Company
was in compliance with all covenants.
During the fiscal years ending September 30, 1996 and September 30,
1995, the Company and Holometrix were also parties to various informal
working capital agreements pursuant to which the Company provided
working capital financing to Holometrix on a short-term basis. Such
working capital advances are limited by the Company's agreement with
Silicon Valley Bank to $50,000 at any one time. These advances are
payable on demand with 10% interest, and secured by a note. As of
September 30, 1996, $20,000 was due to the Company by Holometrix under
these arrangements. During fiscal years 1996 and 1995, Holometrix
borrowed an aggregate of approximately $130,000 and $111,000,
respectively, including interest, from the Company under these
arrangements.
- 4 -<PAGE>
SELECTED FINANCIAL DATA FOR THE FISCAL NINE MONTHS ENDING:
June 30,1997 June 30, 1996
STATEMENT OF OPERATIONS DATA
Net revenues $5,826,000 $3,994,000
Net income (loss) (93,000) (47,000)
CONSOLIDATED BALANCE SHEET DATA
Working capital 471,000 515,000
Total assets 4,397,000 2,563,000
Long-term debt, excluding 698,000 688,000
current portion
Minority Interest 245,000 134,000
Stockholders' Equity 358,000 236,000
Nine Months Ended June 30, 1997 As Compared To The Nine Months Ended
June 30, 1996
Revenues for the first nine months of the 1997 fiscal year totaled
$5,826,000, as compared to $3,994,000 for the first nine months of the
1996 fiscal year, an increase of $1,832,000, or 46%. The source of this
increase is the acquisition of Nametre, whose revenues in the first nine
months of the 1997 fiscal year were $1,839,000.
Cost of sales totaled $2,843,000, or 49% of sales in the first nine
months of the 1997 fiscal year, as compared to $2,030,000, or 51% of
sales in the fist nine months of the 1996 fiscal year, an increase of
$813,000 or 40%. The primary reason for this increase is the
acquisition of Nametre; Nametre's cost of sales for the first nine
months of the 1997 fiscal year were $728,000. The percentage reduction
in cost of sales was primarily due to a reduction in the sales of
Holometrix' products, which tend to have higher cost of sales.
Selling, general and administrative expenses increased to
$2,565,000, or 44% of sales in the first nine months of the 1997 fiscal
year, from $1,639,000, or 41% of sales in the first nine months of the
1996 fiscal year, an increase of $926,000, or 56%. The increase was
primarily attributable to the acquisition of Nametre, whose selling,
general and administrative expenses for the first nine months of the
1997 fiscal year were $889,000. Due to the nature of the selling
process at both Tytronics and Nametre, sales and distribution costs are
proportionately higher at these companies.
Research and development expenses increased slightly to $481,000,
or 8% of sales in the first nine months of the 1997 fiscal year, from
$362,000, or 9% of sales in the first nine months of the 1996 fiscal
year, an increase of $119,000, or 33%. This increase was largely
attributable to the acquisition of Nametre, offset by a reduction in
- 5 -<PAGE>
Tytronics' research and development expenditures due to the completion
of certain Tytronics' programs.
Income from operations decreased to a loss of $62,000, or 1% of
sales, in the first nine months of the 1997 fiscal year, from a loss of
$37,000, also 1% of sales, in the first nine months of the 1996 fiscal
year. The decrease in income from operations is due primarily to a
substantial increase in selling, general and administrative expenses,
and research and development expenses, offset by an increase in gross
profit. All of the operating losses are attributable to Holometrix;
Tytronics and Nametre both had operating profits.
Net income decreased to a loss of $93,000, or 2% of sales during
the first nine months of the 1997 fiscal year, from $47,000, or 1% of
sales in the first nine months of the 1996 fiscal year. The decrease in
net income from operations is due primarily to a substantial increase in
selling, general and administrative expenses, and research and
development expenses, offset by an increase in gross profit. Once more,
all of the net losses are attributable to Holometrix; both Tytronics and
Nametre had net incomes. Other income and expense decreased to $50,000
in the first nine months of the 1997 fiscal year, from $71,000 in the
first nine months of fiscal 1996. Minority interest increased to a gain
of $19,000 in the first nine months of the 1997 fiscal year from a loss
of $61,000 in the first nine months of the 1996 fiscal year, primarily
due to the increase in Nametre's profitability, and its effect upon
Holometrix.
Total Assets at June 30, 1997, increased to $4,397,000 from
$2,563,000 at June 30, 1996, an increase of $1,834,000, or 72%. The
primary source of this increase was due to Holometrix' acquisition of
Nametre on September 30, 1996.
Cash increased to $281,000 on June 30, 1997 from $156,000 on June
30, 1996, primarily due to increased borrowings under line of credit
agreements. Accounts receivable increased to $2,009,000 on June 30,
1997, from $1,061,000 on June 30, 1996, primarily due to the inclusion
of Nametre's accounts receivable. Inventory increased to $1,206,000 on
June 30, 1997, from $659,000 on June 30, 1996, primarily due to the
inclusion of Nametre's inventory and an increased rate of sales,
primarily at Nametre. Equipment and fixtures, net, increased slightly
to $444,000 on June 30, 1997 from $407,000 on June 30, 1996 due to a
slight increase in fixed assets. Other assets, including good will,
increased to $386,000 on June 30, 1997, from $136,000 on June 30, 1996,
primarily due to the inclusion of $245,000 of goodwill associated with
the acquisition of Nametre.
Total Liabilities at June 30, 1997, increased to $4,604,000 from
$2,193.000 on June 30, 1996, an increase of $2,411,000, or 110%,
primarily due to the inclusion of Nametre's liabilities, increases in
notes payable to banks, and increases in the long term debt associated
with the acquisition of Nametre.
Notes payable to banks increased from $350,000 on June 30, 1996 to
$609,000 on June 30, 1997, primarily due to increased drawdowns on
- 6 -<PAGE>
Tytronics' line of credit. Accounts payable increased to $1,738,000 on
June 30, 1997 from $790,000 on June 30, 1996, primarily due to the
inclusion of Nametre's accounts payable, and an increase in commissions
payable. Accrued expenses increased $506,000 on June 30, 1997 from
$260,000 on June 30,1996, largely due to increased reserve positions.
The current portion of long term debt increased only slightly to
$198,000 on June 30, 1997 from $105,000 on June 30, 1996, as much of the
debt associated with Nametre's acquisition became current.
Long-term debt increased only slightly to $698,000 on June 30, 1997
from $688,000 on June 30, 1996, since much of the debt associated with
Nametre's acquisition became current debt.
Stockholders' Equity increased to $358,000 on June 30, 1997 from
$236,000 on June 30, 1996, primarily due to high profitability in the
last three months of fiscal 1996, offset by losses, primarily at
Holometrix, during the first nine months of the 1997 fiscal year.
Minority interest increased from $245,000 on June 30, 1997 from $134,000
on June 30, 1996, due to the change in profitability at Holometrix and
Nametre.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Operating cash flows were positive, amounting to $65,000 during the
first nine months of the 1997 fiscal year, compared to $85,000 in the
first nine months of the 1996 fiscal year. Operating cash flows
approximated the sum of net losses plus depreciation and amortization;
increases in accounts receivable and inventories were offset by
increases in accounts payable and accrued expenses. Accounts receivable
increased by $160,000, offset by increases in accounts payable of
$164,000. Inventories increased by $39,000, while accrued expenses
increased $58,000.
Fixed and other assets increased by $197,000 in the nine month
period ending June 30, 1997, as compared to an increase of $168,000 in
the same period in fiscal 1996. Net borrowings under Tytronics' line of
credit increased by $339,000, offset by a $50,000 repayment of long term
debt associated with the repurchase of Tytronics' equity from a former
major stockholder. The net effect of these transactions, with minor
changes in certain other areas, was an increase in cash of $157,000,
resulting in cash and cash equivalents of $124,000 on June 30, 1997.
Future cash commitments are moderate, assuming continued
profitability. Tytronics believes the combination of operating cash
flows, plus Tytronics' line of credit, and the proceeds from an equity
financing expected to be $600,000 or more, available on or about
September 30, 1997, should be adequate for the foreseeable future.
Additional funding would have to be sought for substantial acquisitions.
- 7 -<PAGE>
Credit agreements
As of June 30, 1997, Tytronics, in concert with its subsidiaries,
Holometrix and Nametre, 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 Tytronics and its subsidiaries, Holometrix
and Nametre. 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 Tytronics' 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 Tytronics'
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, Tytronics' borrowings under its prior line of credit were
$609,000.
IMPACT OF INFLATION
Although no assurance can be given, increases in the inflation rate
are not expected to materially adversely affect the Company's business.
- 8 -
TYTRONICS INCORPORATED
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. Accordingly, they do not include all information
and footnotes required by generally accepted accounting principles for
complete financial statement presentation.
The results of operations for any interim periods reported are not
necessarily indicative of those that mey 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 for a fair presentation of the operating
results of the period have been included.
TYTRONICS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE-MONTH PERIOD ENDED JUNE 30
1997 1996
---- ----
NET SALES $ 5,826,000 $ 3,994,000
COST OF SALES 2,843,000 2,030,000
--------- ---------
GROSS PROFIT 2,983,000 1,964,000
OPERATING EXPENSES:
SELLING, GENERAL &
ADMINISTRATIVE 2,565,000 1,639,000
RESEARCH AND DEVELOPMENT 481,000 362,000
--------- ---------
3,045,000 2,001,000
--------- ---------
INCOME FROM OPERATIONS (62,000) (37,000)
OTHER INCOME (EXPENSE): (50,000) (71,000)
-------- --------
LOSS BEFORE MINORITY
INTEREST (112,000) (108,000)
MINORITY INTEREST IN
SUBSIDIARY (19,000) (61,000)
-------- --------
NET LOSS $ (93,000) $ (47,000)
======== ========
TYTRONICS INCORPORATED
CONSOLIDATED BALANCE SHEET
NINE MONTHS ENDED JUNE 30
ASSETS: 1997
----
CURRENT ASSETS
CASH & CASH EQUIVALENTS $ 281,000
ACCOUNTS RECEIVABLE 2,009,000
INVENTORIES 1,206,000
PREPAID EXPENSES 71,000
---------
TOTAL CURRENT ASSETS 3,567,000
EQUIPMENT AND FIXTURES - NET 434,000
OTHER ASSETS 396,000
---------
TOTAL ASSETS $ 4,397,000
=========
LIABILITIES & STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
NOTES PAYABLE TO BANKS $ 609,000
ACCOUNTS PAYABLE 1,783,000
ACCURED EXPENSES 506,000
CURRENT PORTION OF LONG-TERM DEBT 198,000
---------
TOTAL CURRENT LIABILITIES 3,096,000
---------
LONG-TERM DEBT LESS CURRENT
PORTION 698,000
MINORITY INTEREST IN SUBSIDIARY 245,000
STOCKHOLDERS' EQUITY:
PREFERRED STOCK 29,000
COMMON STOCK 2,000
CAPTIAL IN EXCESS OF PAR VALUE 857,000
ACCUMULATED DEFICIT (174,000)
---------
714,000
LESS TREASURY STOCK, AT COST,
13,500 AND 48,500 SHARES HELD IN
1996 AND 1995, RESPECTIVELY 356,000
---------
TOTAL STOCKHOLDERS' EQUITY 358,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,397,000
=========
TYTRONICS INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE-MONTH PERIOD ENDED JUNE 30,
1997 1996
---- ----
NET INCOME $(93,000) $ (47,000)
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION AND AMORT 157,OOO 158,000
MINORITY INTEREST (19,000) (61,000)
CHANGES IN OPERATING ASSETS AND
LIABILITIES, NET OF EFFECT OF
PURCHASE OF SUBSIDIARIES:
ACCOUNTS RECEIVABLE (160,000) (113,000)
INVENTORIES (39,000) (155,000)
PREPAID EXPENSES (3,000) (16,000)
ACCOUNTS PAYABLE 164,000 245,000
ACCURED EXPENSES 58,000 74,000
------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 65,000 85,000
------- -------
INVESTING ACTIVITES
ADDITIONS TO FIXED ASSETS (97,000) (97,000)
INCREASE IN OTHER ASSETS (100,000) (71,000)
PURCHASE OF SUBSIDIARIES, NET OF
CASH ACQUIRED -- --
------- -------
NET CASH USED IN INVESTING ACTIVITIES (197,000) (168,000)
------- -------
FINANCING ACTIVITIES
NET (REPAYMENT OF) BORROWINGS UNDER
LINE OF CREDIT AGREEMENT 339,000 25,000
NET (REPAYMENT OF) PROCEEDS FROM
LONG-TERM DEBT (50,000) 25,000
PURCHASE OF TREASURY STOCK -- (100,000)
------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 289,000 (50,000)
------- --------
NET (DECREASE) INCREASE IN CASH &
CASH EQUIVALENTS 157,000 (133,000)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE YEAR 124,000 289,000
------- -------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $281,000 $156,000
======= =======
Report of Independent Auditors
The Board of Directors
Tytronics Incorporated
We have audited the accompanying consolidated balance sheets
of Tytronics Incorporated (the Company) as of September 30,
1996 and 1995, and the related consolidated statements of
income, stockholders' equity, and cash flows for the years
then ended. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the
financial statements of Holometrix, Inc., a majority-owned
subsidiary, which statements reflect total assets of
$2,548,723 and $1,073,217 as of September 30, 1996 and 1995,
respectively, and total revenues of $2,200,603 and
$1,795,384 for the year ended September 30, 1996 and the ten
months ended September 30, 1995, respectively. Those
statements were audited by other auditors, whose report has
been furnished to us, and our opinion, insofar as it relates
to data included for Holometrix, Inc., is based solely on
the report of 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 other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other
auditors, the consolidated financial statements referred to
above present fairly, in all material respects, the
financial position of Tytronics Incorporated at September
30, 1996 and 1995 and the consolidated results of its
operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 1, the Company changed its method of
accounting for demonstration equipment in 1995.
/s/ Ernst & Young LLP
December 13, 1996
Tytronics Incorporated
Consolidated Balance Sheets
September 30
1996 1995
Assets
Current assets:
Cash and cash equivalents $123,562 $289,288
Accounts receivable, less allowance for
doubtful accounts of $70,000 and $55,000
in 1996 and 1995, respectively 1,748,770 947,627
Inventories:
Raw materials 501,024 253,819
Work-in-process 316,586 125,299
Finished goods 349,549 124,780
-------------------
1,167,159 503,898
Prepaid expenses 70,298 57,174
-------------------
Total current assets 3,109,789 1,797,987
Equipment and fixtures, net 447,037 446,119
Other assets, net of accumulated
amortization of $144,218
and $103,410 in 1996 and 1995,
respectively 441,606 165,382
-------------------
Total assets $3,998,432 2,409,488
===================
Liabilities and stockholders' equity
Current liabilities:
Notes payable to banks $ 284,000 $ 325,000
Accounts payable 1,648,997 552,354
Accrued expenses 418,636 185,584
Current portion of long-term debt 184,485 57,002
-------------------
Total current liabilities 2,536,118 1,119,940
Long-term debt, less current portion 747,636 536,100
Minority interest in subsidiary 263,927 195,475
Stockholders' equity:
Preferred stock, $1.00 par value,
75,000 shares authorized, 29,327 shares
issued and outstanding 29,327 29,327
Common stock, $.01 par value, 225,000
shares authorized, 147,000 shares issued
and outstanding 1,470 1,470
Capital in excess of par value 857,333 857,333
Accumulated deficit (81,379) (249,157)
--------------------
806,751 638,973
Less treasury stock, at cost, 13,500
and 48,500 shares held in 1996 and
1995, respectively 356,000 81,000
--------------------
Total stockholders' equity 450,751 557,973
--------------------
Total liabilities and stockholders'
equity $3,998,432 $2,409,488
====================
See accompanying notes.
Tytronics Incorporated
Consolidated Statements of Income
Year ended
September 30
1996 1995
Net sales $5,612,887 $4,779,644
Cost of sales 2,784,146 2,305,743
--------------------
Gross profit 2,828,741 2,473,901
Operating expenses:
Selling, general and administrative 2,072,973 1,736,981
Research and development 456,311 453,512
--------------------
2,529,284 2,190,493
--------------------
Income from operations 299,457 283,408
Other income (expense):
Other income 8,165 850
Interest income 19,946 19,579
Interest expense (105,637) (91,702)
--------------------
(77,526) (71,273)
--------------------
Income before income taxes, minority
interest and cumulative effect of
accounting change 221,931 212,135
Income taxes 52,335 12,000
--------------------
Income before minority interest and
cumulative effect of accounting change 169,596 200,135
Minority interest in subsidiary 1,818 24,138
--------------------
Income before cumulative effect of
accounting change 167,778 175,997
Cumulative effect of accounting change,
net of taxes 21,342
--------------------
Net income $ 167,778 $ 154,655
====================
See accompanying notes.
<TABLE>
Tytronics Incorporated
Consolidated Statements of Stockholders' Equity
<CAPTION>
Preferred Stock Common Stock Stock Held in
Treasury
Issued Issued Capital Total
and and in Stockholders'
Outstanding Amount Outstanding Amount Excess Accumulated Shares Cost Equity
Shares Shares of Deficit
Par Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1994 29,327 $29,327 117,000 $1,170 $671,633 $(403,812) (13,500) $(81,000) $ 217,318
(unaudited)
Issuance of stock
related to
Holometrix
purchase 30,000 300 185,700 186,000
Net income for 1995 154,655 154,655
--------------------------------------------------------------------------------------------
Balance at
September 30, 1995 29,327 29,327 147,000 1,470 857,333 (249,157) (13,500) (81,000) 557,973
Repurchase of
preferred stock (12,500) (98,214) (98,214)
Repurchase of
common stock (22,500) (176,786) (176,786)
Net income for 1996 167,778 167,778
--------------------------------------------------------------------------------------------
Balance at
September 30, 1996 29,327 $29,327 147,000 $1,470 $857,333 $(81,379) (48,500)$(356,000) $450,751
============================================================================================
</TABLE>
See accompanying notes.
Tytronics Incorporated
Consolidated Statements of Cash Flows
Year ended
September 30
1996 1995
Operating activities
Net income $ 167,778 $ 154,655
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 226,415 240,573
Minority interest 1,818 24,138
Changes in operating assets and
liabilities, net of effects of purchase
of subsidiaries:
Accounts receivable (380,457) (219,138)
Inventories (223,255) (37,684)
Prepaid expenses 13,068 9,769
Accounts payable 433,272 81,594
Accrued expenses 216,157 (115,806)
--------------------
Net cash provided by operating activities 454,796 138,101
Investing activities
Additions to fixed assets (145,140) (117,988)
Increase in other assets (37,925) (57,607)
Purchase of subsidiaries, net of cash
acquired (266,514) (259,143)
--------------------
Net cash used in investing activities (449,579) (434,738)
Financing activities
Net (repayment of) borrowings under line
of credit agreement (41,000) 110,000
Net (repayment of) proceeds from long-
term debt (29,943) 85,060
Purchase of treasury stock (100,000)
--------------------
Net cash provided by (used in) financing
activities (170,943) 195,060
--------------------
Net decrease in cash and cash
equivalents (165,726) (101,577)
Cash and cash equivalents at beginning of
year 289,288 390,865
--------------------
Cash and cash equivalents at end of year $ 123,562 $ 289,288
====================
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 100,278 $ 104,571
Income taxes 1,182 14,009
Noncash investing and financing activities
Treasury stock repurchase for note (175,000)
payable
Common stock issued for Holometrix
acquisition 186,000
Promissory notes refinancing 315,000
Reclassification of demonstration equipment 66,027
See accompanying notes.
Tytronics Incorporated
Notes to Consolidated Financial Statements
September 30, 1996
1. Significant Accounting Policies
Business
Tytronics Incorporated (Tytronics) is involved in the
design, manufacture and sale of commercial on-line chemical,
liquid and gas analyzers for application in industrial
process and environmental control throughout the world.
Holometrix, Inc. (Holometrix), is a product development,
manufacturing and contract test services company which
specializes in manufacturing instruments and providing
contract test services for measuring thermophysical
properties of a wide variety of materials.
Principles of Consolidation
The consolidated financial statements include the accounts
of Tytronics and its subsidiary, Holometrix, and its
majority-owned subsidiary National Metal Refining Company,
Inc. acquired by Holometrix on September 30, 1996,
(collectively, the Company), of which Tytronics owns 67%.
Significant intercompany accounts and transactions have been
eliminated in consolidation.
Revenue Recognition
Revenue for instrument sales is recognized when instruments
are shipped. Revenue for testing services is recognized as
services are performed.
Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method.
1. Significant Accounting Policies (continued)
Equipment and Fixtures
Equipment and fixtures are stated at cost. Depreciation is
computed using straight-line and accelerated methods over
the estimated useful lives of the assets. As of October 1,
1994, the Company changed its accounting for demonstration
equipment from capitalizing into inventory net of reserves,
to capitalizing into equipment and fixtures and amortizing
over three years. The Company believes capitalizing the
equipment provides a better match of costs with the asset
life. The effect of this change was to reduce net income by
$21,342 for the year ended September 30, 1995. The pro
forma effect of this change on prior years has been omitted
as the Company has determined that it is not practicable to
determine the effect.
Equipment and fixtures consist of the following at September
30:
1996 1995
Furniture and fixtures $ 48,775 $ 36,489
Leasehold improvements 62,185 49,951
Machinery and equipment 541,775 419,706
Demonstration equipment 302,232 269,965
------------------
954,967 776,111
Accumulated depreciation and amortization 507,930 329,992
------------------
$447,037 $446,119
==================
Other Assets
Other assets include patent costs, trademarks, licensing
agreements, various deposits for office equipment and
utilities and goodwill resulting from the excess of cost
over fair value of net assets acquired by Holometrix. Costs
related to patents and trademarks are amortized using the
straight-line method over 17 years. Costs related to
licensing agreements are amortized using the straight-line
method over the life of the agreements. Costs related to
goodwill are amortized using the straight-line method over
15 years.
1. Significant Accounting Policies (continued)
Other assets consisted of the following at September 30:
1996 1995
Patents $205,144 $160,625
Goodwill 244,788
Licensing agreement 43,293 39,841
Trademarks 27,129 17,529
Deposits and other 65,470 50,797
------------------
585,824 268,792
Accumulated amortization (144,218) (103,410)
------------------
$441,606 $165,382
==================
Accounting for the Impairment of Long-Lived Assets
In March 1995, the FASB issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets to Be Disposed Of" (FAS 121), effective
in 1996. The Company adopted FAS 121 and the effect of the
adoption is not material.
Income Taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Tax provisions and credits
are recorded at statutory rates for taxable items included
in the consolidated statements of operations regardless of
the period in which such items are reported for income tax
purposes. Deferred income taxes are recognized for
temporary differences between financial statement and income
tax bases of assets and liabilities and net operating loss
carryforwards for which income tax benefits will be realized
in future years.
1. Significant Accounting Policies (continued)
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
amounts 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 reported period. Actual results
could differ from those estimates.
Concentrations of Credit Risk
Financial instruments which subject the Company to credit
risk consist of cash equivalents and trade accounts
receivable. The risk with respect to cash equivalents is
minimized by the Company's policies in which investments are
placed with high credit quality financial institutions and
the amount of exposure to any one financial institution is
monitored. The risk with respect to trade accounts
receivable is minimized by the credit worthiness of the
Company's customers, the diversity of its customer base and
their dispersion across a wide geographical area, as well as
the Company's credit and collection policies. The Company
performs periodic credit evaluations of its customers'
financial condition and generally does not require
collateral. Credit losses have been within management's
expectations. One distributor accounted for approximately
18% and 23% of revenues in 1996 and 1995, respectively.
2. Acquisition
On November 29, 1994, Tytronics acquired approximately 55%
of the outstanding capital stock of Holometrix (8,960,244
shares) in exchange for approximately $186,000 of Tytronics
common stock (30,000 shares). In addition, the Company
purchased $220,000 in promissory notes of Holometrix from
investors in Holometrix and agreed to loan Holometrix
$150,000 payable on demand to repay a $150,000 loan held by
investors in Holometrix.
The acquisition has been accounted for using the purchase
method. Accordingly, the purchase price was allocated to
assets acquired based on their estimated fair values. In
connection with the acquisition, Tytronics acquired assets
with a fair value of $1,012,262 and assumed liabilities of
$674,080. This treatment did not result in any costs in
excess of net assets acquired. The results of operations of
Holometrix are included with those of the Company from
November 29, 1994, the date of acquisition.
2. Acquisition (continued)
Effective September 30, 1996, Tytronics purchased an
additional 6,000,000 shares of Holometrix $.01 par value
common stock for $175,000 cash, $60,000 note payable and
contribution of $65,000 of an existing $165,000 note payable
owed to Tytronics from Holometrix. The balance of the note
payable of $100,000 was rewritten as a promissory note with
two installments of $50,000 due in fiscal year 1998 and
1999, respectively. Effective September 30, 1996,
Tytronic's ownership in Holometrix increased from 55% to
67%. In addition, an existing $165,000 note from Holometrix
to Tytronics, with three annual installments of $55,000, due
in 1996 was extended to 1999. In consideration of the debt
restructuring, Tytronics received warrants for the purchase
of 1,100,000 and 1,000,000 shares of Holometrix $.01 par
value common stock at an exercise price of $.05 and $.10 per
share, respectively. The warrants expire February 1, 2006.
On September 30, 1996, Holometrix acquired approximately 61%
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. Accordingly, the purchase price was
allocated based on the estimated fair value of the assets
acquired and the liabilities assumed. In connection with
the acquisition, Holometrix acquired assets with a fair
value of $1,046,102 and assumed liabilities of $874,233.
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 Holometrix of
warrants to purchase an additional 13,334 shares at $3 per
share and 10,000 shares at $6 per share.
3. Notes Payable to Banks
Tytronics has a $500,000 revolving line of credit with a
bank, bearing interest at the prime rate plus 2.5% (9.75% at
September 30, 1996), under which $200,000 was outstanding
and $190,440 was available at September 30, 1996. The line
expired on October 5, 1996. Tytronics is currently
borrowing under the terms of the old agreement. The bank is
in the process of extending the credit through January 1997
at which time a full renewal is expected to be made. The
borrowings under the line are secured by accounts receivable
and are available based upon certain percentages of
qualified accounts receivable. The line contains certain
covenants that, among other things, require Tytronics to
maintain a minimum current ratio and tangible capital base,
as defined. In addition, the ratio of senior liabilities,
as defined, less subordinated debt divided by the tangible
capital base may not exceed certain parameters.
3. Notes Payable to Banks (continued)
In 1995, Holometrix entered into a working capital line of
credit with a bank expiring on February 4, 1997, which
provides for borrowings up to $350,000 The line of credit
is secured by substantially all assets of Holometrix.
Advances under the line may not exceed 70% of Holometrix's
eligible accounts receivable, as defined. These amounts are
payable on demand and bear interest at the bank's prime rate
plus 1.5% (8.5% at September 30, 1996). The line of credit
contains covenants which among various matters restricts
further borrowings and security interests, loans and
advances to others, and sales of assets, other than in the
normal course of business. Holometrix is also required to
maintain certain financial covenants. Borrowings under this
line of credit amount to $84,000 and $266,000 was available
as of September 30, 1996.
In 1996, Tytronics issued a line of credit to Holometrix
allowing borrowings up to $50,000, bearing interest at 10%
and payable on demand. Outstanding borrowings against the
line amounted to $20,000 at September 30, 1996, and is
eliminated in consolidation.
4. Long-Term Debt
Long-term debt consisted of the following at September 30:
1996 1995
Subordinated promissory notes payable to
a shareholder, bearing interest payable
monthly at 10% per annum; principal
payable on November 23, 1999 $450,000 $450,000
Promissory note payable to shareholder,
bearing interest at 6% per annum, due in
annual installments through January 2,
1999 175,000
Promissory note to shareholder, bearing
interest at 10%, principal and interest
are paid quarterly through 1998 155,000
Other 152,121 143,102
-------------------
932,121 593,102
Less current portion 184,485 57,002
-------------------
$747,636 $536,100
===================
4. Long-Term Debt (continued)
In 1995, the Company extended repayment of a promissory note
to a shareholder to November 23, 1999.
As of September 30, 1996 and 1995, approximately $61,500 and
$103,000, respectively, was owed to the estate of a former
shareholder.
The aggregate amounts of required principal payments on the
Company's long-term debt at September 30, 1996 are as
follows:
1997 $184,485
1998 178,681
1999 560,204
2000 8,751
--------
$932,121
========
5. Related Party
Tytronics shares space in its office facility with
Holometrix. The operating lease expired in 1996 and was
renewed for three years at a base rent of $68,400, $76,000
and $83,600 in 1997, 1998 and 1999, respectively. Rent
expense is allocated based on the square footage each
occupies. The Company's total rent expense was $99,341 and
$93,410 for the years ended September 30, 1996 and 1995,
respectively, of which $30,801 and $23,801 was allocated to
Tytronics in 1996 and 1995, respectively. The Companies
also share other operating and administrative costs based on
estimate usage. This informal agreement resulted in the
payment of approximately $80,000 and $68,000 in 1996 and
1995, respectively, by Holometrix to Tytronics for such
operating and administrative costs.
6. Stockholders' Equity
Common Stock
The Company granted warrants giving the holders the right to
purchase 12,506 shares of common stock at a price of $12.07
per share. In connection with the 1995 debt refinancing,
the expiration date of these warrants was extended to
November 23, 2000 from November 19, 1997. The Company
granted additional warrants giving the shareholders the
right to purchase 23,106 shares of common stock at $17.27
per share. These warrants also expire on November 23, 2000.
The Company granted warrants to the president of the Company
giving him the right to purchase 314 shares of common stock
at a price of $17.27 per share. These warrants expire on
November 18, 1997.
Option Agreement
In December 1992, the Company established an Incentive Stock
Option Agreement whereby employees of the Company will be
granted options to purchase shares of Tytronics common stock
at a price equal to the fair value at the date of grant.
Options become exercisable in five cumulative installments,
each at 20% of the shares covered by the option on the first
anniversary of the vesting reference date set forth in the
agreement. The options normally expire ten years from the
date of grant (five years from the date of grant for
optionees owning more than 10% of the total combined voting
power of all classes of stock of the Company at the date of
grant). Terminated employees' options expire three months
from the date of termination or one year from the date of
the employee's death. At September 30, 1996 and 1995,
options to purchase 11,500 shares of Tytronics common stock
at $6.00 per share were outstanding. These warrants expire
at various dates through February 2003. At September 30,
1996 and 1995, options to purchase 4,000 shares of common
stock at $7.50 per share were outstanding. These warrants
expire on August 31, 1998. At September 30, 1996, options
to purchase 8,000 shares of common stock at $8.25 per share
were outstanding. These warrants expire on August 24, 2005.
As of September 30, 1996, a total of 35,000 shares of
Tytronics common stock has been reserved for issuance under
the plan.
Preferred Stock
There are 12,500 shares of Series A and Series B preferred
stock (collectively, preferred stock), outstanding at
September 30, 1996 and 1995.
6. Stockholders' Equity (continued)
The preferred stock has a liquidation preference equal to
$13.38 per share plus all declared and unpaid dividends and
is initially convertible on a one-for-one basis into shares
of common stock at the preference of the stockholder. The
initial conversion price is equal to $16.00 and $12.07 per
share for Series A and Series B preferred stock,
respectively. Each share of preferred stock shall
automatically be converted into shares of common stock
immediately upon a public offering under the Securities Act
of 1933 covering the offer and sale of common stock at an
aggregate gross offering price of not less than $3,000,000
and a minimum share price of $25.00 or the vote of holders
of a majority of the outstanding shares of preferred stock.
The conversion ratio is adjustable
for changes in the Company's capital structure. The shares
of preferred stock vote together with the shares of common
stock. Each holder of preferred shares is entitled to the
number of votes equal to the whole number of shares of
common stock into which the shares of preferred stock are
convertible at such time.
The preferred stock is noncumulative; however, before
declaration of a common stock dividend, the Company must
declare a preferred stock dividend at an annual rate equal
to $1.60 and $1.21 for the Series A and Series B Preferred
Stock, respectively.
Certain stockholders have an agreement with the Company in
which the Company agrees not to take certain actions without
the approval of such stockholders. Such actions include
merger or consolidation, payment of dividends, repayment of
debt, making investments (debt or equity) in other
corporations, granting certain liens and mortgages, bulk
sales of assets and making excessive expenditures on leases,
fixed assets or executive compensation.
Treasury Stock
On December 29, 1995, the Company repurchased 12,500 shares
of its Series A preferred, 22,500 shares of its common stock
and warrants for an additional 1,657 shares of common stock
at a price of $12.07, from a stockholder for $100,000 in
cash and $175,000 in notes.
Stock Options
The Company accounts for stock option grants in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and intends to continue to do so.
7. Profit-Sharing Plan
The Company sponsors a 401(k) profit-sharing plan (the plan)
covering all employees of the Company having completed a
minimum of six months of service. The plan permits
participants to make elective contributions up to the
maximum limits allowed by the Internal Revenue Code Section
401(k), with a matching employer contribution. Participants
become fully vested in the Company's matching contributions
in their fifth year of service with the Company.
The plan also permits the employer to make fully vested
discretionary contributions to the plan allocated to
participants' accounts based on their relative compensation.
Total plan expense was $5,217 and $3,850 in 1996 and 1995,
respectively.
8. Income Taxes
The provision for income taxes consisted of the following:
1996 1995
Current income taxes:
State $ 12,335 $ 12,000
Federal 40,000
------------------
Income tax expense $ 52,335 $ 12,000
==================
The federal tax is the result of alternative minimum taxes.
Deferred income taxes reflect the net effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Tytronics net deferred tax
assets are attributable to the following temporary
differences at September 30:
8. Income Taxes (continued)
1996 1995
Deferred tax assets:
Accounts receivable reserves $ 8,800 $ 8,800
Depreciation 23,300
Inventory reserves 6,200 6,200
Other accruals 51,400 24,100
Research and development tax credits 25,500 25,500
Net operating loss carryforwards 71,000 144,000
Valuation allowance (186,200) (208,600)
------------------
Net deferred tax asset $ -0- $ -0-
==================
The Company does not file a consolidated tax return. As of
September 30, 1996, Tytronics has available research and
development credit carryforwards of approximately $25,500
and net operating loss carryforwards for income tax purposes
of approximately $208,112 which expire through the year
2010. The Company has no state or alternative minimum tax
net operating loss carryforwards. The credit carryforwards
and net operating loss carryforwards may be subject to
limitations.
9. Subsequent Event
On December 4, 1996, the Company entered into a letter of
intent to acquire another on-line analytical company,
located in the United States. The company to be acquired
has assets of approximately $2,200,000. The Company plans
to purchase 100% of the stock of this on-line analytical
company for a combination of cash and issuance of stock.
HOLOMETRIX, INC.
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma combined condensed financial information
is based on the historical consolidated financial statements of
Tytronics Incorporated ("Tytronics") and reflects the
reorganization of Tytronics, Holometrix, Inc. ("Holometrix") and
National Metal Refining Company, Inc. ("Nametre") and resulting
issuance of additional common shares of Holometrix in connection
with the reorganization.
For accounting purposes, Tytronics is deemed to be the acquiring
entity. Accordingly, the reorganization will be accounted for as
a recapitalization of Tytronics and the acquisition by Tytronics
of the minority interests of Holometrix and Nametre under the
purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16 Business Combinations. At the
closing date, the financial statements will reflect the
acquisition by Tytronics of the minority interests of Holometrix
and Nametre through the issuance of Holometrix common shares
valued at $1,165,000 based on an independent valuation of
Tytronics, Nametre and Holometrix by Fechtor, Detwiler & Co., Inc.
investment bankers.
The pro forma condensed balance sheet at June 30, 1997 also reflects
the current Tytronics' stock offering which is expected to close
in September of 1997 with expected net proceeds of approximately
$687,000.
The pro forma statements of operations for the year ended September
30, 1996 include historical information of Nametre as if the
acquisition of a 61.23% interest in Nametre by Holometrix had
occurred at the beginning of the period presented. This
acquisition of a 61.23% interest in Nametre occurred on September
30, 1996.
All share and per share information reflect the proposed 50 for 1
reverse stock split.
Holometrix, Inc.
Pro Forma Combined Condensed Balance Sheet
June 30, 1997
($000 omitted)
(unaudited)
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS ADJUSTED
(TYTRONICS INCORPORATED)
---------------------- ----------- ---------
ASSETS
Current Assets:
Cash & Cash Equivalents $ 281 $ 687 (b) $ 968
Accounts Receivable 2,009 2,009
Inventories 1,206 1,206
Prepaid Expenses 71 71
----- --- -----
Total Current Assets 3,567 687 4,254
Equipment and Fixtures-Net 434 0 434
Other assets 396 920 (a) 1,316
----- ----- -----
Total Assets $ 4,397 $ 1,607 $ 6,004
===== ===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 609 $ 609
Accounts Payable 1,783 1,783
Accrued Expenses 506 506
Current Portion,
Long Term Debt 198 198
----- ----- -----
Total Current Liabilities 3,096 0 3,096
Long-Term Debt, less
current portion: 698 698
Minority interest in
subsidiary 245 (245) (a) 0
Stockholders' Equity 358 1,165 (a) 2,210
687 (b)
Total Liabilities and ----- ----- -----
Stockholders' Equity $ 4,397 $ 1,607 $ 6,004
===== ===== =====
(a) To record the acquisition of the minority interest of
Holometrix and Nametre in exchange for the issuance of stock valued at
$1,165,000. Goodwill represents the excess purchase price over the fair
value of net assets acquired calculated as follows:
Total value of 8,046,000 shares issued (160,920 shares
after the 50 for 1 reverse stock split) in exchange
for minority shareholders interest $ 1,165,000
Minority Interest - Historical Value reflected
by Tytronics Incorporated 245,000
---------
Excess of purchase price over fair value $ 920,000
=========
(b) To reflect the assumed issuance of shares of Tytronics common
stock pending the succesful completion of a planned private offering, raising
net proceeds expected to total $687,000.
Holometrix, Inc.
Pro Forma Combined Condensed Statement of Operations
Nine Months Ended June 30, 1997
($000 omitted)
(unaudited)
HISTORICAL PRO FORMA PRO FORMA
(TYTRONICS INCORPORATED) ADJUSTMENTS ADJUSTED
----------------------- ----------- ---------
Net Sales $ 5,826 $ $ 5,826
Cost of Sales 2,843 2,843
----- -----
Gross Profit 2,983 2,983
----- -----
Operating Expenses
Selling, general and
administrative 2,564 46 (b) 2,610
Research and Development 481 481
----- ----- -----
Total 3,045 46 3,091
----- ----- -----
(Loss) From Operations (62) (46) (108)
Other (Expense) (50) - (50)
----- ----- -----
(Loss) Before Income
Taxes and Minority Interest (112) (46) (158)
Income Taxes - - -
----- ----- -----
(Loss) Before Minority Interest (112) (46) (158)
Minority Interest 19 (19) (a) -
----- ----- -----
Net (Loss) $ (93) $ (65) $ (158)
===== ===== =====
Weighted Average of Common Shares
Outstanding 598,197 345,720 (c) 943,917
Net (Loss)
Per Common Share $ (.16) $ (.17)
(a) To eliminate minority interest in Holometrix and Nametre due to
acquisition of remaining interests by Tytronics as a result of the reverse
merger.
(b) To record amortization of goodwill representing the excess purchase
price paid for the remaining interests of Holometrix and Nametre over their
recorded values using an estimated life of 15 years.
(c) To reflect 8,046,000 shares (160,920 shares after the 50 for 1 reverse
stock split) issued as a result of the reverse acquisition and 184,800 shares
(after the 50 for 1 reverse stock split) issued in connection with the proposed
private placement assuming these transactions occurred at the beginning of the
periods presented.
HOLOMETRIX, INC.
Pro Forma Combined Condensed Statement of Operations
Year Ended September 30, 1996
($000 omitted)
(unaudited)
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
(TYTRONICS INCORPORATED) (NAMETRE) ADJUSTMENTS ADJUSTED
Net Sales $ 5,613 $ 2,602 $ $ 8,215
Cost of Sales 2,784 1,247 4,031
_____ _____ _____
Gross Profit 2,829 1,355 4,184
----- ----- -----
Operating Expenses:
Selling, general
and administrative 2,073 1,224 62 (b) 3,375
16 (c)
Research &
Development 456 363 819
_____ _____ _____ _____
Total 2,529 1,587 78 4,194
----- ----- ----- -----
Income (loss)
from operations 300 (232) (78) (10)
Other (expense) (78) -- -- (78)
_____ _____ _____ ______
Income (loss) before
Income Taxes and
Minority Interest 222 (232) (78) (88)
Income taxes 52 -- (52) (d) 0
_____ _____ _____ _____
Income (loss) before
Minority Interest 170 (232) (26) (88)
Minority interest (2) -- 2 (a) --
_____ _____ _____ _____
Net Income (loss) $ 168 $ (232) $ (24) $ (88)
===== ===== ===== =====
Weighted Average
of Common Shares
Outstanding 598,197 345,720(e) 943,917
Net Income (loss) per
Common Share $ .28 $ (.09)<PAGE>
(a) To eliminate minority interest in Holometrix and Nametre due to
acquisition of remaining interests by Tytronics as a result of reverse
merger.
(b) To record amortization of goodwill representing the excess
purchase price paid for the remaining interests of Holometrix and
Nametre over their recorded values using an estimated life of 15 years.
(c) To record amortization of goodwill representing the excess
purchase price paid over the fair value of the net assets required in
connection with the acquisition of a 61.23% interest in Nametre by
Holometrix over a 15 year life ($245,000/15 years).
(d) To adjust the provision for income taxes.
(e) To reflect 8,046,000 shares (160,920 shares after the 50 for 1
reverse stock split) issued as a result of the reverse acquisition and
184,800 shares (after the 50 for 1 reverse stock split) issued in
connection with the proposed private placement assuming these transactions
occurred at the beginning of the periods presented.
PLAN AND AGREEMENT OF MERGER
This Plan and Agreement of Merger (hereinafter called the
"Plan and Agreement") entered into this __ day of October, 1997
between Holometrix Acquisition Corp., a Delaware corporation
(hereinafter sometimes referred to as the "Delaware corporation"),
Tytronics Incorporated, a Massachusetts corporation (hereinafter
sometimes referred to as the "Massachusetts corporation"),
National Metal Refining Company, a New Jersey corporation
(hereinafter sometimes referred to as the "New Jersey
corporation") and Holometrix, Inc., a Delaware corporation
(hereinafter sometimes referred to as "Holometrix"), with the
Delaware corporation, the Massachusetts corporation and the New
Jersey corporation hereinafter sometimes referred to as the
"Constituent Corporations".
W I T N E S S E T H:
WHEREAS, Holometrix has an authorized capital stock
consisting of Ten Million (10,000,000) shares of Preferred Stock,
$.01 par value and Thirty Million (30,000,000) shares of Common
Stock, $1.00 par value, of which 22,296,878 shares of Common Stock
are now issued and outstanding;
WHEREAS, Holometrix has agreed to submit an amendment to its
Certificate of Incorporation to its stockholders for approval to
be effective prior to the Effective Time to increase the number of
authorized shares of its Common Stock to 100,000,000 shares;
WHEREAS, the Massachusetts corporation has an authorized
capital stock consisting of Seventy-Five Thousand (75,000) shares
of Preferred Stock, $1.00 par value, of which Sixteen Thousand
Eight Hundred Twenty-Seven (16,827) shares are issued and
outstanding and Four Hundred Twenty Thousand (420,000) shares of
Common Stock, $.01 par value, of which One Hundred Eleven Thousand
(111,000) are issued and outstanding;
WHEREAS, the New Jersey corporation has an authorized capital
stock consisting of 770,000 shares of Common Stock, $.01-1/3 par
value, of which Seventy-Five Thousand Nine Hundred Eighty-Nine
(75,989) shares, excluding One Hundred Twenty Thousand (120,000)
shares of Common Stock owned by Holometrix, are issued and
outstanding;
WHEREAS, the Board of Directors of the New Jersey corporation
has agreed to submit an amendment of its Certificate of
Incorporation to its stockholders for approval to be effective
prior to the Effective Time to reduce the authorized shares of
Common Stock of the New Jersey corporation to 856 shares and to
affect a nine hundred (900) for one (1) reverse stock split, such
that prior to the Effective Time, approximately 210 shares of
Common Stock of the New Jersey corporation will be issued and
outstanding;<PAGE>
WHEREAS, the Delaware corporation is a wholly-owned
subsidiary of Holometrix, Inc.; and
WHEREAS, the Board of Directors of the Massachusetts
corporation, the New Jersey corporation and of the Delaware
corporation deem it advisable to merge the Massachusetts
corporation and the New Jersey corporation with and into the
Delaware corporation, pursuant to the corporation laws of the
Commonwealth of Massachusetts, and the States of New Jersey and
Delaware.
NOW, THEREFORE, the parties to this Plan and Agreement, in
consideration of the mutual covenants and agreements hereinafter
contained, do hereby prescribe the terms and conditions of said
merger and the mode of carrying the same into effect, as follows:
FIRST: The Massachusetts corporation and the New Jersey
corporation shall be merged into the Delaware corporation on the
Effective Date as hereinafter defined. The Delaware corporation
shall thereafter continue as the Surviving Corporation and as such
is hereinafter sometimes called the "Surviving Corporation".
SECOND: From and after the Effective Date, the
Certificate of Incorporation of the Delaware corporation shall
remain and be the Certificate of Incorporation after the merger
until the same shall be altered or amended as provided by law.
From and after the Effective Date and until amended in accordance
with law, the Certificate of Incorporation, shall be, and may be
certified as, the Certificate of Incorporation of the Surviving
Corporation.
The By-Laws of the Delaware corporation in effect on the
Effective Date shall be the By-Laws of the Surviving Corporation.
THIRD: The shares of the Massachusetts corporation and
the New Jersey corporation shall be exchanged for shares of
Holometrix.
FOURTH: The manner of converting the outstanding shares
of the Massachusetts corporation into shares of Holometrix shall
be as follows:
(a) Each issued and outstanding share of Preferred Stock of
the Massachusetts corporation shall be exchanged and converted
into 254.542 shares of Common Stock of Holometrix (rounded up to
the nearest whole share), which shares shall be deemed fully paid
and nonassessable.
(b) Each issued and outstanding share Common Stock of the
Massachusetts corporation shall be exchanged and converted into
231.402 shares of Common Stock of Holometrix (rounded up to the
nearest whole share), which shares shall be deemed fully paid and
nonassessable.
-2-<PAGE>
(c) After the Effective Date, each holder of an outstanding
certificate or certificates representing shares of the
Massachusetts corporation shall surrender the same to Holometrix,
and each holder shall be entitled upon such surrender to receive
the number of shares of capital stock of Holometrix on the basis
provided herein. Until so surrendered, the outstanding shares of
capital stock of the Massachusetts corporation to be converted
into the stock of Holometrix, as provided herein, may be treated
by Holometrix for all corporate purposes as evidencing the
ownership of shares of Holometrix as though said surrender and
exchange had taken place.
(d) After the Effective Date, the outstanding options and
warrants to purchase capital stock of the Massachusetts
corporation, and all rights in respect thereof, shall be converted
to options and warrants to purchase shares of Holometrix Common
Stock that each holder of such option and warrant would have
become entitled to receive on the conversion, as set forth in
subparagraph (c) above, had each such option and warrant been
exercised immediately prior to the Effective Date, and each
substitute option and warrant shall contain, as nearly as
practical, the same terms and conditions as each such original
option and warrant to purchase capital stock of the Massachusetts
corporation.
FIFTH: The manner of converting the outstanding shares
of the New Jersey corporation into shares of Holometrix shall be
as follows:
(a) Each share of Common Stock of the New Jersey corporation
shall be exchanged and converted into 79.807 shares of Holometrix
Common Stock (rounded up to the nearest whole share), which shares
shall be deemed fully paid and nonassessable.
(b) After the Effective Date, each holder of an outstanding
certificate or certificates representing shares of the New Jersey
corporation shall surrender the same to Holometrix, and each
holder shall be entitled upon such surrender to receive the number
of shares of capital stock of Holometrix on the basis provided
herein. Until so surrendered, the outstanding shares of capital
stock of the New Jersey corporation to be converted into the stock
of Holometrix, as provided herein, may be treated by Holometrix
for all corporate purposes as evidencing the ownership of shares
of Holometrix as though said surrender and exchange had taken
place.
(c) After the Effective Date, the outstanding options and
warrants to purchase capital stock of the New Jersey corporation,
and all rights in respect thereof, shall be converted to options
and warrants to purchase shares of Holometrix Common Stock that
each holder of such option and warrant would have become entitled
to receive on the conversion, as set forth in subparagraph (c)
above, had each such option and warrant been exercised immediately
prior to the Effective Date, and each substitute option and
-3-<PAGE>
warrant shall contain, as nearly as practical, the same terms and
conditions as each such original option and warrant to purchase
capital stock of the New Jersey corporation.
SIXTH: On the Effective Date:
(1) The Constituent Corporations shall become a single
corporation, which shall be the Delaware corporation, the
Surviving Corporation, and the separate existence of the
Massachusetts corporation and the New Jersey corporation shall
cease.
(2) The Surviving Corporation shall be entitled to all
the rights and assets and be subject to all the duties and
liabilities of the Massachusetts corporation, the New Jersey
corporation and the Delaware Corporation, to the full extent
provided in Section 259 of the General Corporation Law of the
State of Delaware, Section 80 of the Business Corporation Law of
the Commonwealth of Massachusetts and Section 10-6 of the Business
Corporation Act of the State of New Jersey. The officers and
directors of the Massachusetts corporation, the officers and
directors of the New Jersey corporation and the officers and
directors of the Surviving Corporation are fully authorized in the
name of the Massachusetts corporation and the New Jersey
corporation or otherwise to execute and deliver all instruments
and do anything else which the Surviving Corporation may request
in order to perfect the transfer to it of all of the Massachusetts
corporation's and the New Jersey corporation's rights and assets,
or otherwise to carry out the purposes of this Agreement.
(3) The directors and officers of the Surviving
Corporation in office on the Effective Date shall include the
following persons in the following positions:
John E. Wolfe President, Treasurer and
Director
David J. Brown Secretary
and such directors and officers shall constitute the directors and
officers of the Delaware corporation until the next annual meeting
of stockholders and until their successors shall have been elected
and qualified.
SEVENTH: This Plan and Agreement shall be submitted to
the shareholders of each of the Constituent Corporations at
meetings separately called for the purpose, and the merger shall
become effective upon the approval of this Plan and Agreement by
the requisite vote or consent of the shareholders of each of said
corporations and the execution, acknowledgment, filing, issuance,
and recording of such documents as may be required by the
applicable Secretaries of State. The term "Effective Date", as
used in this Plan and Agreement, means the latest point of time at
-4-<PAGE>
which the Secretaries of State of Massachusetts, New Jersey and
Delaware accept the Plan and Agreement for filing.
EIGHTH: Anything herein or elsewhere to the contrary
notwithstanding, this Plan and Agreement may be terminated and
abandoned by the Board of Directors of any of the Constituent
Corporations or Holometrix at anytime before the merger shall have
otherwise become effective under the respective laws of such
Constituent Corporation's state of incorporation.
IN WITNESS WHEREOF, the parties to this Plan and
Agreement, pursuant to the approval and authority duly given by
resolutions adopted by their respective Board of Directors, have
caused these presents to be executed by the President and attested
by the Secretary of each party hereto.
(Corporate Seal) HOLOMETRIX ACQUISITION CORP.
(a Delaware corporation)
ATTEST:
By:_____________________
_________________________ John E. Wolfe
David J. Brown President
Secretary
(Corporate Seal) TYTRONICS INCORPORATED
(a Massachusetts corporation)
ATTEST:
By:_____________________
_________________________ John E. Wolfe
President
Clerk
(Corporate Seal) NATIONAL METAL REFINING
COMPANY
(a New Jersey corporation)
ATTEST:
By:_____________________
_________________________ Linda Dousis
President
Secretary
(Corporate Seal) HOLOMETRIX, INC.
(a Delaware corporation)
ATTEST:
By:_____________________
_________________________ John E. Wolfe
President
Secretary
-5-<PAGE>
THE ABOVE PLAN AND AGREEMENT OF MERGER having been executed on
behalf of each corporate party thereto, and having been adopted
separately by each corporate party thereto, in accordance with the
provisions of the General Corporation Law of the State of
Delaware, the Business Corporation Law of the Commonwealth of
Massachusetts and the Business Corporation Act of the State of New
Jersey, the President of each corporate party thereto does now
hereby execute the said Plan and Agreement of Merger, and the
Secretary of each corporate party thereto does now hereby attest
the said Plan and Agreement of Merger under the corporate seals of
the respective corporations, by authority of the directors and
stockholders thereof, as the respective act, deed and agreement of
each of said corporations on this __th day of October, 1997.
(Corporate Seal) HOLOMETRIX ACQUISITION CORP.
(a Delaware corporation)
ATTEST:
By:_____________________
_________________________ John E. Wolfe
David J. Brown President
Secretary
(Corporate Seal) TYTRONICS INCORPORATED
(a Massachusetts corporation)
ATTEST:
By:_____________________
_________________________ John E. Wolfe
President
Clerk
(Corporate Seal) NATIONAL METAL REFINING
COMPANY
(a New Jersey corporation)
ATTEST:
By:_____________________
_________________________ Linda Dousis
President
Secretary
(Corporate Seal) HOLOMETRIX, INC.
(a Delaware corporation)
ATTEST:
By:_____________________
_________________________ John E. Wolfe
President
Secretary
-6-<PAGE>
CERTIFICATE OF MERGER
I, David J. Brown, Secretary of Holometrix Acquisition Corp.,
a corporation organized and existing under the laws of the State
of Delaware, hereby certify, as such secretary and under the seal
of the said corporation, that a Plan and Agreement of Merger,
after having been first duly signed on behalf of the said
corporation, and having been signed on behalf of Tytronics
Incorporated, a Massachusetts corporation, and having been signed
on behalf of National Metal Refining Company, Inc., a New Jersey
Corporation, was duly adopted pursuant to Section 228 of the
General Corporation Law of the State of Delaware by the unanimous
written consent of the stockholder holding 1,000 shares of the
capital stock of the Delaware corporation, the same being all of
the shares issued and outstanding of the Delaware corporation,
which Plan and Agreement of Merger was thereby adopted as the act
of the sole stockholder of said Holometrix Acquisition Corp., a
Delaware corporation, and the duly adopted agreement and act of
the said corporation. Holometrix Acquisition Corp. is the
surviving corporation, and the certificate of incorporation of
said corporation, without amendment, shall be the certificate of
incorporation of the surviving entity. The executed Plan and
Agreement of Merger is on file at the office of the surviving
corporation, Holometrix Acquisition Corp., located at 25 Wiggins
Avenue, Bedford, Massachusetts. The surviving corporation will
furnish a copy of the Plan and Agreement of Merger to any
stockholder of Holometrix Acquisition Corp., Tytronics
-7-<PAGE>
Incorporated or National Metal Refining Company, Inc., upon
request.
WITNESS my hand and the seal of said Holometrix Acquisition
Corp., a Delaware corporation, on this __th day of October, 1997.
(Corporate Seal) __________________________________
David J. Brown
Secretary
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Tytronics
Incorporated Consolidated condensed financial statements for the nine-months
ended June 10, 1997 and 1996 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 281
<SECURITIES> 0
<RECEIVABLES> 1990
<ALLOWANCES> (81)
<INVENTORY> 1206
<CURRENT-ASSETS> 3567
<PP&E> 1,052
<DEPRECIATION> (618)
<TOTAL-ASSETS> 4,427
<CURRENT-LIABILITIES> 3,126
<BONDS> 698
0
29
<COMMON> 2
<OTHER-SE> 327
<TOTAL-LIABILITY-AND-EQUITY> 4,427
<SALES> 5,826
<TOTAL-REVENUES> 5,826
<CGS> 2,843
<TOTAL-COSTS> 2,843
<OTHER-EXPENSES> 3,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> (93)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93)
<EPS-PRIMARY> .84
<EPS-DILUTED> .70
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Tytronics
Incorporated Consolidated financial statements for the year ended September 30,
1996 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 124
<SECURITIES> 0
<RECEIVABLES> 1,819
<ALLOWANCES> (70)
<INVENTORY> 1,167
<CURRENT-ASSETS> 3,110
<PP&E> 955
<DEPRECIATION> (508)
<TOTAL-ASSETS> 3,998
<CURRENT-LIABILITIES> 2,536
<BONDS> 747
0
29
<COMMON> 2
<OTHER-SE> 420
<TOTAL-LIABILITY-AND-EQUITY> 3,998
<SALES> 5,613
<TOTAL-REVENUES> 5,613
<CGS> 2,784
<TOTAL-COSTS> 2,784
<OTHER-EXPENSES> 2,529
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> 168
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
