SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 10-KSB/A No.1
_____________
x Annual Report Pursuant To Section 15(d) Of The Securities
Exchange Act Of 1934
For the fiscal year ended September 30, 1997
Transition Report Pursuant To Section 13 Or 15(d) Of The
Securities Exchange Act Of 1934
For the transition period from __________ to __________
Commission file number 0-16152
Holometrix, Inc.
(Name of Registrant as Specified in Its Charter)
_____________
Delaware 04-2891557
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
25 Wiggins Avenue, Bedford, Massachusetts 01730-2323
(Address of Principal Executive Offices) (Zip Code)
_____________
(781) 275-3300
(Registrant's Telephone Number, Including Area Code)
_____________
Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of Each Exchange on
Title of Each Class Which Registered
None Not applicable
Securities Registered Pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of Class)
Check whether the Registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such other shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. x
The Registrant's consolidated revenues for its fiscal year ended
September 30, 1997 were $4,528,636. The aggregate market value of
shares of the Common Stock held by non-affiliates, based upon the
average of the bid and ask prices for such stock on December 1, 1997
was approximately $219,520. As of December 1, 1997, 23,861,878
shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format Yes No x
ITEM 7. FINANCIAL STATEMENTS.
The Company's consolidated financial statements and the related
auditors' report are presented on pages F-1 through F-26. The
financial statements filed in this Item 7 are as follows:
Item Page
Reports of Independent Certified Public Accountants F-1
Consolidated Balance Sheets - September 30, 1997 and 1996 F-3
Consolidated Statements of Operations for the years ended
September 30, 1997 and 1996 F-5
Consolidated Statements of Stockholders' Equity for
the years ended September 30, 1997 and 1996 F-6
Consolidated Statements of Cash Flows for the years ended F-7
September 30, 1997 and 1996
Notes to Consolidated Financial Statements F-8
Consolidated Financial Statements
September 30, 1997 and 1996
Holometrix, Inc. and Subsidiary
Contents
Reports of independent certified accountants F-1 to F-2
Consolidated financial statements:
Consolidated balance sheets F-3 to F-4
Consolidated statements of operations F-5
Consolidated statements of stockholders' equity F-6
Consolidated statements of cash flows F-7
Notes to consolidated financial statements F-8 to F-25
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Holometrix, Inc.
Bedford, Massachusetts
We have audited the accompanying consolidated balance sheets of
Holometrix, Inc. and subsidiary as of September 30, 1997 and
1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We
did not audit the 1997 financial statements of National Metal
Refining Company, Inc. ("Nametre"), which statements reflect
total assets of $1,245,027 as of September 30, 1997 and total
revenues of $2,451,575 for the year ended September 30, 1997.
Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to
the 1997 amounts included for such subsidiary, is based solely
on the report of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Holometrix, Inc. and subsidiary at September 30,
1997 and 1996, and the results of their operations and their
cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Boston, Massachusetts
November 26, 1997
Holometrix, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, 1997 1996
Assets (Notes G and H)
Current:
Cash and cash equivalents $ 184 423 $ 27 495
Accounts receivable, less allowance for doubtful
accounts of $35,000 in 1997 and 1996 929 480 1 162 148
Inventories (Note D) 845 256 662 323
Other current assets 50 958 32 802
--------------------------------------------------------------------
Total current assets 2 010 117 1 884 768
Equipment and fixtures, net (Note E) 394 993 351 656
Other assets, net (Note F) 305 395 312 299
- ---------------------------------------------------------------------
Total assets $2 710 505 $2 548 723
See accompanying notes to consolidated financial statements.
Holometrix, Inc. and Subsidiary
Consolidated Balance Sheets
(Continued)
September 30, 1997 1996
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable - stockholder (Note G) $ 72 015 $ 20 000
Notes payable - line of credit (Note G) - 84 000
Accounts payable 1 266 795 1 204 028
Accrued payroll and related expenses 107 850 37 086
Accrued expenses - other 158 716 59 135
Due to stockholder (Note M) 51 576 77 204
Current maturities of long-term obligations
(Note H) 93 967 105 000
- ----------------------------------------------------------------
Total current liabilities 1 750 919 1 586 453
Long-term obligations:
Notes payable - stockholder, less current
maturities (Note G) 210 043 100 000
Long-term obligations, less current
maturities (Note H) 14 631 113 539
Minority interest in consolidated subsidiary
(Note B) 103 536 66 634
Commitments and contingencies
(Notes C, G, H, J, K and M)
Stockholders' equity (Notes B and K):
Common stock, $.01 par value, 30,000,000
shares authorized; issued 28,098,157 in 1997
and 26,533,157 in 1996; outstanding
23,861,878 in 1997 and 22,296,878 in 1996 280 982 265 332
Additional paid-in capital 2 544 409 2 459 009
Accumulated deficit (2 090 015)(1 878 244)
- ----------------------------------------------------------------
735 376 846 097
Less: Treasury stock, at cost (104 000) (104 000)
Subscriptions receivable - (60 000)
- ----------------------------------------------------------------
Total stockholders' equity 631 376 682 097
- ----------------------------------------------------------------
Total liabilities and
stockholders' equity $2 710 505 $2 548 723
See accompanying notes to consolidated financial statements.
Holometrix, Inc. and Subsidiary
Consolidated Statements of Operations
September 30, 1997 1996
- -----------------------------------------------------------------
Net revenues (Note L) $4 528 636 $2 200 603
Cost of revenues 2 336 860 1 338 466
- -----------------------------------------------------------------
Gross profit 2 191 776 862 137
- -----------------------------------------------------------------
Selling, general and administrative expenses 1 919 566 668 902
Research and development expenses 365 332 153 984
- -----------------------------------------------------------------
Total operating expenses 2 284 898 822 886
- -----------------------------------------------------------------
Income (loss) from operations (93 122) 39 251
Interest expense 56 747 35 210
- -----------------------------------------------------------------
Income (loss) before taxes on income
and minority interest (149 869) 4 041
Taxes on income (Note I) 25 000 -
Income (loss) before minority interest (174 869) 4 041
Minority interest in net income of subsidiary 36 902 -
- -----------------------------------------------------------------
Net income (loss) $ (211 771) $ 4 041
- -----------------------------------------------------------------
Net income (loss) per common share $ (0.01) $ 0.00
- -----------------------------------------------------------------
Weighted average number of common and
common equivalent shares used in calculation
of income (loss) per common share
(Note C) 22 309 316 16 313 316
See accompanying notes to consolidated financial statements.
<TABLE>
Holometrix, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
<CAPTION>
Preferred
Stock
Series B Common Stock Additional Total
For the years ended Par Value $.01 Par Value $.01 Paid-in Accumulated Treasury Stock Subscriptions Stockholders'
September 30, 1997 Shares Amount Shares Amount Capital Deficit Shares Amount Receivable Equity
and 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1995 - $ - 20 533 157 $205 332 $2 219 009 $(1 882 285) 4 236 279 $(104 000) $ - $ 438 056
Common shares issued
(Note B) - - 6 000 000 60 000 240 000 - - - (60 000) 240 000
Net income for year - - - - - 4 041 - - - 4 041
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1996 - - 26 533 157 265 332 2 459 009 (1 878 244) 4 236 279 (104 000) (60 000) 682 097
Payments received on
subscriptions receivable - - - - - - - - 60 000 60 000
Common shares issued
(Notes B and G) - - 1 550 000 15 500 84 500 - - - - 100 000
Issuance of common stock
to employees 15 000 150 900 - - - - 1 050
Net loss for year - - - - - (211 771) - - - (211 771)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1997 - $ - 28 098 157 $280 982 $2 544 409 $(2 090 015) 4 236 279 $(104 000) $ - $ 631 376
See accompanying notes to consolidated financial statements.
</TABLE>
Holometrix, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Note N)
Years ended September 30, 1997 1996
Cash flows from operating activities:
Net income (loss) $(211 771) $ 4 041
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 164 791 125 125
Issuance of common stock to employees 1 050 -
Minority interest 36 902 -
Changes in operating assets and liabilities,
net of effects of acquisition in 1996:
Accounts receivable 232 668 (335 934)
Inventories (182 933) 16 921
Other current assets (18 156) 10 970
Accounts payable 62 767 328 019
Accrued expenses 170 345 (13 099)
- ------------------------------------------------------------------------
Net cash provided by operating activities 255 663 136 043
- ------------------------------------------------------------------------
Cash flows from investing activities:
Equipment and fixtures additions (178 396) (80 468)
Purchase of Nametre, net of cash acquired - (266 514)
Increase in other assets (22 828) (17 956)
- -------------------------------------------------------------------------
Net cash used for investing activities (201 224) (364 938)
- -------------------------------------------------------------------------
Cash flows from financing activities:
Due to stockholder, net (25 628) 86 350
Borrowings - stockholder & others 262 058 -
Proceeds from subscriptions receivable 60 000 -
Proceeds from issuance of common stock - 175 000
Net repayments on line of credit (84 000) (41 000)
Repayments on long-term obligations (109 941) (4 667)
- -------------------------------------------------------------------------
Net cash provided by financing activities 102 489 215 683
- -------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 156 928 (13 212)
Cash and cash equivalents, beginning of year 27 495 40 707
- -------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 184 423 $ 27 495
See accompanying notes to consolidated financial statements.
Holometrix, Inc. and Subsidiary
Notes to Consolidated Financial Statements
A. Business Organization
Holometrix, Inc. ("Holometrix"), a Delaware corporation
incorporated on October 23, 1985, is a product development,
manufacturing, and contract test services company which
specializes in manufacturing instruments and providing contract
test services for measuring the thermophysical properties of a
wide variety of materials. Holometrix's Instruments Division
currently designs, manufactures, and distributes five product
lines containing a total of sixteen instrument models which
measure thermophysical properties for research and quality
control applications. Holometrix's Testing Services Division
provides contract test and engineering services to evaluate
various temperature-related performance factors of virtually any
material. The Testing Services Division also performs mechanical
and physical properties testing. Holometrix is located in
Bedford, MA.
In 1996, Holometrix purchased a majority of the issued and
outstanding capital stock of National Metal Refining Company,
Inc. ("Nametre" or "Subsidiary"). Nametre is a product
development and manufacturing company that specializes in
manufacturing in-line and laboratory viscosity analyzers. These
analyzers are used to measure the viscosity and viscoelasticity
of a wide range of materials that are sold to the polymer
manufacturing, petrochemical, food, paints and coatings, and pulp
and paper markets. Nametre is located in Metuchen, NJ.
B. Acquisition
On September 30, 1996, Holometrix acquired approximately
61.23% of the outstanding shares of National Metal Refining
Company, Inc., a developer of instruments for the measurement of
viscous properties of materials, for $225,000 in cash and $75,000
in notes payable, plus acquisition costs. The acquisition has
been accounted for under the purchase method of accounting,
resulting in the cost of the acquisition being allocated on the
basis of the estimated fair value of the assets acquired and
liabilities assumed. This allocation resulted in goodwill of
approximately $245,000 which is being amortized over 15 years.
The purchase also provided for the acquisition by Holometrix of
warrants to purchase an additional 13,334 shares at $3 per share
and 10,000 shares at $6 per share. Holometrix raised the funds
to acquire Nametre by issuing 6,000,000 shares of its' common
stock to Tytronics, Incorporated ("Tytronics"), at a purchase
price of $.05 per share. At the time of this
B. Acquisition (Continued)
sale of shares, Holometrix entered into a debt restructuring
agreement with Tytronics. In conjunction with that agreement,
Holometrix also issued warrants to Tytronics to purchase one
million, one hundred thousand (1,100,000) shares of Common Stock
at an exercise price of $0.05 per share and one million
(1,000,000) shares of Common Stock at an exercise price of $0.10
per share, expiring February 1, 2006. Joseph J. Caruso, a
director of Holometrix, is also a director of Nametre. In
addition, Mr. Caruso is the president of Bantam Group, Inc.,
which is a stockholder of Holometrix and Nametre and has entered
into consulting agreements with Holometrix and Nametre. The
purchase did not have a material effect on the Consolidated
Statement of Operation for the year ended September 30, 1996.
During 1997, Tytronics exercised 1,100,000 shares at $.05 per
share and 450,000 shares at $.10 per share.
The unaudited pro forma consolidated results of Holometrix and
Nametre for the year ended September 30, 1996, assuming that the
acquisition had occurred at October 1, 1995, and after giving
effect to certain pro forma adjustments, is as follows:
September 30, 1996
(Unaudited)
Revenue $4 803 389
Net loss $ (27 010)
Net loss per share $ (0.00)
C. Summary of
Significant
Accounting
Policies
Basis of Presentation
The consolidated financial statements include the accounts of
Holometrix and Nametre, its majority-owned subsidiary (the
"Company"). All intercompany accounts and transactions have been
eliminated. As discussed in Note B, Holometrix acquired a
majority interest in Nametre at September 30, 1996. Accordingly,
the Consolidated Statements of Income and Consolidated Statements
of Cash Flows for the year ended September 30, 1996, exclude any
activity of Nametre prior to the date of acquisition.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments
purchased with maturities of three months or less to be cash
equivalents.
Concentration of Credit Risk
Concentration of credit risk consists principally of trade
receivables. This risk is limited due to the large number of
customers comprising the Company's customer bases, and their
dispersion across different businesses and geographic regions.
Ongoing credit reviews of customers' financial condition are
performed, and collateral is not required. The Company maintains
reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.
Inventories
Inventories are valued at the lower of cost or market using
the first-in, first-out (FIFO) method.
Equipment and Fixtures
Equipment and fixtures are stated at cost. Depreciation is
computed using straight-line and accelerated methods over the
estimated useful lives, ranging between 5 and 10 years, of the
related asset. Leasehold improvements are amortized over the
life of the lease including expected renewal periods not to
exceed the maximum useful lives of the assets.
C. Summary of
Significant
Accounting
Policies
(Continued)
Goodwill
Goodwill resulting from the excess of cost over fair value of net
assets acquired is being amortized on a straight-line basis over
15 years. The Company evaluates the recoverability and remaining
life of its goodwill and determines whether the goodwill should
be completely or partially written-off or the amortization period
accelerated. The Company will recognize an impairment of
goodwill if undiscounted estimated future operating cash flows of
the acquired business are determined to be less than the carrying
amount of the goodwill. If the Company determines that the
goodwill has been impaired, the measurement of the impairment
will be equal to the excess of the carrying amount of the
goodwill over the amount of the undiscounted estimated future
operating cash flows. If an impairment of goodwill were to
occur, the Company would reflect the impairment through a
reduction in the carrying value of goodwill.
Other Assets
Other assets include goodwill, a licensing agreement, patent
costs, and various deposits for office equipment and utilities.
Costs related to the licensing agreement are amortized using the
straight-line method over the life of the agreement. Patent
costs are amortized over 8 years.
Revenue Recognition
Revenue for instruments sales is recognized when instruments
are shipped. Revenue for testing services is recognized as
services are performed.
Research and Development
Research and development costs are charged to expense as
incurred.
Income taxes
The Company utilizes the liability method of accounting for
income taxes, as set forth in Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under
SFAS No. 109, deferred tax liabilities or assets are recognized
for the estimated tax effects of temporary differences between
financial reporting and income tax bases of assets and
liabilities and for loss carryforwards based on enacted tax laws
and rates.
C. Summary of
Significant
Accounting
Policies
(Continued)
Net Income (Loss) Per Share
Net income (loss) per common share is computed using the
weighted average number of common and common equivalent shares
outstanding during the year. Common shares issuable upon
exercise of outstanding warrants and options, when dilutive, are
included in the computation of shares outstanding.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Financial Instruments
The estimated fair value of the Company's financial instruments,
which include accounts receivable, accounts payable, notes
payable, and long-term debt, approximate their carrying value.
New Accounting Standards
Effective October 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation." The Company has elected to
continue to account for stock options at their intrinsic value
with disclosure of the effects of fair value accounting on net
earnings (loss) and earnings (loss) per share on a pro forma
basis.
Statement of Financial Accounting Standards No. 128, "Earnings
per Share," ("SFAS No. 128") issued by the Financial Accounting
Standards Board is effective for financial statements for fiscal
years ending after December 15, 1997. The new standard
establishes standards for computing and presenting earnings per
share.
C. Summary of
Significant
Accounting
Policies
(Continued)
New Accounting
Standards (Continued)
The effect of adopting Statement of Financial Accounting
Standards No. 128 is not expected to be material. The Company is
required to adopt the disclosure requirements of SFAS No. 128
during the year ended September 30, 1998.
In June 1997, the Financial Accounting Standards Board issued
two new disclosure standards. Results of operations and
financial position will be unaffected by implementation of these
new standards.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("SFAS No. 130") establishes standards for
reporting and display of comprehensive income, its components,
and accumulated balances. Comprehensive income is defined to
include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements.
SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise," establishes
standards for the way that public enterprises report information
about operating segments in annual financial statements and
requires reporting of selected information about operating
segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products
and services, geographic areas, and major customers. SFAS No.
131 defines operating segments as components of an enterprise
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
C. Summary of
Significant
Accounting
Policies
(Continued)
New Accounting
Standards (Continued)
Both of these new standards are effective for
financial statements for periods beginning after
December 15, 1997 and require comparative
information for earlier years to be restated.
Due to the recent issuance of these standards,
management has been unable to fully evaluate the
impact, if any, they may have on future financial
statement disclosures.
D. Inventories As of September 30, inventories
consist of the following:
1997 1996
Raw materials $494 926 $401 779
Work in process 122 992 109 893
Finished goods 227 338 150 651
-----------------------------------------------
Total $845 256 $662 323
E. Equipment and Fixtures
As of September 30, equipment and fixtures
consist of the following:
1997 1996
Furniture and fixtures $ 80 123 $ 80 795
Leasehold improvements 73 771 70 471
Computer equipment 238 693 212 580
Laboratory and shop
equipment 462 924 313 934
Demo equipment 265 918 265 253
Guarded hot box facility 250 061 250 061
-----------------------------------------------
1 371 490 1 193 094
Less accumulated
depreciation
and amortization 976 497 841 438
-----------------------------------------------
Net $ 394 993 $ 351 656
F. Other Assets As of September 30, other assets
consist of the following:
1997 1996
Goodwill $244 788 $244 788
Licensing agreement 35 450 35 450
Patents 113 561 82 479
Deposits 13 669 21 923
-----------------------------------------------
407 468 384 640
Less accumulated amortization102 073 72 341
-----------------------------------------------
Net $305 395 $312 299
G. Notes Payable -
Stockholder and
Line of Credit
As of September 30, Notes payable -
stockholder and line of credit consist of the
following:
1997 1996
Notes payable - stockholder:
10.5% term loan $282 058 $ -
10% term subordinated note - 100 000
10% demand subordinated note - 20 000
Less current maturities (72 015) (20 000)
---------------------------------------------------
Long-term portion $210 043 $100 000
----------------------------------------------------
Notes payable -
line of credit $ - $ 84 000
G. Notes Payable -
Stockholder and
Line of Credit (Continued)
During 1997, the Company renegotiated its working
capital line of credit. Under the new terms, the
Company and its majority stockholder, Tytronics,
as a consolidated group (the "Group") entered
into a $1,000,000 working capital line of credit
and a $500,000 term loan agreement (the
"Financing"). The Financing is secured by
substantially all assets of the Group and is
guaranteed by Holometrix, Tytronics, and Nametre.
Advances are contingent upon maintaining certain
covenants relative to profitability, liquidity,
and tangible net worth. Advances under the line
of credit after September 1, 1997 are limited to
70% of the Group's eligible accounts receivable,
as defined, or 110% of the Group's consolidated
tangible net worth, as defined. Borrowings are
payable on demand, and bear interest at the
bank's prime rate plus 2% (10.5% at September 30,
1997). The line of credit expires in July 1998.
The term loan is due in July 2001, payable in
monthly installments of $10,417 plus interest at
the bank's prime rate plus 1.25% (9.75% at
September 30, 1997). Advances under the term
loan were made to Tytronics. Total borrowings of
Tytronics outstanding under the Financing at
September 30, 1997 amounted to $607,387.
In connection with the above bank financing,
Tytronics advanced to the Company certain funds
under an informal agreement. At September 30,
1997, $282,058 is payable to Tytronics under the
agreement. The Company has recorded $72,015 as a
current liability based on its informal agreement
with Tytronics. The $210,043 long-term note is payable
over 2 years and 11 months at $6001 per month.
During 1996, in support of the Nametre
acquisition, and in connection with additional
investments by Tytronics of $300,000 in the
Company, Tytronics applied $65,000 of debt to the
purchase of common stock and rewrote the
remaining $100,000 as long term debt, with
payments of $50,000 due November 23, 1997, and
$50,000 due November 23, 1998. During 1997,
Tytronics applied the remaining $100,000 of this
debt to the purchase of common stock by eliminating
this debt through the exercise of 1,550,000 warrants
which were previously issued to Tytronics.
H. Long-Term Obligations
As of September 30, long-term obligations consist
of the following:
1997 1996
10% term note payable -
collateralized $ 50 000 $ 155 000
6% term note payable -
unsecured 19 631 24 572
Note payable - other 38 967 38 967
Less current maturities (93 967) (105 000)
---------------------------------------------------
Long-term portion $ 14 631 $ 113 539
The note payable - collateralized consists of a
10% note payable to the estate of the former
owner of Nametre. Payments are due quarterly and
include principal and interest. The note is
collateralized by substantially all of the assets
of Nametre.
In fiscal 1992, the Company issued a $50,000
Unsecured Promissory Note to a founder of the
Company. Terms of the note required principal
repayment of $25,000 plus accrued interest at 6%
on April 1, 1993 and April 1, 1994. In August,
1994, the note was renegotiated, with the
outstanding debt at $44,000. The new agreement
calls for 68 monthly payments of $500 each,
including interest at 6%, forgives $5,000
principal immediately, and forgives an additional
$5,000 at the end of the payment schedule if all
payments are made on time. At September 30,
1997, the outstanding balance was $19,631, of
which $14,631 is classified as a long-term
liability, and $5,000 is classified as a current
liability.
H. Long-Term
Obligations (Continued)
As of September 30, 1997, the aggregate annual
payments on long-term obligations are as follows:
1998 $ 93 967
1999 5 592
2000 4 039
-------------------------------------------------
Total scheduled payments 103 598
Due fiscal 2000 if payments are late 5 000
-------------------------------------------------
Total $108 598
I. Taxes on Income Years ended September 30, 1997 1996
Current:
Federal $16 200 $ -
State 8 800 -
---------------------------------------------
25 000 -
---------------------------------------------
Deferred:
Federal - -
---------------------------------------------
$25 000 $ -
The Company has net operating loss carryforwards
available for financial reporting and federal
income tax purposes of approximately $1,780,000
expiring through 2012. Because of prior years
transactions with Tytronics and the resulting
"change in ownership," the future use of the
carryforward that existed at the time of the
change is restricted.
I. Taxes on Income (Continued)
Deferred taxes consist of the following:
September 30, 1997 1996
Deferred tax assets:
Net operating loss carryforwards $ 721 000 $ 592 000
Account receivable reserve 14 000 14 000
Other temporary differences 29 000 24 000
Valuation allowance (724 000) (630 000)
------------------------------------------------------------
40 000 -
Deferred tax liability:
Basis difference of property and
equipment 40 000 -
------------------------------------------------------------
Net deferred tax asset $ - $ -
The Company has provided a valuation allowance
equal to 100% of the net deferred tax asset since
it is more likely than not that the deferred tax
asset will not be realized.
A reconciliation of the federal statutory income
tax rate and the effective tax rate as a
percentage of income (loss) before taxes on
income and minority interest for the years ended
September 30 is as follows:
1997 1996
Statutory rate (34.0)% 34.0%
Utilization of federal net
operating loss carryforwards - (34.0)
Operating loss generating no
current tax benefit 34.0 -
Federal and state taxes of
subsidiary not consolidated
for tax purposes 17.0 -
Effective tax rate 17.0% -%
J. Operating Leases
Holometrix conducts its
operations from leased facilities consisting of
office and production space cancelable upon 90
days written notice by either party. Nametre
conducts it operations from leased facilities
consisting of office and production space.
Nametre occupies this facility on a month-to-
month basis under an operating lease. The
Company's total rent expense in fiscal years 1997
and 1996 was approximately $99,000 and $65,000,
respectively, net of rental income from
Tytronics. Rental income from Tytronics in those
same years was approximately $41,000 and $31,000,
respectively.
K. Stock Options
In March 1991, the stockholders
approved the 1991 Stock Plan (the "1991 Plan").
Under this plan, awards of, and options to
purchase, an aggregate of 3,000,000 shares may be
issued to directors, officers, employees, and
consultants of the Company. The exercise price
of incentive stock options (ISOs) granted under
the 1991 Plan may not be less than the fair
market value of the Company's Common Stock on the
date of grant. The exercise price per share of
non-qualified options under the 1991 Plan cannot
be less than the lesser of the book value per
share of Common Stock as of the end of the
preceding fiscal year, or 50% of the fair market
value per share of Common Stock on the date of
grant. On April 20, 1995, the Company issued to
Mr. John E. Wolfe, an officer of the Company, an
ISO under the 1991 Plan to purchase 200,000
shares of common stock at $.03 per common share
exercisable to April 20, 2000. During 1996,
options for 100,000 shares were issued to Mr.
Richard Mannello, who was not then an officer.
During 1997, Mr. Mannello was named an officer of
the Company, and options for an additional
200,000 shares were issued to Mr. Mannello.
K. Stock Options (Continued)
During fiscal year 1996, options to purchase
3,000 shares from the 1991 Plan were cancelled
and returned to its respective Plan.
A summary of stock option activity under the
Plans is as follows:
1991 Plan Non-Qualified
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
Outstanding at
September 30, 1995 527 000 $0.03 209 000 $0.05
Granted 100 000 0.03 - -
Exercised - - - -
Canceled (3 000) 0.02 - -
---------------------------------------------------------------------
Outstanding at
September 30, 1996 624 000 0.03 209 000 0.05
Granted 470 000 .05 - -
Exercised - - - -
Canceled - - (209 000) .05
-----------------------------------------------------------------------
Outstanding at
September 30,
1997 1 094 000 $0.04 - $ -
K. Stock Options(Continued)
The following tables summarize
information about stock options outstanding at
September 30, 1997:
Options Outstanding
-------------------
Weighted-
Average Weighted-
Range of Number Remaining Average
Exercise Outstanding at Contractual Exercise
Prices September 30, 1997 Life (years) Price
-----------------------------------------------------------
$.05 470 000 9.3 $.05
.03 600 000 5.1 .03
.02 24 000 3.5 .02
----------------------------------------------------------------
$.02 - $.05 1 094 000 6.8 $.04
Options Exercisable
-------------------
Weighted-
Average Weighted-
Range of Number Remaining Average
Exercise Exercisable at Contractual Exercise
Prices September 30, 1997 Life (years) Price
--------------------------------------------------------------
$.05 90 000 9.3 $.05
.03 540 000 4.8 .03
.02 24 000 3.5 .02
---------------------------------------------------------------
$.02 - $.05 654 000 6.2 $.03
K. Stock Options (Continued)
The Company accounts for its stock-based
compensation plan using the intrinsic value
method. Accordingly, no compensation cost has
been recognized for its stock option plan. Had
compensation cost for the Company's stock option
plan been determined based on the fair value at
the grant dates for awards under the plan
consistent with the method of Statement of
Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the
Company's net income (loss) and earnings (loss)
per share would have been adjusted to the pro
forma amounts indicated below:
Years ended September 30, 1997 1996
Net income (loss) As reported $(211 771) $4 041
Pro forma $(217 271) $2 841
Earnings (loss) As reported $ (.01) $ .00
per share Pro forma $ (.01) $ .00
In determining the pro forma amounts above, the
Company estimated the fair value of each option
granted using the Black-Scholes option pricing
model with the following weighted-average
assumptions used for grants in 1997 and 1996:
dividend yield of 0% for both years and expected
volatility of 46.5% for both years, risk-free
rates ranging from 6.07% to 6.92% for 1997 and
6.14% to 6.33% for 1996, and expected lives of 10
years for 1997 and 1996. The weighted average
fair value of options granted in fiscal 1997 and
1996 was $22,500 and $5,000, respectively.
Reserved Common Stock
In connection with the stock option plans and
outstanding warrants (see Note B), the Company
has reserved 5,050,000 shares of Common Stock as
of September 30, 1997.
L. Export SalesExport sales for the years ended
September 30 are as follows:
1997 1996
Europe 10 % 9 %
Asia 12 % 2 %
Other 9 % 18 %
31 % 29 %
M. Related Party
Transactions
(see Notes B, G, H, J and K)
The Company shares space in its operating
facility with Tytronics which is a 69.2%
shareholder of the total outstanding shares of
the Company. The companies allocate rent expense
based on the square footage each occupies. On
this basis, rental payments from Tytronics
amounted to $41,105 in fiscal 1997 and $30,801 in
fiscal 1996. The companies also share other
operating and administrative costs based on
estimated usage. During the fiscal years ended
September 30, 1997 and 1996, this informal
agreement resulted in the payments of
approximately $86,000 and $80,000, respectively,
by the Company to Tytronics for such operating
and administrative costs. At September 30, 1997
and 1996, the Company had net amounts due to
Tytronics of $51,576 and $77,204, respectively.
Holometrix and Bantam Group, Inc. ("Bantam"),
a business advisory organization, are parties to
a consulting agreement which provides for payment
of a consulting fee of $1,500 per month and
continues month-to-month unless terminated by
either party on thirty days' notice. Pursuant to
this agreement, Bantam was issued in December,
1993 800,000 shares of the Company's Common Stock
plus the reimbursement of any tax liability
arising from the issuance of the stock. Mr.
Joseph J. Caruso, Holometrix's Chairman, is also
the president of Bantam. In addition, Bantam has
a consulting arrangement with Nametre, which
continues on a month-to-month basis unless
terminated by either party on thirty days'
notice. Payments under this agreement are $1,250
per month.
N. Supplemental
Disclosure of
Cash Flow
Information
1997 1996
Interest paid during the year $ 62 000 $36 168
Income taxes paid during the year $ 800 $ 600
Supplemental Disclosure of Non-Cash Information:
Conversion of debt and accrued interest
into Common Stock $100 000 $65,000
In September 1996, Holometrix acquired 61.23% of
the outstanding stock of Nametre in an
acquisition (Note B). The estimated fair value
of assets acquired was $1,207,381, including
goodwill of $244,788 with liabilities assumed of
$874,233, less minority interest of $66,634.
O. Proposed Reorganization
On August 28, 1997, the Boards of Directors of
Holometrix, Tytronics, and Nametre approved a
proposed reorganization of Holometrix subject to
shareholder approval pursuant to which Tytronics,
the majority owner of Holometrix, and Nametre,
the majority owned subsidiary of Holometrix will
be merged into Holometrix Acquisition Corp., a
Delaware Corporation and the wholly-owned
subsidiary of Holometrix, with the result that
Holometrix Acquisition will be the surviving
entity. Following the reorganization, Holometrix
Acquisition will be merged into Holometrix. The
Company anticipates that the reorganization will
be approved by the shareholders of each company
and that the proposed mergers will occur in the
second quarter of fiscal 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized:
HOLOMETRIX, INC.
By: /s/John A. Hanna, Jr. DATE: January 28, 1998
John A. Hanna, Jr., Treasurer and Chief Financial Officer
(financial and accounting officer)
