<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
OR
[ ] 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 0-8241
BARRINGER LABORATORIES, INC.
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(Name of small business issuer in its charter)
DELAWARE 84-0951626
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15000 WEST 6TH AVENUE, SUITE 300, GOLDEN, COLORADO 80401-5047
- -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (303) 277-1687
-------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
--------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B 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 issuer's net revenues for the fiscal year ended December 31, 1998 were
$6,240,000.
The aggregate market value of voting stock held by nonaffiliates of the
registrant, based on the most recent trading date (April 8, 1999), is
$1,640,718.
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Number of shares outstanding as of April 8, 1999, of Common Stock, $.01 par
value - 6,562,871.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
Yes No X
--- ---
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Statements made or incorporated in this report include a number of
forward-looking statements. Forward-looking statements include, without
limitation, statements containing the words "anticipates", "believes",
"expects", "intends", "future", and words of similar import which express
management's belief, expectations or intentions regarding the Company's
future performance or future events or trends. The Company wishes to caution
readers that forward-looking statements involve known and unknown risks,
uncertainties and other factors, as discussed herein and in other materials
filed by the Company with the Securities and Exchange Commission. Such risks,
uncertainties and other factors may cause actual results, performance or
achievements of the Company to differ materially from those anticipated and
expressed or implied by such forward-looking statements. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
(a) COMPANY DEVELOPMENT
Barringer Laboratories, Inc. (the "Company") provides analytical services to
the environmental services and mineral exploration industries. The Company
was organized under Delaware law in December 1988 to conduct the laboratory
business previously conducted by Barringer Technologies, Inc. ("BTI"), the
Company's founder.
The Company's principal executive office is located at 1500 West 6th Avenue,
Suite 300, Golden, Colorado. This location is also the site of the Company's
environmental testing laboratory. The Company also maintains a full service
mineral assay and geochemistry laboratory in Reno, Nevada.
In October, 1993, the Company formed a wholly owned Mexican subsidiary,
Barringer Laboratorios de Mexico S.A. de C.V. ("BLM"), which owns and
operates a 5,000 square foot sample preparation laboratory in Hermosillo,
Sonora. In October, 1998, BLM upgraded a former sales office in Durango City,
Durango into a 6,500 square foot sample preparation laboratory.
In November, 1996, the Company entered into an agreement with Servicios
Ecologica S.A. ("SESA"), the Peruvian subsidiary of a Canadian environmental
services company, and Dr. Clifton Farrell, to form a Peruvian subsidiary of the
Company, Barringer Laboratories Del Peru S.A. ("BLP"). The Company owns 67% of
the common stock of BLP, SESA 28% and Dr. Farrell the remaining 5%. During 1997,
BLP established a 4,400 square foot sample preparation laboratory in Lima.
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In July, 1997, the Company established a wholly owned subsidiary in Nicaragua,
Barringer Laboratorios de Nicaragua, S.A. ("BLN"). Between July, 1997 and March,
1999 BLN operated a 7,000 square foot sample preparation laboratory in Managua,
primarily serving a single major customer with a large exploration program in
Nicaragua. In May, 1998, BLN established a second sample preparation laboratory
on the site of this customer's exploration property at La Rosita. Due to the
temporary cessation of this customer's exploration activity in Nicaragua, both
of these facilities have been closed down and the equipment is currently in
storage at the customer's mine site in Nicaragua pending a resumption of
exploration work.
In November, 1998, the Company established a branch office in Medellin, Colombia
which then assumed the assets and operations of an approximately 4,000 square
foot sample preparation laboratory formerly owned and operated by a major
customer.
Also in November, 1998, the Company acquired the customer base and entered into
a noncompete agreement with Shasta Geochemistry Laboratory, Inc. ("Shasta"), a
small mineral testing company based in Redding, California. The former Shasta
business has been consolidated into the Company's mineral testing operation in
Reno and the former Shasta laboratory in Redding closed down.
(b) DESCRIPTION OF THE COMPANY'S BUSINESS
OVERVIEW OF SERVICES PROVIDED
The Company provides analytical testing operations through two divisions:
ENVIRONMENTAL DIVISION
The Company performs independent analytical testing services for
governmental agencies, engineering consulting firms, industrial companies
and other entities involved in environmental monitoring programs and the
treatment and management of hazardous waste. The market for the Company's
services results primarily from its customers' need to comply with United
States Federal, state and local environmental regulations. The Company
conducts a modest amount of work for customers required to comply with
similar environmental regulations in other countries. Customers typically
rely heavily on independent laboratories such as the Company to support
their efforts to comply with these regulations.
The Company's environmental facility provides a wide range of laboratory
testing services to detect and measure the presence of chemical and/or
radioactive contamination in samples of water, soil, sediments, air,
industrial wastes and effluents, biological materials, vegetation, produce
and animal tissues, and body fluids. The analytical activities of the
laboratory may be divided into three categories:
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Radiochemistry, or testing for low level radioactive contaminants,
including naturally occurring isotopes such as uranium and radium, the
transuranics such as plutonium and americium and man-made isotopes
such as cobalt 60 and iron 55.
Testing for organic chemical contaminants such as hydrocarbons,
pesticides, herbicides, polychlorinated biphenyls (PCBs), and
polynuclear aromatics (PNAs).
Testing for inorganic chemical contaminants such as trace metals,
nitrates, and sulfates. Included in this category are waste
characterization indicators such as corrosivity, ignitability and
reactivity required under the Resource Conservation and Recovery Act
of 1976, as well as wastewater characterization indicators such as
biological (or chemical) oxygen demand (BOD/COD), and turbidity
required under the Clean Water Act.
The Company's environmental laboratory also has the ability to analyze
mixed wastes: i.e. waste materials that are co-contaminated with both
chemical and radioactive contaminants. In 1998, radiochemistry comprised
approximately 60% of the environmental laboratory's work, inorganic
analysis 26.5% and the balance organics analysis. Even though the Company's
environmental laboratory has the ability to perform organic and inorganic
chemical analysis for a wide range of potential customers with
environmental compliance needs, most of this business is related to, or
supportive of, the Company's radiochemistry activity. During 1998 the
Environmental Division processed samples for 287 customers.
MINERAL DIVISION
The Company's mineralogical and geochemical testing activities are provided
largely in support of the exploration programs of mining companies. The
historical focus of the Mineral Division's business has been the precious
metal mining companies, principally gold miners. The Company is now
conducting an increasing amount of work for base metal mining companies.
The mineral laboratory is equipped to perform precious metal fire assays as
well as geochemical determination of trace quantities of "pathfinder"
metals such as lead, zinc, copper and others. Cyanide leach tests for
characterizing the metallurgical properties of gold ores are also
conducted. The mineral laboratory also includes a metal assay laboratory
for the analysis of high concentrations of base metals such as copper,
lead, iron and zinc. Supporting the Reno laboratory are sample preparation
laboratories in Hermosillo and Durango, Mexico; Managua, Nicaragua
(temporarily closed); Lima, Peru; and Medellin, Colombia. Most of the
Mineral Division's work originated outside the United States in 1998.
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SALES BY DIVISION
The following table sets forth sales by Division for the past two
fiscal years (in thousands $).
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
ENVIRONMENTAL DIVISION
Radiochemistry $2,226 $1,935
Organic Analysis 478 947
Inorganic Analysis 977 1,160
------ ------
TOTAL ENVIRONMENTAL $3,681 $4,042
------ ------
MINERAL DIVISION
United States $ 336 $1,295
Latin America 1,843 1,378
Spain 380 464
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TOTAL MINERAL $2,559 $3,137
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TOTAL COMPANY $6,240 $7,179
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</TABLE>
CUSTOMER BASE AND MARKETING ACTIVITIES
While the market for environmental testing services is widely distributed across
the United States, the Company's special expertise in radiochemistry means that
its Environmental Division's customers are widely scattered geographically. They
include environmental consulting engineering firms, hazardous and low level
radioactive waste treatment/disposal companies, public utilities, industrial
companies (including mining companies) and various Federal, state and local
government agencies.
In 1998, the Environmental Division had 287 customers, of which the three
largest accounted respectively for 19.6%, 17.7% and 4.0% of the Division's total
revenues. The Division's top 10 customers accounted for 56% of total revenues.
The loss of either of its top two customers would represent a material adverse
development for the Company and would probably result in a downsizing of its
environmental laboratory, at least on a temporary basis.
The Mineral Division's customers are also widely distributed geographically and
consist largely of precious metal mining companies. The Mineral Division had
approximately 100 customers in 1998, the three largest of which accounted
respectively for 39.6%, 14.8% and 3.4% of the Division's total revenues. The
largest of these customers, which contributed over 50% of the Division's
business during the first 6 months of 1998, also accounted for 3% of the
Environmental Division's 1998 revenues. Financial problems caused this customer
to shut down its Central American exploration
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program in September 1998. This, in turn, led to a downsizing of the Company's
main mineral testing laboratory in Reno and, in early 1999, to closure of the
Company's two sample preparation facilities in Nicaragua. There is no material
current business from that customer. As of April 8, 1999, neither of the
Company's operating divisions is subject to a lost-customer risk of this
magnitude.
The Company's customers initially award contracts for analytical work, or major
analytical projects, on the basis of responses to a competitive bidding process.
However, in both of the Company's main markets, customers are strongly inclined
to award continuing repeat business to vendors with which they are satisfied
according to three key criteria: (a) accuracy of the analytical data provided;
(b) quality of customer service and (c) price.
The Company maintains a small, highly qualified group of technical sales staff,
who conduct much of their activity by telephone and mail, particularly as it
relates to the competitive bidding process that dominates both of the Company's
main markets for new contracts and projects. However, these sales staff are
devoting increasing amounts of their time to sales trips to visit key customers
and potential customers in different geographic regions of the United States,
and, in the case of the Mineral Division, Mexico, Peru, Nicaragua and other
Latin American countries.
The Company also maintains senior project management staff in both Divisions
whose tasks are to ensure that the technical requirements of incoming work are
well defined and that customers are updated on the status of work or projects
currently in progress in the Company's laboratories.
The Company is an exhibitor at a small number of trade shows each year. These
shows are chosen for their relevance to the Company's areas of particular
expertise and include hazardous waste industry conferences (particularly those
focusing on the nuclear industry) and mining industry symposia. Recently, the
Company has made a number of technical presentations at major mining industry
conferences as a means of promoting its capabilities. The Company is active in a
number of trade associations and other industry forums as a means of promoting
its visibility and technical expertise.
Given the specialized nature of the Company's analytical activities, Management
does not believe that print advertising is a productive channel for attracting
new business and, therefore, devotes few resources to this form of promotional
activity. However, the Company has established a website on the Internet which
is updated regularly with new developments in the company that may be of
interest to its customers.
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INTERNATIONAL ACTIVITIES
During the past several years, the mining companies, which are the primary
customers of the Company's Mineral Division, have reduced their exploration
activities in North America, focusing increasingly on Latin America where
resource yields are often higher and environmental impediments to exploration
and extraction work less severe. For example, gold cash production costs are in
the range of $65-120 per ounce in many Latin American countries compared with
$200-300 per ounce in North America. Since 1993, the Company's Mineral Division
has taken successful steps to maintain its standing in this changing market by
establishing local operations to service the exploration programs of its
customers in countries outside North America. Specifically:
In October, 1993, the Company established a 5,000 square feet sample
preparation laboratory in Hermosillo, Sonora, Mexico, owned and operated by
its wholly owned Mexican subsidiary, BLM. In October, 1998, BLM expanded
its capability in Mexico by upgrading a former sales office in Durango
City, Durango to a 6,500 square foot sample preparation laboratory.
In November, 1996, the Company established a 4,400 square feet sample
preparation laboratory in Lima, Peru, owned and operated by its 67% owned
Peruvian subsidiary, BLP.
In July, 1997, the Company established a 7,000 square feet sample
preparation laboratory in Managua, Nicaragua, owned and operated by its
wholly owned Nicaraguan subsidiary, BLN. This was supplemented in May,
1998, with a portable sample preparation laboratory located at La Rosita.
Both of these facilities are temporarily closed and the equipment in
storage pending a resumption of exploration activity by the Company's main
customer in Nicaragua.
In November, 1998, having established a branch office in Colombia, the
Company took over the assets and operation of a 4,000 square foot sample
preparation laboratory previously owned by a major customer in Medellin.
All of these sample preparation facilities are equipped with drying ovens and
rock crushing equipment for pulverizing the drill cores received from customers
in these countries. Following homogenization of the crushed rock samples,
representative samples are airfreighted to the Company's analytical laboratory
in Reno for fire assay and/or geochemical analysis.
The Company has utilized its presence in these Latin American markets to develop
additional business for its Environmental Division. North American mining and
other industrial corporations wishing to conduct business in these countries are
typically required to conform to environmental standards similar to those
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prevailing in North America. The absence of high quality laboratories in these
countries generally requires that analytical work associated with meeting these
standards be sent to North American laboratories. The proportion of the
Company's environmental work originating in Latin America amounted to
approximately 3% of the Company's total 1998 environmental revenues.
Management believes that it is important to protect and improve its position in
the mineral exploration market in North America (notably Nevada), but that it
will be equally necessary to expand its presence in other countries as the
worldwide mineral exploration industry continues to diversify away from its
traditional geographical locations. However, political unrest or severe economic
or financial disruption (e.g. inflation, currency fluctuations) in any of the
countries in which the Company has established, or might in the future establish
operations, could compromise the viability of its operations in those countries.
ENVIRONMENTAL COMPETITION
Management believes that the size of the U.S. environmental and hazardous waste
testing market exceeds $1 billion annually and that it is served by as many as
1,000 independent analytical laboratories. Most firms competing in this highly
fragmented market utilize similar instrumentation and analytical methods, and
have comparable technical capability to that of the Company. Many are
considerably larger and may have significantly greater financial resources than
the Company.
Since 1991, the U.S. market for environmental testing services has been
characterized by significant overcapacity. Accordingly, while a reputation for
producing accurate data, rapid response to customer requirements and an ability
to meet tight turnaround standards are important competitive factors, most
competition has been based largely on price. Over the past seven years, prices
in some segments of this market have declined by as much as 60%.
There have been a number of attempts to achieve dominance in this industry
through consolidation strategies, but, to date, none have succeeded in creating
a financially successful company with significant market share. During the last
two years, several of the larger environmental laboratory groups have either
filed for protection under Federal bankruptcy laws or significantly downsized
their operations through laboratory closures. Many smaller firms have also
closed down. Current industry reports suggest that as much as 15 - 20% of the
industry's capacity has been eliminated in the past two years.
While there can be no assurance that there will be any improvement in the
competitive conditions prevalent in the market over the past several years, or
that new competitors will not emerge, management believes that the market may be
returning to a more stable supply/demand position.
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While the Company's Environmental Division does conduct a portion of its
business in the general market for environmental chemistry services, its
particular reputation and expertise lie in radiochemical analysis. Within the
overall market, radiochemistry is a niche segment in which there are no more
than 10 - 15 major competitors nationwide. Management believes that the market
for radiochemistry services offers long term, stable work prospects because the
technical issues involved in the clean-up of low level radioactive waste tend to
be inherently more complex than those encountered in the remediation of
non-radioactive chemical waste.
The Department of Energy has made it clear that the clean-up of many of its
radioactively contaminated sites will take at least 20 years, during which time
there will be a steady flow of work for competent contractors including
analytical laboratories such as the Company's. Management believes that a
further long term business opportunity may be developing in the radiochemistry
segment associated with the decommissioning of the country's over 100 nuclear
power plants, which are reaching the end of their technical and economic lives.
The Company also believes that its growing presence and reputation in the
exploration-related mineral testing market in Latin America represents an
opportunity to secure an increasing amount of environmental work from this
region.
MINERAL COMPETITION
The market for mineral assay services is considerably smaller than that for
environmental testing services, both inside and outside the United States. There
are several competitors with a much larger market share than that of the
Company. Two of these competitors are subsidiaries of large, multi-dimensional
testing firms with resources significantly greater than those of the Company.
Following several years of strongly increasing activity, the mineral exploration
industry has suffered a severe downturn since about the middle of 1997. This was
caused in part by low prices for gold and other metals (exacerbated by the
economic downturn in developing Asian economies, which are major consumers of
base metals such as copper, lead and zinc). Also contributing to the exploration
cutbacks was a shortage of investment capital, largely caused by a loss of
confidence in the junior mining companies brought about by the Bre-X episode, a
massive gold mining fraud in Indonesia exposed in early 1997. Current industry
reports suggest that worldwide mineral exploration activity in 1999 will be 40%
below the levels of 1996 and early 1997.
During the last 10 years, the mining industry has refocused its exploration
efforts on Latin America and, to a lesser extent, Asia and Africa, at the
expense of North America. The Company has, as mentioned earlier, taken a number
of steps in recent years to position itself to take advantage of the opportunity
in the Latin
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American market. The Company's experience is that the key to success in this
process is an ability to respond quickly to customers' changing geographical
requirements while maintaining quality in its operations and services.
Given the downturn in the overall mineral exploration market and the general
shift of exploration activity out of North America, many of the smaller
laboratory companies serving this traditional market are finding themselves
under increasing price and volume pressure. Management believes that these
difficult market conditions may provide an opportunity for the Company to
acquire the business of some of these competitors and expand its share of the
North American market. The Shasta acquisition mentioned above was an example of
this type of opportunity.
While there is no assurance that the market for exploration-related mineral
testing will continue to grow in Latin America, the Company has a well
established operational and financial formula for establishing sample
preparation facilities in these countries quickly and cost-effectively, and for
finding competent local technical and managerial staff who can maintain the
Company's quality standards. Management believes that this capability should
allow it to secure and maintain a greater share of this market as the mining
industry continues to expand outside North America and that this business
formula can be extended to other regions of the world where mineral exploration
activity is increasing, most notably Africa and Asia (including the former
Soviet Union countries). No specific plans have been made for expansion into
other foreign markets beyond Latin America.
During 1998, the Mineral Division began to offer a number of ancillary services
to its mining industry customers. These include a geochemical analytical
technology (licensed from a third party company) for assisting in the
identification of mineralization that is buried under hundreds, or even
thousands, of feet of transported overburden; and geochemical data processing
services. While these services have begun to generate a small amount of revenue
in their own right, the Company's objective is to try to distinguish itself from
its industry competitors by providing additional "value-added" services with a
view to expanding its relationships with the major mining companies to all
stages of the mineral exploration process.
LICENSES AND PERMITS
The Company's environmental laboratory requires a number of licenses,
certifications and accreditations in order to provide the range of analytical
services it deems necessary to compete effectively in its target markets. These
are issued by Federal and state environmental agencies, private accrediting
bodies and private industrial corporations. The Company devotes significant
resources to the maintenance of these licenses and certifications, which are
typically renewable on an annual or other periodic basis.
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During the course of the next two years, the Company will be required to secure
accreditation under the National Environmental Laboratory Accreditation Program
("NELAP"), a recently promulgated national standard of accreditation for
environmental laboratories designed to reduce the number of separate
accreditation systems to which laboratories are currently subject. Securing
NELAP accreditation (which is based largely on the ISO Guide 25 standard for
laboratory accreditation) will require a major investment of time and effort,
including the use of outside consulting services. However, because NELAP is
intended to be reciprocal among participating states, Management believes that,
once this accreditation is secured, it will reduce the Company's total cost of
maintaining the necessary Federal and state licenses and accreditations.
In early 1999, the Toronto Stock Exchange and Ontario Securities Commission
finalized a series of recommendations to raise the disclosure standards of
mining companies trading on Canadian stock exchanges. The report included a
recommendation that mineral testing laboratories conducting work for Canadian
mining companies be required to secure accreditation to ISO Guide 25
standards within the next 5 years. The report made it clear that it expects
this accreditation process to become a de facto global standard. Management
believes it essential that the Company's Mineral Division secure this
accreditation within the next 12 - 18 months in order to maintain its share
of business with Canadian mining company customers, and estimates that it
will require a minimum investment of $50,000 in outside consulting assistance
to upgrade procedures and quality assurance systems in the Mineral Division.
During 1998, the Company reached agreement with Barringer GeoSystems (a
company owned by a board member) to license, on an exclusive basis, a
geochemical analytical technology for identifying mineralization that lies
buried under layers of transported overburden. The Company is actively
promoting this technology and has secured work from several major mining
companies. The agreement with Barringer GeoSystems provides for a
renegotiation of the licensing arrangement in the event the volume of
business reaches a certain level in the future.
REGULATION
The environmental side of the Company's activities is regulated by the
Environmental Protection Agency, the Nuclear Regulatory Commission and the
Occupational Safety and Health Agency. Most of these regulations concern the
analytical methods used in the laboratory, maintenance of a safe working
environment, and the proper disposal of used samples and laboratory waste.
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The mineral testing side of the Company's activities is less heavily regulated
but is also required to conform to Federal and local regulations concerning safe
working conditions and the disposal of waste material from its operations. The
Company is not aware of any new regulatory initiatives which, if adopted, would
impose significant incremental costs on the Company. However, the current
Canadian initiative to establish an accreditation system for mineral testing
laboratories (see above) may eventually lead to some form of regulatory
oversight which could impose a financial cost upon the Company.
EMPLOYEES
As of December 31, 1998, the Company had 123 employees of whom 110 were employed
on a full time basis. The total number of staff employed in the United States
was 94, of whom 81 were employed on a full time basis. Most of the Company's
technical staff are degreed professionals, and Management believes the Company's
reputation and ability to provide customers with high quality data and good
service depend upon its ability to attract and retain highly qualified technical
staff. None of the Company's employees are represented by any union and the
Company considers its employee relationships to be satisfactory.
OTHER
The Company's business does not depend on the availability of raw materials, nor
does the Company have any patents, trademarks, licenses (except for the license
from Barringer GeoSystems, as discussed above), franchises, concessions, royalty
agreements or labor contracts. The Company does not devote any significant
efforts to research and development.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company leases office and laboratory space from unaffiliated parties as
follows:
<TABLE>
<CAPTION>
Location Use Square Annual Expiration
-------- --- Footage Lease Date
------- ------ ----------
<S> <C> <C> <C> <C>
15000 West 6th Avenue, Suite 300 Offices and
Golden, Colorado, USA analytical services 17,800 $174,000 February 2001
laboratory
5301 Longley Lane, Building E, Offices and
Suite 178, Reno, Nevada, USA analytical services 25,500 $194,000 September 2001
laboratory
5301 Longley Lane, #24, Reno, Storage space
Nevada, USA 2,420 $13,800 February 2001
Blvd. Garcia Morales 829-A Sample preparation
Bodega 2, Colonia La Manga, laboratory 5,200 $12,000 January 2000
Hermosillo, Sonora, Mexico
Carretera Panamericana Km 10445 Sample preparation
Durango, Durango, Mexico laboratory 6,500 $8,000 June 1999
Avenida Domingo Orue Sample preparation
Surquillo, Lima 34, Peru laboratory 4,400 $24,000 Monthly
Calle 80 Sur N.47 D-65, L-106 Sample preparation
Sabaneta, Colombia Laboratory 4,000 $24,000 Monthly
</TABLE>
The Company believes that the office and laboratory space it currently leases is
adequate for its current operations and is in operable condition.
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ITEM 3. LEGAL PROCEEDINGS
In early 1998, the Company learned that certain employees in one section of its
environmental laboratory did not consistently follow laboratory practices as set
forth in the Company's Standard Operating Procedures and applicable test
methods. Management believes the employee practices in question may have
affected a small percentage of the soil and water test results reported to
clients of the environmental laboratory. The Company commenced an internal
investigation, engaged outside advisors to assist in the investigation, and
initiated a broad program of corrective actions. In addition, the Company
informed the United States Environmental Protection Agency ("EPA") of its
investigation and its corrective action program.
EPA representatives conducted an investigation into this matter in accordance
with Agency policy towards voluntary disclosures of this type, and the Company
cooperated fully in that process. To date, no agency or other party has brought
any action or proceeding against the Company.
By letters dated December 24, 1998 and March 19, 1999, the EPA has informed the
Company that it does not intend to take any civil or criminal enforcement action
against the Company as a result of the matters reported by the Company.
Management believes that the EPA investigation into this matter has concluded.
The Company is not a party to any material, pending, or threatening litigation.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during the
last quarter of its fiscal year ended December 31, 1998.
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PART II
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF OUTSTANDING COMMON STOCK
The Company's common stock is traded on the OTC Bulletin Board under the symbol
BALB. On March 30, 1999, there were approximately 35 holders of record (both
beneficial and nominee) of the common stock.
The following table sets forth the high and low bid quotations per share of
common stock for each quarter of the years indicated. The prices represent
quotations between dealers as reported by the NASDAQ and do not include retail
markup, markdown or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Common Stock
------------------
High Low
---- ---
<S> <C> <C> <C>
1997 First Quarter $3.13 $1.69
Second Quarter 3.00 1.88
Third Quarter 2.19 1.50
Fourth Quarter 1.94 1.50
1998 First Quarter 1.375 .625
Second Quarter .59375 .3125
Third Quarter .5625 .34375
Fourth Quarter .3125 .21875
</TABLE>
DIVIDEND POLICY
The Company has not paid cash dividends on its common stock and does not
anticipate paying cash dividends in the foreseeable future. The payment of
future dividends and the amount thereof will depend upon the Company's earnings,
financial condition, capital requirements and such other factors as the Board of
Directors may consider relevant.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the consolidated
financial statements and related notes included elsewhere herein. The Company's
future operating results may be affected by various trends and factors which are
beyond the Company's control. These include, among other factors, the
competitive environment in which the Company operates, future capital needs,
uncertainty of government contracts, uncertainties in revenue due to
fluctuations in weather, and uncertainty concerning the future price of gold and
other metals.
With the exception of historical information, the matters discussed below under
the headings "Results of Operations" and "Capital Resources and Liquidity"
include forward-looking statements. Forward-looking statements include, without
limitation, statements containing the words "anticipates", "believes",
"expects", "intends", "future", and words of similar import which express
management's belief, expectations or intentions regarding the Company's
future performance or future events or trends. The Company wishes to caution
readers that forward-looking statements involve known and unknown risks,
uncertainties and other factors, as discussed herein and in other materials
filed by the Company with the Securities and Exchange Commission. Such risks,
uncertainties and other factors may cause actual results, performance or
achievements of the Company to differ materially from those anticipated and
expressed or implied by such forward-looking statements. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
RESULTS OF OPERATIONS
The following is a breakdown of consolidated operating results for the years
ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
Consolidated
--------------------------
Years Ended 12/31
1998 1997
---------------------------
<S> <C> <C>
Sales of Services $ 6,240,000 $7,179,000
Cost of Services Sold 5,178,000 5,526,000
---------------------------
Gross Profit 1,062,000 1,653,000
Selling, General and
Administrative Expenses 2,485,000 1,819,000
Corporate Realignment - 131,000
---------------------------
Operating Loss (1,423,000) (297,000)
Other Income (Expense) 5,000 18,000
Gain (Loss) on Disposal of Assets 17,000 (87,000)
Minority Interest in the Loss
of Subsidiary 5,000 54,000
---------------------------
Net Loss $(1,396,000) $(312,000)
---------------------------
---------------------------
</TABLE>
17
<PAGE>
1998 COMPARED TO 1997
Net sales for 1998 of $6,240,000 reflect a 13% decrease compared to 1997
sales of $7,179,000. The Environmental Division's 1998 sales fell by
$361,000, or 8.9%, compared to 1997. This reduction in sales largely
reflected the fact that 1997 sales were boosted in the second half of the
year by two large, one-time projects. One of the Division's key objectives in
1998 was to smooth out the flow of work from month to month by avoiding such
large projects which tend to have a disruptive effect on the operation's
ability to provide a consistently high level of customer service.
Mineral Division's sales fell by $578,000, most of this reduction occurring
in the second half of the year. Sales originating in the United States fell
by $960,000, or 74%, compared with 1997, largely due to the reduction in
mineral exploration work brought about by low gold and other metal prices,
and the downturn in investment in junior mining companies (see Part I, Item 1
b "Description of Company's Business" above). Sales from Latin America
increased by $465,000 to $1,843,000. This increase is comprised of a
reduction in Mexican sales of $145,000 offset by a strong sales increase in
Central America. However, almost all Central American sales in both 1997 and
1998 came from a single customer whose exploration program was dramatically
reduced in the second half of 1998. Sales from outside the United States and
Latin America (almost entirely from a single customer in Spain) totaled
$380,000, a reduction of $84,000 compared to 1997.
On December 4, 1998, the Company completed the acquisition of certain assets
of Shasta Geochemistry Laboratory, Inc. ("Shasta"), an analytical services
company, principally engaged in testing for the mineral exploration
industries, in an all stock transaction, for 150,000 shares of the Company's
common stock valued at $39,000 and contingent future consideration of
additional common stock, not to exceed an additional 150,000 shares, in the
event certain goals are met. The Company was issued one additional share of
its common stock for each $2.00 that total gross revenues collected by the
Company from Shasta customers during the first year after closing exceed
$300,000, and during the second year after closing exceed $600,000. In 1998,
United States sales from former Shasta customers totaled $20,000.
The assets acquired include customer lists, a noncompetition agreement among the
President of Shasta and the Company and all goodwill of Shasta.
The operations of Shasta are incorporated into the operations of the Company's
27,000 square foot laboratory located in Reno, Nevada. The Company has not
acquired any assets nor assumed any liabilities of Shasta other than those
described above.
18
<PAGE>
Gross profit as a percentage of sales fell from 23% in 1997 to 17% in 1998.
Despite reduced sales, the Environmental Division's gross profit margin
increased from 24% in 1997 to 26% in 1998 due to a reduction in the unit costs
of direct labor and other direct costs. Mineral Division's gross margin fell
from 23% in 1997 to 6% in 1998, the main reason being the steep decline in sales
in the second half of the year combined with the heavy fixed costs associated
with the Company's sample preparation facilities in Latin America.
Selling, General and Administrative ("SG&A") costs rose from $1,950,000 in
1997 to $2,485,000 in 1998. The increase of $535,000 is more than accounted
for by two exceptional items: professional expenses related to the EPA
investigation ($330,000); compensation charges associated with the two
private equity offerings during 1998 ($275,000). Asset disposals produced a
gain of $17,000 compared to a loss of $87,000 for 1997. After taking into
account miscellaneous income of $4,000 (compared to $18,000 in 1997), and
eliminating the minority portion of losses in the Peruvian subsidiary ($6,000
compared to $54,000 in 1997), the combination of reduced gross profit margin
and the higher SG & A expenses as described above resulted in an increased
loss before taxes of $1,084,000 ($1,396,000 compared to $312,000 in 1997).
CAPITAL RESOURCES AND LIQUIDITY
Cash and cash equivalents totaled $173,000 at December 31, 1998 compared with
$524,000 at December 31, 1997. The $351,000 reduction resulted from cash used in
operating activities of $956,000 and investments in equipment and facilities of
$137,000, offset by cash receipts from financing activities of $742,000.
Cash used in operations of $990,000 resulted from operating losses before taxes
of $1,396,000 plus a decrease in operating assets (net of operating liabilities)
of $82,000, offset by various non-cash items including depreciation and
amortization ($181,000), compensation charges (non-cash) relating to the
issuance of common stock ($300,000), and bad debt provisions ($24,000).
Cash used in investing activities of $103,000 was largely related to instrument
purchases for the Environmental Division's radiochemistry laboratory, and
equipment purchases and leasehold improvements associated with the establishment
of the Mineral Division's sample preparation facilities in Durango, Mexico and
La Rosita, Nicaragua.
Cash from financing activities resulted from the issuance of 4,722,223 shares of
the Company's common stock in two separate private offerings during the year
(see below). Net proceeds from these offerings as at December 31, 1998 were
$786,000 out of a total of $1,050,000 secured from these two offerings. The
difference was caused by the fact that $255,000 of the cash raised in the second
offering (which was dated December 28, 1998) was not actually received by the
company until early January 1999.
19
<PAGE>
In early 1998, the Company learned that certain employees in one section of its
environmental laboratory did not consistently follow laboratory practices as set
forth in the Company's Standard Operating Procedures and applicable test
methods. Management believes the employee practices in question may have
affected a small percentage of the soil and water test results reported to
clients of the environmental laboratory. The Company commenced an internal
investigation, engaged outside advisors to assist in the investigation, and
initiated a broad program of corrective actions. In addition, the Company
informed the United States Environmental Protection Agency ("EPA") of its
investigation and its corrective action program.
EPA representatives conducted an investigation into this matter in accordance
with Agency policy towards voluntary disclosures of this type, and the Company
cooperated fully in that process. To date, no agency or other party has brought
any action or proceeding against the Company. By letters dated December 24, 1998
and March 19, 1999, EPA has informed the Company that it does not intend to take
any civil or criminal enforcement action against the Company as a result of the
matters reported by the Company.
The costs of legal and other professional fees incurred by the Company in
connection with this investigation totaled approximately $330,000 in 1998. As of
April 8, 1999, a further approximately $10,000 had been incurred in 1999. While
there can be no assurances that the Company will not incur further costs
relating to this episode, Management believes that the EPA investigation into
this matter has concluded and that the future financial impact on the Company
will not be material.
Faced in early 1998 with the considerable uncertainty surrounding the outcome of
the EPA's investigation and its related costs as described above, effective
April 13, 1998, the Company completed the private sale of 1,666,666 shares of
restricted common stock at a price of $.30 per share to provide additional
working capital of $500,000. These shares were issued below the value at which
the Company's stock traded in the period immediately preceding the offering. The
difference between the issuance price and the trading price at that time was
approximately $183,000, which was charged to compensation expense in the second
quarter of 1998. Among the subscribers to this offering were three members of
the Company's Board of Directors, all of whom are now significant existing
stockholders.
Following the steep decline in sales in the Company's Mineral Division in the
second half of 1998 and the resulting operating losses, effective December 28,
1998, the Company completed the private sale of 3,055,556 shares of restricted
common stock at a price of $.18 per share to provide additional working capital
of $550,000. These shares were issued below the value at which the Company's
stock traded in the period immediately preceding the offering. The difference
between the issuance price and the trading
20
<PAGE>
price at that time was approximately $92,000, which was charged to compensation
expense in the fourth quarter of 1998. Among the subscribers to this offering
were three members of the Company's Board of Directors, all of whom now
individually hold in excess of 5% of the Company's outstanding common stock.
The Company's operating plan for the next twelve months will concentrate heavily
on rebuilding sales in the Mineral Division which suffered a steep decline
during 1998, largely due to the depressed level of worldwide mineral exploration
activity. Management estimates that, over the balance of 1999, the Company's
operating activities, plus the necessary investments to rebuild Mineral Division
sales, will require additional funding of approximately $500,000.
The Company is addressing this funding requirement in several ways. Management
believes that $150,000 can be made available through the release of a
Certificate of Deposit currently pledged to the Colorado Department of Health in
order to meet an environmental regulatory requirement relating to laboratories
involved in radiochemistry activities. The Company is currently negotiating to
replace the Certificate of Deposit with a bond.
The Company is also in the process of negotiating a line of credit backed by the
Company's accounts receivable with a number of financial institutions. The
Company has also established a relationship with a company engaged in the
factoring of accounts receivable and is utilizing this relationship to meet its
short term cash requirements pending the outcome of the negotiations (mentioned
above) to secure a line of credit.
There can be no assurance that the Company will not require additional financial
resources to enable it to meet its obligations in the future or that any future
funds required will be generated from operations or from the aforementioned or
other potential sources. The lack of additional capital could force the Company
to substantially curtail operations and/or capital replacements (as discussed
below) and could therefore have a material adverse effect on the Company's
business.
YEAR 2000
The Company is aware of the issues associated with the programming code in its
existing instruments and computer systems as the year 2000 approaches. The issue
is whether these systems will properly recognize date sensitive information when
the year changes to 2000. Systems that do not properly recognize date sensitive
information could generate erroneous data or cause a system to fail.
21
<PAGE>
The Company is in the process of replacing its two major computerized
information systems - accounting system and laboratory information management
system ("LIMS") - with systems certified as year 2000 compliant by their
respective manufacturers. In addition, the Company is either replacing
instruments or installing new software in instruments that are not year 2000
compliant. The two computerized information systems cost approximately
$100,000 and have been financed with capital leases. The cost to remedy the
instrumentation issues is expected to be less than $50,000. Management
believes that costs associated with remediation, if necessary, of fax
machines, telephones, security systems, etc. will not be material. The
Company has not developed contingency plans that would assure it will not be
adversely impacted by the effect of the Year 2000 Issue and does not intend
to prepare such plans. Actual results could differ materially from the above
estimates concerning year 2000 issues.
INCOME TAXES AND NET OPERATING LOSS CARRYFORWARDS
The Company's effective tax rate differs materially from the Federal statutory
rate of 34% as discussed in the notes to the accompanying consolidated financial
statements.
At December 31, 1998, the Company has alternative minimum tax credits of
approximately $15,000 available to offset future federal income taxes on an
indefinite carryforward basis and unused net operating loss carryforwards of
approximately $4,285,000. Such net operating loss carryforwards expire in
varying amounts from 1999 to 2018 and are subject to certain limitations under
Section 382 of the Internal Revenue Code ("IRC") of 1986, as amended.
As of December 31, 1998, a valuation allowance of $1,837,000 has been recorded,
as Management of the Company is not able to determine that it is more likely
than not that its deferred tax assets will be realized. The Company has recorded
a valuation allowance primarily related to the uncertainty of realizing
operating loss carryforwards subject to limitations under the IRC of 1986.
INFLATION
Inflation was not a material factor in either the sales or the operating
expenses of the Company during the two year period ended December 31, 1998, even
though Mexico is considered a highly inflationary economy as discussed in notes
to the accompanying consolidated financial statements.
22
<PAGE>
BARRINGER LABORATORIES, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", requires companies to record
derivatives on the balance sheet as assets or liabilities measured at fair
market value. Gains or losses resulting from changes in the values of those No.
133 is effective for fiscal years beginning after June 15, 1999. Management
believes that the adoption of SFAS No. 133 will have no effect on its financial
statements.
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities", requires that the costs of start-up activities, including
organization costs, be expensed as incurred. This Statement is effective for
financial statements issued for fiscal years beginning after December 15, 1998.
Management believes that the adoption of SOP 98-5 will have no material effect
on its financial statements.
23
<PAGE>
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Barringer Laboratories, Inc.
Golden, Colorado
We have audited the accompanying consolidated balance sheets of Barringer
Laboratories, Inc. and subsidiaries as of December 31, 1998 and 1997 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of 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 Barringer
Laboratories, Inc. and subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years then
ended, in conformity with generally accepted accounting principles.
/S/BDO SEIDMAN, LLP
Denver, Colorado
April 8, 1999
24
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Sales of Services (Notes 11 & 12) $6,240,000 $7,179,000
Cost of Services Sold 5,178,000 5,526,000
---------- ----------
Gross Profit 1,062,000 1,653,000
Selling, General and
Administrative Expenses 2,485,000 1,819,000
Corporate Realignment (Note 4) - 131,000
---------- ----------
Operating Loss (1,423,000) (297,000)
---------- ----------
Other Income (Expense):
Interest income 27,000 33,000
Interest expense (11,000) (17,000)
Gain (loss)on disposal of assets 17,000 (87,000)
Translation loss (12,000) (3,000)
Other 1,000 5,000
---------- ----------
Total Other Income (Expense) 22,000 (69,000)
---------- ----------
Loss before Income
Taxes and Minority Interest
in Loss of Subsidiary (1,401,000) (366,000)
Provision for Income Taxes
(Note 7) - -
---------- ----------
Loss before Minority
Interest in Loss
of Subsidiary (1,401,000) (366,000)
Minority Interest in Loss
of Subsidiary (Note 6) 5,000 54,000
---------- ----------
Net Loss $(1,396,000) $ (312,000)
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1997
---- ----
<S> <C> <C>
Per Share Data (Note 8):
Net Loss per share
Basic $ (.57) $ (.20)
----------- -----------
----------- -----------
Diluted $ (.57) $ (.20)
----------- -----------
----------- -----------
Weighted average common
shares outstanding
Basic 2,442,817 1,591,112
----------- -----------
----------- -----------
Diluted 2,442,817 1,591,112
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
BARRINGER LABORATORIES, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 173,000 $ 524,000
Trade receivables, less
allowance of $34,000 and
$13,000 for doubtful accounts 1,064,000 1,062,000
Prepaid expenses and other 247,000 127,000
Subscription receivable (Note 8) 255,000 -
---------- ----------
Total Current Assets 1,739,000 1,713,000
---------- ----------
Property and Equipment:
Machinery and equipment 2,304,000 2,214,000
Machinery and equipment under
capital lease obligations 234,000 134,000
Leasehold improvements 664,000 663,000
Office furniture and equipment 90,000 90,000
---------- ----------
3,292,000 3,101,000
Less accumulated depreciation and
amortization 2,964,000 2,809,000
---------- ----------
Net Property and Equipment 328,000 292,000
Certificate of Deposit (Note 3) 150,000 150,000
Other Assets 101,000 57,000
---------- ----------
Total Assets $2,318,000 $2,212,000
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
BARRINGER LABORATORIES, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Trade accounts payable $ 247,000 $ 251,000
Accrued liabilities:
Payroll, compensation and
related expenses 343,000 290,000
Accrued property tax 46,000 -
Other 190,000 211,000
Current maturities of obligations
under capital leases (Note 5) 74,000 38,000
----------- -----------
Total Current Liabilities 900,000 790,000
Obligations under capital lease,
less current maturities (Note 5) 71,000 54,000
----------- -----------
Total Liabilities 971,000 844,000
----------- -----------
Minority Interest (Note 6) - 5,000
Commitments and Contingencies
(Notes 5, 9 and 10)
Shareholders' Equity (Note 8)
Preferred stock, $2.00 par value,
1,000,000 shares authorized;
none issued - -
Common stock, $0.01 par value,
10,000,000 shares authorized;
3,407,315 and 1,590,649 shares
issued and outstanding 34,000 16,000
Common stock to be issued 575,000 -
Additional paid-in capital 3,184,000 2,397,000
Accumulated deficit (2,423,000) (1,027,000)
Accumulated other comprehensive income (23,000) (23,000)
----------- -----------
Total Shareholders' Equity 1,347,000 1,363,000
----------- -----------
Total Liabilities and
Shareholders' Equity $ 2,318,000 $ 2,212,000
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN 000'S EXCEPT SHARE DATA)
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Stock Treasury Stock
---------------------------------- ---------------
Issued To Be Issued
Shares Amount Shares Amount Shares Amount
--------- ------ -------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 1,652,016 $ 17 - - 88,260 $ (103)
Stock Granted to Management (Note 8) 16,636 - - - - -
Exercise of Stock Options (Note 9) 53,400 - - - - -
Purchase of Management Stock (Note 8) (43,143) - - - - -
Retirement of Treasury Stock (Note 8) (88,260) (1) - - (88,260) 103
Net Loss for Year - - - - - -
--------- ------ --------- ------ ------- ------
Balance, December 31, 1997 1,590,649 16 - - - -
Private Placement, net of issuance
costs of $9, April 1998 (Note 8) 1,666,666 17 - - - -
Private Placement, December 1998 (Note 8) - - 3,055,556 550 - -
Stock Granted to Directors
(Notes 2 and 8) - - 100,000 25 - -
Stock Issued in Acquisition (Note 8) 150,000 1 - - - -
Net Loss for Year - - - - - -
--------- ------ --------- ------ ------- ------
Balance, December 31, 1998 3,407,315 $ 34 3,155,556 $ 575 - $ -
--------- ------ --------- ------ ------- ------
--------- ------ --------- ------ ------- ------
<CAPTION>
Accumulated
Additional Other
Paid-In Accumulated Comprehensive
Capital Deficit Income Total
---------- ----------- ------------- -------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 $2,532 $ (715) $ (23) $ 1,708
Stock Granted to Management (Note 8) - - - -
Exercise of Stock Options (Note 9) 52 - - 52
Purchase of Management Stock (Note 8) (84) - - (84)
Retirement of Treasury Stock (Note 8) (103) - - (1)
Net Loss for Year - (312) - (312)
------ ------- ------- -------
Balance, December 31, 1997 2,397 (1,027) (23) 1,363
Private Placement, net of issuance
costs of $9, April 1998 (Note 8) 657 - - 674
Private Placement, December 1998 (Note 8) 92 - - 642
Stock Granted to Directors
(Notes 2 and 8) - - - 25
Stock Issued in Acquisition (Note 8) 38 - - 39
Net Loss for Year - (1,396) - (1,396)
------ ------- ------- -------
Balance, December 31, 1998 $3,184 (2,423) $ (23) 1,347
------ ------- ------- -------
------ ------- ------- -------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
29
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year $(1,396,000) $ (312,000)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Compensatory costs related to
issuances of common stock 275,000 -
Depreciation and amortization 181,000 254,000
(Gain) loss on sale of assets (17,000) 87,000
Bad debt expense 24,000 25,000
Compensation costs related to stock
grants to directors 25,000 -
Minority interest in loss
of subsidiary (5,000) (54,000)
Other 5,000 -
(Increase) decrease in operating
assets net of operating liabilities (82,000) 103,000
----------- ------------
Cash Provided by (Used in) Operating
Activities (990,000) 103,000
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (120,000) (203,000)
Proceeds from sale of assets 17,000 -
----------- ------------
Cash used in investing activities (103,000) (203,000)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 786,000 -
Purchase of certificate of deposit - (150,000)
Exercise of stock options - 52,000
Purchase of common stock - (84,000)
Payments on capital lease obligations (44,000) (56,000)
Minority Interest Contributions - 59,000
----------- ------------
Cash Provided by(Used in) Financing
Activities 742,000 (179,000)
----------- ------------
Decrease in cash (351,000) (279,000)
Cash and cash equivalents beginning
of year 524,000 803,000
----------- ------------
Cash and cash equivalents, end of year $ 173,000 $ 524,000
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
Decrease (increase) in operating
assets net of operating liabilities
Trade receivables $ (26,000) $ -
Other current assets (120,000) (58,000)
Other assets (9,000) 18,000
Income tax payable - (19,000)
Accounts payable and accrued
liabilities 73,000 162,000
--------- ---------
Total - net $ (82,000) $ 103,000
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Barringer Laboratories, Inc., (the "Company") is an analytical services
company, principally engaged in analytical testing for the environmental
services and mineral exploration industries.
MANAGEMENT'S PLAN
The Company's operating plan for the next twelve months will concentrate
heavily on rebuilding sales in the Mineral Division which suffered a steep
decline during 1998, largely due to the depressed level of worldwide mineral
exploration activity. Management estimates that, over the balance of 1999,
the Company's operating activities, plus the necessary investments to rebuild
Mineral Division sales, will require additional funding of approximately
$500,000.
The Company is addressing this funding requirement in several ways.
Management believes that $150,000 can be made available through the release
of a Certificate of Deposit currently pledged to the Colorado Department of
Health in order to meet an environmental regulatory requirement relating to
laboratories involved in radiochemistry activities. The Company is currently
negotiating to replace the Certificate of Deposit with a bond. The Company is
also in the process of negotiating a line of credit backed by the Company's
accounts receivable with a number of financial institutions. The Company has
also established a relationship with a company engaged in the factoring of
accounts receivable and is utilizing this relationship to meet its short term
cash requirements pending the outcome of the negotiations (mentioned above)
to secure a line of credit.
There can be no assurance that the Company will not require additional
financial resources to enable it to meet its obligations in the future or
that any future funds required will be generated from operations or from the
aforementioned or other potential sources. The lack of additional capital
could force the Company to substantially curtail operations and/or capital
replacements and could therefore have a material adverse effect on the
Company's business.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements comprise the accounts of
the Company, its wholly-owned Mexican subsidiary, its wholly-owned Nicaraguan
subsidiary, and its 67% owned Peruvian subsidiary. All intercompany balances
and transactions have been eliminated.
32
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PRINCIPAL MARKETS
Sales of services are primarily to customers located in the United States,
with the balance of approximately 36% to customers in Mexico, Nicaragua, Peru
and Spain (See Notes 11 and 12). For the year ended December 31, 1998 based
upon total sales, 6% of the Company's Environmental Division Services were
provided under contracts relating to federal government spending for
environmental enforcement and restoration.
PRINCIPLES OF TRANSLATION
Effective January 1, 1997, the Company remeasured the assets and liabilities
of its Mexican subsidiary from pesos to U.S. dollars since Mexico is
considered a highly inflationary economy. Non-monetary assets and liabilities
are remeasured at the exchange rate at the date of the change in the
functional currency, which rate then becomes, in effect, the "historical
rate" for translating those assets in the future. Monetary assets and
liabilities are remeasured at the exchange rate in effect at the date a
transaction occurs. Gains and losses related to the remeasurement of monetary
assets and liabilities are included in income. The Peruvian and Nicaraguan
subsidiaries are reported in U.S. dollars.
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
The carrying amounts of financial instruments including cash equivalents,
trade accounts receivable, trade accounts payable and accrued liabilities
approximated fair value because of the immediate or short-term maturity of
these instruments. The difference between the carrying amount and fair value
of the Company's capital lease obligations is not significant.
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed to completely perform as contracted.
Concentrations of credit risk, whether on or off the balance sheet, that
arise from financial instruments exist for groups of customers or groups of
counterparties when they have similar economic characteristics that would
cause their ability to meet contractual obligations to be similarly effected
by changes in economic or other conditions.
Concentrations of credit risk with respect to trade receivables are generally
limited due to customers being dispersed across geographic areas. Ongoing
credit evaluations of customers' financial condition are performed and,
generally no collateral is required. The Company maintains an allowance for
potential losses based on management's analysis of possible uncollectible
accounts (See Note 12).
33
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SALES OF ACCOUNTS RECEIVABLE
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". SFAS 125 provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. Under SFAS 125, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls
and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
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 reporting period.
Actual results could differ from those estimates.
PROPERTY, EQUIPMENT, DEPRECIATION AND AMORTIZATION
Property and equipment are carried at cost. Depreciation of owned equipment
is computed on a straight-line basis over the estimated useful lives of the
related assets, generally from three to ten years. Leasehold improvements are
amortized over the term of the related lease, generally from five to ten
years. Equipment under capital leases is amortized on a straight-line basis
over the term of the lease, generally three to five years, which approximates
the estimated useful lives of the leased equipment.
Depreciation expense for the years ended December 31, 1998 and 1997, was
$180,000 and $254,000, respectively.
LONG-TERM ASSETS
The Company applies SFAS 121, "Accounting for the Impairment of Long-Lived
Assets". Under SFAS 121, long-lived assets and certain intangibles are
evaluated for impairment when events or changes in circumstances indicate
that the carrying value of the assets may not be recoverable through the
estimated undiscounted future cash flows resulting from the use of these
assets. When any such impairment exists, the related assets will be written
down to fair value.
34
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
The Company accounts for income taxes under SFAS 109 "Accounting for Income
Taxes". Accordingly, deferred tax liabilities and assets are determined based
on temporary differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements that will result in
taxable or deductible amounts in future years using the enacted tax rates in
effect for the year in which the differences are expected to reverse.
REVENUE RECOGNITION
Sales are recorded in the periods that services are performed. Revenue is
recognized when sample testing is completed and a report is issued. Where
contracts provide for testing of multiple samples at varying times, revenue
is recognized on a per sample basis when sample testing for a batch is
completed and the report is issued.
STATEMENTS OF CASH FLOWS
For purposes of the Statements of Cash Flows, the Company considers cash and
all highly liquid investments with an original maturity of three months or
less to be cash and cash equivalents.
LOSS PER SHARE
The Company follows the provisions of SFAS 128, "Earnings Per Share". SFAS
128 provides for the calculation of "Basic" and "Diluted" loss per share.
Basic loss per share includes no dilution and is computed by dividing losses
available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted loss per share reflects the
potential dilution of securities that could share in the loss of an entity,
similar to fully diluted loss per share. In loss periods, dilutive common
equivalent shares are excluded as the effect would be anti-dilutive. For the
years ended December 31, 1998 and 1997, 191,600 and 176,975 dilutive common
equivalent shares of common stock were not included in the computation of
diluted loss per share because their effect was anti-dilutive.
STOCK OPTION PLANS
The Company applies Accounting Principal Board Opinion ("APB") 25, "Accounting
for Stock Issued to Employees", and related Interpretations in accounting for
all stock option plans. Under APB 25, no compensation cost has been
recognized for stock options issued to employees as the exercise price of the
Company's stock options granted equals or exceeds the market price of the
underlying common stock on the date of grant.
35
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS 123, "Accounting for Stock-Based Compensation", requires the Company to
provide pro forma information regarding net income (loss) as if compensation
cost for the Company's stock option plans had been determined in accordance
with the fair value based method prescribed in SFAS 123.
COMPREHENSIVE INCOME
During 1998 the Company adopted SFAS 130, "Reporting Comprehensive Income".
Comprehensive income is comprised of net income and all changes to the
statements of shareholders' equity, except those due to investment by
shareholders, changes in paid-in-capital and distributions to shareholders.
The adoption of SFAS 130 does not impact the Company's financial statements
for the years ended December 31, 1998 and 1997.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities"
requires companies to record derivatives on the balance sheet as assets or
liabilities measured at fair market value. Gains or losses resulting from
changes in the values of those derivatives are accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
SFAS 133 is effective for fiscal years beginning after June 15, 1999.
Management believes that the adoption of SFAS 133 will have no effect on its
financial statements.
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities," requires that the costs of start-up activities, including
organization costs, be expensed as incurred. This Statement is effective for
financial statements issued for fiscal years beginning after December 15,
1998. Management believes that the adoption of SOP 98-5 will have no material
effect on its financial statements.
RECLASSIFICATIONS
Certain amounts in prior year financial statements have been reclassed to
conform with current year presentation.
36
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITION
On December 4, 1998, the Company completed the acquisition of certain assets
of Shasta Geochemistry Laboratory, Inc. ("Shasta"), an analytical services
company, principally engaged in testing for the mineral exploration
industries, in an all stock transaction, for 150,000 shares of the Company's
common stock valued at $39,000 and contingent future consideration of
additional common stock, not to exceed an additional 150,000 shares, in the
event certain goals are met (see Note 8). The Company will issue one
additional share of its common stock for each $2.00 that total gross revenues
collected by the company from Shasta customers during the first year after
closing exceed $300,000, and during the second year after closing exceed
$600,000. The purchase price allocation is preliminary and may change based
on the resolution of these contingencies.
The assets acquired include customer lists, a noncompetition agreement among
the President of Shasta and the Company and all goodwill of Shasta.
The operations of Shasta are incorporated into the operations of the
Company's 27,000 square foot laboratory located in Reno, Nevada. The Company
has not acquired any assets nor assumed any liabilities of Shasta other than
those described above.
The acquisition was accounted for as a purchase with the assets valued at the
fair value of the common stock issued by the Company and this value has been
allocated to customer list (50%) and noncompetition agreement (50%) and is
being amortized over 4 and 2 years, respectively.
The results of operations of Shasta are included in the accompanying
financial statements from the date of acquisition. The following unaudited
pro forma financial information assumes the acquisition had occurred on
January 1 of each year:
PRO FORMA INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share date) 1998 1997
------- ------
<S> <C> <C>
Sales of Services $ 6,615 $8,297
Net income (loss) $(1,332) $ 139
Net income (loss) per share:
Basic $ (.55) $ .08
Diluted $ (.55) $ .07
</TABLE>
The unaudited pro forma results do not necessarily represent results which
would have occurred if the acquisition had taken place on the basis assumed
above, nor are they indicative of the results of future combined operations.
37
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. CERTIFICATE OF DEPOSIT
The certificate of deposit is security for the $150,000 letter of credit
required by the Colorado Department of Health to support the Company's
Radiochemistry license. This license is a regulatory requirement for any
company engaged in the analysis of radioactive materials.
4. SALE OF ACCOUNTS RECEIVABLE
During 1998 the Company sold approximately $101,000 of its accounts
receivable to an independent factoring company under an agreement for
approximately $80,000 which reflects a 20% retainage. Pursuant to the
provisions of SFAS 125, the Company reflected the transaction as a sale of
assets less the costs of the transaction and less any anticipated future loss
in value of the retained asset. To the extent that payments from customers
exceeds the amount received from the factoring company, the difference less
fees and expenses is refunded to the Company. In January 1999, the Company
received the retained share of these receivables.
5. OBLIGATIONS UNDER CAPITAL LEASE
The obligations under capital lease consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
--------- --------
<S> <C> <C>
Obligations under capital lease $ 145,000 $ 92,000
Less current maturities 74,000 38,000
--------- --------
$ 71,000 $ 54,000
--------- --------
--------- --------
</TABLE>
As of December 31, 1998, future net minimum lease payments under capital
lease obligations are as follows:
<TABLE>
<S> <C>
1999 $ 87,000
2000 48,000
2001 32,000
--------
Total minimum lease payments 167,000
Less amounts representing interest 21,000
Less amounts representing executory costs 1,000
--------
Present value of net minimum lease payments $145,000
--------
--------
</TABLE>
38
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. MINORITY INTEREST
The minority interest represents the net value of the Peruvian minority
shareholder's investment in the Company's Peruvian subsidiary. The December
31, 1997 net value consists of the minority shareholder's original investment
of $59,000 less their share in the 1997 loss of the Company's Peruvian
subsidiary of $54,000 . In 1998, $5,000 of Peruvian losses were charged
against the minority shareholders' investment, and the remainder were
included in Net Loss.
7. INCOME TAXES
Sources of loss before income taxes and after minority interest in loss of
subsidiary include:
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
United States operations $ (993,000) $ (82,000)
Foreign operations (403,000) (230,000)
----------- ------------
$(1,396,000) $ (312,000)
----------- ------------
----------- ------------
</TABLE>
The provision for income taxes for the years ended December 31, consisted of
the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Current:
Federal $ - $ -
State - -
Deferred Benefit:
Federal (302,000) (25,000)
State (24,000) (7,000)
--------- ---------
(326,000) (32,000)
Increase in
valuation allowance 326,000 32,000
--------- ---------
$ - $ -
--------- ---------
--------- ---------
</TABLE>
39
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The significant components of deferred income tax benefit consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Net operating
loss carryforwards (327,000) $ 23,000
Expense accruals ( 3,000) (28,000)
Depreciation and amortization 8,000 (10,000)
Other ( 4,000) (17,000)
--------- ---------
Deferred income tax benefit $(326,000) $ (32,000)
--------- ---------
--------- ---------
</TABLE>
The following summary reconciles income taxes at the United States statutory
rate of 34% in 1998 and 1997 with the actual taxes:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Federal benefit computed
at the statutory rate $(475,000) $(106,000)
Losses for which no tax
benefit has been recognized 169,000 61,000
Valuation allowance 326,000 32,000
Other (20,000) 13,000
--------- ---------
Provision for income taxes $ - $ -
--------- ---------
--------- ---------
</TABLE>
Temporary differences between the financial statement carrying amounts and
the tax basis of assets and labilities that give rise to significant portions
of the net deferred tax asset relate to the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Tax operating loss carryforwards $ 1,586,000 $ 1,259,000
Property and equipment, principally
due to differences in depreciation 162,000 170,000
Expense accruals 57,000 54,000
Other 62,000 58,000
----------- -----------
1,867,000 1,541,000
Valuation allowance (1,837,000) (1,511,000)
----------- -----------
Net deferred tax asset $ 30,000 $ 30,000
----------- -----------
----------- -----------
</TABLE>
At December 31, 1998 and 1997, the net deferred tax asset recorded is
included in prepaid expenses and other in the accompanying consolidated
balance sheets. As of December 31, 1998 and 1997, a valuation allowance has
been recorded, as Management of the Company is not able to determine that it
is more likely than not that the deferred tax asset will be realized.
40
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1998, the Company has alternative minimum tax credits of
approximately $15,000 available to offset future federal income taxes on an
indefinite carryforward basis and unused net operating loss carryforwards of
approximately $4,285,000. Such net operating loss carryforwards expire in
varying amounts from 1999 to 2018 and are subject to certain limitations
under Section 382 of the Internal Revenue Code ("IRC") of 1986, as amended.
8. SHAREHOLDERS' EQUITY
STOCK GRANTED TO MANAGEMENT
During 1997, the Company granted a former member of management under a
cashless exercise of 16,636 shares of common stock in exchange for 25,000
non-qualified stock options held by the former member of management to
purchase common stock at $.90 per share. No compensation expense was recorded
related to this transaction.
PURCHASE OF MANAGEMENT STOCK
During 1997, the Company purchased 35,143 shares of common stock at $2.00 a
share and purchased 8,000 shares of common stock at $1.75 per share from
former members of management.
RETIREMENT OF TREASURY STOCK
Effective October 24, 1997, the Company retired 88,260 shares of its common
stock valued at $103,000.
SALE OF COMMON STOCK
Effective April 1998, the Company completed the sale of 1,666,666 shares of
restricted common stock at a price of $.30 per share for $500,000, less
issuance costs of $9,000, to provide additional working capital. In addition,
effective December 1998, the Company finalized an agreement to sell 3,055,556
shares of restricted common stock at a price of $.18 per share for $550,000
consisting of $295,000 of cash proceeds and a stock subscription receivable of
$255,000 to provide additional working capital. Subsequent to December 31,
1998, all stock subscriptions receivable were collected and the shares of
common stock were issued.
41
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The shares were issued at prices less than the market price per share on the
effective dates. The difference between the per share transaction prices, as
adjusted for dilution, and the issuance price has been recorded as a $183,000
and a $92,000 noncash charge, respectively, and are included in Selling,
General and Administrative Expenses in the Consolidated Statements of
Operations for the year ended December 31, 1998.
Among the subscribers of the two placements are three members of the
Company's board of directors, two of whom are already significant
shareholders. The Company claims exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended.
STOCK GRANTED TO DIRECTORS
In December 1998, the Company granted 100,000 shares of its common stock to
outside directors in consideration for 1998 directors' fees. The Company
recorded compensatory expense of $25,000 in 1998 based upon the approximate
market price per share at date of grant. The shares of common stock were
issued in February 1999.
PREFERRED STOCK
The Preferred Stock of the Company can be issued in series. With respect to
each series issued, the Board of Directors of the Company will determine,
among other things, the number of shares in the series, voting rights and
terms, dividend rates and terms, liquidation preferences and redemption and
conversion privileges. There was no preferred stock outstanding at December 31,
1998 and 1997.
CONTINGENT STOCK
In connection with the acquisition of Shasta, the Company will issue
additional shares of common stock, not to exceed 150,000 shares in the event
that certain sales goals are met (see Note 2).
42
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCK OPTIONS AND WARRANTS
The following table sets forth the number of shares of common stock that are
reserved as of December 31, 1998 for all outstanding options and warrants.
<TABLE>
<CAPTION>
Exercise, Common Stock
Conversion or Outstanding or
Security Option Price Reserved for Issuance
- ---------------------- ------------- ---------------------
<S> <C> <C>
Common Stock 3,407,315
Stock to be Issued 3,155,556
Stock Options (a)
$ .50 25,000
$ .90 3,600
$1.00 58,000
Warrants (b)
Nassau Group Warrants $1.06 80,000
expiring five years $1.25 25,000
after issuance ---------
Total 6,754,471
---------
---------
</TABLE>
(a) STOCK OPTIONS
At December 31, 1998, the Company has four stock option plans, which are
described below. The Company applies APB 25, "Accounting for Stock Issued to
Employees", and related Interpretations in accounting for all plans. Under
APB 25, no compensation cost has been recognized for stock options issued to
employees as the exercise price of the Company's stock options granted equals
or exceeds the market price of the underlying common stock on the date of
grant.
1989 INCENTIVE STOCK OPTION PLAN
The 1989 Incentive Stock Option Plan (the "Plan") is designed to provide
incentives for employees who may or may not be key employees, as well as
officers and directors who are also employees of the Company and its
subsidiaries, by providing up to 200,000 shares of the Company's common stock
issuable pursuant to grants.
43
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Plan is administered by a Committee of at least three directors appointed
by the Board of Directors. The Committee is authorized to determine the
individuals to whom, and the times at which, options will be granted, the
number of shares subject to each grant, the applicable restriction period,
the purchase price for the shares subject to the option, and to specify such
other terms and provisions of any grants of options as it deems necessary or
advisable. However, the term of the options may not be for more than five
years and the purchase price per share shall not be less than the market
value of such shares at the time of grant. Additionally, options granted
under the Plan typically vest 60% after two years of continuous employment of
the optionee after the date of grant and 20% each year of continuous
employment thereafter. During 1998, no options were exercised. During 1997,
options to purchase 43,400 shares of common stock at $.90 per share were
exercised. At December 31, 1998 and 1997, options to purchase 3,600 and
5,600, respectively, shares of common stock are exercisable under this plan.
The Plan will terminate in December 1999, except for outstanding options
under the Plan, which will remain in effect until they have been exercised or
shall have been expired by their terms.
1997 LONG-TERM INCENTIVE PLAN
Stockholders approved the 1997 Long-Term Incentive Plan ("1997 Plan"). The
1997 Plan is designed to provide key management employees of the Company
with added incentives to continue in the long-term service of the Company and
to create in such employees a more direct interest in the future success of
the Company by relating compensation to increases in shareholder value, so
that the income of key management employees is more closely aligned with the
income of the shareholders of the Company. The 1997 Plan is also designed to
attract key employees and to retain and motivate participating employees by
providing an opportunity for investment in the Company. The 1997 Plan is
administered by the Board of Directors or through an Incentive Plan Committee
appointed by the Board of Directors and consisting of not less than two
persons, all of whom must be non-employee directors. The 1997 Plan reserves
120,000 shares of the Company's common stock for issuance. Any shares that
are the subject of an award under the 1997 Plan which have lapsed or expired
unexercised or unissued will automatically become available for reissue under
the 1997 Plan. The exercise prices, vesting schedules, and other pertinent
terms of the 1997 Plan will be determined by the Committee, but no exercise
price for an incentive stock option will be less than the fair market value
of the stock on the date the option is granted. There were no options granted
under this plan in 1998 and 1997.
44
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER STOCK OPTIONS
The Company also grants non-qualified stock options to management, outside
directors, and consultants as authorized by the Board of Directors. These
options are exercisable at varying times from date of grant and expire five
years from date of grant. As of December 31, 1998, all non-qualified stock
options have been granted at an exercise price at or in excess of the current
market value at the time of grant.
Non-qualified stock options to purchase 22,500 shares of common stock at
$1.00 were canceled in 1997 and non-qualified stock options to purchase
10,000 shares of common stock at $1.00 were exercised in 1997. Also during
1997, 25,000 non-qualified stock options held by a former member of
management to purchase common stock at $.90 per share were exchanged for
16,636 shares of common stock under a cashless exercise. During 1998, stock
options to purchase 81,500 shares expired and were cancelled and stock
options to purchase 25,000 shares of common stock at an exercise price of
$.50 per share were granted. Of the 25,000 stock options, 7,500 vested
immediately; 7,500 will vest on January 27, 2000, and 10,000 vest 20% per
year until June 1, 2003. As of December 31, 1998 and 1997, non-qualified
stock options to purchase 37,500 and 101,500 shares of common stock,
respectively, were exercisable.
NON-EMPLOYEE DIRECTORS PLAN
Stockholders approved the Non-Employee Directors Stock Option Plan (the
"Non-Employee Directors Plan"). The Non-Employee Directors Plan provides for
the grant of stock options to non-employee directors of the Company and its
affiliated corporations in order to encourage and provide incentives for high
level performance by the non-employee directors of the Company. The maximum
number of shares of common stock that may be subject to stock options under
the Non-Employee Directors Plan is 30,000 shares. Upon adoption of the
non-Employee Directors Plan or upon initial election or appointment of a
non-employee director to the Board of Directors of the Company, he or she
shall be granted a stock option to purchase 1,000 shares of common stock. In
addition, each non-employee director shall be granted a stock option to
purchase 1,000 shares of common stock effective as to each anniversary date
of the initial grant of a stock option to such director. Each stock option
granted under the Non-Employee Directors Plan shall be vested one-third on
the date of grant, one-third upon the first yearly anniversary date of a
grant and the final one-third upon the second yearly anniversary date of the
grant. The purchase price per share of common stock for the shares to be
purchased pursuant to the exercise of a stock option will be 100% of the fair
market value of the common stock on the date of grant of the option. No
options granted under this plan in 1998 or 1997.
45
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(b) WARRANTS
In May 1996, the Company granted to certain individuals associated with The
Nassau Group, Inc. (a director of the Company is also Managing Director of
Nassau) warrants to purchase 80,000 shares and 25,000 shares of common stock
at $1.06 and $1.25 per share, respectively, as an inducement to such
individuals to become involved in the Company and also an inducement to
purchase 10% of the outstanding shares of the Company's common stock. Such
warrants are exercisable for a period of five years from the date of grant.
Of the total warrants granted, warrants to purchase 50,000 shares of common
stock vested when granted and the remaining warrants vest on a monthly basis
over a one year period.
At December 31, 1998 and 1997, warrants to purchase 105,000 shares of common
stock were issued and exercisable under the agreement.
In March 1998, the Company entered into an agreement whereby contingent
warrants to purchase 10,000 shares of the Company's common stock will be
granted at an exercise price equivalent to the average trading price of the
Company's common stock in the 30 days prior to that date. The warrants are
contingent upon the legal settlement of the Company's EPA investigation,
which was settled in March 1999 (see Note 10). The warrants are exercisable
for a three year period from that date.
(c) STOCK APPRECIATION RIGHTS
In March 1998, the Company granted Stock Appreciation Rights ("SAR's") on
30,000 shares of the Company's common stock to a non-employee. 20,000 of the
SAR's are contingent upon the successful completion of certain objectives and
the remaining 10,000 SAR's vest immediately. The base price of the SAR's are
$.51 per share with the maximum stock appreciation attaching to the SAR's of
$1.50 per share. The SAR's expire in March 2000. During 1998, the Company's
stock price per share did not exceed the SAR's base price of $.51 per share
and therefore the Company did not recognize any compensation expense.
46
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS 123, "Accounting for Stock-Based Compensation", requires the Company to
provide pro forma information regarding net loss as if compensation costs for
the Company's stock option plans had been determined in accordance with the fair
value based method prescribed in SFAS 123. The Company estimated the fair value
of each stock option at the grant date by using the Black-Scholes option-pricing
model with the following weighted-average assumptions used:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1998 1997
------------------------
<S> <C> <C>
Dividend Yield 0% -
Expected volatility 153% -
Risk-Free interest rates 5.5% -
Expected lives in years 5 years -
</TABLE>
There were no options or warrants granted during 1997.
Under the accounting provisions of SFAS 123, the Company's net loss and net loss
per share would have been adjusted to the following pro forma amounts:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1998 1997
---------- ----------
<S> <C> <C>
NET LOSS:
As reported $ (1,396,000) $ (312,000)
Pro forma (1,407,000) (343,000)
NET LOSS PER SHARE:
Basic
As reported $ (.57) $ (.20)
Pro forma $ (.58) $ (.22)
Diluted
As reported $ (.57) $ (.20)
Pro forma $ (.58) $ (.22)
</TABLE>
47
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of the Company's stock option plans and outstanding
warrants as of December 31, 1998 and 1997 and changes during the years ended on
those dates is presented below:
<TABLE>
<CAPTION>
1998 1997
--------------------------- ----------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ------- ------ --------
<S> <C> <C> <C> <C>
Outstanding 248,100 $ 1.05 443,000 $ 1.04
Granted 25,000 .50 - -
Exercised - - (53,400) .92
Canceled (81,500) 1.01 (141,500) 1.08
------- -------- -------- --------
Outstanding,
end of year 191,600 $ .99 248,100 $ 1.05
------- -------- -------- --------
------- -------- -------- --------
Options and warrants
exercisable, end
of year 162,900 $ 1.04 204,600 $ 1.06
------- -------- -------- --------
------- -------- -------- --------
Weighted average fair
value of options
and warrants granted
during the year $ .50 $ -
-------- --------
-------- --------
</TABLE>
The following table summarizes information about stock options and warrants
outstanding at December 31, 1998 and 1997.
<TABLE>
<CAPTION>
Options/Warrants
Options/Warrants Outstanding Exercisable
--------------------------------------- ---------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- ------------ ----------- ----------- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
December 31, 1998
$ .50 25,000 4.6 years $ .50 7,500 $ .50
$ .90-$1.06 141,600 2.2 years $1.04 130,400 $1.04
$1.25 25,000 3.2 years $1.25 25,000 $1.25
--------- ---------
$ .50-$1.25 191,600 2.7 years $ .99 162,900 $1.05
--------- ---------
--------- ---------
December 31, 1997
$ .90-$1.06 223,100 2.5 years $1.03 179,600 $1.03
$1.25 25,000 4.2 years $1.25 25,000 $1.25
--------- ---------
$ .90-$1.25 248,100 2.7 years $1.05 204,600 $1.06
--------- ---------
--------- ---------
</TABLE>
48
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average grant date fair value of stock options and warrants granted
is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1998 1997
------ ------
<S> <C> <C>
Market value equal to exercise
price $ - $ -
Market value greater than exercise
price 0.56 -
Market value less than exercise
price 0.41 -
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
(a) LEASE COMMITMENTS
The Company rents office and laboratory facilities, and equipment under various
operating leases. Total rental expenses under such leases amounted to $723,000
and $715,000 for the years ended December 31, 1998 and 1997, respectively. At
December 31, 1998, future minimum rental payments required under operating
leases that have initial or remaining noncancellable terms in excess of one year
are as follows:
<TABLE>
<S> <C>
Year ending December 31, 1999 $ 660,000
2000 371,000
2001 228,000
----------
$1,259,000
----------
----------
</TABLE>
(b) INVESTIGATION
In early 1998, the Company learned that certain employees in one section of its
environmental laboratory did not consistently follow laboratory procedures as
set forth in the Company's Standard Operating Procedures and applicable test
methods. Management believes the employee practices in question may have
affected a small percentage of the soil and water test results reported to
clients of the environmental laboratory. The Company commenced an internal
investigation, engaged outside advisors to assist in the investigation, and
initiated a broad program of corrective actions. In addition, the Company
informed the United States Environmental Protection Agency ("EPA") of its
investigation and its corrective action program.
49
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EPA representatives conducted an investigation into this matter in accordance
with Agency policy towards voluntary disclosures of this type, and the Company
cooperated fully in that process. To date, no agency or other party has brought
any action or proceeding against the Company.
By letters dated December 24, 1998, and March 19, 1999, EPA has informed the
Company that it does not intend to take any civil or criminal enforcement action
against the Company as a result of the matters reported by the Company.
Management believes that the EPA investigation into this matter has concluded.
(c) EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with the Operations
Director of the Reno, NV laboratory for a period of two years commencing
November 24, 1998 at an annual base salary of $65,000 with potential for
bonuses and increases in the base salary at the end of year one and year two.
The contract also provides for severance compensation if the employee is
terminated without cause for a period of two years from the date of the
agreement.
The Company has entered into an agreement with a finance and accounting
independent contractor which includes compensation of $2,500 per week. Also
included is a cash bonus incentive and Stock Appreciation Rights for 30,000
shares of the Company's common stock upon completion of agreed upon
assignments and warrants to purchase 10,000 shares of the Company's common
stock upon settlement of the EPA investigation.
(d) EMPLOYEE RETIREMENT PLAN
In 1994, the Company established a tax-qualified 401(k) cash or deferred
compensation plan that covers all employees of the Company who have completed
one year of service and attained age 21. Participants are permitted, within the
limitations imposed by the Internal Revenue Code of 1954, as amended, to make
pretax contributions. Participants are always fully vested in their accounts
under the Plan. The Company makes matching contributions equal to 100% of the
first 2% of an employee's salary and 50% of the next 5% of an employee's salary,
which contributions vest in the employee proportionately over a period of six
years. During 1998 and 1997, the Company contributed $47,701 and $52,476,
respectively, to the plan.
11. MAJOR CUSTOMERS
Three customers accounted for more than 10% individually and approximately
40% in the aggregate of the Company's total revenue in 1998 (see Note 12). In
1997, no single customer accounted for more than 10% of the Company's total
revenues.
50
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION
In 1998, the Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information". Disclosures required by SFAS No. 131
are as follows (in thousands $):
The Company reports separately operating results in the following two principal,
strategic, business segments: Environmental analytical testing services and
mineralogical and geochemical testing activities. The Company evaluates segment
performance based on income (loss) from operations. A summary of segment and
related information for the years ended December 31, 1998 and 1997, is as
follows (in thousands $):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Environmental
Sales of Services $ 3,681 $ 4,042
Costs and Expenses $ 3,208 $ 3,625
Operating Profit $ 473 $ 417
Mineral
Sales of Services $ 2,559 $ 3,137
Costs and Expenses $ 2,868 $ 2,783
Operating $ (309) $ 354
Profit(Loss)
Corporate
Costs and Expenses $ 1,587 $ 1,068
Operating Loss $(1,587) $(1,068)
Consolidated
Sales of Services $ 6,240 $ 7,179
Costs and Expenses $ 7,663 $ 7,476
Operating Loss $(1,423) $ (297)
</TABLE>
51
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the Company's operations by geographic area for the years ended
December 31, 1998 and 1997, is as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Total sales of services
United States $3,941,000 $5,273,000
Mexico 503,000 685,000
Nicaragua 1,122,000 599,000
Peru 177,000 154,000
Spain 380,000 464,000
Colombia 117,000 4,000
---------- ----------
Total $6,240,000 $7,179,000
---------- ----------
---------- ----------
Loss from operations
before income taxes and after
minority interest in loss of
subsidiary
United States (includes loss
for Spain and Colombia) $ (993,000) $ (82,000)
Mexico (156,000) (87,000)
Nicaragua (82,000) (35,000)
Peru (165,000) (108,000)
---------- ----------
Total $(1,396,000) $ (312,000)
---------- ----------
---------- ----------
Long-Lived Assets
United States $ 260,000 $ 216,000
Mexico 25,000 16,000
Nicaragua 23,000 11,000
Peru 37,000 66,000
Eliminations (17,000) (17,000)
---------- ----------
Totals $ 328,000 $ 292,000
---------- ----------
---------- ----------
</TABLE>
During 1998, sales to three customers represented approximately $1,122,000,
$721,000 and $652,000 of the Company's total sales. At December 31, 1998,
accounts receivable from two of these customers totaled $196,000 and
$114,000. For the year ended December 31, 1997, there were no such
concentrations in sales or accounts receivable.
For the year ended December 31, sales from significant customers consisted of
the following:
<TABLE>
<CAPTION>
1998
----
<S> <C>
A (Foreign sales) 18.0%
B 11.6%
C 10.4%
</TABLE>
52
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company made cash payments for interest of $9,000 and $17,000 in 1998 and
1997.
The Company made no cash payments for income taxes in 1998 and $49,000 in 1997.
Supplemental disclosure of noncash investing and financing activities:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997
---- ----
<S> <C> <C>
Common stock issued for subscription
receivable $255,000 $ -
Common stock issued for acquisition
of certain assets of Shasta
Laboratories, Inc. 39,000 -
Capital lease obligations entered into
for property and equipment 97,000 -
Common stock granted to Management - 16,636
</TABLE>
14. CORPORATE REALIGNMENT EXPENSE
The Company recorded severance costs and other expenses associated with changes
in management personnel in 1997 of $131,000.
53
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART II
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
CONSOLIDATED FINANCIAL DISCLOSURE
Not applicable.
54
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Position with the Company Director
Name and affiliates Since
---- ------------------------- --------
<S> <C> <C>
J. Graham Russell..................Director, President and 1997
Chief Executive Officer
of the Company
R. Scott Asen......................Director of the Company 1996
Anthony R. Barringer...............Director of the Company 1991
J. Francis Lavelle.................Director of the Company 1996
C.F. Wasser, III...................Director of the Company 1991
</TABLE>
J. Graham Russell, 52, joined the Company as President, Chief Executive Officer,
and a Director on December 8, 1997. From January, 1995 until December 8, 1997,
Mr. Russell was an independent consultant to the environmental laboratory
industry. In February, 1996, he founded Chemical Management Services, L.L.C., an
innovative chemical recycling technology company. He remains a Principal and
majority owner of this company. Prior to January, 1995, Mr. Russell held a
number of executive positions with U.S based subsidiaries of The Ocean Group,
plc, a major British industrial services corporation, quoted on the London stock
exchange. His last assignment for The Ocean Group, plc, ran from January, 1985
until January, 1995, during which time he was President and CEO of National
Environmental Testing, Inc., which he built from start-up to the third largest
environmental testing company in the U.S. with revenues of nearly $50 million at
its peak. Mr. Russell is a British citizen. He has an MA in economic geography
from Cambridge University in the United Kingdom and an MBA from the Cranfield
Institute of Technology, one of Britain's largest business schools.
55
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
R. Scott Asen, 54, is a Director of the Company. Mr. Asen has been general
partner of Pioneer Associates, Pioneer III-A, Pioneer III-B and Pioneer IV,
venture capital investment funds, since 1981, 1983, and 1984, respectively.
Since 1983, Mr. Asen has been President of Asen and Co., Inc., an investment
management firm. Presently, Mr. Asen is also a director of Davox Corporation,
SeaMed Corporation and a number of privately held companies.
Dr. Anthony R. Barringer, 73, is a Director of the Company and the founder of
Barringer Technologies, Inc. (BTI) for which he was President and later
served as Chairman until he resigned in January, 1993, and Chief Executive
Officer until January, 1989. Since November, 1989, Dr. Barringer has been the
principal officer of Barringer Patents Inc., a technology development firm
not in competition with the Company. Dr. Barringer is also Chairman and Chief
Executive Officer of Barringer GeoSystems Inc., a company formed in August,
1994 for the development of airborne geophysical systems. This firm is not in
competition with the Company.
J. Francis Lavelle, 35, is a Director of the Company. Mr. Lavelle is the
founder and, since 1992, a Managing Director of The Nassau Group, Inc. a
boutique investment banking and strategic consulting firm which focuses on
the environmental industry. Prior to establishing The Nassau Group, Mr.
Lavelle was an executive with Baring Brothers & Co., Inc., a UK based firm,
for five years, his last position being Vice President responsible for
international and domestic mergers and acquisitions. Mr. Lavelle joined
Baring Brothers from Booz, Allen & Hamilton where his fields of expertise
were international merger and acquisition advice as well as business strategy
development. He graduated CUM LAUDE from Princeton University after
completing an A.B. degree at the Woodrow Wilson School of Public and
International Affairs.
C.F. Wasser, III, 47, is a Director of the Company. From December, 1982 to
January, 1993, Mr. Wasser was Senior Vice President of Sales for Kidder
Peabody & Co., Inc. in Minneapolis, Minnesota. He served as a Senior Vice
President for Paine Webber in Wayzata, Minnesota from January, 1993 to
October 1995 and Senior Vice President - Investments for EVEREN Securities,
Inc. in Minneapolis, Minnesota from October, 1995 to January, 1998.
56
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
All five directors are elected by the holders of the Company's Common Stock to
serve one year terms or until their successors shall be elected and shall
qualify.
There are no family relationships between any of the directors and officers of
the Company.
57
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the total remuneration, on an accrued basis,
during the Company's last fiscal year ended December 31, 1998 for the Chief
Executive Officer and the executive officers whose total cash and non-cash
compensation exceeded $100,000 and for their prior two years remuneration.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
----------------------------------- ---------------------- --------
Other
Annual Restricted All Other
Name and Compen- Stock LTIP Compen-
Principal sation Award(s) Option/ Payouts sation
Position Year(1) Salary($) Bonus($) ($) ($) SARs(#)(2) ($) ($)(3)
- -------- ------- --------- -------- ----------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Graham Russell 1998 155,000 - N/A N/A - N/A N/A
President/CEO(4) 1997 7,692 - N/A N/A - N/A N/A
John S. Lovell 1998 90,000 - N/A N/A 15,000 N/A N/A
Chief Technical 1997 29,800 - N/A N/A - N/A N/A
Officer and (5)
Secretary
Vern Peterson 1998 104,501 - N/A N/A - N/A 3,734
Vice President(6) 1997 94,370 10,000 23,662 N/A 18,000 N/A 7,468
1996 82,597 23,662 N/A N/A 18,000 N/A 7,468
Former Executive Officers
Robert H. Walker 1997 111,800 - 79,878 N/A - N/A 14,035
Former President 1996 111,800 44,364 N/A N/A 60,000 N/A 13,733
and CEO (7)
Charles E. Ramsay 1997 73,942 - 19,465 N/A - N/A 10,416
Former Chief 1996 70,500 23,101 N/A N/A 12,000 N/A 9,751
Financial Officer (8)
</TABLE>
(1) Periods presented are for the year ended December 31.
(2) Number of shares of the Company's common stock subject to options granted
during the year indicated.
(3) Represents employer contributions for insurance, disability, 401K and a car
allowance.
(4) Mr. Russell joined the Company on December 8, 1997. Mr. Russell's salary
for fiscal year 1998 was $155,000. Mr Russell's salary for fiscal year 1999
is $110,000 cash and $15,000 in common stock.
58
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
(5) Dr. Lovell was acting president and CEO for the Company from September 22,
1997 to December 7, 1997. Dr. Lovell is currently Chief Technical Officer
and Secretary of the Company.
(6) Other annual compensation for 1997 was a result of Mr. Peterson selling
16,400 shares of common stock which he had acquired through exercising
incentive stock options during 1997. Mr. Peterson's employment terminated
with the Company on January 27, 1999.
(7) Mr. Walker's employment terminated on October 16, 1997. Amounts shown as
Other Annual Compensation consists of the following:
<TABLE>
<S> <C>
16,636 shares of common $44,751
stock exchanged for 25,000
non-qualified stock options
Company buy-out of outstanding 18,175
exercisable stock options
at $2.00 per option
less option price
25,000 options @ $.375
8,000 options @ $1.10
Company's buy-back of common 11,000 stock, which Mr. Walker
acquired through exercised stock options in 1997, at $2,00 per
share less option price
10,000 shares @ $1.10
Accrued Vacation 5,952
-------
Total $79,878
-------
-------
</TABLE>
Additionally, the Company continued to pay approximately $37,000 in
salary and fringe benefits to Mr. Walker through April 16, 1998.
59
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
(8) Mr. Ramsay's employment terminated on December 19, 1997. Amounts shown
as Other Annual Compensation consist of the following:
<TABLE>
<S> <C>
Accrued Vacation $ 7,225
Company's buy-back of common 6,800
stock, which Mr. Ramsay
acquired through exercised
stock options in 1997, at
$1.75 less option price
8,000 shares at $.85
Company's buy-out of outstanding 5,400
exercisable stock options
at $1.75 per option
less option price
6,400 option @ $.85
-------
Total $19,465
-------
-------
</TABLE>
Additionally, the Company continued to pay approximately $40,000 in salary and
fringe benefits to Mr. Ramsay through June 19, 1998.
Bonuses for Mr. Russell and other individuals are determined by the Compensation
Committee of the Board of Directors based on overall Company performance.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
-----------------------------------------------------------------------------------------
Individual Grants
-----------------------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options/SARs
Options/ Granted to Exercise
SARs Employees in or Base Expiration
Name Granted Fiscal Year Price($/Sh) Date
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John S. Lovell 15,000 60% $.50 06/01/2003
</TABLE>
60
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
AGGREGATE OPTIONS EXERCISED IN 1998 AND OPTION VALUES AT DECEMBER 31, 1998.
The following table sets forth certain information regarding options to purchase
shares of the Company's common stock exercised during the Company's 1998 fiscal
year and the number and value of exercisable and unexercisable options to
purchase shares of the Company's common stock held as of the end of the
Company's 1997 fiscal year by the executive officers of the Company named in the
Summary Compensation Table:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized($)(1) Unexercisable Unexercisable(2)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John S. Lovell - - 7,500/7,500 N/A
Vern K. Peterson - - 12,400/7,200 N/A
</TABLE>
(1) Value realized is equal to the difference between the fair market value per
share of common stock on the date of exercise and the option exercise price
per share multiplied by the number of shares acquired upon exercise of an
option.
(2) Value of exercisable/unexercisable in-the-money options is equal to the
difference between the fair market value per share of common stock of $.25
at December 31, 1998, and the option exercise price per share multiplied by
the number of shares subject to options.
61
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
STOCK OPTIONS
1989 INCENTIVE STOCK OPTION PLAN 1989
The 1989 Incentive Stock Option Plan (the "Plan") is designed to provide
incentives for employees who may or may not be key employees, as well as
officers and directors who are also employees of the Company and its
subsidiaries, by providing up to 200,000 shares of the Company's common stock
issuable pursuant to grants.
The Plan is administered by a Committee of at least three directors appointed
by the Board of Directors. The Committee is authorized to determine the
individuals to whom, and the times at which, options will be granted, the
number of shares subject to each grant, the applicable restriction period,
the purchase price for the shares subject to the option, and to specify such
other terms and provisions of any grants of options as it deems necessary or
advisable. However, the term of the options may not be for more than five
years and the purchase price per share shall not be less than the market
value of such shares at the time of grant. Additionally, options granted
under the Plan typically vest 60% after two years of continuous employment of
the optionee after the date of grant and 20% each year of continuous
employment thereafter. During 1998, no options were exercised. During 1997,
options to purchase 43,400 shares of common stock at $.90 per share were
exercised. At December 31, 1998 and 1997, options to purchase 3,600 and
5,600, respectively, shares of common stock are exercisable under this plan.
The Plan will terminate in December 1999, except for outstanding options under
the Plan, which will remain in effect until they have been exercised or shall
have been expired by their terms.
1997 LONG-TERM INCENTIVE PLAN
Stockholders approved the 1997 Long-Term Incentive Plan ("1997 Plan"). The
1997 Plan is designed to provide key management employees of the Company
with added incentives to continue in the long-term service of the Company and
to create in such employees a more direct interest in the future success of
the Company by relating compensation to increases in shareholder value, so
that the income of key management employees is more closely aligned with the
income of the shareholders of the Company. The 1997 Plan is also designed to
attract key employees and to retain and motivate participating employees by
providing an opportunity for investment in the Company. The 1997 Plan is
administered by the Board of Directors or through an Incentive Plan Committee
appointed by the
62
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
Board of Directors and consisting of not less than two persons, all of whom
must be non-employee directors. The 1997 Plan reserves 120,000 shares of the
Company's common stock for issuance. Any shares that are the subject of an
award under the 1997 Plan which have lapsed or expired unexercised or
unissued will automatically become available for reissue under the 1997 Plan.
The exercise 345prices, vesting schedules, and other pertinent terms of the
1997 Plan will be determined by the Committee, but no exercise price for an
incentive stock option will be less than the fair market value of the stock
on the date the option is granted. There were no options granted under this
plan in 1998 and 1997.
OTHER STOCK OPTIONS
The Company also grants non-qualified stock options to management, outside
directors, and consultants as authorized by the Board of Directors. These
options are exercisable at varying times from date of grant and expire five
years from date of grant. As of December 31, 1998, all non-qualified stock
options have been granted at an exercise price at or in excess of the current
market value at the time of grant.
Non-qualified stock options to purchase 22,500 shares of common stock at $1.00
were canceled in 1997 and non-qualified stock options to purchase 10,000 shares
of common stock at $1.00 were exercised in 1997. Also during 1997, 25,000
non-qualified stock options held by a former member of management to purchase
common stock at $.90 per share were exchanged for 16,636 shares of common stock
under a cashless exercise. During 1998, stock options to purchase 81,500 shares
expired and were cancelled and stock options to purchase 25,000 shares of common
stock at an exercise price of $.50 per share were granted. Of the 25,000 stock
options, 7,500 vested immediately; 7,500 will vest on January 27, 2000, and
10,000 vest 20% per year until June 1, 2003. As of December 31, 1998 and 1997,
non-qualified stock options to purchase 37,500 and 101,500 shares of common
stock, respectively, were exercisable.
NON-EMPLOYEE DIRECTORS PLAN
Stockholders approved the Non-Employee Directors Stock Option Plan (the
"Non-Employee Directors Plan"). The Non-Employee Directors Plan provides for the
grant of stock options to non-employee directors of the Company and its
affiliated corporations in order to encourage and provide incentives for high
level performance by the non-employee directors of the Company. The maximum
number of shares of common stock that may be subject to stock options under
63
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
the Non-Employee Directors Plan is 30,000 shares. Upon adoption of the
non-Employee Directors Plan or upon initial election or appointment of a
non-employee director to the Board of Directors of the Company, he or she shall
be granted a stock option to purchase 1,000 shares of common stock. In addition,
each non-employee director shall be granted a stock option to purchase 1,000
shares of common stock effective as to each anniversary date of the initial
grant of a stock option to such director. Each stock option granted under the
Non-Employee Directors Plan shall be vested one-third on the date of grant,
one-third upon the first yearly anniversary date of a grant and the final
one-third upon the second yearly anniversary date of the grant. The purchase
price per share of common stock for the shares to be purchased pursuant to the
exercise of a stock option will be 100% of the fair market value of the common
stock on the date of grant of the option. No options granted under this plan in
1998 or 1997.
401(k) CASH OR DEFERRED COMPENSATION PLAN
In 1994, the Company established a tax-qualified 401(k) cash or deferred
compensation plan that covers all employees of the Company who have completed
one year of service and attained age 21. Participants are permitted, within the
limitations imposed by the Internal Revenue Code of 1954, as amended, to make
pretax contributions. Participants are always fully vested in their accounts
under the Plan. The Company makes matching contributions equal to 100% of the
first 2% of an employee's salary and 50% of the next 5% of an employee's salary,
which contributions vest in the employee proportionately over a period of six
years. Amounts accrued pursuant to the Plan for the benefit of executive
officers are included in the Summary Compensation Table under the column "All
Other Compensation". Prior to 1994, the Company was part of Barringer
Technologies Inc.'s tax qualified 401(k) plan.
COMPENSATION OF DIRECTORS
The non-employee directors were granted 25,000 shares of common stock plus
reimbursement of expenses in 1998. The shares of common stock were issued in
February 1999.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with the Operations
Director of the Reno, NV laboratory for a period of two years commencing
November 24, 1998 at an annual base salary of $65,000 with potential for
bonuses and increases in the base salary at the end of year one and year two.
The contract also provides for severance compensation if the employee is
terminated without cause for a period of two years from the date of the
agreement.
The Company has entered into an agreement with a finance and accounting
independent contractor which includes compensation of $2,500 per week. Also
included is a cash bonus incentive and Stock Appreciation Rights for 30,000
shares of the Company's common stock upon completion of agreed upon
assignments and warrants to purchase 10,000 shares of the Company's common
stock upon settlement of the EPA investigation.
64
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of April 8, 1999, the number of outstanding
options and warrants included with the number of shares of common stock owned by
each officer and director of the Company and all directors and officers as a
group and any persons (including any "group" as used in Section 13(d)(3) of the
Securities Exchange Act of 1934) known by the Company to own beneficially 5% or
more of such securities. As of April 8, 1999, there were 6,562,871 shares of the
Company's common stock issued and outstanding, 86,600 outstanding options to
purchase the Company's common stock, and 105,000 outstanding warrants to
purchase the Company's common stock.
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner of Common Stock of Class
- ------------------------ ----------------- --------
<S> <C> <C>
J. Graham Russell.................... 333,333 5.1
Barringer Laboratories, Inc.
15000 W. Sixth Ave., Suite 300
Golden, Colorado 80401
John Lovell, PhD (8) 146,389 2.2
Barringer Laboratories, Inc.
150000 W. Sixth Ave., Suite 300
Golden, Colorado 80401
R. Scott Asen(1)(2)(3)(4)(5)(7)...... 2,564,961 39.1
Asen and Co., Inc.
224 East 49th St.
New York, NY 10017
Anthony R. Barringer(7).............. 62,000 1.0
25060 Montane Drive West
Golden, Colorado 80401
J. Francis Lavelle(6)(7)............. 1,499,635 22.9
The Nassau Group, Inc.
18 Kings Hwy. North
Westport, CT 06880
</TABLE>
65
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT (CONTINUED)
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner of Common Stock of Class
- ------------------------ ----------------- ---------
<S> <C> <C>
C.F. Wasser, III(5)(7)............... 166,438 2.5
12290 Chinchilla Ct.
Rosemont, Minnesota 55068
All directors and officers as a group
consisting of six (6) persons...... 4,772,756 72.7
</TABLE>
- -------------------------------------
*Less than 1%
(1) Includes 50,257 shares of the Company's common stock held by an account
titled,"Dean Witter Reynolds C/F David V. Foster IRA Rollover dated
2/17/95". Mr. Asen manages this account and disclaims beneficial ownership
of all shares owned by this account.
(2) Includes 128,333 shares of the Company's common stock held by an account
titled,"Asen and Co., Inc. FBO SDFJ, Inc.". Mr. Asen manages this account
and disclaims beneficial ownership of all shares owned by this account.
(3) Includes 128,333 shares of the Company's common stock held by an account
titled "Woodmere Count Investments". Mr. Asen manages this account and
disclaims beneficial ownership of all shares owned by this account.
(4) Includes 80,555 shares of the Company's common stock held by an account
titled "Nicole Miller & Kim Taipale JT Ten". Mr. Asen manages this account
and disclaims beneficial ownership of all shares owned by this account.
(5) Includes 472,222 shares of the Company's common stock held by an account
titled, "AB Associated LP". Mr. Asen manages this account and disclaims
beneficial ownership of all shares owned by the partnership except those
shares in which he has a pecuniary interest. That number of shares will be
determined by the final performance of the partnership.
66
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
(6) Includes 50,469 of the Company's warrants. The warrants were issued to Mr.
Lavelle as an inducement to Mr. Lavelle to become involved in the Company
and also an inducement to purchase 10% of the outstanding shares of the
Company's common stock. Each warrant entitles Mr. Lavelle to purchase one
share of the Company's common stock upon an average payment of $1.11. Each
warrant is exercisable for a period of five (5) years after date of issue.
As of December 31, 1998 and 1997, all warrants have been issued.
(7) Includes 25,000 shares of common stock issued in 1998 in consideration of
director's compensation.
(8) Includes options to purchase 15,000 shares of the Company's common stock at
$.50 per share. 7,500 of the options vest immediately and 7,500 options
vest on January 27, 2000. At December 31, 1998, none of the options had
been exercised.
67
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective April 30, 1992 the Company sold all the common stock of its Canadian
subsidiary, Barringer Laboratories, Ltd to Philip Environmental Ltd. The Company
used the net proceeds to repay $1,662,000 of short-term borrowings plus related
interest including the portion of such indebtedness which was due and owed
Barringer Technologies, Inc. ("BTI"), the Company's then largest stockholder.
Principal and interest under this agreement were originally due on May 31, 1994.
Interest was payable semi-annually at a bank's prime rate plus 2%. In 1994, BTI
made a $136,000 principal payment on its note due to the Company. Additionally,
BTI paid $93,000 to Philip Environmental on behalf of the Company. This payment
was related to the warranties, representations, and guarantees made by the
Company in the 1992 sale of the Company's Canadian subsidiary.
In connection with a new line of credit in 1994, the Company agreed to extend
BTI's note due date to May 31, 1995 for BTI's guarantee of the line of credit
and increase the interest on the note to a bank's prime rate plus 4% (12.5% at
December 31, 1994) payable monthly from a bank's prime rate plus 2% payable
semi-annually.
Effective December 13, 1995 under an agreement dated December 8, 1995, the
Company had purchased from BTI 647,238 shares of the Company's common stock for
$809,000, which consisted of a cash payment of $300,000 and cancellation of
intercompany obligations (note and intercompany Account Receivable) in the
amount of $509,000. Additionally, 88,260 shares of the Company's common stock
owned by BTI were placed in an escrow account, to be returned to BTI if the
Company's 1996 earnings were at least 13% higher than 1995 earnings. The
Company's 1996 earnings were not 13% higher than 1995 earnings, and therefore
the 88,260 shares were reverted back to the Company with a purchase price per
share of $1.10. BTI had agreed not to transfer its remaining 26% interest in the
Company until January 2, 1997, subject to certain conditions, and had agreed to
grant the Company a right of first refusal with respect to such shares until
January 2, 1997, subject to certain conditions. The Intercompany Agreement
between the Company and BTI was terminated on December 13, 1995.
68
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
BTI terminated all voting trusts, proxy arrangements, and all other arrangements
and agreements of any kind or nature to which it was a party under which it was
authorized to vote shares of the Company. BTI did not enter into any voting
trusts, proxy agreements, and any other agreements relating to shares of the
Company.
Effective October 28, 1996 under an Agreement dated October 7, 1996, BTI sold
all of its remaining ownership of the Company's common stock, net of the 88,260
escrowed shares of the Company's common stock which were returned to the
Company.
As of November 18, 1996 BTI sold all of its remaining ownership of the Company's
outstanding Common Stock.
Effective May 17, 1996, the Company entered into an exclusive agreement with The
Nassau Group, Inc. ("Nassau") of Westport, Connecticut, to provide the Company
with financial advisory services and investment banking support over the course
of the next two years. Nassau provides assistance in terms of evaluating
strategic growth and acquisition opportunities, evaluating financing
alternatives and helping to arrange for the Company's future capital needs. The
Company granted warrants to individuals associated with Nassau as an inducement
to such individuals to become involved in the Company and also an inducement to
purchase 10% of the outstanding shares of the Company's common stock. Such
warrants will be exercisable for a period of five years after date of issue and
entitle these individuals to purchase 80,000 shares and 25,000 shares of common
stock at $1.06 per share and $1.25 per share, respectively. Messrs. Lavelle and
Holmes, Directors of the Company, are principals of Nassau. In connection with
the Company's April 1998 financing described in Item 7, Nassau waived any
compensation rights which it may have had.
On December 4, 1998, the Company completed the acquisition of certain assets of
Shasta Geochemistry Laboratory, Inc. ("Shasta"), an analytical services company,
principally engaged in testing for the mineral exploration industries, in an all
stock transaction, for 150,000 shares of the Company's common stock valued at
$39,000 and contingent future consideration of additional common stock, not to
exceed an additional 150,000 shares, in the event certain goals are met). The
Company will issue one additional share of its common stock for each $2.00 that
total gross revenues collected by the company from Shasta customers during the
first year after closing exceed $300,000, and during the second year after
closing exceed $600,000. The purchase price allocation is preliminary and may
change based on the resolution of these contingencies.
69
<PAGE>
The assets acquired include customer lists, a noncompetition agreement among the
President of Shasta and the Company and all goodwill of Shasta.
The operations of Shasta are incorporated into the operations of the Company's
27,000 square foot laboratory located in Reno, Nevada. The Company has not
acquired any assets nor assumed any liabilities of Shasta other than those
described above.
The acquisition was accounted for as a purchase with the assets valued at the
fair value of the common stock issued by the Company and this value has been
allocated to customer list (50%) and noncompetition agreement (50%) and is being
amortized over 4 and 2 years, respectively.
Effective April 1998, the Company completed the sale of 1,666,666 shares of
restricted common stock at a price of $.30 per share for $500,000, less issuance
costs of $9,000, to provide additional working capital. In addition, effective
December 1998, the Company finalized an agreement to sell 3,055,556 shares of
restricted common stock at a price of $.18 per share for $550,000 consisting of
$295,000 of cash proceeds and stock subscription receivable of $255,000 to
provide additional working capital. Subsequent to December 13, 1998, all stock
subscriptions receivable were collected and the shares of common stock were
issued.
The shares were issued at prices less than the market price per share on the
effective dates. The difference between the per share transaction prices, as
adjusted for dilution, and the issuance price has been recorded as a $183,000
and a $92,000 noncash charge, respectively, and are included in Selling, General
and Administrative Expenses in the Consolidated Statements of Operations for the
year ended December 31, 1998.
Among the subscribers of the two placements are three members of the Company's
board of directors, two of whom are already significant shareholders. The
Company claims exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
70
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART III
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
23.1 Consent of BDO Seidman, LLP
(b) REPORTS ON FORM 8-K.
The following reports on Form 8-K were filed:
Asset Purchase Agreeement between Shasta Geochemistry
Laboratory, Inc. and Barringer Laboratories, Inc. filed on
December 17, 1998
Financial Statements of Business Acquired and Pro Forma
Financial Information filed on February 17, 1999
71
<PAGE>
SIGNATURES
In accordance with 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.
BARRINGER LABORATORIES, INC.
Date: April 14, 1999
By: /s/ J. Graham Russell
----------------------------
J. Graham Russell, President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLES OR CAPACITIES DATE
- --------- -------------------- ----
<S> <C> <C>
/s/ J. Graham Russell Director, President and April 14, 1999
- ------------------------ Chief Executive Officer
J. Graham Russell (Principal Executive and
Financial Officer)
/s/ R. Scott Asen Director April 14, 1999
- ------------------------
R. Scott Asen
/s/ Anthony R. Barringer Director April 14, 1999
- ------------------------
Anthony R. Barringer
/s/ C.F. Wasser, III Director April 14, 1999
- ------------------------
C.F. Wasser, III
/s/ J. Francis Lavelle Director April 14, 1999
- ------------------------
J. Francis Lavelle
</TABLE>
72
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Exhibit 23.1 Consent of BDO Seidman, LLP. 76
</TABLE>
73
<PAGE>
SIGNATURES
In accordance with 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.
BARRINGER LABORATORIES, INC.
Date: April 14, 1998
By: /s/ J. Graham Russell
---------------------------
J. Graham Russell, President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Titles or Capacities Date
- --------- -------------------- ----
<S> <C> <C>
/s/J. Graham Russell Director, President and April 14, 1999
- ---------------------- Chief Executive Officer
J. Graham Russell (Principal Executive
Officer)
/s/R. Scott Asen Director April 14, 1999
- ----------------------
R. Scott Asen
/s/Anthony R. Barringer Director April 14, 1999
- ----------------------
Anthony R. Barringer
/s/C.F. Wasser, III Director April 14, 1999
- ----------------------
C.F. Wasser, III
/s/J. Francis Lavelle Director April 14, 1999
- ----------------------
J. Francis Lavelle
</TABLE>
74
<PAGE>
EXHIBIT 23.1
CONSENT OF BDO SEIDMAN, LLP
75
<PAGE>
EXHIBIT 23.1
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Barringer Laboratories, Inc.
Golden, Colorado
We hereby consent to the incorporation by reference in this Registration
Statement of our report dated April 8, 1999, relating to the consolidated
financial statements of Barringer Laboratories, Inc. and subsidiaries appearing
in the Company's Annual Report on Form 10-KSB for the year ended December 31,
1998.
/s/BDO SEIDMAN, LLP
Denver, Colorado
April 14, 1999
76
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 173,000
<SECURITIES> 0
<RECEIVABLES> 1,064,000
<ALLOWANCES> 34,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,739,000
<PP&E> 3,292,000
<DEPRECIATION> (2,964,000)
<TOTAL-ASSETS> 2,318,000
<CURRENT-LIABILITIES> 900,000
<BONDS> 0
0
0
<COMMON> 34,000
<OTHER-SE> 1,313,000
<TOTAL-LIABILITY-AND-EQUITY> 2,318,000
<SALES> 6,240,000
<TOTAL-REVENUES> 6,240,000
<CGS> 5,178,000
<TOTAL-COSTS> 7,663,000
<OTHER-EXPENSES> 22,000
<LOSS-PROVISION> 24,000
<INTEREST-EXPENSE> 11,000
<INCOME-PRETAX> (1,401,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,396,000)
<EPS-PRIMARY> (.57)
<EPS-DILUTED> (.57)
</TABLE>
