SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission
March 31, 2000 File Number 0-8241
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Barringer Laboratories, Inc.
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(Name of small business issuer in its charter)
Delaware 84-0951626
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15000 West 6th Avenue, Suite 300, Golden, Colorado 80401-5047
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(Address of principal executive office)
Issuer's telephone number, including area code (303) 277-1687
----------------
Number of shares outstanding as of June 13, 2000 - 16,803,180 of Common Stock,
$.01 par value.
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BARRINGER LABORATORIES, INC.
INDEX
Part I - Financial Information
Item 1 Financial Statements
- Consolidated Balance Sheets as of March 31, 2000 (Unaudited) and
December 31, 1999
- Consolidated Statements of Operations (Unaudited) for the Three
Months Ended March 31, 2000 and 1999;
- Consolidated Statements of Cash Flows (Unaudited) for the Three
Months Ended March 31, 2000 and 1999;
- Notes to Consolidated Financial Statements;
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II - Other Information
Signatures
Page 2
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<TABLE>
<CAPTION>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
--------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ................................. $ 13,000 $ 92,000
Trade receivables, less
allowance of $118,000 and
$116,000 for doubtful accounts .......................... 451,000 705,000
Prepaid expenses and other ................................ 79,000 92,000
---------- ----------
Total Current Assets .................................. 543,000 889,000
---------- ----------
Property and Equipment:
Machinery and equipment ................................... 1,376,000 1,375,000
Machinery and equipment under
capital lease obligations ............................... 234,000 234,000
Leasehold improvements .................................... 519,000 519,000
Office furniture and equipment ............................ 60,000 59,000
---------- ----------
2,189,000 2,187,000
Less accumulated depreciation
and amortization ........................................ 2,091,000 2,054,000
---------- ----------
Net Property and Equipment ............................ 98,000 133,000
---------- ----------
Other Assets ................................................ 34,000 34,000
---------- ----------
Total Assets ................................................ $ 675,000 $1,056,000
========== ==========
See accompanying notes to consolidated financial statements.
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<CAPTION>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
-------- ------------
(Unaudited)
<S> <C> <C>
Liabilities and Shareholders' Deficit
Current Liabilities:
Line of Credit ..................................... $ 285,000 $ 267,000
Subordinated convertible notes
payable .......................................... 589,000 373,000
Trade accounts payable ............................. 433,000 562,000
Accrued liabilities:
Payroll, compensation and
related expenses ............................... 135,000 178,000
Accrued property tax ............................. 37,000 38,000
Other ............................................ 250,000 342,000
Current maturities of obligations
under capital leases ............................. 41,000 41,000
Net liabilities of discontinued
operations ....................................... 502,000 627,000
----------- -----------
Total Current Liabilities ........................ 2,272,000 2,428,000
Obligations under capital leases,
less current maturities ............................ 18,000 31,000
----------- -----------
Total Liabilities ................................ 2,290,000 2,459,000
----------- -----------
Shareholders' Deficit:
Preferred stock, $2.00 par value,
1,000,000 shares authorized;
none issued ...................................... -- --
Common stock, $0.01 par value,
shares authorized, 50,000,000;
issued and outstanding 6,803,180
and 6,708,982 .................................... 68,000 68,000
Treasury stock, at cost ............................ (5,000) (5,000)
Additional paid-in capital ......................... 4,007,000 3,752,000
Accumulated deficit ................................ (5,685,000) (5,218,000)
----------- -----------
Total Shareholders' Deficit ...................... (1,615,000) (1,403,000)
----------- -----------
Total Liabilities and
Shareholders' Deficit .............................. $ 675,000 $ 1,056,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
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<TABLE>
<CAPTION>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31
---------------------------
2000 1999
---- ----
<S> <C> <C>
Sales of Services ........................................ $ 793,000 $ 930,000
Cost of Services Sold .................................... 751,000 642,000
----------- -----------
Gross Profit ............................................. 42,000 288,000
Selling, General and
Administrative Expenses, (Including
non-cash compensation of $25,000
and $0, respectively) ................................... 273,000 335,000
----------- -----------
Operating Loss ........................................... (231,000) (47,000)
Other Income (Expense):
Interest income ....................................... -- 1,000
Interest expense ...................................... (21,000) (8,000)
Non-cash interest expense ............................. (215,000) --
----------- -----------
Total Other Income (Expense) ............................. (236,000) (7,000)
----------- -----------
Loss from Continuing Operations .......................... (467,000) (54,000)
Loss from discontinued operations
of mineralogical and geochemical
testing business segment ................................ -- (392,000)
----------- -----------
Net Loss ................................................. $ (467,000) $ (446,000)
=========== ===========
See accompanying notes to consolidated financial statements.
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<CAPTION>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31
---------------------------
2000 1999
---- ----
<S> <C> <C>
Per Share Data:
Net Loss per share
Basic and Diluted:
Loss from Continuing
Operations ....................................... $ (.07) $ (.01)
Loss from Discontinued
Operations ....................................... -- (.06)
----------- -----------
Net Loss ............................................ $ (.07) $ (.07)
=========== ===========
Weighted average common shares Outstanding:
Basic and Diluted .................................... 6,764,310 6,562,871
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6
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<TABLE>
<CAPTION>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
Three Months Ended March 31
------------------------------
2000 1999
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net loss ........................................................... $(467,000) $(446,000)
Items not affecting cash
Non-cash compensation and interest
expense ........................................................ 240,000 --
Depreciation and amortization
expense ........................................................ 37,000 33,000
Bad debt expense ................................................. 3,000 7,000
Other ............................................................ 8,000 (19,000)
Increase (decrease) in operating
Assets net of operating liabilities ............................ (119,000) 58,000
--------- ---------
Cash Used In Operating Activities ................................ (298,000) (367,000)
--------- ---------
Cash Flows Used In Investing Activities
Purchase of property and
equipment ........................................................ (2,000) (1,000)
--------- ---------
Cash Flows From Financing Activities
Borrowing under line of credit ..................................... 18,000 --
Proceeds from issuing convertible
Notes payable .................................................... 216,000 --
Proceeds from sale of common stock ................................. -- 255,000
Payments of capital lease obligations .............................. (13,000) (24,000)
--------- ---------
Cash Provided by Financing Activities .............................. 221,000 231,000
--------- ---------
Decrease in cash ................................................... (79,000) (137,000)
Cash and cash equivalents
- beginning of period ............................................ 92,000 173,000
--------- ---------
Cash and cash equivalents
- end of period .................................................. $ 13,000 $ 36,000
========= =========
See accompanying notes to consolidated financial statements.
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<CAPTION>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
(Continued)
Three Months Ended March 31
------------------------------
2000 1999
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<S> <C> <C>
Decrease (increase) in
operating assets net of
operating liabilities
Trade receivables ................................................ $ 253,000 $ (87,000)
Other current assets ............................................. 13,000 (138,000)
Accounts payable and
accrued liabilities ............................................ (260,000) (13,000)
Net liabilities of discontinued
operations ..................................................... (125,000) 296,000
--------- ---------
Total, net ......................................................... $(119,000) $ 58,000
========= =========
Cash paid during the
period for interest .............................................. $ 21,000 $ 8,000
========= =========
Cash paid during the
period for income taxes .......................................... $ -- $ --
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 8
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated interim financial statements include the accounts of
Barringer Laboratories, Inc. and its subsidiaries, and have been prepared
by the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
These statements reflect all adjustments consisting of normal recurring
adjustments, which in the opinion of management, are necessary for their
presentation of the information contained herein.
The accounting policies followed by the Company are set forth in the Notes
to Consolidated Financial Statements in the 1999 audited financial
statements of Barringer Laboratories, Inc. and subsidiaries included in its
Annual Report on Form 10-KSB for the year ended December 31, 1999.
The Form 10-KSB should be read in conjunction herewith. The consolidated
financial statements of the Company for the three months ended March 31,
1999 have been restated to give retroactive affect to the Company's
discontinued operations (see Note 8).
2. Management's Plan
The Company's operating plan for 1999 focused on revitalizing its Mineral
Division, which had suffered a steep decline in revenue during 1998, due to
the depressed level of worldwide mineral exploration activity. Conditions
in this market continued to deteriorate during 1999 and the Company
determined to exit this business (see Note 8).
The Company entered into an agency agreement with Inspectorate Griffith
USA, Inc. (Inspectorate) effective October 15, 1999. Under the terms of the
agreement, the Company transferred all of its domestic and international
mineral testing customer contracts, while retaining existing trade accounts
receivable, to Inspectorate along with the right to use the Licensed Mark
for promotional marketing and sales activity. In consideration, the Company
is entitled to a commission of 2 1/2% of payments received by Inspectorate
Page 9
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
pursuant to the contracts for a period of three years. No commission has
been recorded or received from Inspectorate as of December 31, 1999 or
March 31, 2000. In addition, Inspectorate has hired certain of the
Company's employees and acquired certain fixed assets at fair market value.
The Company has recorded a loss as of December 31, 1999 on disposal of this
segment of $1,086,000, which includes all foreign investments and an
immaterial minority interest.
The Company's intent is to focus on the environmental testing services
business.
As of March 31, 2000, the Company had a net working capital deficiency of
$1,729,000. This net working capital deficiency resulted principally from a
net loss of $2,795,000 and $467,000 (including depreciation and other
non-cash charges) for the year ended December 31, 1999 and the quarter
ended March 31, 2000, respectively. Also contributing to the working
capital deficiency was the line of credit of $285,000, subordinated
convertible notes payable of $589,000, net liabilities of discontinued
operations of $502,000 and trade accounts payable and accrued expenses of
$850,000.
The Company's current cash requirements to sustain its operations for the
year 2000 are estimated to be approximately $600,000. The Company expects
that these requirements will be provided by a combination of cash generated
from operations, cash provided by the Company's line of credit based upon
eligible domestic accounts receivable, and cash from short-term debt and/or
equity financings with existing shareholders.
To address its funding requirements, the Company has sold shares of its
common stock and has issued convertible notes. From January through March
31, 2000 the Company issued $216,000 of subordinated convertible notes. All
convertible subordinated notes outstanding totaling $600,000 were converted
into 10,000,000 shares of common stock in April 2000. The Company
recognized $215,000 of compensatory non-cash interest expense in connection
with the sale of the notes, as the notes were convertible at a discount to
market into common stock. During April 2000, an additional $100,000 of
subordinated convertible notes were sold to certain existing stockholders
and management under on the same terms and conditions.
There can be no assurance that any funds required during the next twelve
months or thereafter can be generated from operations or, if such required
funds are not internally generated, that funds will be available from
Page 10
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
external sources such as debt or equity financings or other potential
sources. The lack of additional capital could force the Company to
substantially curtail or cease operations and would, therefore, have a
material adverse effect on its business. Further, there can be no assurance
that any such required funds, if available, will be available on attractive
terms or that they will not have a significantly dilutive effect on the
Company's existing shareholders.
3. Accounting Policies
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 accounts
of the subsidiaries are a part of the discontinued operations and
intercompany balances and transactions have been eliminated in
consolidation. In connection with its discontinued operations, in 1999 the
Company wrote off the immaterial minority interest in its Peruvian
operations.
Loss Per Share
The Company follows the provision 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
income 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. In loss periods, dilutive common equivalent shares are excluded as
the effect would be anti-dilutive.
For the three months ended March 31, 2000 and 1999, dilutive common share
equivalents of 212,000 and 191,600 were not included in the computation of
diluted per share data because their effect was antidilutive. For the three
months ended March 31, 2000, debt convertible into 10,000,000 common shares
was not included in the computation of diluted loss per share because its
effect was anti-dilutive.
4. Income Taxes and Net Operating Loss Carryforwards
At March 31, 2000, 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
Page 11
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of approximately $6,300,000. Such net operating loss carryforwards expire
in varying amounts from 2000 to 2020 and are subject to certain limitations
under Section 382 of the Internal Revenue Code ("IRC") of 1986 as amended.
As of March 31, 2000 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.
5. Purchase of Treasury Stock
During November 1999, the Company purchased 27,777 shares of its common
stock from a former employee for $5,000. The shares of stock were cancelled
in April 2000.
6. Subordinated Convertible Notes Payable
During January through March 2000, the Company issued $216,000 of
subordinated, convertible notes pursuant to subscription agreements to
certain existing stockholders. Such notes are convertible into shares of
the Company's common stock at $.06 per share. Such stockholders include a
major stockholder who purchased notes of $86,000 and the Company's
President who purchased notes of $8,000. The notes, which are secured by
substantially all of the Company's assets, are subordinated to the line of
credit and are due two years from the date of issuance. The notes are
non-interest bearing. The Company recorded $215,000 in non-cash interest
expense in connection with the beneficial conversion feature of the notes.
Additional subordinated convertible notes totaling $11,000 were issued in
April 2000, convertible into common stock under the same terms and
conditions. In April 2000, the $600,000 in notes were converted into
10,000,000 shares of common stock.
During April and May 2000, $100,000 of additional subordinated convertible
notes were issued, which are convertible into 1,666,666 shares of common
stock at $.06 per share. The Company will recognize $100,000 of non-cash
interest expense in connection with the sale of the notes, as the
conversion of the notes to common stock was at a price below market value
at the date of issuance.
7. Line of Credit
On May 25, 1999, the Company entered into a General Credit and Security
Agreement with Spectrum Commercial Services, a division of Lyon Financial
Services, Inc. ("Spectrum").
Page 12
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the Credit Agreement, Spectrum agreed to provide a revolving line of
credit, secured by essentially all of the Company's assets. The Company
assigned substantially all collections on its domestic, and some foreign,
accounts receivable to Spectrum.
The Note is due on May 24, 2001, or earlier upon demand. The maturity date
of the line of credit may be extended after May 24, 2001 by the Company for
successive twelve month periods. Spectrum, upon certain specified
conditions, including the demand feature, may terminate the Credit
Agreement before the maturity date. However, the Credit Agreement provides
that if the Company terminates the Credit Agreement before the maturity
date, it will be liable for a prepayment charge equal to $3,800 times the
number of months until the maturity date.
The maximum amount which Spectrum will advance at any given time is jequal
to the lesser of:
- a borrowing base equal to 80% of the Company's eligible accounts
receivable, as defined in the agreement, or
- a maximum principal amount of $750,000.
In addition, Spectrum, in its sole discretion, may decrease or increase the
borrowing base percentage below or above the 80% described above.
Advances under the line of credit bear interest at the prime lending rate
(8.5% as of March 31, 2000) as defined in the agreement, plus 5.35%.
Provisions of the credit agreement indicate that, if the Company meets
required profit levels, as defined in the agreement, the interest rate will
be reduced to prime plus 4.35%. However, in no event will the interest rate
be less than 10% per year, and the interest payable for each calendar month
will be a minimum of $3,800, regardless of the amounts which have been
advanced. The profit levels were not met in 1999 or 2000.
The Company is obligated under the Credit Agreement for an administration
fee of $2,000 per calendar quarter and annual life maintenance fee of
$15,000.
The Credit Agreement also includes various affirmative and negative
covenants, which the Company must meet. The affirmative covenants include
the requirement that the Company maintain nominal profit levels before
income taxes or that restrict the net losses that the Company may incur.
The negative covenants prohibit or restrict, without Spectrum's consent,
such items as expenditures for fixed assets, indebtedness,
Page 13
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
recapitalizations, mergers, entry into new lines of business, employee
compensation and substantial changes in the present ownership, management
or business of the Company and require submission of Form 10-KSB within 90
days of year-end. At December 31, 1999, the Company did not comply with the
nominal profit and financial statement covenants and received waivers of
the defaults. Additionally, Spectrum consented to certain transactions
prohibited by the agreement, including the issuance of the subordinated,
convertible notes payable and the repurchase of a stockholders shares. The
Company is in compliance will all covenants as of March 31, 2000. As of
March 31, 2000, $285,715 is outstanding under this agreement.
8. Discontinued Operations
Effective September 30, 1999, the Company disposed of its mineralogical and
geochemical testing business segment. Accordingly, this segment has been
presented as a discontinued operation as of the year ended December 31,
1999 and for the three months ended March 31, 2000 and March 31, 1999.
Revenues from the mineralogical and geochemical testing business segment
for the three months ended March 31, 1999 were $275,000. No revenues were
earned for the three months ended March 31, 2000.
For the three months ended March 31, 1999, the Company recognized a loss
from the discontinued operation of approximately $392,000.
In connection with the discontinued business segment, effective October 15,
1999, the Company entered into an agency agreement with Inspectorate
Griffith USA, Inc. ("Inspectorate"). Under the terms of the agreement, the
Company transferred all of its mineral testing domestic and international
customer contracts, while retaining existing trade accounts receivable, to
Inspectorate along with the right to use the Licensed Mark for promotional
marketing and sales activity. In consideration, the Company is entitled to
a commission of 2 1/2% of the payments received by Inspectorate pursuant to
the contracts for a period of three years. No commission has been recorded
or received from Inspectorate as of March 31, 2000. In addition,
Inspectorate has hired certain of the Company's employees and has acquired
certain fixed assets at fair market value.
Page 14
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At March 31, 2000 and December 31, 1999, net liabilities of the
discontinued business segment, retained by the Company following the
transfer to Inspectorate, consisted of the following:
March 31 December 31
2000 1999
--------- -----------
(Unaudited)
Assets:
Trade receivables, net $ 25,000 $ 69,000
Prepaid expenses and other 22,000 29,000
Property and equipment, net -- 21,000
Other assets 7,000 26,000
--------- ---------
Total Assets 54,000 145,000
--------- ---------
Liabilities:
Trade accounts payable 89,000 186,000
Accrued liabilities 467,000 586,000
--------- ---------
Total Liabilities 556,000 772,000
--------- ---------
Net Liabilities of
Discontinued Operations $(502,000) $(627,000)
========= =========
Page 15
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
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 other uncertain business conditions that affect the
Company's businesses.
With the exception of historical information, the matters discussed below under
the headings "Results of Operations" and "Capital Resources and Liquidity" may
include forward-looking statements that involve risks and uncertainties. The
Company cautions readers that a number of important factors discussed herein,
and in other reports filed with the Securities and Exchange Commission,
particularly the Company's Form 10-KSB for the year ended December 31, 1999,
could affect the Company's actual results and cause actual results to differ
materially from those in the forward looking statements.
Results of Operations
Three Months Ended March 31, 2000
Sales of services of the environmental business, for the three months ended
March 31, 2000 of $793,000 were 85% of prior year first quarter sales of
$930,000.
The following table shows the breakdown of business by type of analytical work
for the first quarter of 2000 as compared to the first quarter of 1999 ($000).
Type of Work 2000 1999 Increase / (Decrease)
------------ ---- ---- --------------------
Radiochemistry $ 495 $ 535 ($ 40) (7)%
Inorganics $ 115 $ 233 ($118) (51)%
Organics $ 183 $ 162 $ 21 13 %
Total $ 793 $ 930 ($137) (15)%
Radiochemistry laboratory sales of $495,000 for the first quarter of 2000 were
down 7% or $40,000 from the first quarter of 1999. The decrease was due to weak
January business in 2000. New business picked up substantially in February and
March as compared to 1999. The decline in inorganics work continues to be
largely attributable to the ongoing decline in the work volume from the
Company's second largest customer, a former uranium mining company whose site
clean-up work has been declining gradually for several years and will do so in
the future. Organics work volume is up over 1999 as a result of a marketing
<PAGE>
BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
program designed to take advantage of the surplus instrument capacity in that
laboratory. The Company continues to focus its attention on the low level
radiation testing market.
New business for the first quarter of 2000 of $748,000 was $151,000 and 20%
higher as compared to the first quarter of 1999.
Gross profit of $42,000 for the three months ended March 31, 2000 is $246,000
and 85% (points) lower than the first quarter of 1999. The gross profit
deterioration was caused by the lower sales volume and by higher costs of
services sold. The higher costs were due to higher labor and personnel related
costs plus higher supply costs.
Selling, general and administrative expenses in the first quarter of 2000 were
$62,000 lower than the first quarter of 1999 principally due to salaries and
personnel related costs.
Other income and expense for the first quarter of 2000 is $229,000 higher than
the first quarter of 1999. The increase was primarily due to the non-cash
interest charge of $215,000 related to the sale of the subordinated convertible
notes payable plus higher interest related to the line of credit.
Loss from continuing operations of $ 467,000 for the first quarter of 2000 was
$413,000 higher than the first quarter of 1999. The increased loss was due to
lower sales volume while costs of sales increased and the non-cash interest
charge related to the subordinated convertible notes in 2000.
Discontinued operations represent the mineralogical and geochemical testing
business segment that was disposed of as of September 30, 1999. Operating losses
in this segment were caused by the lower sales of services in the quarter.
Capital Resources and Liquidity
The following is presented on a consolidated basis including both continuing and
discontinued operations.
The Company is faced with a significant working capital shortage. At March 31,
2000, negative working capital was $1,729,000. Management is attempting to
minimize the negative impact of the working capital shortage through close
supervision of general and administrative expenses. In addition, the Company is
seeking additional equity and/or debt financing. The Company has raised equity
capital from certain of its existing stockholders and may continue to raise
additional equity capital from them. No assurance can be made that additional
capital will be raised, or if raised, that it will be on terms beneficial to the
Company.
Page 16
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Cash and cash equivalents totaled $13,000 at March 31, 2000 compared with
$92,000 at December 31, 1999. The $79,000 reduction resulted from cash used in
operating activities of $298,000 and cash used in investing activities of
$2,000, offset by cash flows from financing activities of $221,000.
Cash used in operations of $298,000 resulted from operating losses of $467,000
plus an increase in operating assets (net of operating liabilities) of $119,000,
offset by various non-cash items including depreciation and amortization
($37,000), non-cash charges related to subordinated convertible notes and
non-cash compensation ($240,000) and bad debt provisions ($3,000).
Cash used in investing activities of $2,000 was primarily related to cash paid
in connection with the purchase of laboratory equipment.
Cash from financing activities provided cash of $221,000. Financing activities
were primarily related to cash collected of $216,000 under subscription
agreements with existing shareholders to issue subordinated convertible notes.
The notes are convertible into shares of restricted common stock at $.06 per
share. Borrowing under the line of credit provided $18,000 of cash in the first
quarter.
As of December 31, 1999, the Company had a net working capital deficiency of
$1,539,000. This net working capital deficiency resulted principally from a net
loss of $2,795,000 which includes the loss from discontinued operations of
$2,333,000 (including depreciation and other non-cash charges) for the year
ended December 31, 1999. Also contributing to the working capital deficiency was
the line of credit of $267,000, subordinated convertible notes payable of
$373,000, net liabilities of discontinued operations of $627,000 and trade
accounts payable and accrued expenses of $1,120,000 which includes accruals
related to the discontinued operations.
At March 31, 2000, the Company had a net working capital deficiency of
$1,729,000. The increase in the deficit is primarily due to the loss in the
first quarter which was financed through the line of credit and issuance of
subordinated convertible notes payable.
The Company's current cash requirements to sustain its operations for the next
year are estimated to be approximately $600,000. The Company expects that these
requirements will be provided by a combination of cash generated from
operations, cash provided by the Company's line of credit based upon eligible
domestic accounts receivable, and cash from short-term debt and/or equity
financings with existing shareholders.
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
There can be no assurance that any funds required during the next twelve months
or thereafter can be generated from operations or, if such required funds are
not internally generated, that funds will be available from external sources
such as debt or equity financings or other potential sources. The lack of
additional capital could force the Company to substantially curtail or cease
operations and would, therefore, have a material adverse effect on its business.
Further, there can be no assurance that any such required funds, if available,
will be available on attractive terms or that they will not have a significantly
dilutive effect on the Company's existing shareholders.
Income Taxes and Net Operating Loss Carryforwards
At March 31, 2000, the Company has approximately $15,000 of alternative minimum
tax credits and unused net operating loss carryforwards of approximately
$6,300,000. The alternative minimum tax credits have no expiration date and the
loss carryforwards expire in varying amounts from 2000 to 2020 and are subject
to certain limitations under Section 382 of the Internal Revenue Code ("IRC") of
1986 as amended.
Inflation
Inflation was not a material factor in either the sales or the operating
expenses of the Company.
Year 2000
During 1999, the Company initiated its Year 2000 compliance project. The
evaluation addressed internal hardware and software, production instruments, key
vendors, customers, and other significant third parties. The Company did not
experience any Y2K disruptions, not did any entity expend any significant
amounts during 1999 or in 2000 to ensure Y2K compliance.
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
PART II
Other Information
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
During January through March 2000, the Company issued subordinated,
convertible notes pursuant to subscription agreements to certain
existing stockholders. Such notes are convertible into shares of the
Company's common stock at $.06 per share, at the option of the
Company. Such stockholders include a major stockholder who purchased
notes of $184,000 and the Company's President who purchased notes of
$8,000. The notes, which are secured by substantially all of the
Company's assets are subordinated to the line of credit and are due
two years from the date of issuance. The notes are non-interest
bearing. There was no underwriter, placement agent or broker dealer
involved in the sale of the notes. The Company claimed exemption from
registration under the Securities Act of 1933 pursuant to the private
offering exemption set forth in Section 4 (2) thereof. The Company
claimed this exemption by virtue of offering the securities privately
to only a small number of stockholders who already had a substantial
familiarity with the Company and to whom the appropriate disclosures
were made.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Schedule 14A, Proxy Statement, to amend the Company's Certificate of
Incorporation, as amended, to increase the authorized number of shares
of Common Stock from 10 million to 50 million. At a special
stockholders meeting held on March 29, 2000, the shareholders voted in
favor of increasing the number of authorized shares of common stock
from 10 million to 50 million. All votes cast voted in favor of the
increase in authorized shares.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
Form 8-K, Current Report, dated March 3, 2000 regarding financing by
the Company involving the issuance of convertible notes and common
stock.
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BARRINGER LABORATORIES, INC. AND SUBSIDIARIES
Exhibit No. Description
---------- -----------
10.4 Form of Convertible Note of the Company
Issued to investors
10.5 Form of Security Agreement between the
Company and Investors
10.6 Form of Registration Rights Agreement
Between the Company and Investors
Form 8-K, Current Report, dated March 3, 2000 regarding the transfer
of the Company's contracts and customers relating to the mineral and
metallurgical analytical services performed by the Company.
Exhibit No. Description
---------- -----------
10.3 Agency Agreement between Inspectorate
Griffith USA, Inc. and the Company
27 Financial Data Schedule.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BARRINGER LABORATORIES, INC.
(REGISTRANT)
Date: June 13, 2000 By: /s/J. Graham Russell
------------- -------------------------------------
J. Graham Russell
President and C.E.O.