UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended June 30, 1996
Commission file Number 0-23892
ENVIROMETRICS, INC.
(Exact name of registrant as specified in its charter.)
DELAWARE 57-0941152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9229 UNIVERSITY BOULEVARD
CHARLESTON, SC 29406
(Address of principal executive offices)
Registrant's telephone number, including area code:
(803) 553-9456
Indicate by check mark whether the registrant(1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [] NO [X]
As of July 31, 1996 the Registrant had outstanding
2,500,203 shares of common Stock. Transitional small
business disclosure format (check one):
YES [ ] NO [X]
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page #
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 1996 and December 31, 1995 2-3
Condensed Statements of Operations for the
First Quarter ended March 31, 1997 and 1996 4-5
Condensed Statements of Cash Flows for the
First Quarter ended March 31, 1997 and 1996 6-7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Conditions 9-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports 15
Signature 15
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
ASSETS (Unaudited) (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 34,481 $ 29,604
Current portion of notes
receivable 72,186 74,000
Trade receivables less allowance
for doubtful accounts of
1997 $26,353; 1996 $26,353 349,745 364,458
Other receivables, including
amounts due from stockholders
1997 $44,026; 1996 $33,035 85,138 52,123
Inventories 148,238 287,541
Prepaid expenses 61,494 87,867
-------- --------
TOTAL CURRENT ASSETS 751,282 895,593
-------- --------
OTHER ASSETS AND INTANGIBLES
Deposits 29,116 30,737
Notes receivable 696,745 727,307
Organization and loan costs,
net of accumulated amortization
1997 $5,796; 1996 $40,372 26,005 31,801
License and distribution agreements
net of accumulated amortization
1997 $7,500; 1996 $6,000 20,500 22,000
Other 79,178 76,788
------- -------
851,544 888,633
------- -------
PROPERTY AND EQUIPMENT
Furniture and equipment 1,240,727 1,240,727
Vehicles 61,342 106,299
--------- ---------
1,302,069 1,347,026
Less accumulated depreciation
and amortization (970,697) (968,247)
--------- ---------
331,372 378,779
--------- ---------
$1,934,198 $2,163,005
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 89,075 $ 80,762
Current maturities of
long-term debt 770,061 525,506
Accounts payable 522,267 851,239
Accrued expenses 601,136 612,551
--------- ---------
TOTAL CURRENT LIABILITIES 1,982,539 2,070,058
--------- ---------
LONG-TERM DEBT,
less current maturities 288,173 352,585
---------- ----------
STOCKHOLDERS' EQUITY
Common stock par value $.001 per
share $.001;
authorized 10,000,000 shares;
issued 1997 - 2,471,626 shares;
1996 - 2,500,203 shares 2,472 2,472
Additional paid-in capital 5,101,417 5,101,417
Retained deficit (5,440,403) (5,363,527)
---------- ----------
( 336,514) ( 259,638)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,934,198 $2,163,005
========== ==========
<FN>
See Notes to Condensed Financial Statements
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE QUARTER ENDED MARCH 31, 1997 and 1996
<TABLE>
<CAPTION>
Three months ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
NET SALES AND SERVICE REVENUE
Services $ 295,545 $ 801,829
Products 391,581 722,477
---------- ----------
687,126 1,524,306
COST OF GOODS SOLD AND
DIRECT SERVICE COSTS
Services 177,130 583,223
Products 276,704 512,239
----------- ----------
453,834 1,095,462
----------- ----------
GROSS PROFIT 233,292 428,844
----------- ----------
OTHER OPERATING REVENUE 9,753 113
----------- ----------
OPERATING EXPENSES
Sales and marketing 51,091 94,263
General and administrative 166,901 361,374
Research and development 41,683 61,832
Shipping and receiving 5,903 18,091
Quality control -- 3,742
Depreciation and amortization 32,201 64,790
--------- ---------
297,779 604,092
--------- ---------
OPERATING LOSS ( 54,734) (175,135)
--------- ---------
FINANCIAL INCOME (EXPENSE)
Interest income 15,391 1,414
Interest expense (32,158) (39,108)
Amortization of loan costs (5,375) (5,154)
--------- --------
(22,142) (42,848)
--------- --------
NET LOSS $ (76,876) $ (217,983)
========= ==========
Net loss per common share $ (0.031) $ (0.087)
========= ==========
Dividends per common share $ - $ -
========= ==========
Weighted average number
of common shares outstanding 2,471,626 2,500,203
<FN>
See Notes to Condensed Financial Statements
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FIRST QUARTER ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flow From Operating Activities:
Net (loss) $ ( 76,876) $ (217,983)
Adjustments To Reconcile net
(loss) to net cash used in
operating activities
Depreciation and amortization 32,201 64,790
Amortization of loan costs 5,375 5,154
Provision (recoveries for
doubtful accounts - (12,759)
Non-cash expense paid by issuance
of warrants - 3,750
(Gain) loss on disposal of equipment - -
Change in assets and liabilities:
Decrease in cash, restricted - 99,297
(Increase) decrease in accounts
receivable 14,713 105,498
(Increase)in inventory 139,303 (39,085)
(Increase)decrease in prepaid expenses 26,373 20,136
Decrease(increase)in accounts payable
and accrued expenses (64,429) 44,844
-------- --------
Net cash provided by
operating activities 76,660 73,642
-------- --------
Cash Flow From Investing Activities:
Property and equipment 18,748 ( 3,080)
(Increase) in deposits, organization
and loan and acquisition costs - (41,498)
Decrease in notes receivable 32,376 -
(Increase) in other assets (35,405) (14,205)
-------- --------
Net cash used in investing activities 15,719 (58,783)
Cash Flows From Financing Activities:
Net proceeds from borrowings on
short-term notes 8,313 200,000
Principal payments on short-term notes (150,000)
Proceeds from long-term borrowing (95,815) (111,933)
--------- --------
Net cash used in financing activities (87,502) (61,933)
--------- --------
Net (decrease) increase in cash and
cash equivalents 4,877 (47,074)
Cash and cash equivalents, beginning 29,604 53,143
--------- --------
Cash and cash equivalents, ending $ 34,481 $ 6,069
========= ========
Supplemental Disclosure of Cash Flows
Information
Cash payments for interest $ $ 32,467
========= =========
<FN>
See Notes to Condensed Financial Statements
</TABLE>
<PAGE>
Envirometrics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(1) The unaudited condensed financial statements and related
notes have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to
such rules and regulations. The accompanying condensed
consolidated financial statements of the Company, and notes
thereto, for the year ended December 31, 1995.
The results of operations for the interim periods shown in this
report are not necessarily indicative of results to be expected
for the fiscal year. In the opinion of management, the information
contained herein reflects all adjustments necessary to present fairly
the consolidated financial position, results of operations and changes
in cash flow for the interim periods. All such adjustments are of a
normal recurring nature.
(2) Net loss per common share is computed using the weighted average
number of common shares outstanding, after giving effect for the 1 for
2 reverse split effective with the initial public offering.
(3) On May 13, 1996 the Company entered into a two year financing
arrangement with Reservoir Capital Corporation. Under the terms of the
agreement, the Company will offer to sell to Reservoir Capital
Corporation the eligible trade accounts receivable at an approved
advance rate. On that date Reservoir Capital Corporation advanced
approximately $233,000 on behalf of the Company. The Company
immediately reduced one of its bank notes by approximately $50,000.
The Company intends to utilize the remaining funds to reduce its trade
accounts payable.
(4) The Company disposed of the civil engineering service group during
the third quarter of 1996.
(5) All real property was disposed of as of December, 1996. The first
and second mortgages were paid out and the Company took a $230,000 note
from the Buyer, Dr. James Miller.
<PAGE>
Three Months Ended March 31, 1997 Compared to Three Months
Ended March 31, 1996
Sales for the first Three months of 1997 amounted to
$687,100 which were $837,200 (54.9%)lower than the
$1,524,300 reported for the first Three months of 1996.
The Service group decreased its sales by 63.1% or
$506,300 to $295,500 and the Products group lost revenues
of $330,900 (45.8%)and reported $391,600 for the Three
months ended March 31, 1997 as compared to $722,500 for the
Three months ended March 31, 1996. Included in the Service
group revenue reduction of $506,300 is a decrease of
$433,200 related to the Environmental consulting and
Engineering and Civil Engineering and Surveying Division
which was disposed at July 31, 1996. The Consultative
Services and Air Quality groups reported $73,100 less
revenues for the first Three months of 1997 as compared to
the first Three months of 1996. The reason for the reduction
in the Products group revenue is related to the decrease in
activity in asbestos air monitoring in the industry.
Cost of goods sold and direct service costs decreased by
45.6% or $641,600 to $453,800 for the first Three months of
1997 as compared to $1,095,600 reported for the first Three
months of 1996. The Services Division reduced its direct
service costs by $406,100 (69.6%) and reported $177,100 for
the first Three months of 1997 as compared to $583,200 for
the first Three months of 1996. Included in the Service group
direct service costs reduction of $406,100 is a decrease of
$284,500 related to the Environmental Consulting and
Engineering and Civil Engineering and Surveying Division
which was disposed at July 31, 1996. The Products group
decreased its cost of good sold by $235,500 or 46.0%, to
$276,700 for 1997 as compared to $512,200 for the first
Three months of 1996 due to the non stockpiling of air
monitoring cassettes by one large customer.
<PAGE>
The gross profit for the first Three months ended March 31,
1997 decreased by $195,600, a decrease of 45.6%, to $233,300
as compared to $428,800 for the Three months ended March 31,
1996. The Services Division recorded a significant decrease
of 45.8% or $100,200 in its gross profit for the first
Three months of 1997 as compared to the first Three months
of 1996. Included in the Service group gross profit reduction
of $100,200 is a decrease of $148,600 related to the
Environmental Consulting and Engineering and Civil
Engineering and Surveying Division which was disposed at
July 31, 1996. Excluding the decrease from the disposition
of the Engineering and Civil Engineering and Surveying
Division, the gross profit for the remaining services
increased by $48,400. The Products Division experienced a
significant decrease of 45.4% or a $95,400 reduction in its
gross profit for the first Three months of 1997 as compared
to the first Three months of 1996.
The Services Division reported a 40.1% gross margin for the
first quarter of 1997 as compared to a 27.3% margin for the
same quarter in 1996. The reason for the significantly
improved gross margin in the Services Division and the
$100,200 decrease in the amount of gross profit reported by
that division is related to the Environmental Consulting
and Engineering and Civil Engineering and Surveying Division,
which was disposed at July 31, 1996, and the efficiency
gained from downsizing of personnel and reduction of
nonbillable expenses, including compensation. The Products
Division reported a 29.3% gross margin for the first quarter
of 1997 as compared to a 29.1% margin for the same quarter
in 1996.
Percentage comparisons of gross margins reported by the
company are as follows:
Period Total Products Services
1st Three Months 1997 33.9% 29.3% 40.1%
1st Three Months 1996 28.1% 29.1% 27.3%
<PAGE>
Percentage comparisons of gross margins reported by the
company excluding the Environmental Consulting and
Engineering and Civil Engineering and Surveying Division,
which was disposed at July 31, 1996, are as follows:
Period Total Products Services
1st Three Months 1997 33.9% 29.3% 40.1%
1st Three Months 1996 28.1% 29.1% 19.0%
Other operating revenue increased by $9,700 to $9,800 for
the first Three months ended March 31, 1997 as compared to
$100 for the first Three months ended March 31, 1996.
Operating expenses were $306,300 lower and amounted to
$297,800 for the Three months ended March 31, 1997, as
compared to $604,100 reported for the Three months ended
March 31, 1996. The operating expenses for the first Three
months of 1996 included $104,500 of expenses related the
Environmental Consulting and Engineering and Civil
Engineering and Surveying Division, which was disposed on
July 31, 1996. Sales and marketing expenses decreased by
$43,200, which savings were mostly attributable to the
agreement with Zellweger Analytics, Inc. for the
distribution of the ACT product line. General and
administrative costs decreased by $194,500 to $166,900 for
the Three months ended March 31, 1997, as compared to
$361,400 reported for the Three months ended March 31, 1996.
Included in the first quarter 1996 general and
administrative expenses is approximately $25,000 of
consulting fees that were related to a contract that was
terminated in August 1996 and $81,700 of amounts attributable
to the Environmental Consulting and Engineering and Civil
Engineering and Surveying Division, which was disposed on
July 31, 1996. A portion of the decrease is due to a reduction
in personnel and restructuring of costs. Research and
development costs decreased by $20,100 to $41,700. Shipping
and receiving costs decreased by $12,200 to $5,900 for the
Three months ended March 31, 1997 as compared to $18,100 for
the Three months ended March 31, 1996. This decline is
related to the decrease in sales reported above. A reduction
of $3,700 in costs related to quality control was the result
of a reduction in personnel in the first quarter of 1996.
Depreciation and amortization costs decreased by $32,600 for
the first quarter ended March 31, 1997 as compared to 1996
of which $22,800 was attributable the Environmental
Consulting and Engineering and Civil Engineering and
Surveying Division, which was disposed on July 31, 1996.
<PAGE>
The Company incurred an operating loss of $54,700 for the
Three months ended March 31, 1997 as compared to an operating
loss of $175,100 for the Three months ended March 31, 1996.
The operating loss for the Three months ended March 31, 1996
would have been $218,700, excluding the Environmental
Consulting and Engineering and Civil Engineering and
Surveying Division, which was disposed on July 31, 1996.
Interest income for the Three months ended March 31, 1997
was $14,000 higher than the amount recorded for 1996.
Interest earned in 1997 resulted from interest earned on a
note that was exchanged in connection with the disposition of
the Environmental Consulting and Engineering and Civil
Engineering and Surveying Division completed on July 31,1996
and a mortgage note that was recorded as a result of the sale
of the real property in December 1996. Interest expense of
$32,100 for the Three months ended March 31, 1997 was $6,900
lower than the amount reported for the first Three months of
1996 which was $39,100. Amortization of loan costs for the
first Three months of 1997 was $5,400 and was $200 higher
than the $5,200 reported for the first Three months ended
March 31, 1996.
The Company incurred a net loss of $76,900 for the first
Three months ended March 31, 1997 as compared to a net loss
of $218,000 for the Three months ended March 31, 1996. The
net loss for the first Three months of 1996, excluding the
Environmental Consulting and Engineering and Civil
Engineering and Surveying Division, which was disposed on
July 31, 1996 would have been $255,500 which is $37,500
higher than the $218,000 reported for the first Three months
of 1996.
<PAGE>
FINANCIAL CONDITION
The Company's financial condition continued to deteriorate
during the first Three months of 1997 due principally to
continued operating losses, and the Company is experiencing
severe cash flow problems.
The working capital deficiency has increased from $1,174,500
at December 31, 1996 to $1,231,300 at March 31, 1997.
The Company has been negotiating with several vendors to
restructure accounts payable and certain lenders appear
willing to restructure debt since the Company has not been
able to meet its obligations timely. In January 1997, the
Company entered into agreements with several lenders that
ties payment of debts to actual collections from notes
receivable and related interest payments received.
The Consultative Services Division experienced a reduction
in sales revenues and the trade receivables from that group
are down to $161,700 at March 31, 1997 from $207,400 at
December 31, 1996. The Products Division reduced inventories
by $139,300 to $148,200 from $287,500 at December 31, 1996
as a result of cash flow problems which resulted in less
products available for sale.
During January 1997 the Company, through its Products
Division subsidiary, terminated its two year Master
Distribution Agreement with Zellweger Analytics, Inc.
(Zellweger) for non performance. The Company is currently
in discussions with Zellweger to reach agreement on the
prepaid purchase deposit in excess of $500,000 which is
recorded as deferred revenue and included in accrued
liabilities at March 31, 1997 and December 31, 1996.
In April 1997, the Company was successful in subleasing its
office space at Faber Place to another Company for one year.
This will result in savings of approximately $3,000 per month
in rent. The Company has been experiencing a reduction in
facility costs since it disposed of its real estate in
December 1996. The Company executed a five year lease on its
University Boulevard location after the sale of the real
estate, and has reduced its monthly cash outlay by
approximately $7,000.
<PAGE>
The Company receives interest income in 1997 of
approximately $5,000 per month from two notes receivable
executed during 1996, related to the disposition of the
Environmental Consulting and Engineering and Civil
Engineering and Surveying Division on July 31, 1996 and
sale of the real estate in December 1996.
The Company entered into an agreement to sell its air
sampling cassettes products line, including equipment and
inventory, for cash, to a major customer during May 1997.
The total amount of cash to be received by the Company is
dependent on sales of inventory acquired by the Seller, to
third parties after the transaction is complete. This
transaction is in keeping with management's decision to
eliminate unprofitable or marginally profitable services
and products. The cash collected from this transaction will
be used to pay down certain vendors.
The Company has a factoring agreement with Reservoir Capital
Corporation (Reservoir) which advances funds based on
invoicing for sales of the Products Division. The Company
intends to pursue a release of the first lien on accounts
receivable, held by the Small Business Administration (SBA)
as collateral against debt on invoicing of the laboratory
and consultative division, which are not currently factored,
and to continue its factoring arrangement with Reservoir.
There is no assurance that the Company can be successful in
obtaining a release of the accounts receivable by the SBA,
and the Company will realize a cash flow reduction if it is
unable to negotiate such an arrangement. The Company
believes there is adequate collateral to secure the SBA
loans, considering other assets that also secure the SBA
debt.
The Company intends to expand its consultative services,
including outsourcing, and is in discussions with another
company to jointly market a broad base of services including
health and safety services beginning in the second quarter
of 1997. In addition, the Company is looking to grow its
laboratory services base through aggressive marketing,
identifying potential merger partners (other industrial
hygiene laboratories) to increase revenues and streamline
or reduce costs.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports
Exhibit
10.1 Stock Purchase Agreement by and between Envirometrics, Inc.,
Andrew C. Gillette and Trico Envirometrics, Inc.
10.2 Promissory Note and related documents by and between
Trico Envirometrics, Inc. (Andrew C. Gillette) and
Envirometrics, Inc.
10.3 Real Estate Sales Agreement between Envirometrics
Commercial Inc. and James W. Miller, M.D. for the parcel of
real property known as Unit F-2, 9229 University Boulevard,
Charleston, SC
10.4 Real Estate Sales Agreement between Envirometrics
Commercial Inc. and James W. Miller, M.D. for the parcel of
real property known as 1019 Bankton Drive, Charleston, SC
10.5 Lease Agreement by and between Envirometrics, Inc. and James
W. Miller, M.D.
10.6 Promissory Note dated December 19, 1996 by James W. Miller,
M.D. to Envirometrics, Inc.
10.7 Memorandum of Agreement and Promissory Notes by and between
Envirometrics, Inc. and The United States Company dated
December 24, 1996
10.8 Promissory Note and Conversion Agreement between Envirometrics,
Inc. and Walter H. Elliott, III dated December 31, 1996
10.9 Collateral Assignment of Proceeds dated January 1, 1997
10.10 Security Agreement by and between Envirometrics, Inc. and
Charles B. Stoyle dated March 20, 1997
10.11 Asset Purchase Agreement between Envirometrics, Inc. and
Multi-metrics, Inc., dated April 28, 1997
10.12 Preferred Stock Subscription and Conversion Agreement and
Investment Representations by Precision Southeast Inc.
dated April 29, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ENVIROMETRICS, INC.
<TABLE>
<S> <C>
Date: May 19, 1997 Walter H. Elliott, III
--------------------------------
Walter H. Elliott, III
President and CEO
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 34,481
<SECURITIES> 0
<RECEIVABLES> 507,069
<ALLOWANCES> 70,379
<INVENTORY> 148,238
<CURRENT-ASSETS> 751,282
<PP&E> 1,302,069
<DEPRECIATION> 970,697
<TOTAL-ASSETS> 331,372
<CURRENT-LIABILITIES> 1,982,539
<BONDS> 288,173
0
0
<COMMON> 2,472
<OTHER-SE> (338,986)
<TOTAL-LIABILITY-AND-EQUITY> 1,934,198
<SALES> 687,126
<TOTAL-REVENUES> 687,126
<CGS> 453,834
<TOTAL-COSTS> 751,613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,142
<INCOME-PRETAX> (76,876)
<INCOME-TAX> 0
<INCOME-CONTINUING> (76,876)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (76,876)
<EPS-PRIMARY> (.031)
<EPS-DILUTED> (.031)
</TABLE>
