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, 1997
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 August 12, 1997 the Registrant had outstanding 2,612,626 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
March 31, 1997 and December 31, 1996 2-3
Condensed Statements of Operations for the
First Quarter ended March 31, 1997 and 1996 4
Condensed Statements of Cash Flows for the
First Quarter ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Conditions 7-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 5. Other Information 14
Item 6. Exhibits and Reports 14
Signature 15
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
ASSETS (Unaudited) (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 54,709 $ 29,604
Current portion of notes
receivable 98,809 104,562
Trade receivables less allowance
for doubtful accounts of
1997 $23,453; 1996 $26,353 224,255 364,458
Other receivables, including
amounts due from stockholders
1997 and 1996 $33,035 23,466 18,400
Inventories 55,074 287,541
Prepaid expenses 64,812 87,867
-------- --------
TOTAL CURRENT ASSETS 521,125 892,432
-------- --------
OTHER ASSETS AND INTANGIBLES
Deposits 29,116 30,737
Notes receivable 646,479 696,745
Organization and loan costs,
net of accumulated amortization
1997 $41,208; 1996 $40,372 45,088 31,801
License and distribution agreements
net of accumulated amortization
1997 $11,000; 1996 $8,000 19,000 22,000
Other 132,827 110,511
------- -------
872,510 891,794
------- -------
PROPERTY AND EQUIPMENT
Furniture and equipment 1,098,228 1,240,727
Vehicles 44,034 88,991
--------- ---------
1,142,262 1,329,718
Less accumulated depreciation
and amortization (938,872) (961,431)
--------- ---------
203,390 368,287
--------- ---------
$1,597,025 $2,152,513
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 31,351 $ 80,762
Current maturities of
long-term debt 294,503 273,428
Accounts payable 561,044 853,674
Accrued expenses 622,318 612,551
--------- ---------
TOTAL CURRENT LIABILITIES 1,509,216 1,820,415
--------- ---------
LONG-TERM DEBT,
less current maturities 626,297 602,585
---------- ----------
STOCKHOLDERS' EQUITY
Common stock par value $.001;
authorized 10,000,000 shares;
issued 1997 - 2,612,626 shares;
1996 - 2,471,626 shares 2,613 2,472
Additional paid-in capital 5,101,276 5,101,417
Retained deficit (5,642,377) (5,374,376)
---------- ----------
( 538,488) ( 270,487)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,597,025 $2,152,513
========== ==========
<FN>
See Notes to Condensed Financial Statements
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE QUARTER ENDED JUNE 30, 1997 and 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
--------- -------- ------- --------
<S> <C> <C> <C> <C>
NET SALES AND SERVICE
REVENUE
Services $ 229,773 $ 737,857 $ 525,318 $1,539,686
Products 222,326 461,610 613,907 1,184,087
---------- --------- ---------- ----------
452,099 1,199,467 1,139,225 2,723,773
---------- --------- ---------- ----------
COST OF GOODS SOLD AND
DIRECT SERVICE COSTS
Services 154,208 593,712 331,338 1,176,935
Products 176,282 321,183 452,986 833,422
---------- ---------- ---------- ----------
330,490 914,895 784,324 2,010,357
---------- ---------- ---------- ----------
GROSS PROFIT 121,609 284,572 354,901 713,416
--------- ---------- ---------- ----------
OTHER OPERATING REVENUE (3,509) 420 6,244 533
--------- ---------- ---------- ----------
OPERATING EXPENSES
Sales and marketing 21,074 91,311 72,165 185,574
General and admin 202,007 332,198 368,908 693,707
Research and development 51,334 48,430 93,017 110,262
Shipping and receiving 4,211 23,226 10,114 41,317
Quality control - 3,798 - 7,540
Depreciation and
amortization 27,535 54,168 59,736 118,823
--------- --------- ---------- ----------
306,161 553,131 603,940 1,157,223
Write-off of goodwill - 614,938 - 614,938
--------- --------- ---------- ----------
306,161 1,168,069 603,940 1,772 161
--------- ---------- ---------- ----------
OPERATING LOSS (188,061) (883,077) (242,795) (1,058,212)
--------- ---------- ---------- ----------
FINANCIAL INCOME (EXPENSE)
Interest income 15,315 - 30,706 1,414
Interest expense (14,654) (59,214) (46,812) (98,322)
Gain (loss) on disposition 1,650 - 1,650 -
of product line
Amortization of loan costs (5,375) (15,917) (10,750) (21,071)
-------- ---------- ---------- ----------
(3,064) (75,131) (25,206) (117,979)
-------- ---------- ---------- ----------
NET LOSS $ (191,125) $ (958,208) $(268,001) $ 1,176,191)
========= ========== ========== ==========
Weighted average number of
common shares outstanding 2,612,626 2,500,203 2,542,516 2,500,203
========== ========== ========== ==========
Net loss per common share$ (0.073) $ (0.383) $ (0.105) $ (0.470)
========= ========== ========== ==========
Dividends per common share$ - $ - $ - $ -
========= ========== ========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SECOND QUARTER ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flow From Operating Activities:
Net (loss) $ ( 268,001) $(1,176,191)
Adjustments To Reconcile net
income (loss) to net cash used
in operating activities
Depreciation 59,769 110,608
Amortization 10,750 644,224
Provision (recoveries for
doubtful accounts) - (12,870)
Non-cash expense paid by issuance
of warrants - 7,500
(Gain) loss on disposal of equipment (1,650) (5,818)
Change in assets and liabilities:
Decrease in cash, restricted - 99,299
Decrease in accounts receivable 140,203 200,482
Decrease in inventory 181,395 13,817
Decrease in prepaid expenses 23,055 26,963
Increase(decrease)in accounts payable
and accrued expenses (126,891) 104,447
--------- ----------
Net cash provided by
operating activities 18,630 12,461
--------- ----------
Cash Flow From Investing Activities:
Purchase of property and equipment - (33,989)
Collection of note receivable 56,019 -
Cash received on disposition of
product line 5,100 -
Loan on assets sold in connection
with disposition of asb prod line 454 -
Book value of assets sold in connection
with disposition of asb prod line,
net of cash paid to third party (5,554) -
(Increase) in deposits, organization
and loan and acquisition costs - (83,263)
(Increase) in other assets (44,920) (16,510)
--------- ----------
Net cash used in investing activities 11,099 (133,762)
Cash Flows From Financing Activities:
Proceeds from borrowings on
short-term notes 25,000 277,884
Principal payments on short-term
notes, net (29,624) (18,140)
Principal payments on long-term
borrowing - (155,892)
--------- ----------
Net cash (used in) provided by
financing activities (4,624) 103,852
--------- ----------
Net (decrease) increase in cash and
cash equivalents 25,105 (17,449)
Cash and cash equivalents, beginning 29,604 53,143
-------- ----------
Cash and cash equivalents, ending $ 54,709 $ 35,694
========= ==========
Supplemental Disclosure of Cash Flows
Information
Cash payments for interest $ 41,258 $ 32,647
========= ==========
Disposition of asbestos product line
Book value of inventory (65,200) -
Book value of equipment (96,326) -
Loss on disposition of above 454 -
Cash paid to third party 155,972 -
--------- ----------
Cash received $ (5,100) $ -
========= ==========
Supplemental Disclosure of Non Cash
Financing Activities
Issuance of common stock for warrants $ 141 $ -
========= ==========
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
Envirometrics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30. 1997
(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, should be read in conjunction with the
audited financial statements and related notes included in the
Company's Annual Report on Form 10-KSB for the year ended December
31, 1995. The Company has not completed its audit of the consolidated
financial statements for the year ended December 31, 1996 and has not
filed Form 10-KSB for the year ended December 31, 1996.
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 in 1994.
(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.
On December 5, 1996, The United States Company loaned $50,000 to the
Company. The note is due in December 1997 and the Company is required
to pay interest only monthly. Two Directors of the Company are
officers of The United States Company.
(3) The Company disposed of the Environmental Consulting and
Engineering and Civil Engineering and Surveying Division during
the third quarter of 1996.
(4) All real property was disposed of during December 31, 1996, and
the Company entered into a five year leasing agreement (containing
options to extend) with the Buyer. The first and second mortgages
were paid off and the Company took a $230,000 note (Due no later than
December 31, 1998) from the Buyer. The buyer pays interest only
monthly at 10%. The note is secured by the real estate.
(5) The Company sold its asbestos product line (inventory and
equipment) to a large customer during May 1997 for $161,072 cash.
Proceeds from the disposition were used to reduce vendor trade amounts.
(6) The Company's common stock and warrants were deleted from The Nasdaq
SmallCap Market(tm) on December 3, 1996 for failure to meet the capital
and surplus requirement for continued listing. The Company is listed on
the OTC-Bulletin Board.
(7) On April 1, 1997 the Company issued 125,000 shares of its common
stock to The United States Company in exchange for 640,000 warrants to
purchase its common stock. On that same date the Company issued 5,000
shares of common stock to Walter H. "Skip" Elliott, III, President and
CEO, 5,000 shares of common stock to Elsie L. Rose, Treasurer, 5,000
shares of common stock to Robin A. Bowers, Secretary at that date, and
1,000 shares of common stock to another employee.
<PAGE>
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30,
1996
Sales for the second Quarter of 1997 amounted to $452,100 which were
$747,400 (62.3%)lower than the $1,199,500 reported for the second
Quarter of 1996. The Service group decreased its sales by 68.9% or
$508,100 to $229,800 and the Products group lost revenues of $239,300
(51.8%)and reported $222,300 for the Three months ended June 30, 1997 as
compared to $461,600 for the Three months ended June 30, 1996. Included
in the Service group revenue reduction of $508,100 is a decrease of
$436,800 related to the Environmental Consulting and Engineering and
Civil Engineering and Surveying Division which was disposed at July 31,
1996. The Services group reported $71,300 less revenues for the second
Quarter of 1997 as compared to the second Quarter 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 and the
disposition of this product line during May 1997.
Cost of goods sold and direct service costs decreased by 63.9% or
$584,400 to $330,500 for the second Quarter of 1997 as compared to
$914,900 reported for the second Quarter of 1996. The Services Division
reduced its direct service costs by $439,500 (74.0%) and reported
$154,200 for the second Quarter of 1997 as compared to $593,700 for the
second Quarter of 1996. Included in the Service group direct service
costs reduction of $439,500 is a decrease of $368,200 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 $144,900 or 45.1%, to $176,300
for 1997 as compared to $321,200 for the second Quarter of 1996 due to
the non stockpiling of air monitoring cassettes by one large customer.
The gross profit for the second Quarter ended June 30, 1997 decreased by
$163,000, a decrease of 57.3%, to $121,600 as compared to $284,600 for
the Three months ended June 30, 1996. The Services Division recorded a
decrease of 47.6% or $68,600 in its gross profit for the second Quarter
of 1997 as compared to the second Quarter of 1996. The Service group
gross profit reduction of $68,600 is attributable to the Environmental
Consulting and Engineering and Civil Engineering and Surveying Division
which was disposed at July 31, 1996. The Products Division experienced a
significant decrease of 67.2% or a $94,400 reduction in its gross profit
for the second Quarter of 1997 as compared to the second Quarter of 1996.
The Services Division reported a 32.9% gross margin for the second
Quarter of 1997 as compared to a 19.5% margin for the same Quarter in
1996. The reason for the significantly improved gross margin in the
Services Division and the $68,600 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 20.7% gross margin for the second
Quarter of 1997 as compared to a 30.4% margin for the same Quarter in
1996.
<PAGE>
Percentage comparisons of gross margins reported by the company are as
follows:
[C] [C] [C] [C]
Period Total Products Services
2nd Quarter 1997 26.9% 20.7% 32.9%
2nd Quarter 1996 23.7% 30.4% 19.5%
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:
[C] [C] [C] [C]
Period Total Products Services
2nd Quarter 1997 26.9% 20.7% 32.9%
2nd Quarter 1996 28.3% 30.4% 25.1%
Other operating expense was $3,500 for the Quarter ended June 30, 1997
as compared to $400 of revenue for the Quarter ended June 30, 1996.
Operating expenses were $861,900 lower and amounted to $306,200 for the
Three months ended June 30, 1997, as compared to $1,168,100 reported
for the Three months ended June 30, 1996. The operating expenses for
the second Quarter of 1996 included $696,800 of expenses related to the
Environmental Consulting and Engineering and Civil Engineering and
Surveying Division, which was disposed on July 31, 1996. Operating
expenses for the second Quarter of 1996 included a one time charge of
$615,000 related to the write-off of goodwill related to the
Environmental Consulting and Engineering and Civil Engineering and
Surveying Division. Sales and marketing expenses decreased by $70,200,
which savings were mostly attributable to the decline in sales for 1997,
and the agreement with Zellweger Analytics, Inc. for the distribution of
the ACT product line in 1996. General and administrative costs
decreased by $130,200 to $202,000 for the Three months ended June 30,
1997, as compared to $332,200 reported for the Three months ended June
30, 1996. Included in the second Quarter 1996 general and administrative
expenses is approximately $20,800 of consulting fees and expenses that
were related to a contract that was terminated in August 1996 and
$57,900 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 increased by $2,900 to $51,300. Shipping and
receiving costs decreased by $19,000 to $4,200 for the Three months
ended June 30, 1997 as compared to $23,200 for the Three months ended
June 30, 1996. This decline is related to the decrease in sales
reported above. A reduction of $3,800 in costs related to quality
control was the result of a reduction in personnel which occurred in
the first Quarter of 1996. Depreciation and amortization costs decreased
by $26,600 for the second Quarter ended June 30, 1997 as compared to
1996 of which $23,900 was attributable the Environmental Consulting and
Engineering and Civil Engineering and Surveying Division, which was
disposed on July 31, 1996.
The Company incurred an operating loss of $188,100 for the Three months
ended June 30, 1997 as compared to an operating loss of $883,100 for the
Three months ended June 30, 1996. The operating loss for the Three
months ended June 30, 1996 would have been $254,700, excluding the
Environmental Consulting and Engineering and Civil Engineering and
Surveying Division, which was disposed on July 31, 1996.
<PAGE>
Interest income for the Quarter ended June 30, 1997 was $15,300 and no
interest income was recorded for the Quarter ended June 30, 1996.
Interest income 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 $14,700 for the Three months ended June 30, 1997 was $44,500
lower than the amount reported for the second Quarter of 1996 which was
$59,200. The decrease in interest expense is attributable to reduced
borrowing under the Company's asset based lending arrangement and the
payoff of the mortgages in December 1996 when the real estate was sold.
Amortization of loan costs for the second Quarter of 1997 was $5,400 and
was $10,500 lower than the $15,900 reported for the Quarter ended June
30, 1996.
The Company incurred a net loss of $191,100 for the Three months ended
June 30, 1997 as compared to a net loss of $958,200 for the Three months
ended June 30, 1996. The net loss for the second Quarter of 1996,
excluding the Environmental Consulting and Engineering and Civil
Engineering and Surveying Division, which was disposed on July 31,
1996 would have been $323,300 which is $634,900 lower than the $958,200
reported for the second Quarter of 1996.
Six Months Ended June 30, 1997 Compared to Six Months Ended
June 30, 1996
Sales for the first six months of 1997 amounted to $1,139,200 which
were $1,584,600 (58.2%)lower than the $2,723,800 reported for the first
six months of 1996. The Service group decreased its sales by 65.9% or
$1,014,400 to $525,300 and the Products group lost revenues of $570,200
(48.2%)and reported $613,900 for the six months ended June 30, 1997 as
compared to $1,184,100 for the six months ended June 30, 1996. Included
in the Service group revenue reduction of $1,014,400 is a decrease of
$869,900 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
$144,500 less revenues for the first six months of 1997 as compared to
the first six months of 1996. The reason for the reduction in the
Products group revenue is related to the decrease in activity in the
asbestos air monitoring in the industry and the disposition of this
product line during May 1997.
Cost of goods sold and direct service costs decreased by 61.0% or
$1,226,000 to $784,300 for the first six months of 1997 as compared to
$2,010,300 reported for the first six months of 1996. The Services
Division reduced its direct service costs by $845,600 (71.8%) and
reported $331,300 for the first six months of 1997 as compared to
$1,176,900 for the first six months of 1996. Included in the Service
group direct service costs reduction of $1,226,000 is a decrease of
$652,800 related to the Environmental Consulting and Engineering and
Civil Engineering and Surveying Division which was disposed at July 31,
The Products group decreased its cost of good sold by $380,400 or 45.6%,
to $453,000 for 1997 as compared to $833,400 for the first six months
of 1996 due to the non stockpiling of air monitoring cassettes by one
large customer.
<PAGE>
The gross profit for the first six months ended June 30, 1997 decreased
by $358,500, a decrease of 50.3%, to $354,900 as compared to $713,400
for the six months ended June 30, 1996. The Services Division recorded
a significant decrease of 46.5% or $168,800 in its gross profit for the
first six months of 1997 as compared to the first six months of 1996.
Included in the Service group gross profit reduction of $168,800 is a
decrease of $217,200 related to the Environmental Consulting and
Engineering and Civil Engineering and Surveying Division which was
disposed at July 1, 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 54.1% or a
$189,700 reduction in its gross profit and reported $160,900 of gross
profit for the first six months of 1997 as compared to the $350,600 for
the first six months of 1996.
The Services Division reported a 36.9% gross margin for the second
quarter of 1997 as compared to a 23.6% margin for the same quarter in
1996. The reason for the significantly improved gross margin in the
Services Division and the $168,800 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 26.2% gross margin for the second
quarter of 1997 as compared to a 29.6% margin for the same quarter in
1996.
Percentage comparisons of gross margins reported by the company are as
follows:
[C] [C] [C] [C]
Period Total Products Services
1st Six Months 1997 31.2% 26.2% 36.9%
1st Six Months 1996 26.2% 29.6% 23.6%
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:
[C] [C] [C] [C]
Period Total Products Services
1st Six Months 1997 31.2% 26.2% 36.9%
1st Six Months 1996 26.8% 29.6% 21.7%
Other operating revenue was $6,200 for the first six months ended
June 30, 1997 as compared to $500 for the first six months ended June
30, 1996.
<PAGE>
Operating expenses were $1,168,200 lower and amounted to $604,000 for
the six months ended June 30, 1997, as compared to $1,772,200 reported
for the six months ended June 30, 1996. The operating expenses for the
first six months of 1996 included $801,300 of expenses related the
Environmental Consulting and Engineering and Civil Engineering and
Surveying Division, which was disposed on July 31, 1996. Operating
expenses for the first six months of 1996 included a one time charge
of $615,000 related to the write-off of goodwill related to the
Environmental Consulting and Engineering and Civil Engineering and
Surveying Division. Sales and marketing expenses decreased by $113,400,
which savings were mostly attributable to the decline in sales for 1997,
and the agreement with Zellweger Analytics, Inc. for the distribution of
the ACT product line in 1996. General and administrative costs
decreased by $324,800 to $368,900 for the six months ended June 30,
1997, as compared to $693,700 reported for the six months ended June 30,
1996. Included in the second quarter 1996 general and administrative
expenses is approximately $79,300 of consulting fees and expenses that
were related to a contract that was terminated in August 1996 and
$139,800 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 $17,200 to $93,000. Shipping and
receiving costs decreased by $31,200 to $10,200 for the six months
ended June 30, 1997 as compared to $41,300 for the six months ended
June 30, 1996. This decline is related to the decrease in sales
reported above. A reduction of $7,500 in costs related to quality
control was the result of a reduction in personnel in the second quarter
of 1996. Depreciation and amortization costs decreased by $59,100 for the
second quarter ended June 30, 1997 as compared to 1996 of which $46,600
was attributable the Environmental Consulting and Engineering and Civil
Engineering and Surveying Division, which was disposed on July 31, 1996.
The Company incurred an operating loss of $242,800 for the six months
ended June 30, 1997 as compared to an operating loss of $1,058,200 for
the six months ended June 30, 1996, which included a one time charge of
$615,000 related to the write-off of goodwill related to the
Environmental Consulting and Engineering and Civil Engineering and
Surveying Division. The operating loss for the six months ended June
30, 1996 would have been $473,400, excluding the Environmental
Consulting and Engineering and Civil Engineering and Surveying Division,
which was disposed on July 31, 1996.
Interest income for the six months ended June 30, 1997 was $29,300
higher than the amount recorded for 1996. Interest income 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 $46,800
for the six months ended June 30, 1997 was $51,500 lower than the amount
reported for the first six months of 1996 which was $98,300. The
decrease in interest expense is attributable to reduced borrowing under
the Company's asset based lending arrangement and the payoff of the
mortgages in December 1996 when the real estate was sold. Amortization
of loan costs for the first six months of 1997 was $10,800 and was
$10,300 lower than the $21,100 reported for the first six months ended
June 30, 1996.
<PAGE>
The Company incurred a net loss of $268,000 for the six months ended
June 30, 1997 as compared to a net loss of $1,176,200 for the six months
ended June 30, 1996, which included a one time charge of $615,000
related to the write-off of goodwill related to the Environmental
Consulting and Engineering and Civil Engineering and Surveying Division.
The net loss for the first six 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
$578,800 which is $597,400 lower than the $1,176,200 reported for the
first six months of 1996.
FINANCIAL CONDITION
The Company's financial condition continued to deteriorate during the
first Six 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 $928,000 at December
31, 1996 to $988,100 at June 30, 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 Services Division experienced a reduction in sales revenues and
the trade receivables from that group are down to $133,400 at June 30,
1997 from $207,400 at December 31, 1996. The Products Division reduced
inventories by $232,400 to $55,100 from $287,500 at December 31, 1996
as a result of reduced sales of products and the sale of the asbestos
product line to a major customer during May of 1997.
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 $480,000 which is recorded as
deferred revenue and included in accrued liabilities at June 30, 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 sold its air sampling cassettes products line, including
equipment and inventory, for $161,072, to a major customer during May
The total amount of cash received by the Company was $5,100 and $155,972
was paid to a vendor. This transaction was part of management's
strategy to eliminate unprofitable or marginally profitable services
and products.
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 second 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.
The Company plans to pursue the refinancing of certain loans, amounting
to approximately $300,000 from related parties and stockholders and
included in current maturities of long-term debt, by the third quarter
of 1997.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
On June 11, 1997, Robin A. Bowers, Secretary, tendered her
resignation as an officer of the Company. As of this date, no
replacement has been elected.
Item 6. Exhibits and Reports
Exhibit
10.13 Asset Purchase Agreement by and between Envirometrics Products
Company and Multi-Metrics, Inc.
10.14 Letter of Resignation by Robin A. Bowers
<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: August 14, 1997 Walter H. Elliott, III
--------------------------------
Walter H. Elliott, III
President and CEO
</TABLE>
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<PERIOD-END> JUN-30-1997
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