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 September 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 November 11, 1997 the Registrant had outstanding 2,487,626 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
September 30, 1997 and December 31, 1996 2-3
Condensed Statements of Operations for the
Third Quarter ended September 30, 1997 and 1996 4
Condensed Statements of Cash Flows for the
Third Quarter ended September 30, 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
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
ASSETS (Unaudited) (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 53,523 $ 29,604
Current portion of notes
receivable 100,548 104,562
Trade receivables less allowance
for doubtful accounts of
1997 $23,453; 1996 $26,353 199,708 364,458
Other receivables, including
amounts due from stockholders
1997 and 1996 $33,035 23,968 18,400
Inventories 42,541 287,541
Prepaid expenses 48,438 87,867
-------- --------
TOTAL CURRENT ASSETS 468,726 892,432
-------- --------
OTHER ASSETS AND INTANGIBLES
Deposits 28,616 30,737
Notes receivable 620,680 696,745
Organization and loan costs,
net of accumulated amortization
1997 $58,527; 1996 $40,372 15,255 31,801
License and distribution agreements
net of accumulated amortization
1997 $12,500; 1996 $8,000 17,500 22,000
Other 146,823 110,511
------- -------
828,874 891,794
------- -------
PROPERTY AND EQUIPMENT
Furniture and equipment 1,098,227 1,240,727
Vehicles 44,034 88,991
--------- ---------
1,142,261 1,329,718
Less accumulated depreciation
and amortization (960,216) (961,431)
--------- ---------
182,045 368,287
--------- ---------
$1,479,645 $2,152,513
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 30,161 $ 80,762
Current maturities of
long-term debt 332,521 273,428
Accounts payable 555,320 853,674
Accrued expenses 652,429 612,551
--------- ---------
TOTAL CURRENT LIABILITIES 1,570,431 1,820,415
--------- ---------
LONG-TERM DEBT,
less current maturities 553,382 602,585
---------- ----------
STOCKHOLDERS' EQUITY
Common stock par value $.001;
authorized 10,000,000 shares;
issued 1997 - 2,487,626 shares;
1996 - 2,471,626 shares 2,488 2,472
Additional paid-in capital 5,102,277 5,101,417
Retained deficit (5,748,933) (5,374,376)
---------- ----------
( 644,168) ( 270,487)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,479,645 $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 SEPTEMBER 30, 1997 and 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1997 1996
--------- -------- ------- --------
<S> <C> <C> <C> <C>
NET SALES AND SERVICE
REVENUE
Services $ 205,345 $ 467,948 $ 730,663 $2,007,634
Products 97,436 318,595 711,343 1,502,682
---------- --------- ---------- ----------
302,781 786,543 1,442,006 3,510,316
---------- --------- ---------- ----------
COST OF GOODS SOLD AND
DIRECT SERVICE COSTS
Services 149,171 364,065 480,509 1,541,000
Products 31,295 236,790 484,281 1,070,212
---------- ---------- ---------- ----------
180,466 600,855 964,790 2,611,212
---------- ---------- ---------- ----------
GROSS PROFIT 122,315 185,688 477,216 899,104
--------- ---------- ---------- ----------
OTHER OPERATING REVENUE 12,069 2,515 18,313 3,048
--------- ---------- ---------- ----------
OPERATING EXPENSES
Sales and marketing 21,373 61,000 93,538 246,574
General and admin 151,492 167,979 520,400 861,686
Research and development 26,996 48,171 120,013 158,433
Shipping and receiving 164 18,050 10,278 59,367
Quality control - 2,233 - 9,773
Depreciation and
amortization 27,164 56,408 86,900 175,231
--------- --------- ---------- ----------
227,189 353,841 831,129 1,511,064
Write-off of goodwill - - - 614,938
--------- --------- ---------- ----------
227,189 353,841 831,129 2,126,002
--------- ---------- ---------- ----------
OPERATING LOSS (92,805) (165,638) (335,600) (1,223,850)
--------- ---------- ---------- ----------
FINANCIAL INCOME (EXPENSE)
Interest income 14,756 6,435 45,462 7,849
Interest expense (19,638) (35,146) (66,450) (133,468)
Gain (loss) on disposition
of subsidiary - 124,553 - 124,553
Gain (loss) on disposition (3,494) - (1,844) -
of product line
Amortization of loan costs (5,375) (25,378) (16,125) (46,449)
-------- ---------- ---------- ----------
(13,751) 70,464 (38,957) (47,515)
-------- ---------- ---------- ----------
NET LOSS $ (106,556) $ (95,174) $(374,557) $ 1,271,365)
========= ========== ========== ==========
Weighted average number of
common shares outstanding 2,592,246 2,443,679 2,559,274 2,481,155
========== ========== ========== ==========
Net loss per common share $ (0.041) $ (0.039) $ (0.146) $ (0.512)
========= ========== ========== ==========
Dividends per common share$ - $ - $ - $ -
========= ========== ========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THIRD QUARTER ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Sept. 30, 1997 Sept. 30, 1996
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flow From Operating Activities:
Net (loss) $ ( 374,557) $(1,271,365)
Adjustments To Reconcile net
income (loss) to net cash used
in operating activities
Depreciation 86,900 151,805
Amortization 16,125 684,813
Provision (recoveries for
doubtful accounts) - (12,869)
Non-cash expense paid by issuance
of warrants - 7,500
(Gain) loss on disposal of equipment 3,450 (680)
(Gain) loss on disposal of subsidiary - (124,553)
(Gain) from settlement of vendor debt (1,556)
Change in assets and liabilities:
Decrease in cash, restricted - 125,644
Decrease in accounts receivable 170,318 139,317
Decrease in inventory 179,800 172,324
Decrease in prepaid expenses 39,429 58,490
Increase(decrease)in accounts payable
and accrued expenses (100,948) 189,981
--------- ----------
Net cash provided by
operating activities 18,961 120,407
--------- ----------
Cash Flow From Investing Activities:
Purchase of property and equipment - (64,395)
Collection of note receivable 80,079 22,466
Cash received on disposition of
product line 5,100 -
Proceeds from sale of equipment 454 26,555
Book value of assets sold in connection
with disposition of asb prod line,
net of cash paid to third party (5,554) - (5,554) -
(Increase) in deposits, organization
and loan and acquisition costs 2,121 (69,210)
(Increase) in other assets (36,531) (20,975)
--------- ----------
Net cash used in investing activities 45,669 (105,559)
Cash Flows From Financing Activities:
Proceeds from borrowings on
short-term notes 25,000 327,884
Principal payments on short-term
notes, net (65,711) (18,140)
Principal payments on long-term
borrowing - (362,430)
--------- ----------
Net cash (used in) provided by
financing activities (40,711) (52,686)
--------- ----------
Net (decrease) increase in cash and
cash equivalents 23,919 (37,838)
Cash and cash equivalents, beginning 29,604 53,143
-------- ----------
Cash and cash equivalents, ending $ 53,523 $ 15,305
========= ==========
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, net $ 16 $ -
========= ==========
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
ENVIROMETRICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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. During September 1997 The United States Company tendered
125,000 shares back to the Company.
(8) During October 1997 the Company settled employment agreements with two
employees at termination of their employment by agreeing to grant warrants
for each to purchase 50,000 shares of Company common stock. No amounts have
been recorded in the financial statements.
<PAGE>
Three Months Ended September 30, 1997 Compared to Three Months Ended
September 30, 1996
Sales for the third Quarter of 1997 amounted to $302,800 which were $483,800
(61.5%)lower than the $786,600 reported for the third Quarter of 1996. The
Service group decreased its sales by 56.1% or $262,600 to $205,300 and the
Products group lost revenues of $221,200 (69.4%)and reported $97,400 for the
Three months ended September 30, 1997 as compared to $318,600 for the Three
months ended September 30, 1996. Included in the Service group revenue
reduction of $262,600 is a decrease of $133,100 related to the Environmental
Consulting and Engineering and Civil Engineering and Surveying Division
which was disposed at July 31, 1996. The remaining Services group reported
$129,500 less revenues for the third Quarter of 1997 compared to the
third 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 70.0% or $420,400
to $180,500 for the third Quarter of 1997 as compared to $600,900 reported
for the third Quarter of 1996. The Services Division reduced its direct
service costs by $214,900 (59.0%) and reported $149,200 for the third
Quarter of 1997 as compared to $364,100 for the third Quarter of 1996.
Included in the Service group direct service costs reduction of $214,900 is
a decrease of $109,700 related to the Environmental Consulting and
Engineering and Surveying Division which was disposed at July 31, 1996.
The Products group decreased its cost of goods sold by $205,500 or 86.8%,
to $31,300 for 1997 as compared to $236,800 for the third Quarter of 1996
due to the disposition of the asbestos air monitoring product line in
May 1997.
The gross profit for the third Quarter ended September 30, 1997 decreased by
$63,400, a decrease of 34.1%, to $122,300 as compared to $185,700 for the
Three months ended September 30, 1996. The Services Division recorded a
decrease of 45.9% or $47,700 in its gross profit for the third Quarter of
1997 as compared to the third Quarter of 1996. $23,500 of the Service group
gross profit reduction of $47,700 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
decrease of 19.2% or a $15,700 reduction in its gross profit for the
third Quarter of 1997 as compared to the third Quarter of 1996.
The Services Division reported a 27.4% gross margin for the third Quarter of
1997 as compared to a 22.2% margin for the same Quarter in 1996. The reason
for the significantly improved gross margin in the Services Division and the
$47,700 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 67.9%
gross margin for the third Quarter of 1997 as compared to a 25.7% margin
for the same Quarter in 1996 as a result of the disposition of the
asbestos air monitoring product line in May 1997, leaving the ACT product
line which has significantly higher margins.
Percentage comparisons of gross margins reported by the company are as
follows:
[S] [C] [C] [C]
Period Total Products Services
3rd Quarter 1997 40.4% 67.9% 27.4%
3rd Quarter 1996 23.6% 25.7% 22.2%
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:
[S] [C] [C] [C]
Period Total Products Services
3rd Quarter 1997 40.4% 67.9% 27.4%
3rd Quarter 1996 24.6% 25.7% 23.5%
Other operating revenue was $12,100 for the Quarter ended September 30, 1997
as compared to $2,500 of revenue for the Quarter ended September 30, 1996.
Operating expenses were $126,700 lower and amounted to $227,200 for the Three
months ended September 30, 1997, as compared to $353,800 reported for the
Three months ended September 30, 1996. The operating expenses for the third
Quarter of 1996 included $45,400 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 $39,600, which savings were mostly attributable to the decline in sales
for 1997, and the agreement with Zelweger Analytics, Inc. for the
distribution of the ACT product line in 1996. General and administrative
costs decreased by $16,500 to $151,500 for the Three months ended
September 30, 1997, as compared to $168,000 reported for the Three months
ended September 30, 1996. General and administrative costs decreased by
$56,700 excluding amounts attributable to the Environmental Consulting and
Engineering and Civil Engineering and Surveying Division, which was disposed
on July 31, 1996 and the one time reduction in expense of $80,500 for the
final settlement with the former CEO. Included in the third Quarter 1996
general and administrative expenses is approximately $15,000 of
consulting fees and expenses that were related to a contract that was
terminated in August 1996. Research and development costs decreased
by $21,200 to $27,000. Shipping and receiving costs decreased by $17,900
to $200 for the Three months ended September 30, 1997 as compared to
$18,100 for the Three months ended September 30, 1996. This decline
is related to the decrease in sales reported above. A reduction of
$2,200 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 deceased overall by $29,200 but ongoing activities
realized an increase of $3,600 for the third Quarter ended September
30, 1997 as compared to 1996 of which $32,800 of expense was
attributable to 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 $92,800 for the Three months ended
September 30, 1997 as compared to an operating loss of $165,600 for the Three
months ended September 30, 1996. The operating loss for the Three months
ended September 30, 1996 would have been $152,200, excluding the
Environmental Consulting and Engineering and Civil Engineering and Surveying
Division, which was disposed on July 31, 1996.
Interest income for the Quarter ended September 30, 1997 was $14,800 compared
to $6,400 of interest income recorded for the Quarter ended September 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
$19,600 for the Three months ended September 30, 1997 was $15,500 lower
than the amount reported for the third Quarter of 1996 which was
$35,100. 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 ofloan costs for the third Quarter of 1997 was $5,400 and
was $20,000 lower than the $25,400 reported for the Quarter ended
September 30, 1996.
The Company incurred a net loss of $106,600 for the Three months ended
September 30, 1997 as compared to a net loss of $95,200 for the Three months
ended September 30, 1996. The net loss for the third 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
$76,900 which is $18,200 lower than the $95,200 reported for the third
Quarter of 1996.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Sales for the first Nine months of 1997 amounted to $1,442,000 which were
$2,068,300 (58.9%)lower than the $3,510,300 reported for the first Nine
months of 1996. The Service group decreased its sales by 63.6% or $1,277,000
to $730,700 and the Products group lost revenues of $791,300 (52.7%)and
reported $711,300 for the Nine months ended September 30, 1997 as compared
to $1,502,600 for the Nine months ended September 30, 1996. Included in the
Service group revenue reduction of $1,277,000 is a decrease of nearly
$1,000,000 ($999,500) 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 $277,500 less revenues for the first Nine months of 1997
as compared to the first Nine 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 63.1% or $1,646,400
to $964,800 for the first Nine months of 1997 as compared to $2,611,200
reported for the first Nine months of 1996. The Services Division reduced
its direct service costs by $1,060,500 (68.8%) and reported $480,500 for the
first Nine months of 1997 as compared to $1,541,000 for the first Nine months
of 1996. Included in the Service group direct service costs reduction of
$1,060,500 is a decrease of $758,000 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 goods sold by $585,900 or 54.8%, to $484,300 for 1997 as compared to
$1,070,200 for the first Nine months of 1996 due to the non stockpiling
of air monitoring cassettes by one large customer and the disposition
of the asbestos air monitoring product line in May 1997.
The gross profit for the first Nine months ended September 30, 1997
decreased by $421,900, a decrease of 46.9%, to $477,200 as compared to
$899,100 for the Nine months ended September 30, 1996. The Services Division
recorded a significant decrease of 46.4% or $216,500 in its gross profit for
the first Nine months of 1997 as compared to the first Nine months of 1996.
Included in the Service group gross profit reduction of $216,500 is a
decrease of $241,400 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 Environmental Consulting and Engineering and Civil
Engineering and Surveying Division, the gross rpofit for the remaining
services increased by $24,900. The Products Division experienced a
significant decrease of 47.5% or a $205,400 reduction in its gross profit
and reported $227,100 of gross profit for the first Nine months of 1997
as compared to the $432,500 for the first Nine months of 1996.
The Services Division reported a 34.2% gross margin for the third quarter of
1997 as compared to a 23.2% margin for the same quarter in 1996. The reason
for the significantly improved gross margin in the Services Division and the
$216,500 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 31.9%
gross margin for the third quarter of 1997 as compared to a 28.8% margin
for the same quarter in 1996.
Percentage comparisons of gross margins reported by the company are as
follows:
[S] [C] [C] [C]
Period Total Products Services
1st Nine Months 1997 33.1% 31.9% 34.2%
1st Nine Months 1996 25.6% 28.8% 23.2%
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:
[S] [C] [C] [C]
Period Total Products Services
1st Nine Months 1997 33.1% 31.9% 34.2%
1st Nine Months 1996 26.2% 28.8% 22.3%
Other operating revenue was $18,300 for the first Nine months ended
September 30, 1997 as compared to $3,000 for the first Nine months ended
September 30, 1996.
Operating expenses were $1,294,900 lower and amounted to $831,100 for the
Nine months ended September 30, 1997, as compared to $2,126,000 reported for
the Nine months ended September 30, 1996. The operating expenses for the
first Nine months of 1996 included $838,500 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 first Nine 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 $153,000, 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 $341,300 to $520,400 for the Nine months ended September 30, 1997,
as compared to $861,700 reported for the Nine months ended September 30,
1996. Included in the third quarter 1996 general and administrative
expenses is approximately $86,800 of consulting fees and expenses that
were related to a contract that was terminated in August 1996 and
$180,500 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 $38,400 to $120,000. Shipping and
receiving costs decreased by $49,100 to $10,300 for the Nine months
ended September 30, 1997 as compared to $59,400 for the Nine months
ended September 30, 1996. This decline is related to the decrease in
sales reported above. A reduction of $9,800 in costs related to quality
control was the result of a reduction in personnel in the third quarter
of 1996. Depreciation and amortization costs decreased by $88,300 for
the third quarter ended September 30, 1997 as compared to 1996 of
which $43,000 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 $335,600 for the Nine months ended
September 30, 1997 as compared to an operating loss of $1,223,900 for the
Nine months ended September 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 Nine months ended September 30, 1996 would have
been $625,600, excluding the Environmental Consulting and Engineering
and Civil Engineering and Surveying division, which was disposed on
July 31, 1996.
Interest income for the Nine months ended September 30, 1997 was $37,600
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 $66,500 for the Nine months ended
September 30, 1997 was $67,000 lower than the amount reported for
the first Nine months of 1996 which was $133,500. 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 Nine months of 1997 was $16,100 and was $30,300
lower than the $46,400 reported for the first Nine months ended
September 30, 1996.
The Company incurred a net loss of $374,600 for the Nine months ended
September 30, 1997 as compared to a net loss of $1,271,400 for the Nine
months ended September 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 Nine 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 $655,700 which is $615,600 lower than the
$1,271,400 reported for the first Nine months of 1996.
<PAGE>
FINANCIAL CONDITION
The Company's financial condition continued to deteriorate during the first
Nine 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 $1,101,700 at September 30, 1997. Included in the working capital
deficiency are approximately $300,000 in related party debt which terms are
expected to be extended and the prepaid purchase deposit from Zellweger
Analytics, Inc. in excess of $480,000 which is recorded as deferred revenue
and included in accrued liabilities at September 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 $143,400 at September 30, 1997
from $207,400 at December 31, 1996. The Products Division reduced inventories
by $232,200 to $56,100 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 conducting
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 September 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.
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 1997.
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 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
1998. 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 fourth quarter of 1997.
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports
Exhibit
<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: November 12, 1997 Walter H. Elliott, III
--------------------------------
Walter H. Elliott, III
President and CEO
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 53,523
<SECURITIES> 0
<RECEIVABLES> 300,771
<ALLOWANCES> 23,453
<INVENTORY> 42,541
<CURRENT-ASSETS> 877,312
<PP&E> 1,142,261
<DEPRECIATION> 960,216
<TOTAL-ASSETS> 1,479,645
<CURRENT-LIABILITIES> 1,570,431
<BONDS> 553,382
0
0
<COMMON> 2,488
<OTHER-SE> (646,656)
<TOTAL-LIABILITY-AND-EQUITY> 1,479,645
<SALES> 1,442,006
<TOTAL-REVENUES> 1,442,006
<CGS> 964,790
<TOTAL-COSTS> 964,790
<OTHER-EXPENSES> 785,323
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,450
<INCOME-PRETAX> (374,557)
<INCOME-TAX> 0
<INCOME-CONTINUING> (374,557)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (374,557)
<EPS-PRIMARY> (.146)
<EPS-DILUTED> (.146)
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