UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended June 30, 1998
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:
(843) 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 June 30, 1998 the Registrant had outstanding 2,796,671 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 Sheet at
June 30, 1998 and December 31, 1997 2
Condensed Statement of Operations for the
Second Quarter ended June 30, 1998 and 1997 3
Condensed Statement of Cash Flows for the
Second Quarter ended June 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Conditions 8-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports
Signature 13
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
ASSETS (Unaudited) (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 25,015 $ 54,096
Current portion of notes
receivable 308,766 100,548
Trade receivables less allowance
for doubtful accounts
1998 and 1997 $18,082 93,348 117,625
Other receivables 2,166 4,367
Inventories 15,017 17,334
Prepaid expenses 23,780 53,821
-------- --------
TOTAL CURRENT ASSETS 468,092 347,791
-------- --------
OTHER ASSETS AND INTANGIBLES
Deposits 929 21,093
Notes receivable,
less current portion 337,712 596,197
Organization and loan costs,
net of accumulated amortization
1998 $61,838; 1997 $51,958 - 9,880
Other, including amounts due
amounts due from stockholders 151,319 146,148
------- -------
489,960 773,318
------- -------
PROPERTY AND EQUIPMENT
Furniture and equipment 1,079,738 1,079,738
Vehicles 14,421 44,033
--------- ---------
1,094,159 1,123,771
Less accumulated depreciation
and amortization (969,664) (963,843)
--------- ---------
124,495 159,928
--------- ---------
$1,082,547 $1,281,037
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of
long-term debt $ 247,470 $ 336,106
Accounts payable 275,464 546,605
Accrued expenses 130,318 174,037
--------- ---------
TOTAL CURRENT LIABILITIES 653,252 1,056,748
--------- ---------
LONG-TERM DEBT,
less current maturities 108,613 544,506
---------- ----------
STOCKHOLDERS' EQUITY
Common stock par value $.001;
authorized 10,000,000 shares;
issued 1998 - 2,796,671 shares
and 1997 - 2,669,899 shares 2,797 2,670
Preferred stock, no par value;
authorized 2,500,000 shares;
issued 1998 - 351,268
and 1997 - 70,000 shares 3,513 700
Additional paid-in capital 5,807,890 5,320,369
Retained earnings(deficit) (5,493,518) (5,643,956)
---------- ----------
320,682 ( 320,217)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,082,547 $1,281,037
========== ==========
<FN>
See Notes to Condensed Financial Statements
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE QUARTER ENDED JUNE 30, 1998 and 1997
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1998 1997
--------- --------
<S> <C> <C>
NET SERVICE REVENUE $ 380,844 $ 525,318
DIRECT SERVICE COSTS 257,760 331,338
---------- ----------
GROSS PROFIT 123,084 193,980
---------- ----------
32.3% 36.9%
OTHER OPERATING REVENUE 20,653 6,244
----------- ----------
OPERATING EXPENSES
Sales and marketing 22,184 23,803
General and administrative 195,760 290,413
Depreciation and
amortization 23,712 37,797
--------- ---------
241,656 352,013
--------- ---------
OPERATING LOSS (97,919) (151,789)
--------- ---------
FINANCIAL INCOME (EXPENSE)
Interest income 27,329 30,706
Interest expense (21,921) (46,812)
Gain (loss) on disposition
of property (9,121) 1,650
Gain (loss) on vendor
balances negotiated 284,306 -
Other 3,747 -
Amortization of loan costs (9,880) (10,750)
-------- ---------
274,460 (25,206)
-------- ----------
INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS 176,541 (176,995)
DISCONTINUED OPERATIONS (26,103) (91,006)
-------- --------
NET INCOME (LOSS) $ 150,438 $ (268,001)
========= ==========
Weighted average number of
common shares outstanding 2,670,599 2,542,516
========== ==========
Net loss per common share $ (0.056) $ (0.105)
========= ==========
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, 1998 AND 1997
<TABLE>
<CAPTION>
<C> <C>
June 30,1998 June 30,1997
Cash Flow From Operating Activities:
Net income (loss) $ 150,438 $ (268,001)
Adjustments To Reconcile net
income (loss) to net cash used
in operating activities
Depreciation 23,712 59,769
Amortization 9,880 10,750
Provision (recoveries) for doubtful accounts
(Gain) on vendor debt mediation (284,306) -
(Gain) loss on disposal of equipment 9,121 (1,650)
Change in assets and liabilities:
Decrease in accounts receivable 26,478 140,203
Decrease in inventory 2,317 181,395
Decrease in prepaid expenses 30,041 23,055
Increase(decrease)in accounts payable
and accrued expenses (25,343) (126,891)
-------- ---------
Net cash provided by
operating activities (57,662) 18,630
--------- ---------
Cash Flow From Investing Activities:
Collections of notes receivable 50,267 56,019
Cash received on disposition of
product line 3,400 5,100
Loss on disposition of product line - 454
Book value of assets sold in connection with
disposition of asbestos product line,
net of cash paid to third party - (5,554)
Decrease in deposits 20,164 -
(Increase) in other assets (5,171) (44,920)
--------- ----------
Net cash provided by investing
activities 68,660 11,099
--------- ----------
Cash Flows From Financing Activities:
Proceeds from borrowings on
short-term notes 20,000 25,000
Principal payments on short-term
notes, net - (29,624)
Principal payments on long-term borrowing (60,079) -
-------- ---------
Net cash provided by investing activitiess (40,079) (4,624)
--------- ----------
Net (decrease) increase in cash and
cash equivalents (29,081) 25,105
Cash and cash equivalents, beginning 54,096 29,604
--------- ----------
Cash and cash equivalents, ending $ 25,015 $ 54,709
========= ==========
Supplemental Disclosure of Cash Flows
Information
Cash payments for interest $ 5,128 $ 41,258
========= ==========
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 and other $ - $ 141
========== ==========
Issuance of common stock for
debt conversion $ 68,082 $ -
========== ==========
Issuance of preferred stock for
debt conversion $ 422,379 $ -
========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
ENVIROMETRICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(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 is audits of the consolidated
financial statements for the years ended December 31, 1997 and 1996 and has
not filed form 10-KSB for the years ended December 31, 1997 and 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) Shakespeare Partners, LTD, whose general partner is a stockholder of the
Company, had outstanding notes payable due from the Company amounting to
$200,000 at June 30, 1998 and $287,700 at December 31, 1997. No interest
was paid by the Company during 1997 or year to date 1998. Shakespeare
Partners, LTD, loaned an additional $20,000 to the Company in May 1998 in
connection with negotiation and settlement of certain vendor debt.
Approximately $149,700 of debt was converted to 74,878 preferred shares
which have dividend and preference in liquidation rights.
The United States Company had outstanding notes payable due from the Company
amounting to $16,000 at June 30, 1998 and $209,100 at December 1997. No
interest was paid during 1997 or year to date during 1998. Approximately
$85,000 of debt was converted to 111,648 preferred shares which have dividend
and preference in liquidation rights. $124,100 was forgiven by the United
States Company. Two Directors of the Company are officers of the United
States Company. The Treasurer is a Principal in The United States Company.
The President and CEO had outstanding notes payable due from the Company
amounting to approximately $15,000 at December 1997. No interest was paid
during 1997 or year to date during 1998. Approximately $17,700 of debt was
converted to 8,835 preferred shares which have dividend and preference in
liquidation rights.
(4) 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. The Company sold its
remaining Air Chemical Technology (ACT) product line to its exclusive
distributor for a $354,850 reduction in prepaid purchase deposits. In
addition, $10,000 cash was paid and 70,000 shares of preferred stock were
issued at a value of $140,000, which eliminated the prepaid purchase deposits
liability.
(5) The Company has a $230,000 note receivable (due no later than December
31, 1998) from the Buyer of its real property in December 1996. The buyer
pays interest only monthly at 10%. The note is secured by the real estate.
(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. The Company issued 125,000 shares to Shakespeare
Partners Ltd. in connection with a prior loan. On June 29, 1998 the
Company granted 700,000 options to purchase common stock to its Directors and
Officers.
(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 June 30, 1998 Compared to Three Months Ended June 30, 1997
The following financial information reports operating trends taking into
account the discontinued operations of the Products Group for 1997.
Net service revenue for the Service group, which is comprised of the
industrial hygiene laboratory and health and safety consulting, for the
second quarter of 1998 amounted to $182,100 which was $47,700 (20.8%)lower
than the $229,800 reported for the second quarter of 1997. Additional sales
that would have been reported without the discontinued Products line amounted
to $222,300 for the second quarter of 1997.
Direct service costs decreased by 10.8% or $16,600 to $137,600 for the second
quarter of 1998 as compared to $154,200 reported for the second quarter of
1997. Additional cost of sales that would have been reported without the
discontinued Products line amounted to $176,300 for the second quarter of
1997.
The gross profit for the second quarter ended June 30, 1998 decreased by
$31,000, a decrease of 41.1%, to $44,500 as compared to $75,500 for the
three months ended June 30, 1997. Additional gross profit that would have
been reported without the discontinued Products line amounted to $46,000 for
the second quarter of 1997.
The Company reported a 24.4% gross margin for the second quarter of 1998 as
compared to a 32.9% margin for the second quarter in 1997. The reason for
the deterioration in gross margin in the Services Division and the $31,000
decrease in the amount of gross profit reported by that division is due to
reduced sample analysis during the second quarter of 1998 and a large
consultative project that was performed during the second quarter of 1997.
Other operating revenue was $9,200 for the quarter ended June 30, 1998 as
compared to a $3,500 loss for 1997.
Operating expenses were $50,300 lower and amounted to $121,600 for the Three
months ended June 30, 1998, as compared to $171,900 reported for the Three
months ended June 30, 1997. Sales and marketing expenses increased by
$14,000, which were mostly attributable to an increase in staff for 1998.
General and administrative costs decreased by $49,600 to $97,500 for the
Three months ended June 30, 1998, as compared to $147,100 reported for the
Three months ended June 30, 1997. Depreciation and amortization costs
decreased overall by $14,600 due to the reduction in vehicles of the
Service Group for the second quarter of 1998.
The Company incurred an operating loss of $67,800 for the three months ended
June 30, 1998 as compared to an operating loss of $99,800 for the three
months ended June 30, 1997. Additional operating loss that would have been
reported without the discontinued Products line amounted to $88,200 for the
second quarter of 1997.
Interest income for the quarter ended June 30, 1998 was $15,500 compared to
$15,300 of interest income recorded for the quarter ended June 30, 1997.
Interest expense of $12,200 for the three months ended June 30, 1998 was
$2,400 lower than the amount reported for the second quarter of 1997 which
was $14,600. The decrease in interest expense is attributable to elimination
of borrowing under the Company's asset based lending arrangement for the
Products Group which was disposed during the fourth quarter of 1997. The
Company recorded a net gain of $284,800 in 1998 on vendor trade payables
and notes payable that were negotiated. Amortization of loan costs for the
second quarter of 1998 was $4,500 as compared to %5,400 for 1997.
The Company reported income before discontinued operations of $215,800 for
the three months ended June 30, 1998 as compared to a net loss before
discontinued operations of $102,900 for the Three months ended June 30,
1997. Discontinued operations for the second quarter ended June 30, 1998
was $26,100 and 1997 was $88,200 related to the Products line. Net income
for the second quarter ended June 30, 1998 was $189,700 which is $380,800
higher than the net loss of $191,100 reported for the second quarter ended
June 30, 1997.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
The following financial information reports operating trends taking into
account the discontinued operations of the Products Group for 1997. Net
service revenue for the Service group, which is comprised of the industrial
hygiene laboratory and the health and safety consulting, for the first six
months of 1998 amounted to $380,800 which was $144,500 (27.5%) lower than the
$525,300 reported for the first six months of 1997. Additional sales that
would have been reported without the discontinued Products line amounted to
$613,900 for the first six months of 1997.
Direct service costs decreased by 22.2% or $73,600 to $257,700 for the first
six months of 1998 as compared to $331,300 reported for the first six months
of 1997. Additional cost of sales that would have been reported without the
discontinued Products line amounted to $453,000 for the first six months of
1997.
The gross profit for the six months ended June 30, 1998 decreased by $70,900,
a decrease of 36.6%, to $123,100 as compared to $194,000 for the six months
ended June 30, 1997. Additional gross profit that would have been reported
without the discontinued Products line amounted to $160,900 for the first
six months of 1997.
The Company reported a 32.3% gross margin for the first six months of 1998 as
compared to a 36.9% margin for the same quarter in 1997. The reason for the
deterioration in gross margin in the Services Division and the $70,900
decrease in the amount of gross profit reported by that division is due to
reduced sample analysis during the first six months of 1998 and a large
consultative project that was performed during the same period of 1997.
Other operating revenue was $20,600 for the six months ended June 30, 1998 as
compared to $6,200 of revenue for the six months ended June 30, 1997.
Operating expenses were $110,300 lower and amounted to $241,600 for the six
months ended June 30, 1998, as compared to $352,000 reported for the six
months ended June 30, 1997. Sales and marketing expenses decreased by $1,600
for 1998. General and administrative costs decreased by $94,600 to $195,800
for the six months ended June 30, 1998, as compared to $290,400 reported for
the six months ended June 30, 1997. Depreciation and amortization costs
decreased overall by $14,100 due to the reduction in vehicles of the Service
Group for the first six months of 1998.
The Company incurred an operating loss of $97,900 for the six months ended
June 30, 1998 as compared to an operating loss of $151,800 for the six
months ended June 30, 1997. Additional operating loss that would have been
reported without the discontinued Products line amounted to $91,000 for the
first six months of 1997.
Interest income for the six months ended June 30, 1998 was $27,300 compared
to $30,700 of interest income recorded for the six months ended June 30,
1997. The decrease is due to the reduction in the principal balance
outstanding for a note receivable that was executed during 1996 in
connection with the disposition of the Environmental Consulting and
Engineering and Civil Engineering and Surveying Division. Interest expense
of $21,900 for the six months ended June 30, 1998 was $24,900 lower than the
amount reported for the first six months of 1997 which was $46,800. The
decrease in interest expense is attributable to elimination of borrowing
under the Company's asset based lending arrangement for the Products Group
which was disposed during the fourth quarter of 1997. The Company recorded
a net gain of $284,300 in 1998 on vendor trade payables and notes payable
that were negotiated. Amortization of loan costs for the first six months
of 1998 was $9,900 and 1997 was $10,700.
The Company incurred net operating income before discontinued operations of
$176,600 for the six months ended June 30, 1998 as compared to a net loss
before discontinued operations of $177,000 for the six months ended June 30,
1997. Discontinued operations for the first six months ended June 30, 1997
was $91,000 related to the Products line. Net income for the six months
ended June 30, 1998 was $150,500 which is $418,500 higher than the net loss
of $268,000 reported for the six months ended June 30, 1997.
FINANCIAL CONDITION
The Company's financial condition improved significantly during the Second
Three months of 1998 due principally to conversion of debt of secured
creditors to preferred shares, however, the Company is continuing to
experience cash flow problems.
The working capital deficiency has decreased from $709,000 at December 31,
1997 to $185,200 at June 30, 1998. This is due to the conversion of debt
owed to related party secured creditors to equity of $422,400 and
forgiveness of debt by a secured creditor of $124,100. Vendor trade payables
were reduced by a net amount of $160,700 which was recorded as a gain and
$68,100 which was converted to common stock at June 30, 1998.
Trade accounts receivable are down approximately $14,300 to $93,300 at June
30, 1998 from $117,600 at December 31, 1997.
The Company receives interest income in 1998 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 $230,000 note receivable from the sale of the
real estate is due no later than December 1998.
The Company is looking to grow its laboratory services base and industrial
hygiene and health and safety consulting services through aggressive
marketing, identifying potential merger partners to increase revenues and
streamline or reduce costs.
<PAGE>
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: August 14, 1998 Walter H. Elliott, III
--------------------------------
Walter H. Elliott, III
President and CEO
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 25,015
<SECURITIES> 0
<RECEIVABLES> 409,198
<ALLOWANCES> (4,918)
<INVENTORY> 15,017
<CURRENT-ASSETS> 468,092
<PP&E> 1,094,159
<DEPRECIATION> 969,664
<TOTAL-ASSETS> 1,082,547
<CURRENT-LIABILITIES> 653,252
<BONDS> 0
0
3,513
<COMMON> 2,797
<OTHER-SE> 314,372
<TOTAL-LIABILITY-AND-EQUITY> 1,082,547
<SALES> 380,844
<TOTAL-REVENUES> 716,879
<CGS> 257,760
<TOTAL-COSTS> 257,760
<OTHER-EXPENSES> 286,760
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,921
<INCOME-PRETAX> 150,438
<INCOME-TAX> 0
<INCOME-CONTINUING> 150,438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150,438
<EPS-PRIMARY> (.056)
<EPS-DILUTED> (.056)
</TABLE>
