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, 1999
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 September 30, 1999 the Registrant had outstanding 3,010,186 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
September 30, 1999 and December 31, 1998 2
Condensed Statement of Operations for the
Third Quarter ended September 30, 1999 and 1998 3
Condensed Statement of Cash Flows for the
Third Quarter ended September 30, 1999 and 1998 4
Notes to Consolidated Financial Statements 5-6
Item 2.Management's Discussion and Analysis of Results of
Operations and Financial Conditions 7-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 3. Defaults upon Senior Securities 13
Item 5. Other Information 13-14
Item 6. Exhibits and Reports 15
Signature 15
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
ASSETS (Unaudited) (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 251,376 $ 40,934
Current portion of notes
receivable 418,294
Trade receivables less allowance
for doubtful accounts 1999 $5,000
and 1998 $5,000 166,021 183,155
Other receivables 22,213
Prepaid expenses 40,760 27,077
-------- --------
TOTAL CURRENT ASSETS 458,157 691,673
-------- --------
OTHER ASSETS AND INTANGIBLES
Deposits 2,847 2,951
Due from shareholders 23,005 23,005
Other 36,245 31,373
------- -------
62,097 57,329
------- -------
PROPERTY AND EQUIPMENT
Furniture and equipment 987,470 984,635
Vehicles 9,490 9,490
--------- ---------
996,960 994,125
Less accumulated depreciation
and amortization (929,652) (900,800)
--------- ---------
67,308 93,325
--------- ---------
$ 587,562 $ 842,327
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 16,117 $ 10,149
Current maturities of
long-term debt $ 22,302 $ 241,156
Accounts payable 232,923 242,893
Accrued expenses 192,756 182,341
--------- ---------
TOTAL CURRENT LIABILITIES 464,098 676,539
--------- ---------
LONG-TERM DEBT,
less current maturities 81,832 94,400
---------- ----------
STOCKHOLDERS' EQUITY
Common stock par value $.001;
authorized 10,000,000 shares;
issued 1999 and 1998 -
3,010,186 shares 3,010 3,010
Preferred stock, no par value;
authorized 2,500,000 shares;
issued 1999 and 1998 -
353,518 shares 3,535 3,535
Additional paid-in capital 5,948,661 5,948,661
Retained earnings(deficit) (5,913,574) (5,883,818)
---------- ----------
41,632 71,388
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 587,562 $ 842,327
========== ==========
<FN>
See Notes to Condensed Financial Statements
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1999 and 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------- -------- --------- --------
<S> <C> <C> <C> <C>
NET SERVICE REVENUE
Consultative $ 213,041 $90,193 $ 577,790 $ 232,223
Laboratory 77,723 108,828 278,995 347,642
-------- -------- -------- --------
290,764 199,021 856,785 579,865
DIRECT SERVICE COSTS
Consultative 126,867 58,796 327,512 136,875
Laboratory 74,019 75,524 244,870 255,205
--------- -------- --------- ---------
200,886 134,320 572,382 392,080
---------- ---------- ---------- ----------
GROSS PROFIT 89,878 64,701 284,403 187,785
---------- ---------- ---------- ----------
30.9% 32.5% 33.2% 32.4%
OTHER OPERATING REVENUE - (328) 3,654 20,325
---------- ---------- ---------- ----------
OPERATING EXPENSES
Sales and marketing (3,750) 8,779 12,364 30,963
General and administrative 102,368 86,272 275,624 282,032
Depreciation and
amortization 8,284 11,375 28,851 35,087
--------- --------- --------- ---------
106,902 106,426 316,839 348,082
--------- --------- --------- ---------
OPERATING INCOME (LOSS) (17,024) (42,053) (28,782) (139,972)
--------- --------- --------- ---------
FINANCIAL INCOME (EXPENSE)
Interest income 2,478 13,070 6,753 40,399
Interest expense (827) (4,300) (4,275) (26,221)
Gain (loss) on disposition
of property - (845) - (9,966)
Gain (loss) on vendor
balances negotiated 93 14,481 26,292 174,630
Other - (3,747) 25
Amortization of loan costs - - (9,880)
-------- --------- -------- ---------
1,744 18,659 28,795 168,962
-------- ---------- -------- ----------
INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS (15,280) (23,394) 13 28,990
DISCONTINUED OPERATIONS - (122) - (26,225)
-------- -------- -------- --------
NET INCOME (LOSS) $(15,280) $(23,516) $ 13 $ 2,765
========= ======== ======= ==========
Weighted average number of
common shares outstanding 3,010,186 2,794,171 3,010,186 2,731,305
========== ========== ========== ==========
Net earnings (loss)
per common share $(0.005) $(0.008) $ 0.000 $ 0.001
========= ========== ========= ==========
Net (loss) per common share,
after preferred dividends $(0.008) $(0.012) $ n/a $ n/a
========= ========== ========= ==========
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, 1999 AND 1998
<TABLE>
<CAPTION>
<C> <C>
September 30,1999 September 30,1998
Cash Flows From Operating Activities:
Net income (loss) $ 13 $ 2,765
Adjustments To Reconcile net
income (loss)
Depreciation 28,851 35,087
Amortization - 9,880
Loss on disposal of equipment - 9,966
Common stock issued for
interest and loan costs - 3,554
Net (gain) loss on vendor
balances negotiated (26,292) (174,630)
Change in assets and liabilities:
(Increase) decrease in accounts
receivable 39,347 (9,283)
Decrease in inventory - 2,361
(Increase) decrease in prepaid
expenses 2,434 26,076
Increase (decrease) in accounts
payable and accrued expenses (4,679) 4,391
-------- ---------
Net cash provided by
operating activities 39,674 (89,833)
--------- ---------
Cash Flows From Investing Activities:
Collection of note receivable 195,000 76,065
Cash received on disposition of
product line - 3,400
Purchase of furniture and equipment (2,835) -
(Increase) decrease in deposits 104 19,191
(Increase) decrease in other assets (3,224) (859)
--------- ---------
Net cash provided by investing
activities 189,045 97,797
--------- --------
Cash Flows From Financing Activities:
Principal payments on short-term notes (10,149) 30,000
Principal payments on long-term
borrowing (8,128) (70,402)
-------- ---------
Net cash used in financing activities (18,277) (40,402)
--------- ----------
Net increase (decrease) in cash and
cash equivalents 210,442 (32,438)
Cash and cash equivalents, beginning 40,934 54,096
--------- ----------
Cash and cash equivalents, ending $ 251,376 $ 21,658
========= ==========
Supplemental Disclosure of Cash Flows
Information
Cash payments for interest $ 20,563 $ 6,664
========= ==========
Supplemental Disclosure of Cash Flows
Information
Notes payable satisfied by
assignment of note receivable $ 223,294 $ -
========= =========
Issuance of common stock for warrants,
loan costs and other $ - $ 3,554
========= =========
Issuance of common stock for
debt conversion $ $ 76,877
========= =========
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
September 30, 1999
(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 audits of the consolidated financial
statements for the years ended December 31, 1998, 1997 and 1996 and has not
filed form 10-KSB for the years ended December 31, 1998, 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 December 31, 1998. No interest was paid by the Company during
1998 or year to date 1999. Approximately $149,700 of debt was converted to
74,878 preferred shares which have dividend and preference in liquidation
rights.
In December 1998 the Company entered into an agreement with Shakespeare
Partners, LTD and its General Partner to sell its note receivable from Trico
Incorporated amounting to $364,427 for $260,000 which resulted in a loss to
the Company of $104,427 and was recorded in December 1998. The Company
received $60,000 in cash during December 1998 and reduced the outstanding
$200,000 note payable balance to zero in January 1999.
The United States Company converted 100% of its outstanding notes payable
during 1998. $16,288 of accrued interest was paid during 1999.
No interest was paid during 1998. Approximately $223,296 of
debt was converted to 111,648 preferred shares which have dividend and
preference in liquidation rights. Two Directors of the Company are officers
of the United States Company. The Secretary and Treasurer is a Principal
in The United States Company.
The President and CEO converted 100% of his outstanding notes payable during
1998. No interest was paid during 1998. Approximately $17,700 (original
debt plus accrued interest) was converted to 8,835 preferred shares which
have dividend and preference in liquidation rights.
An officer converted $4,500 of accrued salary to 2,250 preferred shares in
December 1998 which have dividend and preference in liquidation rights.
In addition to the related party transactions discussed above, approximately
$171,812 of vendor debt was converted to 85,907 preferred shares during
1998 which have dividend and preference in liquidation rights.
The aforementioned preferred shares are callable by the Company and
the holder can put the shares to the Company under the terms of the issuance.
(4) The Company had a $218,294 note receivable from the Buyer of its real
property in December 1996 which was paid in January 1999.
(5) 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. The Company intends to file required forms 10-KSB no
later than December 1999 to meet the requirements of the OTC-Bulletin Board
to retain is listing status. The Company recently learned that its listing
on the OTC-Bulletin Board will be deleted November 18, 1999.
(6) 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.
(7) 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.
(8) During 1998 the Company issued 180,287 shares of common stock in
connection with the negotiation and settlement of vendor trade payable
balances.
(9) At September 30, 1999 the Company had accrued $49,453 in dividends on
the preferred shares discussed above. The Company intends to request
delay in payment of these amounts.
<PAGE>
Three Months Ended September 30, 1999 Compared to Three Months Ended
September 30, 1998
The following financial information reports operating trends for the Company
for 1999 for the remaining operating subsidiary compared to 1998.
Net service revenue for the Consultative Service group which is comprised of
health and safety consulting for the third quarter of 1999 amounted to
$213,000 which was $122,800 (136.0%) higher than the $90,200 reported for
the third quarter of 1998. One customer accounted for $55,900 in 1999
third quarter revenue. Net service revenue for the Laboratory Service
group, which is comprised of the industrial hygiene laboratory for the third
quarter of 1999 amounted to $77,700 which was $31,100 (28.6%) lower than the
$108,800 reported for the third quarter of 1998.
Consultative direct service costs increased by 115.8% or $68,100 to $126,900
for the third quarter of 1999 as compared to $58,800 reported for the third
quarter of 1998 due to the significant increase in Consultative Service
revenue noted above and related purchase of outside services and higher
personnel costs. Laboratory direct service costs decreased by 2.0% or
$1,500 to $74,000 for the third quarter of 1999 as compared to $75,500
reported for the third quarter of 1998. The reduced costs are attributable
to lower use of outside laboratories and lower equipment costs.
The gross profit for the third quarter ended September 30, 1999 increased by
$25,200 an increase of 38.9%, to $89,900 as compared to $64,700 for the
three months ended September 30, 1998.
The Company reported a 44.7% gross margin for the third quarter of 1999 as
compared to a 48.2% margin for the third quarter in 1998. The reason for
the decrease in gross margin is related to the fixed cost nature of the
laboratory activities and the decreased revenue for that segment of
operations.
Percentage comparisons of gross margins reported by the company are as follows:
Period Total Consultative Laboratory
3rd Quarter 1999 44.7% 40.4% 4.8%
3rd Quarter 1998 48.2% 34.8% 30.6%
Operating expenses were approximately the same for both reporting periods,
($500 higher for 1999) and amounted to $106,900 for the three months ended
September 30, 1999, as compared to $106,400 reported for the three months
ended September 30, 1998. Sales and marketing expenses decreased by $12,500
due to reduced personnel costs. General and administrative costs increased
by $16,100 to $102,400 for the three months ended September 30, 1999, as
compared to $86,300 reported for the three months ended September 30, 1998.
Non-recurring legal expenses in connection with shareholder matters amounted
to $7,500 for the third quarter of 1999. Depreciation and amortization costs
decreased overall by $3,100 due to older equipment being fully depreciated and
not replaced.
The Company incurred an operating loss of $17,000 for the three months ended
September 30, 1999 as compared to an operating loss of $42,000 for the three
months ended September 30, 1998. The significant improvement is due to the
Consultative group's increase in revenue for 1999 as compared to 1998.
Interest income for the quarter ended September 30, 1999 was $2,500 compared
to $13,100 of interest income recorded for the quarter ended September 30,
1998. The decrease of $10,600 is due to the reduction in the principal
balance outstanding for two notes receivable in 1999. One note that was
executed during 1996 in connection with the disposition of the Environmental
Consulting and Engineering and Civil Engineering and Surveying Division was
used to pay off a shareholder loan in January 1999. The second note was
collected in January 1999. Interest expense of $800 for the three months
ended September 30, 1999 was $3,500 lower than the amount reported for the
second quarter of 1998 which was $4,300, due to the transactions noted above.
The Company recorded a net gain of $100 for the third quarter of 1999 and
$14,500 for the third quarter of 1998 on vendor trade payables and notes
payable that were negotiated. Loan costs were fully amortized at the end of
the second quarter of 1998, so no amounts were amortized during the third
quarter of 1999 and 1998.
The Company reported a loss before discontinued operations of $15,300 for the
three months ended September 30, 1999 as compared to a loss before
discontinued operations of $23,400 for the three months ended September 30,
1998. Discontinued operations for 1998 related to the products group and
amounted to a loss of $100 for minor trailing expenses.
A net loss was recorded for the third quarter ended September 30, 1999 of
$15,300 which is $8,200 lower than the net loss reported for the third
quarter ended September 30, 1998 of $23,500.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
Net service revenue for the Service group, which is comprised of the
industrial hygiene laboratory and the health and safety consulting, for the
first nine months of 1999 amounted to $856,800 which was $276,900 (47.8%)
higher than the $579,900 reported for the first nine months of 1998.
The increase is attributable to a large project begun in the fourth quarter
of 1998. Consultative service revenue for the six months ended September 30,
1999 was $345,600 or 148.8% higher than the $232,200 reported for the
nine months ended September 30, 1998. One customer accounted for $270,500 of
the first nine months of 1999 revenue. Laboratory service revenue for the
nine months ended September 30, 1999 decreased by $68,600 to $279,000 as
compared to $347,600 for the nine months ended September 30, 1998. This
decrease is due to reduced laboratory sample volume.
Direct service costs increased by 46.0% or $180,300 to $572,400 for the first
nine months of 1999 as compared to $392,100 reported for the first six
months of 1998. The consultative group experienced higher direct service
costs from the use of out-side laboratories used in conjunction with the
major client project discussed above and the use of subcontractors.
The gross profit for the nine months ended September 30, 1999 increased by
$96,600, an increase of 51.5%, to $284,400 as compared to $187,800 for the
nine months ended September 30, 1998. The increase is due to the major
client project discussed above.
The Company reported a 33.2% gross margin for the first nine months of 1999
as compared to a 32.4% margin for the same period in 1998. The reason for
the increase in gross margin in the Services Division is due to the
consultative group project discussed above.
Percentage comparisons of gross margins reported by the company are as follows:
Period Total Consultative Laboratory
1st Nine Months 1999 33.2% 43.3% 12.2%
1st Nine Months 1998 32.4% 41.1% 26.6%
Other operating revenue was $3,700 for the nine months ended September 30,
1999 as compared to $20,300 of revenue for the nine months ended September
30, 1998. Most of the decrease was due to refunds and reimbursements
related to insurance and rent.
Operating expenses were $31,200 lower and amounted to $316,800 for the nine
months ended September 30, 1999, as compared to $348,100 reported for the
nine months ended September 30, 1998. Sales and marketing expenses decreased
by $18,600 which was attributable to a reduction in staff in 1998. General
and administrative costs decreased by $6,400 to $275,600 for the nine months
ended September 30, 1999, as compared to $282,000 reported for the nine
months ended September 30, 1998. The decreased costs are attributable to
salary reallocations, travel expenses incurred in connection with trying
to find potential merger candidates in 1998, and an increase in maintenance
costs on older equipment and leasehold improvements. Non-recurring legal
expenses in connection with the financing transactions and collection of
notes receivable in January 1999 amounted to $4,300 and legal expenses in
connection with shareholder matters amounted to $7,500 for the first nine
months of 1999. Depreciation and amortization costs decreased overall by
$6,200.
The Company incurred an operating loss of $28,800 for the nine months ended
September 30, 1999 as compared to operating loss of $140,000 for the nine
months ended September 30, 1998 due to the reasons discussed above.
Interest income for the nine months ended September 30, 1999 was $6,800
compared to $40,400 of interest income recorded for the nine months ended
September 30, 1998. The decrease in interest income is due to earnings from
the note receivable in 1998 which was collected in January 1999. Interest
expense of $4,300 for the nine months ended September 30, 1999 was $21,900
lower than the amount reported for the first nine months of 1998 which was
$26,200. The decrease in interest expense is attributable to conversion of
long-term debt to equity at June 30, 1998. The Company recorded a net gain
of $26,300 for the nine months ended September 30, 1999 on
vendor trade payables and notes payable that were negotiated as compared
to $174,600 gain on vendor trade paybles and notes payable that were negotiated
in 1998. Loan costs were fully amortized at the end of the second quarter of
1998 and amounted to $9,900 in that nine month period.
The Company broke even before discontinued operations for the nine months
ended September 30, 1999 as compared to income before discontinued
operations of $29,000 for the nine months ended September 30, 1998.
Discontinued operations for 1998 related to the products group and amounted
to a loss of $26,300. The loss before discontinued operations for the nine
months ended September 30, 1999 would have been $26,300 which is $119,300
lower than the loss before discontinued operations of $145,600 for the nine
months ended September 30, 1998, excluding the gain on vendor balances
negotiated.
The Company broke even for the nine-month period ended September 30, 1999
and reported net income of $2,800 for 1998.
FINANCIAL CONDITION
The Company's financial condition slightly deteriorated during the first nine
months of 1999 compared to December 31, 1998 due principally to additional
accrued legal expenses and dividends for preferred stockholders. The Company
had cash on hand in excess of $251,000 at September 30, 1999. The Company
intends to use cash for working capital, complete its debt mediation, pursue
complimentary joint ventures and potential mergers, and purchase certain
equipment and personal computers.
Working capital has decreased by $21,100 from $15,100 at December 31, 1998 to
a $6,000 deficiency at September 30, 1999 due to additional accrued
dividends and legal expenses. Also, approximately $5,100 of legal costs
were capitalized and reported under other assets.
Trade accounts receivable decreased approximately $17,100 to $166,000 at
September 30, 1999 from $183,200 at December 31, 1998. Part of the decrease
is attributable to lower laboratory revenues and collections of accounts
with higher outstanding balances at December 31, 1998.
RECENT DEVELOPMENTS
In September 1998 the Company, through its wholly owned subsidiary, Azimuth,
Inc. (Azimuth), entered into a strategic alliance with PHT Services, Ltd.
(PHTS) for the marketing and selling of environmental, health and safety
services to health care organizations in South Carolina. The alliance
between Azimuth and PHTS was formalized under a contract that outlines the
environmental, health and safety services PHTS will market to its clients.
Azimuth and PHTS will share the revenue generated. During November 1998
the Company received its first engagement under this arrangement.
In November 1998 the Company, through its wholly owned subsidiary, Azimuth,
Inc. (Azimuth), entered into a strategic alliance with Enviro-Guard, Ltd. to
cross sell services into the respective customer bases of each company.
In August, 1999 Enviro-Guard, Ltd. notified the Company by letter its intent
to terminate the strategic alliance agreement because of the lack of business
opportunities that it has generated. In October 1999, the Company gave its
consent to this termination.
<PAGE>
GENERAL OVERVIEW
The Company believes there exists a synergy between the core competencies of
its operating subsidiary and the Workers' Compensation market (i.e.
Agencies, Claims' Management, and Claims' Administration). In 1994,
the total Workers' Compensation market, including medical benefits,
disability and survivor benefits, administration costs, lost productivity
and other miscellaneous occupational health and service costs, was estimated
at $121 billion. Traditionally, the participants in this market approach
the control of these costs from a reactive mode, trying to minimize the cost
after the injury has occurred. Envirometrics, Inc. is exploring this market
from the vantage of conducting a strategic roll-up of companies in its current
Occupational Health and Safety market and consolidating these together with
companies that operate in the Workers' Compensation market. The combination
of occupational health and safety with workers' compensation products lends
itself to program selling in addition to cross selling opportunities to a
higher level of management not typically accessible to the stand alone
occupational health and safety company and would provide more of a
preventative solution to workers' compensation costs. The Company is
currently identifying merger and acquisition candidates in these two
markets to further this strategic plan. However no letters of intent or
other contractual terms have been reached with any companies in connection
with pursuing management's strategic plan, and there is no guarantee that
any merger or roll-up transactions will occur in the future.
The information provided in this overview contains forward looking statements
that involve risks and uncertainties, including the failure of the Company
to find appropriate consolidation and/or roll-up partners, or the inability
to close consolidation and/or roll-up transactions if agreements are entered
into with such partners, and the failure of any consummated consolidated
and/or roll-up transaction to result in successful business operations for
the Company. Statements made in this overview that are not historical facts
are forward looking statements that are subject to the safe harbor created
by the Private Securities Litigation Reform Act of 1995. The Company's actual
results and outcome of the aforementioned plan could differ significantly
from those discussed herein.
YEAR 2000
Historically, certain computer programs were written using two digits rather
that four to define the applicable year. Accordingly, the Company's software
may recognize a date using "00" as 1900 rather than the year 2000, which
could result in computer systems failures or miscalculations, commonly
referred to as the Year 2000 ("Y2K") issue. The Y2K issue can arise at any
point in the Company's supply, lab analysis processing, and financial
applications.
Incomplete or untimely resolution of the Y2K issue by the company, key
suppliers, customers and other parties could have a material adverse effect on
the company's results of operations, financial condition and cash flows.
The Company has developed a plan to modify its information technology to
recognize the Year 2000 and has, to the extent necessary, begun analyzing
and converting, where necessary, its critical data processing systems.
Since many of the Company's systems and software are relatively new, management
does not expect Year 2000 issues related to its own internal systems to be
significant and does not anticipate that it will incur significant operating
expenses or be required to invest heavily in computer systems improvements
to be Year 2000 compliant. The Company estimates that it may have to replace
three desktop personal computers used in its laboratory operations and
is incorporating that plan into its capital budget. The Company
initiated formal communications with certain of its significant lab
equipment suppliers and service providers to determine the extent to which
the Company's systems may be vulnerable to embedded technology such as
microcontrollers. The Company currently expects the project to be completed
in the fourth quarter of 1999 and will not exceed $10, 000 in capitalized
costs. There can be no guarantee that the systems of suppliers or other
companies on which the Company relies will be converted in a timely manner
and will not have a material adverse effect on the Company's systems.
To date the Company has not developed a formal contingency plan. The
Company believes it is taking the steps necessary regarding Year 2000
compliance with respect to matters within its control. However, no
assurance can be given that the Company's systems will be made
Year 2000 compliant in a timely manner or that the Year 2000 problem will
not have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 3. Defaults upon Senior Securities
Dividends on Preferred Shares
The Company is in arrears for payment of dividends on its preferred stock in
amount of $34,652 as of November 15, 1999. The Company continues to accrue
dividends at the stated rate of $.14 per share per annum and has not paid the
July 1, 1999 and October 1, 1999 required amounts of $17,326 each. The next
payment of $17, 326 will be due January 1, 2000.
Item 5. Other Information
Change in Auditor
The Company contacted its auditor, McGladrey & Pullen, LLC, ("McGladrey"),
in May of 1999 to discuss the need to complete the audits of its financial
statements for the years ended December 31, 1998, 1997 and 1996 so that it
could file the required annual 10-KSB reports for those years. The Company
has $37,812 outstanding in past due fees to McGladrey of which $20,657
relates to fees for the 1995 audit; $12,750 relates to accounting services
in connection with due diligence services for a terminated merger and
regulatory matters during 1996; and $4,405 relates to fees in connection
with preliminary audit services for the 1996 calendar year performed in early
1997. The 1996 audit was not completed as the Company was experiencing severe
cash flow problems.
In discussing the past due fees and the audit services, McGladrey communi-
cated that it might not be possible for them to continue as auditors.
Company management indicated to McGladrey that it would consider
alternatives and make a decision regarding these matters.
In October 1999 the Company notified McGladrey that it had engaged the firm
of Welch, Roberts & Amburn, Certified Public Accountants, LLP, to conduct
the audits of its financial statements for the years ended December 31,
1998, 1997 and 1996.
In November 1999 McGladrey agreed to settle the past due fees for a lower
amount.
Loss of Listing from OTC-Bulletin Board
The Company is in the process of completing the required financial statement
audits for the years ended December 31, 1998, 1997 and 1996. The Company
intends to file required forms 10-KSB no later than November 1999 to meet
the requirements of the OTC-Bulletin Board to retain is listing status.
The Company believed it had, with the prescribed grace period,
until December 1999 to bring all regulatory filings current, but recently
learned that the deletion from OTC-Bulletin Board will occur November 18,
1999. The Company is contacting its Market Makers to request that they file
a "piggy-back" exemption and be re-listed on OTC-Bulletin Board thirty (30)
days from its deletion date. One of its Market Makers has already filed this
exemption. During the thirty (30) day deletion the stock will be traded via
"Pink Sheets".
Possible Amendment of Forms 10-QSB
The Company anticipates filing amended quarterly 10-QSB reports for the
periods ended June 30, 1998 and September 30, 1998 as a result of proposed
adjustments in connection with the audit of its financial statements for the
year ended December 30, 1998, which is currently being conducted.
Adjustments being considered at this time have insignificant impact on
operating income (loss) for 1998. The unaudited September 1998 statements
of operations and the unaudited balance sheet at December 31, 1998 reflect
adjustments to those amounts previously reported.
Item 6. Exhibits and Reports - None
SIGNATURE
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 15, 1999 Walter H. Elliott, III
_______________________
Walter H. Elliott, III
President and CEO
</TABLE>
<TABLE> <S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
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<RECEIVABLES> 171,021
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