-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R7FWuaAK/Ji9/AYQrGc1NDaDNKoQXnXXxZuZe7lXbaJejFeGvvMeWi8keEjelTT0 LAM8QoLTJ+GvsML26O7VYw== 0000917253-99-000006.txt : 19990518 0000917253-99-000006.hdr.sgml : 19990518 ACCESSION NUMBER: 0000917253-99-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENVIROMETRICS INC /DE/ CENTRAL INDEX KEY: 0000917253 STANDARD INDUSTRIAL CLASSIFICATION: 3823 IRS NUMBER: 570941152 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23892 FILM NUMBER: 99619776 BUSINESS ADDRESS: STREET 1: 9229 UNIVERSITY BLVD CITY: CHARLESTON STATE: SC ZIP: 29406 BUSINESS PHONE: 8035539456 MAIL ADDRESS: STREET 1: 9229 UNIVERSITY BLVD CITY: CHARLESTON STATE: SC ZIP: 29406 10QSB 1 ENVIROMETRICS, INC. 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 March 31, 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 March 31, 1999 the Registrant had outstanding 3,012,686 shares of common Stock. Transitional small business disclosure format (check one): YES [ ] NO [X] INDEX PART I. FINANCIAL INFORMATION Page # Item 1. Financial Statements Condensed Consolidated Balance Sheet at March 31, 1999 and December 31, 1998 2 Condensed Statement of Operations for the First Quarter ended March 31, 1999 and 1998 3 Condensed Statement of Cash Flows for the First Quarter ended March 31, 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 7-10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 5. Other Information 11 Item 6. Exhibits and Reports 11 Signature 11 ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1999 and December 31, 1998
March 31, 1999 December 31, 1998 ASSETS (Unaudited) (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 312,522 $ 40,934 Current portion of notes receivable 418,294 Trade receivables less allowance for doubtful accounts 1999 and 1998 $5,000 94,483 183,155 Other receivables 22,213 Prepaid expenses 40,107 38,830 -------- -------- TOTAL CURRENT ASSETS 447,112 703,426 -------- -------- OTHER ASSETS AND INTANGIBLES Deposits 3,079 2,951 Due from shareholders 23,005 23,005 Other 31,121 31,373 ------- ------- 57,205 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 (911,666) (900,800) --------- --------- 85,294 93,325 --------- --------- $ 589,611 $ 854,080 ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 4,059 $ 10,149 Current maturities of long-term debt $ 24,027 $ 241,156 Accounts payable 187,467 242,895 Accrued expenses 130,970 138,652 --------- --------- TOTAL CURRENT LIABILITIES 346,523 632,852 --------- --------- LONG-TERM DEBT, less current maturities 89,802 94,400 ---------- ---------- STOCKHOLDERS' EQUITY Common stock par value $.001; authorized 10,000,000 shares; issued 1999 and 1998 - 3,012,686 shares 3,013 3,013 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 5,764,498 5,764,498 Retained earnings(deficit) (5,617,760) (5,644,218) ---------- ---------- 153,286 126,828 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 589,611 $ 854,080 ========== ========== See Notes to Condensed Financial Statements
ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, 1999 and 1998
THREE MONTHS ENDED March 31, March 31, 1999 1998 --------- -------- NET SERVICE REVENUE Consultative $ 200,294 $ 72,893 Laboratory 85,351 125,849 -------- -------- 285,645 198,742 DIRECT SERVICE COSTS Consultative 94,424 42,627 Laboratory 81,222 77,547 --------- --------- 175,646 120,174 GROSS PROFIT 109,999 78,568 ---------- ---------- 38.5% 39.5% OTHER OPERATING REVENUE 2,939 11,395 ---------- ---------- OPERATING EXPENSES Sales and marketing 11,250 9,949 General and administrative 84,880 98,231 Depreciation and amortization 10,866 11,856 --------- --------- 106,996 120,036 --------- --------- OPERATING INCOME (LOSS) 5,942 (30,073) --------- --------- FINANCIAL INCOME (EXPENSE) Interest income 1,843 11,804 Interest expense (2,523) (8,097) Gain (loss) on disposition of property - (11,720) Gain (loss) on vendor balances negotiated 21,171 (1,167) Other 25 5,350 Amortization of loan costs (5,375) -------- --------- 20,516 (9,205) -------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 26,458 (39,278) PROVISION FOR INCOME TAXES - - -------- -------- NET INCOME (LOSS) $ 26,458 $ (39,278) ========= ========== Weighted average number of common shares outstanding 3,012,686 2,544,899 ========== ========== Net earnings (loss) per common share $ 0.009 $ (0.015) ========= ========== Dividends per common share $ - $ - ========= ========== See Notes to Condensed Consolidated Financial Statements
ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FIRST QUARTER ENDED MARCH 31, 1999 AND 1998
March 31,1999 March 31,1998 Cash Flows From Operating Activities: Net income (loss) $ 26,458 $ (39,278) Adjustments To Reconcile net income (loss) to net cash used in operating activities Depreciation 10,866 7,356 Amortization - 9,875 Net (gain) loss on vendor balances negotiated (21,171) 1,167 Loss on disposal of equipment - 11,720 Change in assets and liabilities: (Increase)Decrease in accounts receivable 110,885 (39,677) (Increase)Decrease in prepaid expenses (1,277) 14,026 (Increase)Decrease in accounts payable and accrued expenses (41,939) 5,898 -------- --------- Net cash provided by operating activities 83,822 (28,913) --------- --------- Cash Flows From Investing Activities: Purchase of furniture and equipment (2,835) - Decrease in notes receivable 218,294 24,914 Decrease in other assets 124 21,232 --------- ---------- Net cash provided by investing activities 215,583 46,146 --------- ---------- Cash Flows From Financing Activities: Principal payments on long-term borrowing (27,817) (27,174) -------- --------- Net cash used in financing activities (27,817) (27,174) --------- ---------- Net (decrease) increase in cash and cash equivalents 271,588 (9,941) Cash and cash equivalents, beginning 40,934 54,096 --------- ---------- Cash and cash equivalents, ending $ 312,522 $ 44,155 ========= ========== Supplemental Disclosure of Cash Flows Information Cash payments for interest $ 2,768 $ 908 ========= ========== See Notes to Condensed Consolidated Financial Statements
ENVIROMETRICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 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 Company intends to complete its required financial statement audits and file required forms 10-KSB no later than November 1999 to meet the requirements of the OTC-Bulletin Board to retain its listing status. The Company may be deleted from the OTC-Bulletin Board if it is not in compliance with listing requirements by December 1999. 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. No interest was paid 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 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. (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. (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. Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 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 first quarter of 1999 amounted to $200,300 which was $127,400 (174.8%) higher than the $72,900 reported for the first quarter of 1998. One customer accounted for $157,800 in revenue. Net service revenue for the Laboratory Service group, which is comprised of the industrial hygiene laboratory for the first quarter of 1999 amounted to $85,400 which was $40,500 (32.2%) lower than the $125,900 reported for the first quarter of 1998. This is accounted for by a large Project from one customer that occurred during the first quarter of 1998 that was not repeated in the first quarter of 1999. Consultative direct service costs increased by 121.5% or $51,800 to $94,400 for the first quarter of 1999 as compared to $42,600 reported for the first quarter of 1998 due to additional personnel and the purchase of outside services due to the increase in revenue discussed above. Laboratory direct service costs increased by 4.7% or $3,700 to $81,200 for the first quarter of 1999 as compared to $77,500 reported for the first quarter of 1998 due to increased personnel costs and outside laboratory services utilized. The gross profit for the first quarter ended March 31, 1999 increased by $31,400 an increase of 40.0%, to $110,000 as compared to $78,600 for the three months ended March 31, 1998. The Company reported a 38.5% gross margin for the first quarter of 1999 as compared to a 39.5% margin for the first quarter in 1998. The reason for the deterioration in gross margin is related to the fixed costs nature of laboratory operations and the increase in direct costs of the laboratory group over a lower revenue base. This was offset to a large degree by the significant improvement in the consultative group contribution. Percentage comparisons of gross margins reported by the Company are as follows: Period Total Consultative Laboratory 1st Quarter 1999 38.5% 52.9% 4.8% 1st Quarter 1998 39.5% 41.5% 38.4% Other operating revenue was $2,900 for the quarter ended March 31, 1999 as compared to $11,400 for the quarter ended March 31, 1998. Operating expenses were $13,000 lower and amounted to $107,000 for the three months ended March 31, 1999, as compared to $120,000 reported for the three months ended March 31, 1998. Sales and marketing expenses increased by $1,300. General and administrative costs decreased by $13,300 to $84,900 for the three months ended March 31, 1999, as compared to $98,200 reported for the three months ended March 31, 1998. This decrease is primarily attributable to a reduction in personnel costs and facilities and equipment costs. Depreciation and amortization costs decreased overall by $1,000 due to older equipment being fully depreciated and not replaced. The Company incurred operating revenue of $5,900 for the three months ended March 31, 1999 as compared to an operating loss of $30,100 for the three months ended March 31, 1998. The significant improvement is due to the Consultative group's increase in revenue, due to a significant project in the first quarter of 1999 as compared to 1998. Interest income for the quarter ended March 31, 1999 was $1,800 compared to $11,800 of interest income recorded for the quarter ended March 31, 1998. The decrease of $10,000 is due to the reduction in the principal balance outstanding for two notes receivable. 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 $2,500 for the three months ended March 31, 1999 was $5,600 lower than the amount reported for the first quarter of 1998 which was $8,100 due to the transactions noted above. The Company recorded a net gain of $21,200 for the first quarter of 1999 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 first quarter of 1999. Amortization of loan costs for the first quarter of 1998 was $5,400. In addition, the company recorded a loss on dispositin of vehicles of $11,700 during the first quarter of 1998. Net income for the first quarter ended March 31, 1999 was $26,500 which is $65,700 higher than the net loss of $39,300 reported for the first quarter ended March 31, 1998. FINANCIAL CONDITION The Company's financial condition continued to improve during the first three months of 1999 due principally to the collection of a note receivable, stronger collections of trade receivables and negotiation of trade payable balances with vendors. The Company had cash on hand in excess of $312,000, at March 31, 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 increased by $30,000 from $70,600 at December 31, 1998 to $100,600 at March 31, 1999 due to the items discussed above. Trade accounts receivable decreased approximately $88,700 to $94,500 at March 31, 1998 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 arrangment. 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. Enviro-Guard has a complete service line for medical environmental monitoring, including medical gas systems evaluation and decontamination. The alliance will compliment the existing menu of services offered by Azimuth to hospitals. The alliance between Azimuth and Enviro-Guard was formalized under a contract that outlines the services to be provided by each company. 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 reather 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 to five desktop personal computers used in its laboratory operations and is incorporating that plan into its capital budget. The Company is planning to initiate 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 third quarter of 1999. 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. PART II. OTHER INFORMATION Item 1. Legal Proceedings - None Item 5. Other Information - None 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. Date: May 13, 1999 Walter H. Elliott, III _______________________ Walter H. Elliott, III President and CEO
EX-27 2 ART 5 FDS FOR 1ST QTR 10-QSB 1999
5 3-MOS DEC-31-1999 MAR-31-1999 312,522 0 94,483 (5,000) 0 447,112 996,960 911,666 589,611 346,523 0 0 3,535 3,013 146,738 589,611 285,645 288,584 175,646 175,646 83,957 0 2,523 26,458 0 26,458 0 0 0 26,458 .009 .009
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