-----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, LHNJ1T+FY+hobyJaJrVl8uBDMcdZfg3/9HmGkyhLtMfQkYcsqR3daVIKybGGqpo4 s6NCJ6zXMkzILaEx8mlQaQ== 0000917253-00-000027.txt : 20000516 0000917253-00-000027.hdr.sgml : 20000516 ACCESSION NUMBER: 0000917253-00-000027 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENVIROMETRICS INC /DE/ CENTRAL INDEX KEY: 0000917253 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [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: 636052 BUSINESS ADDRESS: STREET 1: 9229 UNIVERSITY BLVD STREET 2: STE 201 CITY: CHARLESTON STATE: SC ZIP: 29406 BUSINESS PHONE: 8035539456 MAIL ADDRESS: STREET 1: 9229 UNIVERSITY BLVD STREET 2: STE 201 CITY: CHARLESTON STATE: SC ZIP: 29406 10QSB 1 QUARTERLY REPORT FOR 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, 2000 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 December 31, 1999 the Registrant had outstanding 3,640,880 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, 2000 and December 31, 1999 2 Condensed Statement of Operations for the First Quarter ended March 31, 2000 and 1999 3 Condensed Statement of Cash Flows for the First Quarter ended March 31, 2000 and 1999 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Conditions 6-9 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 3. Defaults upon Senior Securities 10 Item 5. Other Information 10-17 Item 6. Exhibits and Reports 18 Signature 18 ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2000 and December 31, 1999 2000 1999 ASSETS (Unaudited) (Audited) ------ ----------- --------- CURRENT ASSETS Cash and cash equivalents $ 44,423 $ 104,607 Trade receivables less allowance for doubtful accounts $5,000 in 2000 and 1999 50,348 131,654 Inventories 4,000 4,000 Prepaid expenses 16,172 27,634 ----------- ----------- TOTAL CURRENT ASSETS 114,943 267,895 ----------- ----------- OTHER ASSETS AND INTANGIBLES Deposits 2,500 2,500 Other 8,265 - ----------- ----------- 10,765 2,500 ----------- ----------- PROPERTY AND EQUIPMENT Furniture and equipment 921,358 921,358 Vehicles 9,490 9,490 ----------- ----------- 930,848 930,848 Less accumulated depreciation (877,505) (870,816) ----------- ----------- 53,343 60,032 ----------- ----------- $ 179,051 $ 330,427 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ - $ 12,848 Current maturities of long-term debt 28,154 13,708 Accounts payable 244,843 221,228 Accrued expenses 133,308 170,677 ------------ ----------- TOTAL CURRENT LIABILITIES 406,305 418,461 ------------ ----------- LONG-TERM DEBT, less current maturities 71,681 71,681 Deferred Gain on Asset Sale 18,125 24,167 ------------ ----------- 89,806 95,848 ------------ ----------- Redeemable Preferred Sotck 717,985 717,985 ------------ ----------- STOCKHOLDERS' EQUITY Common stock par value $.001; authorized 10,000,000 shares; issued 2000 and 1999 - 3,640,880 shares 3,640 3,640 Additional paid-in capital 5,069,388 5,069,388 Retained earnings(deficit) (6,108,073) (5,974,895) ------------ ------------ (1,035,045) (901,867) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 179,051 $ 330,427 ============ ============ See Notes to Condensed Consolidated Financial Statements ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED March 31 March 31 2000 1999 -------- -------- FINANCIAL INCOME (EXPENSE) Interest income 775 1,843 Interest expense (852) (2,523) Gain (loss) on disposition of property 6,042 6,042 Gain (loss) on vendor balances negotiated - 21,171 Other - 25 ----------- ---------- 5,965 26,558 ----------- ---------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS 5,965 26,558 DISCONTINUED OPERATIONS (139,143) 5,942 ----------- ---------- NET INCOME (LOSS) $ (133,178) $ 32,500 =========== ========== Weighted average number of common shares outstanding 3,640,880 3,012,686 =========== ========== Net income (loss) per common share $ (0.037) $ 0.011 =========== ========== Net (loss) per common share, after preferred dividends $ (0.039) $ 0.008 =========== ========== Dividends per common share $ - $ - =========== ========== See Notes to Condensed Consolidated Financial Statements ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FIRST QUARTER ENDED MARCH 31, 2000 AND 1999 March 31 March 31 2000 1999 ---- ---- Cash Flows From Discontinued Operation's: Net (loss) $ (133,178) $ 32,500 Adjustments To Reconcile net (loss) to net cash used in discontinued operation's. Depreciation 6,689 10,866 (Gain)loss on disposal of property (6,042) (6,042) Common stock issued for interest and loan costs - - Net gain on vendor balances negotiated - (21,171) Change in assets and liabilities: (Increase) decrease in accounts receivable 81,306 110,885 (Increase) decrease in prepaid expenses 11,462 (1,277) Increase (decrease) in accounts payable and accrued expenses (13,754) (41,939) ------------ ----------- Net cash (used in) provided by discontinued operation's (53,517) 83,822 ------------ ----------- Cash Flows From Investing Activities: Collection of note receivable - 218,294 Purchase of furniture and equipment - (2,835) (Increase) decrease in other assets (8,265) 124 ----------- ----------- Net cash provided by investing activities (8,265) 215,583 ----------- ----------- Cash Flows From Financing Activities: Principal payments on long-term borrowing 1,598 (27,817) ----------- ----------- Net cash used in financing activities 1,598 (27,817) ----------- ----------- Net increase (decrease) in cash and cash equivalents (60,184) 271,588 Cash and cash equivalents, beginning 104,607 40,934 ----------- ----------- Cash and cash equivalents, ending $ 44,423 $ 312,522 =========== =========== Supplemental Disclosure of Cash Flows Information Cash payments for interest $ 852 $ 2,768 =========== =========== Supplemental Disclosure of Cash Flows Information 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 =========== =========== See Notes to Condensed Consolidated Financial Statements ENVIROMETRICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 (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, 1999. The results of activity 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, discontinued 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) 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's listing on the OTC-Bulletin board was deleted November 18, 1999 and re-listed on March 21, 2000 after filing the required forms 10-KSB for the years 1996, 1997, 1998 and 1999. (4) At March 31, 2000 the Company had accrued $69,304 in dividends on the preferred shares discussed above. In March 2000, the holders of all preferred shares agreed to convert to Common Stock all accrued dividends. (5) The Company disposed of all remaining operations subsequent to March 31, 2000. Therefore, all activity has been reflected as discontinued operations. (6) The Company has entered into a binding agreement with The Catapult Group, Inc. to acquire all of the outstanding stock of that corporation. As of May 15, 2000, the transaction has not been consumated. THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999 Subsequent to March 31, 2000 the Company sold its remaining consultative and laboratory operations. Because of these two transactions, the Company has reported all activity as discontinued operations for the quarter ended March 31, 2000, and has restated the corresponding amounts for the quarter ended March 31, 1999. The resignation of a key employee and shareholder had a significant negative impact on operations for the consultative group. The consultative operations were subsequently sold to a newly formed limited liability company owned 100% by the former key employee. Laboratory activity revenue and cost of revenue remained fairly flat for the quarter ended March 31, 2000, as compared to the same period ended March 31, 1999. This unit was sold during May 2000. The following reports the trends had the Company remained as an operating company. The following financial information reports operating trends for the Company for 2000 for the remaining operating subsidiary compared to 1999. Net service revenue for the Consultative Service group which is comprised of health and safety consulting for the first quarter of 2000 amounted to $49,700 which was $150,600 (75.2%) lower than the $200,300 reported for the first quarter of 1999. One customer accounted for $157,800 in 1999 first quarter revenue. Net service revenue for the Laboratory Service group, which is comprised of the industrial hygiene laboratory for the third quarter of 2000 amounted to $82,000 which was $3,300 (3.96%) lower than the $85,300 reported for the first quarter of 1999. Consultative direct service costs decreased by 40.7% or $38,500 to $56,000 for the first quarter of 2000 as compared to $94,400 reported for the first quarter of 1999 due to the decrease in Consultative Service revenue noted above. Laboratory direct service costs decreased by .20% or $100 to $81,100 for the first quarter of 2000 as compared to $81,200 reported for the first quarter of 1999. The reduced costs are attributable to decreased operating expense's over the lower revenue base noted above.. The gross loss for the first quarter ended March 31,2000 decreased by $115,400 a decrease of 104.9%, to ($5,400) as compared to $110,000 for the three months ended March 31, 1999. The Company reported a (4.1%) gross margin for the first quarter of 2000 as compared to a 38.5% margin for the first quarter in 1999. The reason for the decrease in gross margin is related to the fixed cost nature of the laboratory activities and the decreased revenue for both segments of operations. Percentage comparisons of gross margins reported by the company are as follows: Period Total Consultative Laboratory 1st Quarter 2000 (4.1%) (12.6%) 1.1% 1st Quarter 1999 38.5% 52.9% 4.8% Operating expenses amounted to $133,767 for the three months ended March 31, 2000, as compared to $106,900 reported for the three months ended March 31, 1999. Sales and marketing expenses were approximately the same for both reporting periods. General and administrative costs increased by $31,000 to $115,800 for the three months ended March 31, 2000, as compared to $84,900 reported for the three months ended March 31, 1999. Legal and auditing expenses in connection with the filing of Forms 10-KSB for the years ended 1996, 1997, 1998, and 1999 amounted to $33,600 for the first quarter of 2000. Depreciation and amortization costs decreased overall by $4,200 due to older equipment being fully depreciated and not replaced. The Company incurred an operating loss of $139,100 for the three months ended March 31, 2000 as compared to an operating income of $5,900 for the three months ended March 31, 1999. The significant deterioration is due to the decrease in revenue generation for 2000 as compared to 1999 and the additional expense of the audits in connection with the filing of Forms 10-KSB for the years ended 1996, 1997, 1998, and 1999. Interest income for the quarter ended March 31,2000 was $800 compared to $1,800 of interest income recorded for the quarter ended March 31,1999. A net loss was recorded for the first quarter ended March 31, 2000 of $139,200 which is $165,700 lower than net income reported for the first quarter ended March 31, 1999 of $26,500. FINANCIAL CONDITION The independent auditor's report stated that the Company has suffered from recurring losses from operations and decreases in working capital and stockholders' equity. This raises substantial doubt about the Company's ability to continue as a going concern. The Company's financial condition deteriorated during the first quarter ended March 31, 2000 over 1999 due to decreased operating activity in the first quarter of 2000 and additional professional services incurred in the first quarter to complete the audits of the Company's financial statements for the years 1996, 1997, 1998, and 1999. The Company is experiencing severe cash flow constraints. Working capital deficiency at March 31, 2000 amounted to $291,400. Cash decreased by approximately $60,000 and trade accounts receivable decreased by approximately $80,000. The Company does not have adequate assets to meet its obligations. Approximately $80,000 (representing 100%) of debt in connection with the Small Business Administration is expected to be paid from the proceeds of the sale of the consultative operations. As part of that agreement, the Company also will receive some cash flow based on revenue from certain existing customer contracts transferred. In addition, $69,304 of accrued dividends on preferred shares were converted into common shares during April 2000. The Company expects to eliminate a minimum of $53,000 in trade payables related to vendor amounts greater than three years old. The Company anticipates payment of monies in excess of $100,000 of accrued professional fees at March 31, 2000 will be from the anticipated $2,000,000 capital raise required to successfully complete the merger with The Catapult Group, Inc. There are no agreements in place at the current date with any funding sources. RECENT DEVELOPMENTS Due to the lack of synergy between current operations of Envirometrics and the operations of The Catapult Group, and the poor financial performance experienced in recent months from these operations, the Board of Directors authorized Mr. Elliott to explore the sale of current operations with interested buyers. In the normal course of business, Azimuth, Inc. (the remaining operating subsidiary of Envirometrics) has operated as two units (i) the Consultative Business and (ii) the Laboratory Business. See Envirometrics, Inc. 1999 Form 10-KSB, for the definitions of the Consultative Business and the Laboratory Business. For ease of disposition the two units were sold separately to different buyers. Since October 1999, revenues of the Azimuth subsidiary have been down beyond the normal cyclical down-turn experienced in this market during the winter months. This coupled with Mr. Bennett leaving (see Envirometrics 1999 Report on Form 10-KSB--Item I: Description of Business--Post "Turnaround" Phase) and the lack of synergy between the historical Envirometrics' operations with those of The Catapult Group, prompted the decision by the Board of Directors of Envirometrics to act to dispose of current operations in the Environmental, Health and Safety market. As of May 12, 2000 the following is the status of the disposition outlined by business unit, (i) the Consultative Business and (ii) the Laboratory Business. The Consultative Business On April 24, 2000 Azimuth Inc. ("Seller") and Envirometrics signed an agreement with Richard D. Bennett ("RDB") and Risk Technologies, LLC ("Purchaser") for the sale of certain assets of Azimuth pertaining to the Consultative Business ("Agreement"). The assets include equipment used in the Consultative Business, current and former Consultative Business clients, the Azimuth name, certain work in process and the good will of the Consultative Business ("Assets"). The purchase price for the Assets is $100,000, payable at closing as the assumption of two U.S. Small Business Administration ("SBA") notes totaling approximately $80,000 and a Promissory Note from the Purchaser, co-signed and guaranteed by RDB. The assumption of the SBA notes and the Promissory Note equal the purchase price of $100,000. The SBA notes expire in 2005 and the Promissory Note will pay out on the first anniversary after closing. The financial obligations outlined in the Agreement are secured by up to 300,000 shares of RDB's common stock of Envirometrics. This transaction closed on April 26, 2000. The Laboratory Business On April 6, 2000 Envirometrics entered into a non-binding letter of intent to sell certain assets of Azimuth pertaining to the Laboratory Business to a prospective buyer. The buyer is an independent third party having no affiliation with Envirometrics. The assets include certain equipment pertaining to the Laboratory Business, current and former Laboratory Business clients and certain work in process ("Lab Assets"). The proposed purchase price for the Lab Assets is $25,000 cash at closing and a 10% commission paid on Laboratory Business clients which continue to send laboratory analytical work to the prospective buyer. The commission is capped at $40,000 per year for two years with a minimum guaranteed fee of $30,000 over the two year term of the commission period. The commission payments will be secured by a first security interest in the equipment and the accounts receivable generated from the Laboratory Business clients. This transaction closed on May 8, 2000. GENERAL OVERVIEW During the course of the "Turnaround" phase (see Envirometrics, Inc. 1999 10-KSB, Item 1: Description of Business), the Company has explored alternative plans for growth to include the identification of companies in other markets which had greater growth potential than the Environmental, Health and Safety market. This process was begun with a view to keeping all options open for the future of the Company. In September 1999, the Company was introduced to The Catapult Group, Inc. (The Catapult Group), a Georgia corporation. The Catapult Group is an Internet integration firm offering intelligent end-to-end e-business solutions to large and middle-market organizations. These solutions range from strategic e-business planning and application development to marketing and communications services for Internet enterprises. The Catapult Group was looking to enter the public market without incurring the cost of an expensive Initial Public Offering and was exploring the avenue of a reverse merger with a company whose securities were already traded publicly. In February 2000, the Company and The Catapult Group reached terms that each felt were fair to the parties and entered into a non-binding agreement ("Agreement") to acquire The Catapult Group (See Item 13: Exhibits, Lists and Reports on Form 8K--Plan and Agreement to Exchange Stock). On March 8, 2000, the Agreement became binding on the transaction parties. Consummation of the Agreement is still subject to certain specific, as well as additional customary, conditions to closing (e.g., the pre-closing completion of a $2 million private placement for provision of working capital funds by The Catapult Group). The acquisition of The Catapult Group, if consummated, will be transacted as a stock exchange whereby the shareholders of The Catapult Group will receive shares of the Company. The Catapult Group will become a wholly-owned subsidiary of the Company. The Catapult Group shareholders and option holders as a group will end up with 90% ownership of the outstanding stock of the Company. The Company will change its name from Envirometrics, Inc. to The Catapult Group, Inc. after closing. The transaction will involve the reverse split of the pre-closing shares of the Company so that current Company shareholders and option holders, after issuance of common shares to The Catapult Group shareholders and reserving shares for their option holders, will hold 10% of the outstanding stock. It is anticipated that the Agreement will close on or about June 15, 2000. On May 8, 2000, the Company filed a preliminary Information Statement with the Securities and Exchange Commission. It is expected that a definative Information Statement will be filed on May 18, 2000, and subsequently mailed to the shareholders of Envirometrics relating to the request for Written Consent for authorizing (a) the acquisition of The Catapult Group, Inc., including (i) the reverse split of current outstanding common stock, (ii) the amendment of the Articles of Incorporation to change the name of the Corporation to The Catapult Group, Inc. and (iii) the consummation of the Plan and Agreement to exchange stock in connection with the acquisition of The Catapult Group, Inc. and (b) the amendment of the Articles of Incorporation to increase the authorized shares of Common Stock from 10 million to 20 million shares. This 10-QSB contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that certain statements in this 10-QSB are "forward looking statement" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors. Such uncertainties and risks include, among others, certain risks associated with the closing of the The Catapult Group transaction described herein, government regulation, and general economic and business conditions. Actual events, circumstances, effects and results may be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Consequently, the forward-looking statements contained herein should not be regarded as representations by the Company or any other person that the projected outcomes can or will be achieved. PART II. OTHER INFORMATION Item 1. Legal Proceedings - None Item 3. Defaults upon Senior Securities Dividends on Preferred Shares - ----------------------------- In March 2000, outstanding shares of Envirometrics convertible preferred stock, all of Series A and B and two thirds (2/3) of Series C, along with accrued dividends at that date were converted to 1,676,053 shares of Envirometrics Common Stock. Item 5. Other Information Re-listing on Over The Counter Bulletin Board - --------------------------------------------- On January 28, 2000 the Company brought its filings with the SEC current, thus meeting the requirements for re-listing on the OTCBB. One of the Company's market makers submitted the neceessary documentation to have the Company's common stock re-listed on OTCBB and on March 21, 2000 the Company's common stock began trading again on OTCBB. ProForma Financial Information - ------------------------------ ENVIROMETRICS, INC. AND THE CATAPULT GROUP, INC. UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION The following unaudited pro forma condensed financial information relates to the merger, which will be accounted for as a purchase transaction. The following pro forma condensed financial information has been prepared based upon the net monetary assets of Envirometrics, Inc. acquired and the historical consolidated financial statements of The Catapult Group, Inc., giving effect to the combination. In the financial statements of the Company, the acquisition is accounted for as a reverse purchase of the assets and liabilities of Envirometrics, Inc. by The Catapult Group, Inc. The accounting treatment applied in the reverse acquisition differs from the legal form of the transaction and the continuing legal entity is Envirometrics, Inc. The pro forma condensed financial information does not purport to present the financial condition and results of operations of Envirometrics, Inc. and The Catapult Group, Inc. had the Merger actually been completed as of the dates indicated. In addition, the pro forma condensed financial information is not necessarily indicative of the future results of operations and should be read in connection with the historical consolidated financial statements and the notes thereto of Envirometrics, Inc. and The Catapult Group, Inc., respectively. THE CATAPULT GROUP, INC. (formerly ENVIROMETRICS, INC. AND SUBSIDIARIES) PROFORMA CONSOLIDATED BALANCE SHEET MARCH 31, 2000
Actual Adjustments Pro Forma --------------- --------------- --------------- ASSETS Current Assets Cash and cash equivalents $ 14,842 $ 44,423 (1) $ 59,265 Trade receivables, less allowance for doubtful accounts of $5,000 in 2000 and 1999 339,030 50,348 (1) 389,378 Other net monetary assets 155,000 (2) 155,000 Prepaid expenses 3,000 16,172 (1) 19,172 ------------- ------------ ------------- Total Current Assets 356,872 265,943 622,815 ------------- ------------ ------------- Property and Equipment Furniture and equipment 70,086 - 70,086 Less accumulated depreciation (17,569) - (17,569) ------------- ------------ ------------- 52,517 - 52,517 ------------- ------------ ------------- Other Assets Deposits 4,942 10,765 (1) 15,707 Goodwill, net of accumulated amortization of $23,381 479,484 - 479,484 ------------- ------------ ------------- 484,426 10,765 495,191 ------------- ------------ ------------- TOTAL $ 893,815 $ 276,708 $ 1,170,523 ============= ============ ============= See Notes to Consolidated Proforma Financial Statements Actual Adjustments Pro Forma --------------- --------------- --------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable $ 500,000 $ $ 500,000 Current maturities of long-term debt - 19,154 (1) 19,154 Accounts payable 114,741 191,843 (1) 306,584 Accrued expenses and other 62,392 (69,304) (3) 102,229 109,141 (1) ------------- ------------ ------------- Total Current Liabilities 677,133 250,834 927,967 ------------- ------------ ------------- Redeemable Preferred Stock, Par value $.001; authorized 2,500,000 shares; issued 1999 - 24,959 717,995 (1) 49,918 (668,077) (3) ------------- ------------ ------------- - 49,918 49,918 ------------- ------------ ------------- Common Stock and Accumulated Deficit Common stock, par value $.001; authorized 10,000,000 shares; issued 1999 - 6,168,838 shares 60,000 (60,000) (6) 6,169 5,616 (6) 3,852 (1) 148 (4) 25 (4) 1,503 (4) (4,975) (5) Additional paid-in capital 554,930 54,384 (6) 707,324 69,156 (3) (25) (4) (765,277) (1) 666,574 (3) 4,975 (5) Accumulated deficit (398,248) - (419,028) -------------- ------------ ------------- 216,682 (24,044) 192,638 -------------- ------------ ------------- $ 893,815 $ 276,708 $ 1,170,523 ============== ============ ============= See Notes to Consolidated Proforma Financial Statements
THE CATAPULT GROUP, INC. (formerly Envirometrics, Inc.) PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS QUARTER ENDED MARCH 31,2000
CATAPULT ADJUSTMENTS CONSOLIDATED -------- ----------- ------------ Service Revenue $ 575,557 $ - $ 575,557 - --------------- Direct Service Costs 208,532 - 208,532 - -------------------- ------------ ----------- ------------- Gross Profit 367,025 - 367,025 ------------ ----------- ------------- Operating Expenses - ------------------ Sales and marketing 82,740 - 82,740 General and administrative 243,961 - 243,961 Depreciation and amortization 11,419 - 11,419 ------------ ----------- ------------- 338,120 - 338,120 ------------ ----------- ------------- Operating Income 28,905 - 28,905 ------------ ----------- ------------- Other Income (Expense) - ---------------------- Interest income - - - Interest expense (8,125) - (8,125) ----------- ----------- ------------- Net Income (Loss) $ 20,780 $ - $ 20,780 - ----------------- =========== =========== ============= Net Income (Loss) Per Common Share $ 0.003 n/a 0.003 - --------------------------- =========== =========== ============= Weighted average number of common shares outstanding 6,000,000 (17,852) $ 5,982,148 =========== =========== ============= See Notes to Consolidated Proforma Financial Statements
THE CATAPULT GROUP, INC. (formerly ENVIROMETRICS, INC. AND SUBSIDIARIES) NOTES TO UNAUDITED PROFORMA CONDENSED FINANCIAL STATEMENTS The unaudited pro forma condensed financial statements have been prepared combining the net monetary assets purchased of Envirometrics, Inc. and The Catapult Group, Inc. and adjusting such combined balances to conform to the accounting policies of the two companies. The following describes adjustments and other items relevant to the pro forma financial statements. (1) Net deficiency in monetary assets acquired amounted to $24,044 at March 31, 2000. This is due to the net use of cash approximating $60,000 and significant decrease of approximately $80,000 in trade accounts receivable from December 31, 1999. (2) Net monetary assets acquired included $155,000 from the disposition of the Envirometrics, Inc. operations. (3) Included in the transaction is the conversion of 328,559 preferred shares into 1,502,793 common shares of Envirometrics, Inc. before the reverse split. (4) Accrued dividends on Envirometrics, Inc. preferred stock converted into 173,261common shares of Envirometrics, Inc. before the reverse split. (5) The holders of Envirometrics, Inc. common shares participated in a reverse split transaction and were issued one share of Envirometrics, Inc. common stock for every ten shares held. (6) Recapitalization. The weighted average number of shares outstanding was calculated assuming Envirometrics shares were exchanged for all of the outstanding shares of The Catapult Group at January 1, 2000 and that 5,616,016 new shares of Envirometrics, Inc. common stock was issued. (7) Loss per Common Share. Loss per common share is based upon the weighted average number of common shares outstanding. The calculation also assumes that holders of Envirometrics, Inc. common shares participated in a reverse split transaction and were issued one share of Envirometrics, Inc. common stock for every ten shares held. The holders of the preferred stock of Envirometrics, Inc. converted 328,559 preferred shares and $69,304 of amounts in accrued dividends on the preferred shares at March 31, 2000, into 1,676,053 common shares at April 17, 2000. These were assumed converted at March 31, 2000 in the calculation of weighted average number of shares outstanding at March 31, 2000. (8) Impairment of long-lived assets. The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be fully recoverable. The Company performs undiscounted cash flow analyses to determine if impairment exists. Based on a review performed for the quarter ended March 31, 2000, no impairment existed that would require adjustment to or disclosure in the pro forma financial statements. Note 1. Proforma Financial Condition and Plan of Operation Prior to the closing of and in accordance with the Exchange Agreement, The Catapult Group shall have obtained a financing commitment for Two Million Dollars ($2,000,000) in net proceeds or such lesser amount as may be agreed to by Envirometrics and The Catapult Group, from a third party investor(s) upon terms and conditions satisfactory to Envirometrics and The Catapult Group. Though this condition is a condition precedent to closing the Acquisition, it may be waived in whole or in part by Envirometrics and The Catapult Group. If The Catapult Group is successful in obtaining up to the $2,000,000 capital raise, the proceeds will be used (i) to payoff the notes payable ($500,000) related to the acquisition of i2o, Inc., (ii) for the acquisition of related companiew (up to $600,000) and (iii) working capital to fund personnel and other costs associated with the execution of The Catapult Group business plans (up to $900,000). The pro forma consolidated balance sheet presents negative working capital in the amount of $305,200. Included in this is the aforementioned $500,000 in notes payable, $250,000 of which is currently in default. Without the capital raise mentioned above or the obtaining of additional financing it is doubtful that there will be sufficient resources to meet obligations as they become due. Note 2. Results of Operations and Management's Plans Envirometrics' plan to exchange stock with The Catapult Group, Inc. contemplates a shift in business strategy to Internet strategy consulting. Traditionally, the Catapult Group has provided end-to-end Internet solutions to its customers. Moving forward, the company will continue to provide these services and focus strongly on the technology auditing aspects of internet strategy, quality assurance and project management and control. The Catapult Group, Inc. is currently completing a development project for an online telecommunications product and service marketplace company. Revenues for the development of this project during the first quarter of 2000 were approximately $150,000. The customer intends to launch this site in May 2000, and seek additional funding for ongoing development. Although continued revenue is conditional on available funding, The Catapult Group, Inc. contemplates the provision of services in future phases of this project. The Catapult Group is also a vendor in good standing with a very large communications corporation. Project development revenues from work for this customer were approximately $126,200 during the first quarter of 2000. At present, however, there are no projects ongoing for this customer. The Catapult Group, Inc. intends to focus its service offering on the consulting aspects of Internet strategy. Elements of this operating segment include Internet technology architecture development, technology auditing, quality assurance and project management services. In the early part of the second quarter 2000, The Catapult Group, Inc.has secured approximately 5 agreements for technology blueprint projects with estimated revenues that average approximately $25,000 per project. The company believes that the growing importance of planning and control in the Internet market will lead to increased activity in this operating segment. Although The Catapult Group, Inc. was profitable during the first quarter of 2000, a downturn in revenues and business activity is contemplated in the short term as the company completes the transition to the public market and effects a shift in strategy to a pure consulting model.The company anticipates losses during the second and third quarters of 2000 with a return to profitability late in the fourth quarter or in early 2001. The Catapult Group, Inc. intends to secure working capital to support ongoing activities and to build the infrastructure necessary to implement the company's business plan. Item 6. Exhibits and Reports - ----------------------------- (a) The following exhibits are filed along with this Report on Form 10-QSB: Number Description of Exhibit - ------ ---------------------- 10.1 Preferred Stock Conversion Agreement: Ten State Street, LLP 10.2 Preferred Stock Conversion Agreement: Walter H. Elliott, III 10.3 Preferred Stock Conversion Agreement: Shakespeare Partners 10.4 Preferred Stock Conversion Agreement: Precision Southeast, Inc. 10.5 Preferred Stock Conversion Agreement: Elsie L. Rose 10.6 Preferred Stock Conversion Agreement: United States Company, Inc. 10.7 Asset Purchase Agreement between Registrant and Risk Technologies, LLC dated April 26, 2000. 10.8 Asset Purchase Agreement between Registrant and GAL Services, Inc dated May 08, 2000. 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 15, 2000 Walter H. Elliott, III _______________________ Walter H. Elliott, III President and CEO EX-10.1 2 PREFERRED STOCK CONVERSION AGREEMENT March 24, 2000 Mr. Timothy Scrantom Ten State Street, L.L.P. 10 State Street Charleston, South Carolina 29401 Envirometrics, Inc. 9229 University Boulevard Charleston, SC 29401 Re: 20,032 Shares of Series B Preferred Stock of Envirometrics, Inc. (the "Company") Held By Ten State Street, L.L.P. Ladies and Gentlemen: Pursuant to our Agreement of June30, 1998, (the "Agreement," Paragraphs 10-24 of which are fully incorporated herein by reference and ratified and reaffirmed in their entirety by the undersigned), we hereby notify you of our intent to convert the above-referenced shares of Preferred Stock (the "Preferred Stock") to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of Common Stock for one share of Preferred Stock. Kindly effect this conversion on the tenth day following your receipt of this notice or as soon thereafter as practicable. We are enclosing herewith any Certificate(s) we hold representing the Preferred Stock. If you are holding any Certificate(s) representing the Preferred Stock, you are hereby instructed to cancel same upon the issuance of the Common Stock to us. With regard to any dividends which have accrued on the Preferred Stock, you are hereby instructed to issue Common Stock to us in lieu of such accruals at a price of $0.40 per share. We understand that no fractional shares will be issued, and shares will be rounded off to the nearest whole number. We represent that: (a) we have familiarized ourselves with the affairs of the Company, and we are aware of the Agreement for the Exchange of Stock (the "Catapult Agreement") between the Company and The Catapult Group, Inc. of Atlanta, GA; (b) we have received and reviewed a copy of the Catapult press release dated March 13, 2000 which refers to the Catapult Agreement; and (c) we are aware that the Company intends to effect a split of the Common Stock prior to the closing of the Catapult Agreement at a ratio of one new share of Common Stock being issued for every ten shares then outstanding. Sincerely yours, EX-10.2 3 PREFERRED STOCK CONVERSION AGREEMENT March 20, 2000 Mr. Walter H. "Skip" Elliott, III 205 Walnut Hill Drive Summerville, SC 29485 Envirometrics, Inc. 9229 University Boulevard Charleston, SC 29401 Re: 8,835 Shares of Series B Preferred Stock of Envirometrics, Inc. (the "Company") Held By Walter H. Elliott, III Ladies and Gentlemen: Pursuant to our Agreement of June 30, 1998, (the "Agreement", Paragraphs 10-24 of which are fully incorporated herein by reference and ratified and reaffirmed in their entirety by the undersigned), we hereby notify you of our intent to convert the above-referenced shares of Preferred Stock (the "Preferred Stock") to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of Common Stock for one share of Preferred Stock. Kindly effect this conversion on the tenth day following your receipt of this notice or as soon thereafter as practicable. I am enclosing herewith any Certificate(s) I hold representing the Preferred Stock. If you are holding any Certificate(s) representing the Preferred Stock, you are hereby instructed to cancel same upon the issuance of the Common Stock to me. With regard to any dividends which have accrued on the Preferred Stock, you are hereby instructed to issue Common Stock to me in lieu of such accruals at a price of $0.40 per share. I understand that no fractional shares will be issued, and shares will be rounded off to the nearest whole number. I represent that I have familiarized myself with the affairs of the Company, and I am aware of the Agreement for the Exchange of Stock (the "Catapult Agreement") between the Company and The Catapult Group, Inc. of Atlanta, GA and that the Company intends to effect a split of the Common Stock prior to the Closing thereof at a ratio of one new share of Common Stock being issued for every ten shares then outstanding; and, further, that I have had sufficient opportunity to have the Catapult Agreement reviewed by counsel of my choice and I am fully familiar with the terms thereof. Sincerely yours, Walter H. Elliott, III EX-10.3 4 PREFERRED STOCK CONVERSION AGREEMENT March 31, 2000 Mr. H. E. "Skipper" Igoe Shakespeare Partners 33 Frenchmans Key Williamsburg, VA 23185 Envirometrics, Inc. 9229 University Boulevard Charleston, SC 29401 Re: 49,919 Shares of Series C Preferred Stock of Envirometrics, Inc. (the "Company") Held By Shakespeare Partners. Ladies and Gentlemen: Pursuant to our Agreement of June 30, 1998, (the "Agreement," Paragraphs 10-24 of which are fully incorporated herein by reference and ratified and reaffirmed in their entirety by the undersigned), we hereby notify you of our intent to convert the above-referenced shares of Preferred Stock (the "Preferred Stock") to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of Common Stock for one share of Preferred Stock. Kindly effect this conversion on the tenth day following your receipt of this notice or as soon thereafter as practicable. We are enclosing herewith any Certificate(s) we hold representing the Preferred Stock. If you are holding any Certificate(s) representing the Preferred Stock, you are hereby instructed to cancel same upon the issuance of the Common Stock to us. With regard to any dividends which have accrued on the entire Preferred Stock, you are hereby instructed to issue Common Stock to us in lieu of such accruals at a price of $0.40 per share. We understand that no fractional shares will be issued, and shares will be rounded off to the nearest whole number. We represent that: (a) we have familiarized ourselves with the affairs of the Company, and we are aware of the Agreement for the Exchange of Stock (the "Catapult Agreement") between the Company and The Catapult Group, Inc. of Atlanta, GA; (b) we have received and reviewed a copy of the Catapult press release dated March 13, 2000 which refers to the Catapult Agreement; and (c) we are aware that the Company intends to effect a split of the Common Stock prior to the closing of the Catapult Agreement at a ratio of one new share of Common Stock being issued for every ten shares then outstanding. Sincerely yours, EX-10.4 5 PREFERRED STOCK CONVERSION AGREEMENT March 10, 2000 Mr. S. Richard Averette President Precision Southeast, Inc. P.O. Box 1405 Myrtle Beach, South Carolina 29578 Envirometrics, Inc. 9229 University Boulevard Charleston, SC 29401 Re: 65,875 Shares of Series B Preferred Stock of Envirometrics, Inc. (the "Company") Held By S. Richard Averette Ladies and Gentlemen: Pursuant to our Agreement of June 30, 1998, (the "Agreement," Paragraphs 10-24 of which are fully incorporated herein by reference and ratified and reaffirmed in their entirety by the undersigned), we hereby notify you of our intent to convert the above-referenced shares of Preferred Stock (the "Preferred Stock") to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of Common Stock for one share of Preferred Stock. Kindly effect this conversion on the tenth day following your receipt of this notice or as soon thereafter as practicable. We are enclosing herewith any Certificate(s) we hold representing the Preferred Stock. If you are holding any Certificate(s) representing the Preferred Stock, you are hereby instructed to cancel same upon the issuance of the Common Stock to us. With regard to any dividends which have accrued on the Preferred Stock, you are hereby instructed to issue Common Stock to us in lieu of such accruals at a price of $0.40 per share. We understand that no fractional shares will be issued, and shares will be rounded off to the nearest whole number. We represent that we have familiarized ourselves with the affairs of the Company, and we are aware of the Agreement for the Exchange of Stock (the "Catapult Agreement") between the Company and The Catapult Group, Inc. of Atlanta, GA and that the Company intends to effect a split of the Common Stock prior to the Closing thereof at a ratio of one new share of Common Stock being issued for every ten shares then outstanding; and, further, that we have had sufficient opportunity to have the Catapult Agreement reviewed by counsel of our choice and are fully familiar with the terms thereof. Sincerely yours, EX-10.5 6 PREFERRED STOCK CONVERSION AGREEMENT March 24, 2000 Ms. Elsie L. Rose Rose, Sanderson, & Creasy, LLC 1051 Technology Park Drive Glen Allen, VA 23060 Envirometrics, Inc. 9229 University Boulevard Charleston, SC 29401 Re: 2,250 Shares of Series B Preferred Stock of Envirometrics, Inc. (the "Company") Held By Elsie L. Rose. Ladies and Gentlemen: Pursuant to our Agreement of June 30, 1998, (the "Agreement,") Paragraphs 10-24 of which are fully incorporated herein by reference and ratified and reaffirmed in their entirety by the undersigned), we hereby notify you of our intent to convert the above-referenced shares of Preferred Stock (the "Preferred Stock") to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of Common Stock for one share of Preferred Stock. Kindly effect this conversion on the tenth day following your receipt of this notice or as soon thereafter as practicable. We are enclosing herewith any Certificate(s) we hold representing the Preferred Stock. If you are holding any Certificate(s) representing the Preferred Stock, you are hereby instructed to cancel same upon the issuance of the Common Stock to us. With regard to any dividends which have accrued on the Preferred Stock, you are hereby instructed to issue Common Stock to us in lieu of such accruals at a price of $0.40 per share. We understand that no fractional shares will be issued, and shares will be rounded off to the nearest whole number. We represent that: (a) we have familiarized ourselves with the affairs of the Company, and we are aware of the Agreement for the Exchange of Stock (the "Catapult Agreement") between the Company and The Catapult Group, Inc. of Atlanta, GA; (b) we have received and reviewed a copy of the Catapult press release dated March 13, 2000 which refers to the Catapult Agreement; and (c) we are aware that the Company intends to effect a split of the Common Stock prior to the closing of the Catapult Agreement at a ratio of one new share of Common Stock being issued for every ten shares then outstanding. Sincerely yours, EX-10.6 7 PREFERRED STOCK CONVERSION AGREEMENT March 24, 2000 Ms. Elsie L. Rose United States Company, Inc. 1051 Technology Park Drive Glen Allen, VA 23060 Envirometrics, Inc. 9229 University Boulevard Charleston, SC 29401 Re: 111,648 Shares of Series B Preferred Stock of Envirometrics, Inc. (the "Company") Held By United States Company, Inc. Ladies and Gentlemen: Pursuant to our Agreement of June 30, 1998, (the "Agreement," Paragraphs 10-24 of which are fully incorporated herein by reference and ratified and reaffirmed in their entirety by the undersigned), we hereby notify you of our intent to convert the above-referenced shares of Preferred Stock (the "Preferred Stock") to Envirometrics Common Stock (the "Common Stock") at a ratio of 5 shares of Common Stock for one share of Preferred Stock. Kindly effect this conversion on the tenth day following your receipt of this notice or as soon thereafter as practicable. We are enclosing herewith any Certificate(s) we hold representing the Preferred Stock. If you are holding any Certificate(s) representing the Preferred Stock, you are hereby instructed to cancel same upon the issuance of the Common Stock to us. With regard to any dividends which have accrued on the Preferred Stock, you are hereby instructed to issue Common Stock to us in lieu of such accruals at a price of $0.40 per share. We understand that no fractional shares will be issued, and shares will be rounded off to the nearest whole number. We represent that: (a) we have familiarized ourselves with the affairs of the Company, and we are aware of the Agreement for the Exchange of Stock (the "Catapult Agreement") between the Company and The Catapult Group, Inc. of Atlanta, GA; (b) we have received and reviewed a copy of the Catapult press release dated March 13, 2000 which refers to the Catapult Agreement; and (c) we are aware that the Company intends to effect a split of the Common Stock prior to the closing of the Catapult Agreement at a ratio of one new share of Common Stock being issued for every ten shares then outstanding. Sincerely yours, EX-10.7 8 ASSET PURCHASE AGREEMENT: RISK TECHNOLOGIES, LLC 4.24.00 4 4.24.00 AGREEMENT THIS AGREEMENT ( hereinafter the "Agreement") is made and entered into as of the ___day of April, 2000, by and among AZIMUTH, INCORPORATED ("Seller"), a South Carolina corporation having its principal place of business in Charleston, South Carolina; ENVIROMETRICS, INC. ("EVRM"), a Delaware corporation having its principal place of business in Charleston, South Carolina, and sole shareholder of Seller; RICHARD D. BENNETT ("RDB"), an individual residing in Mount Pleasant, South Carolina; and RISK TECHNOLOGIES, LLC a sole member limited liability company formed under the laws of South Carolina ("Purchaser"). Background Seller is engaged, inter alia, in the business of Industrial Safety and Hygiene consulting at its office at 9229 University Boulevard, Charleston, SC (the "Premises"), which business is expressly identified and segregated as Seller's Consultative Business (the "Consultative Business") on Seller's internal financial statements; and, RDB was previously employed by Seller as its President and by EVRM as its Senior Vice President under an employment agreement (the "Employment Agreement") which contains provisions regarding nondisclosure and noncompetition by RDB from which Purchaser and RDB wish to be released; and, Seller desires to sell to the Purchaser and the Purchaser desires to purchase from Seller, subject to the terms and conditions herein, its tangible and intangible assets used in the Consultative Business which are described below; and EVRM is the lessee of the Premises, and Purchaser wishes to sublease an area of the Premises for a period of time following the Closing hereof as described below. Agreement In consideration of the mutual promises contained below and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: ARTICLE I - PURCHASE AND SALE OF ASSETS 1.01 The Assets. At Closing the Seller hereby agrees to sell, convey, transfer, assign, set over and deliver to the Purchaser, and the Purchaser agrees to purchase and accept, the following assets (the "Assets"): a. All of the equipment described in Exhibit "A" attached hereto; b. The list of current and former Consultative Business clients attached hereto as Exhibit "B" (the "Consultative Business Clients"); c. The "Azimuth" name and any service marks, logos, and trademarks for "Azimuth" and Occupational Healthguard"; provided, however, that Seller shall be permitted to retain the name "Azimuth" as its corporate name so long as it adheres to the provisions below regarding noncompetition with Purchaser; d. Those segments or portions of outstanding contracts between Seller and Consultative Business Clients which have yet to be performed ("Incomplete Contract Segments"); and all outstanding proposals for prospective engagements ("Outstanding Proposals"). All of the foregoing are listed and described in Exhibit "C" attached hereto. Purchaser agrees to assume Seller's obligations under such contracts and proposals and to discharge such obligations on a timely basis with a high degree of professionalism, diligence and skill; provided, however, that Seller shall retain its contract with Owens Corning, Anderson, SC plant (Job #98-069, commenced 8/17/98) and same shall not be conveyed to, nor assumed by, Purchaser under this Agreement; and, provided further, all amounts which have been prepaid to Seller, if any, shall be credited to Purchaser at Closing to the extent that such prepayment is for work not yet completed on the Closing Date. e. All records and files in Seller's possession of Consultative Business Clients which have given Seller written instructions to release same to Purchaser. Purchaser will keep and maintain such records and files in safekeeping and make them available to Seller to the extent Seller, or Seller's parent, successor or insurance company may require same to respond to claims. f. The good will of the Consultative Business. No assets which are not explicitly described above are included in this Agreement, and specifically excluded are Seller's laboratory and all assets, clients, records and business related thereto (collectively, the "Laboratory Business"). The Assets are being sold "as is" and "where is," and Seller makes no express or implied representation or warranty whatever in regard thereto, including warranty of merchantability, fitness for a particular purpose or any other warranty of any nature, all which are hereby expressly disclaimed by Seller to the maximum extent permitted by the laws of the State of South Carolina. 1.02 Purchase Price. The purchase price for the Assets (the "Purchase Price") shall be One Hundred Thousand Dollars ($100,000.00), payable at Closing as follows: a. Purchaser's and RDB's assumption of and agreement to pay the two promissory notes to the U.S. Small Business Administration described in Exhibit "D" attached hereto (the "SBA Loans") having combined balances of approximately Eighty-five Thousand Dollars ($85,000.00). Such assumption shall be as of the May 1, 2000 payment; and, b. A Promissory Note from Purchaser to Seller, co-signed and guaranteed by RDB in the principal amount of the difference between the combined outstanding balances of the SBA Loans and the Purchase Price, minus a credit of $100.00 to Purchaser for the proration of personal property taxes related to the Assets as set forth below, with principal and accrued interest payable not later than on the first anniversary of Closing. Interest shall accrue at a rate equal to the lowest interest rate being quoted on the Closing Date by Wachovia Bank, Charleston, South Carolina for short term, unsecured loans to its best customers plus one per cent (1%). Purchaser's and RDB's agreement assuming the SBA Loans shall indemnify and hold harmless Seller, EVRM and Dr. and Mrs. Charles E. Feigley from any further obligation or liability thereon. Purchaser shall make its best efforts to obtain the release of Seller from its liability under the SBA Loans as well as a release of Dr. and Mrs. Feigley and the collateral Dr. and Mrs. Feigley have pledged as security for the SBA Loans. Seller will cooperate with Purchaser in this regard. 1.03 Security Agreement. a. Pledge of Stock. The obligations of Purchaser and RDB under Section 1.02 (a) and (b) above shall be secured by a first security interest granted to EVRM in One Hundred Thousand (100,000) shares of EVRM common stock owned by RDB (the "Shares"), the certificates for which shall be delivered at Closing to Seller with stock powers duly endorsed in blank by RDB. b. Pledge of Additional Stock. If Seller, Dr. and Mrs. Feigley and their collateral are not released from liability under the SBA loans by ninety (90) days after Closing RDB will provide a first security interest in an additional Two Hundred Thousand (200,000) of such shares (the "Additional Shares") as collateral for EVRM's security interest. At Closing, the certificate(s) representing the Additional Shares with stock powers duly endorsed in blank shall be deposited with a mutually acceptable escrow agent which will either return them to RDB upon such release of Seller, the Feigleys and their collateral or deliver them to Seller at the expiration of the ninety day period if such releases have not been obtained. c. RDB may notify EVRM at the end of any calendar quarter following Closing if the "bid" price for EVRM Common Stock for each trading day of such quarter on the OTC-BB or such recognized exchange on which the Shares and Additional Shares (collectively, the "Pledged Securities") were traded was such that the average of their "bid" prices on each day of such quarter bore a ratio to the combined outstanding balances as of the last day of such quarter, including accrued interest, of the SBA Loans (for which such releases have not been obtained) and the Promissory Note provided for in Section 1.02 (b) above (collectively, the "Outstanding Loans Balance"), which was in excess of 3 to 2. Such notice will contain such daily "bid" prices of the EVRM Common Stock and the Outstanding Loans Balance. After verification of the data contained in such notice, EVRM will deliver an amount of the Pledged Securities to RDB having a value equal to (a) their average daily "bid" price for that quarter minus (b) the Outstanding Loans Balance multiplied by the fraction, 3/2. d. At Closing, RDB shall execute a security agreement in favor of EVRM containing the foregoing terms, as well as such other terms and provisions as are usual and customary in such security and stock pledge agreements in addition to a UCC-1 Financing Statement containing the requisite information regarding the security interest. Such agreement shall provide that, absent a default therein or in the obligations which it secures, RDB shall retain his rights to all cash dividends and his rights to vote the Pledged Securities in addition to his right to execute any waivers or consents with respect thereto. 1.04 Closing. The Closing of this Agreement shall be the consummation of all transactions contemplated hereby to be performed at Closing and shall take place at 2:00 p.m. on April 26, 2000, at the Premises or at such other time and place as Seller and Purchaser may mutually agree in writing (the "Closing Date"). ARTICLE II - REPRESENTATIONS AND WARRANTIES 2.01 Representations and Warranties of the Seller. Seller and EVRM hereby represent and warrant to the Purchaser as follows: a. Formation and Organization. Seller is a corporation duly formed and validly existing and in good standing under the laws of the State of South Carolina. b. Authority, Binding Effect. Seller and EVRM have the authority to own property and carry on business, to execute and deliver this Agreement and the other instruments and documents required or contemplated hereby, to perform the obligations hereunder, and to consummate this Agreement. This Agreement has been duly executed and delivered by Seller and EVRM and constitutes a legal, valid, and binding obligation enforceable in accordance with its terms and the other agreements required or contemplated hereby to be executed by the Seller, subject only to its ratification by Seller's and EVRM's Boards of Directors. c. Title to the Assets. Seller has good and marketable title to the Assets and shall convey same to Purchaser at Closing, free and clear of all liens, claims, encumbrances, charges, restrictions and other burdens, except as disclosed in this Agreement and expressly assumed by Purchaser pursuant to the terms of this Agreement; provided, that any file or record referred to in Section 1.01 (e) above will be conveyed to Purchaser if, as and when the written instructions therefor are received by Seller, for a period of Ninety (90) days following Closing. After that time, Seller shall have no further obligation to Purchaser in this regard. d. Right to Use of Name. Seller has good title and possesses complete ownership of the trade name "Azimuth," free and clear of all claims, charges, liens, encumbrances or restrictions. e. Absence of Violations, Compliance. To the best of the knowledge of Seller, the use of the Assets in its Consultative Business does not constitute a violation of any applicable zoning, building, environmental or other ordinances, regulations, codes or other laws. Seller currently complies in all material respects with all other laws applicable to it and its business, properties and relationships. f. Consents. To the best of the Seller's knowledge, no third party consent or agreements of any party, judicial, governmental, creditor, lender or otherwise, is necessary for the execution and delivery of this Agreement and the other instruments and documents required or contemplated hereby other than the consent of the landlord of the Premises to the Sublease (as described below). g. Litigation. There is no litigation, claim, arbitration, governmental investigation or other proceeding pending or threatened which affects the Assets or which may impair the ability of Seller to perform the obligations contained in this Agreement, including any claim by any client of the Consultative Business regarding unsatisfactory work by Seller. h. Payment of Taxes and Wages. Seller has properly filed all returns that are required to be filed by it which relate to the Assets with any government authority, and all compensation, employment and other taxes and withholding, fees, and other governmental charges related thereto have or will be paid by Seller except the personal property taxes related to the Assets which are due in December, 2000. For the purposes of this Agreement, the sum of One Hundred Dollars ($100.00) shall be deemed to be a fair proration of Seller's portion of such taxes. i. Material Accuracy. None of the agreements, covenants, representations or warranties contained in this Agreement or in any Exhibit hereto pursuant to this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. 2.02 Representations and Warranties of Purchaser. The Purchaser hereby represents and warrants to Seller as follows: a. Formation and Organization. Purchaser is a limited liability company duly formed and validly existing and in good standing under the laws of the State of South Carolina, and RDB is its sole member. b. Authority, Binding Effect. Purchaser has the authority to own property and carry on business, to execute and deliver this Agreement and the other instruments and documents required or contemplated hereby, to perform the obligations hereunder, and to consummate this Agreement. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid, and binding obligation enforceable in accordance with its terms and the other agreements required or contemplated hereby to be executed by the Purchaser. c. Litigation. There is no litigation, claim, obligation, proceeding, investigation pending or threatened or any other thing which may impair the Purchaser's ability to perform any of its obligations contained in this Agreement. ARTICLE III - COVENANTS 3.01 Covenants of the Seller and EVRM. a. Sublease. EVRM hereby agrees to sublease to Purchaser approximately 1,000 square feet of office space in the Premises (the "Sublease") on a week-to-week basis at a rental of One Hundred Seventy Dollars ($170.00) per week commencing on the day of Closing and payable on the first day of each week thereafter. The Sublease will be revocable by either party upon one week's notice to the other. Such rent and sublease shall be entirely net to EVRM which will have no responsibility whatever thereunder for any services to Purchaser except the provision of electricity, water and HVAC. Purchaser agrees to be responsible for all other expenses associated with the Sublease. b. Use of Certain Telephone Numbers. Seller agrees to allow Purchaser to use existing Azimuth telephone numbers, including the existing toll free telephone number, during the term of the Sublease. Purchaser will reimburse Seller for any costs incurred under such agreement. The parties acknowledge that the toll free number is currently in use by the Laboratory Business as are two of the local numbers, and another number is the main corporate number for EVRM and is listed on its 10-K's. At such time as EVRM and the Laboratory Business no longer need their telephone and telefax numbers, EVRM will use its best efforts to transfer them to Purchaser as soon thereafter as practicable. Any unrecovered deposits will be reimbursed by Purchaser. In the meantime, should Purchaser so elect, EVRM will use its best efforts to transfer the number (843) 569-8792 to Purchaser. Should Purchaser terminate the sublease, Seller agrees to transfer incoming calls for Purchaser to a number provided to Seller and to provide such number to caller for future use. c. Release. Effective upon Closing, Seller and EVRM forever release and discharge Purchaser and RDB, individually, from and against any and all claims, demands, counterclaims, actions, costs, causes of action, damages, debts, obligations and liabilities of whatever nature arising out of the Employment Agreement or out of RDB's relationship with Seller and EVRM up to and including the date of this Agreement. This release is subject to the Closing of this Agreement. d. Noncompetition. For a period of Three (3) years following Closing within the State of South Carolina, neither Seller nor EVRM shall, directly or indirectly, (i) engage in the Industrial Safety and Hygiene consulting business; (ii) solicit in competition with the Purchaser any Consultative Business Clients or accept Industrial Safety and Hygiene consulting business from any of them; or (iii) without the consent of the Purchaser, solicit any person who is or has been employed by the Purchaser or encourage any such person to leave the employ of the Purchaser. e. Notwithstanding any provision herein to the contrary: (i) Nothing herein is intended, nor shall it be deemed, to impair or prevent in any way whatsoever Seller's continued, unfettered engagement in the Laboratory Business, including the performance of laboratory services for Consultative Business Clients. Seller may continue to use the name "Azimuth Laboratories" in its conduct of such business. (ii) Should Seller convey all or any portion of the Laboratory Business, it will not convey the use of the name, "Azimuth Laboratories" for a period of longer than six months from the Closing of such transaction, and it will make its best efforts to acquire a noncompetitive agreement from the purchaser(s) in such transaction preventing such purchaser(s) from competing with the Consultative Business. 3.02 Covenants of the Purchaser. a. Sublease. Purchaser agrees to abide by the terms of the sublease as set forth in Paragraph 3.01(a) above. b. Release. Effective upon Closing, Purchaser and RDB forever release and discharge Seller and EVRM, and their respective directors, officers and representatives, from and against any and all claims, demands, counterclaims, actions, costs, causes of action, damages, debts, obligations and liabilities of whatever nature arising out of the Employment Agreement or out of RDB's relationship with Seller and EVRM up to and including the date of this Agreement. This release is subject to the Closing of this Agreement. c. Noncompetition. For a period of Three (3) years following Closing within the State of South Carolina, neither Purchaser nor RDB shall, directly or indirectly, (i) engage in any business competitive with an Industrial Safety and Hygiene laboratory business; (ii) solicit in competition with the Laboratory Business any clients of the Laboratory Business or accept Industrial Safety and Hygiene laboratory business from any of them; or (iii) without the consent of Seller and EVRM, solicit any person who is or has been employed by either of them or encourage any such person to leave the employ of either of them (iv) use the name "Azimuth" as a trade name in conjunction with the word "laboratory" or "laboratories." d. Receivables, Revenues and Revenue Sharing. (i) Notice. At Closing, or as soon thereafter as is practicable, Seller will notify all Consultative Business Client accounts receivable of this transaction. (ii) Receivables. All amounts due, as of Closing, for completed contracts and completed segments of outstanding contracts between Seller and Consultative Business Clients shall be receivables which belong to Seller and Seller shall invoice such Clients accordingly at or prior to Closing. So long as such invoice, or any portion thereof, remains outstanding, Purchaser will pay to Seller all revenues which Purchaser receives from such invoiced Client until such invoice is paid in full, at which time Seller shall assign to Purchaser so much of such account receivable as remains unpaid by such Client. (iii) Until August 18, 2000 Purchaser shall pay to EVRM, upon receipt, (a) seven and one-half per cent (7.5%) of all gross revenues which result from Incomplete Contact Segments or Outstanding Proposals, excluding PHT, PHTS and PHT Members. (iv) Purchaser shall submit to EVRM at the beginning of each month following Closing a report of receivables and receipts from Consultative Business Clients for the preceding month, each of which shall include: copies of all invoices to, and a breakdown of all receipts from, Consultative Business Clients for the preceding month; a breakdown of Purchaser's payments to EVRM the preceding month; and such other information as EVRM may reasonably request. EVRM or its representatives may inspect all records related to Purchaser's revenues at any time during normal business hours upon 2 days notice. For purposes of this Agreement, any outstanding invoice for revenues included in (iii) above which is less than forty-five days old on August 18, 2000 shall be deemed to have been paid in full prior to that date, and the related percentage shall be paid to EVRM at that time. e. Engagement of Seller's Employees. Purchaser agrees to engage Gary Eargle, Terry Sherril, and Jim Brown as employees upon the same terms they are currently employed by Seller for a period of at least six months following Closing, provided that any such employment may be terminated for cause, and that those employees will enter into reasonable employment agreements with Purchaser. f. Release of Third Parties. At Closing, EVRM will execute a release, prepared by Purchaser and in form and substance approved by EVRM prior to Closing, of PHT and PHTS from liability resulting from their engagement of Purchaser. ARTICLE IV - MISCELLANEOUS For purposes of this Article IV, the word "party" shall be deemed to include EVRM and Seller jointly and severally, as the applicable context may require, on the one hand, and Purchaser and RDB, jointly and severally, as the applicable context may require, on the other. 4.01 Survival of Representations. The following shall survive the Closing: (a) all representations and warranties contained herein; (b) all provisions containing covenants to be performed subsequent to the Closing. 4.02 Injunctive Relief; Costs of Actions. The parties agree that failure by Purchaser or RDB on the one hand, or Seller or EVRM on the other, to comply with the provisions of Section 3.01(d) or 3.02(c) of this Agreement will cause irreparable damage to the other party that may not be compensated adequately by monetary damages. Accordingly, the parties agree that, in the event of breach or threatened breach of the terms of either provision, the non-defaulting party shall be entitled to injunctive or other preliminary or equitable relief in addition to such other remedies as may be available to it for such breach or threatened breach, including damages. In the event of any action at law or in equity to enforce the provisions of this Agreement, the unsuccessful party shall pay to the other all costs and expenses so incurred, including attorneys' fees. 4.03 Brokerage Fees. The parties each represent and warrant that no statement or representation has been made to anyone which would incur liability for any broker's or finder's fees or commissions payable in connection with this Agreement. If any finder's fee or brokerage or other commission is claimed by any person to be due on the basis of any statement or representation alleged to have been made by any party, that party alleged to have so made the statement or representation shall indemnify and hold harmless the other party from and reimburse the other party for any loss, cost, expense, or liability in connection with any such claim. 4.04 Expenses. The parties shall pay their own expenses incurred in connection with this Agreement, including the fees of any attorneys, accountants, consultants or others engaged by it. 4.05 Notices. All notices and other communications to be given hereunder shall be in writing and shall be deemed to have been given when personally delivered, or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: a. If to the Seller or EVRM: Envirometrics, Inc. 9229 University Blvd. Charleston, SC 29406 b. If to the Purchaser or RDB: Risk Technologies, LLC and Richard D. Bennett 2059 Emerald Terrace Mount Pleasant, SC 19464 Communications sent by other means shall be deemed operative only upon actual receipt. Addresses may be changed by either party upon written notice to the other given as provided herein. 4.06 Binding Effect. All of the terms of this Agreement shall be binding upon and shall inure to the benefit of the respective successors and assigns of the parties hereto. 4.07 Assignment. This Agreement may not be assigned by either party without the consent of the other party; provided, (1) Seller may assign its rights hereunder to EVRM, and (2) Seller may assign its rights to enforce the provisions of Section 3.02(c) above to a purchaser of the Laboratory Business provided that, as a condition of such assignment, the purchaser of the Laboratory Business agrees and covenants to be bound to noncompetitive covenants identical to those contained in Section 3.01(d) and Seller assigns the right of enforcement of same, including enforcement rights identical to those contained in Section 4.02, to Purchaser. 4.08 Choice of Laws. This Agreement shall be construed and enforced in accordance with the laws of the State of South Carolina. 4.09 Waiver. The waiver of any right under this Agreement by any party hereto in any particular instance or instances shall not, unless so specified by such party, be construed as or constitute a continuing waiver. 4.10 Entire Agreement. This Agreement contains the entire agreement and understanding of the parties. There are no representations or warranties made by any party hereto and relied upon by any other party hereto except as set forth herein. 4.11 Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions hereof shall not be affected thereby. 4.12 Amendment. This Agreement may not be amended or supplemented except by a writing signed by the party against whom such amendment or supplementation is sought to be enforced. THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4.13 Availability of Representation by Independent Counsel. The Purchaser and RDB confirm and acknowledge that they have been represented by independent counsel who has reviewed this Agreement and advised them regarding its provisions. 4.14 Parties. The terms "Seller" and "Purchaser" herein shall mean and include any successors-in-interest of either party. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective authorized signatories as of the date first above written. Azimuth, Incorporated 'Seller' ____________________________ By: ________________________________ Witness Walter H. Elliott III, Chief Executive Officer Envirometrics, Inc. 'EVRM' ____________________________ By: ________________________________ Witness Walter H. Elliott III, Chief Executive Officer Risk Technologies, LLC 'Purchaser' ____________________________ By:___________________________________ Witness Richard D. Bennett, Sole Member ____________________________ ____________________________________ Witness Richard D. Bennett 'RDB' EX-10.8 9 ASSET PURCHASE AGREEMENT: GAL SERVICES, INC. 5.8.00 AGREEMENT THIS AGREEMENT ( hereinafter the "Agreement") is made and entered into as of the ___day of May, 2000, by and among AZIMUTH, INCORPORATED ("Azimuth"), a South Carolina corporation having its principal place of business in Charleston, South Carolina; ENVIROMETRICS, INC. ("EVRM"), a Delaware corporation having its principal place of business in Charleston, South Carolina, and sole shareholder of Azimuth; and GAL Services, Inc., a New York corporation having its principal place of business in East Syracuse, New York ("GSI"). Background Azimuth is engaged, inter alia, in the business of operating an Industrial Safety and Hygiene laboratory which business is expressly identified and segregated as Azimuth's Laboratory Business (the "Laboratory Business") on Azimuth's internal financial statements; and, Azimuth desires to sell, certain assets, and lease others, to GSI, and GSI desires to purchase and lease the said assets from Azimuth, subject to the terms and conditions herein. Agreement In consideration of the mutual promises contained below and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: ARTICLE I - PURCHASE AND SALE OF ASSETS 1.01 The Sold Assets. At Closing Azimuth hereby agrees to sell, convey, transfer, assign, set over and deliver to GSI, and GSI agrees to purchase and accept, the following assets (the "Sold Assets"): a. The list of current and former Laboratory Business clients (the "Laboratory Business Clients") attached hereto as Exhibit "A"; b. A license to use the name "Azimuth Laboratories" for so long as may be necessary to effect an orderly transition of the Laboratory Business Clients but not longer than six months from Closing, provided that such license is non-exclusive to the extent that the use of the name "Azimuth" may be used by Azimuth's consultative business so long as such use does not include the term "Laboratory" or "Laboratories"; and, provided further, that Azimuth shall be permitted to retain the name "Azimuth" as its corporate name so long as it adheres to the provisions below regarding noncompetition with GSI; c. Those outstanding assignments from Laboratory Business Clients upon which work has begun but which remain unfinished and uninvoiced at Closing, if any ("Work in Process") provided that none of the Work in Process will have been received by Azimuth more than Seven days prior to closing. GSI agrees to assume Azimuth's remaining obligations under such assignments; d. All records and files in Azimuth's possession of Laboratory Business Clients which have given Azimuth written instructions to release same to GSI (except that records and files relating to Work in Process and proposals outstanding at Closing will be delivered to GSI at Closing). GSI will keep and maintain such records and files in safekeeping and make them available to Azimuth to the extent Azimuth, or Azimuth's parent, successor or insurance company may require same to respond to future claims. No assets which are not explicitly described above are included in the Sold Assets, and specifically excluded are Azimuth's consultative business and the assets, clients, records and business related thereto (collectively, the "Consultative Business"). It is acknowledged by Azimuth that GSI is not assuming any liability of Azimuth other than that expressly described in Section 1.01 (c). 1.02 Purchase Price. The purchase price for the Sold Assets (the "Purchase Price") shall consist of Twenty-five Thousand Dollars ($25,000.00), payable at Closing. 1.03 Allocation of Purchase Price. The Purchase Price will be allocated among the various Assets as GSI, in its discretion, may elect, in conformity with GAAP. 1.05 Closing. The Closing of this Agreement shall be the consummation of all transactions contemplated hereby to be performed at Closing and shall take place at the offices of Azimuth or at such other place as Azimuth and GSI may mutually agree in writing either (a) within two business days of notice by Azimuth to GSI of its readiness to close within two business days, or (b) at 12:00 Noon May 8, 2000, whichever is sooner. GSI will have access to the Laboratory facilities for 7 days after Closing to remove any Leased Assets. The obligation of GSI to close this transaction is conditioned upon the following: (a) the representations and warranties set forth in Section 3.01 shall be true and correct in all material respects at and as of the Closing Date; (b) Azimuth shall have performed and complied with all of its covenants hereunder in all material respects through the Closing. ARTICLE II - LEASE OF ASSETS At Closing, Azimuth hereby agrees to lease to GSI, and GSI hereby agrees to rent from Azimuth, all of the equipment described in Exhibit "B" attached hereto (the "Leased Assets") upon the following terms and conditions: 2.01 Rent. The rent (the "Rent") which GSI shall pay to Azimuth for the Leased Assets shall consist of, and be payable according to, the following: a. Base Rent, which shall be Ten percent (10%) of all Gross Revenues received by GSI from Laboratory Business Clients during the first two years following Closing except as set forth below. The Base Rent will be paid on the 15th day of each month following GSI's receipt of payment from clients on the applicable revenues. "Gross Revenues" shall be exclusive of any deductions for taxes or any other charges other than costs associated with subcontracted analytical work. GSI shall use its commercially reasonable efforts to acquire the business of Laboratory Business Clients and will perform its obligations to them on a timely basis with a degree of professionalism and skill that meets generally accepted standards of the industry. Such standards will not obligate GSI to maintain an office in South Carolina. Azimuth shall assist GSI in the notification of Laboratory Business Clients of the transaction contemplated hereby. GSI's obligations to pay Base Rent shall terminate if and when the Base Rent paid into escrow (as provided below) and to Azimuth cumulatively (the "Cumulative Base Rent") equals Forty Thousand Dollars ($40,000.00) per year during each of the two years following the Closing Date. If at the end of such two year period the Cumulative Base Rent is less than $30,000.00, GSI shall continue to pay into escrow and/or to Azimuth, as required by Section 2.02 below, ten percent (10%) of Gross Revenue received from Laboratory Business Clients over the five years following such two year period until such Cumulative Base Rent equals $30,000.00. If the Cumulative Base Rent at the end of such seven years is less than $30,000 (the "Minimum Base Rent"), GSI shall pay the difference between the Minimum Base Rent and the Cumulative Base Rent into escrow and/or to Azimuth, as required by Section 2.02 below, in one lump sum payment at that time, unless the Minimum Base Rent requirement has been eliminated as provided in Section 2.02 below. b. Additional Rent, consisting of (i) twenty-five per cent (25%) of Gross Revenues received by GSI on non-Lead analysis Work in Process and (ii) ten per cent (10%) of Gross Revenues received by GSI on Lead analysis Work in Process, both payable monthly as above. 2.02 Liens. The parties acknowledge that the Leased Assets are subject to security interests of the U. S. Small Business Administration (the "Liens") evidenced by UCC 1 Financing Statements ## 90-026761, continued at 95-0217 and 90-026762, continued at 95-0217 on file with the Secretary of State of the State of South Carolina. Notwithstanding anything to the contrary herein, so long as the Liens are outstanding, GSI will pay all Rent into escrow with the law firm of Wood and Smith, P.C., Syracure, New York as escrow agent. If a proceeding is commenced to foreclose either or both of the Liens, Azimuth shall be required to offer to the lienholder, prior to the seizure of any of the Leased Assets, all of the funds then in the escrow account, up to a maximum of $35,000.00, in exchange for termination of the Liens. If the lienholder refuses such offer and seizes the Leased Assets and the funds then in escrow are equal to or greater than $35,000.00, then the escrow will terminate, and: (a) GSI will receive the first $35,000.00 of the escrowed funds; (b) Azimuth will receive the balance; (c) thereafter, Rent will be paid directly to Azimuth according to the terms of Section 2.01 above. If the lienholder refuses such offer and seizes the Leased Assets and the funds then in escrow are less than $35,000.00, then the escrow will terminate, and: (a) GSI will receive all of the escrowed funds; (b) ensuing Rent will accrue to the account of GSI until it, together with the escrowed funds paid to GSI, equals $35,000.00; and, (c) thereafter, Rent will be paid directly to Azimuth according to the terms of Section 2.01 above; except that (d) the Minimum Base Rent requirement will be extinguished. Upon termination of the Liens, at GSI's election, (a) the lease of the Leased Assets provided for herein shall remain in effect until the last rental payment due thereunder, upon which title to the Leased Assets will pass to GSI; or, (b) title to the Leased Assets will thereupon pass to GSI upon its payment of $1.00 to Azimuth, and all ensuing rental payments to Azimuth will become referral fees. At Closing, Azimuth will deposit a Bill of Sale for the Leased Assets in the form attached hereto as Exhibit C which will be released to GSI when title to the Leased Assets passes to GSI. 2.03 Condition of Assets; Net Lease. The Leased Assets are leased "as is" and "where is," and Seller makes no express or implied representation or warranty whatever in regard thereto, including warranty of merchantability, fitness for a particular purpose or any other warranty of any nature, all which are hereby expressly disclaimed by Seller to the extent permitted by the laws of the State of South Carolina. The lease of the Leased Assets shall be absolutely net to Azimuth. Any expenses in connection with the Leased Assets, including all maintenance, repairs, taxes (except year 2000 ad valorem taxes as set forth in Section 3.01 below) and insurance, and there shall be no deduction or setoff of any nature against the Rent except as may be expressly set forth herein. 2.04 Security Agreement. The obligations of GSI hereunder will be secured by a first security interest in the accounts receivable from Laboratory Business Clients and the proceeds therefrom. At Closing, Purchaser shall execute a security agreement in favor of EVRM containing the foregoing terms, as well as such other terms and provisions as are usual and customary in such security agreements in addition to a UCC-1 Financing Statement containing the requisite information regarding the security interest. ARTICLE III - REPRESENTATIONS AND WARRANTIES 3.01 Representations and Warranties of Azimuth. For purposes of this Agreement the terms "Sold Assets" and "Leased Assets" shall be referred to collectively as the "Assets." Azimuth hereby represents and warrants to GSI, which warranties shall be true and correct on the Closing Date, as follows: a. Formation and Organization. Azimuth is a corporation duly formed and validly existing and in good standing under the laws of the State of South Carolina. b. Authority, Binding Effect. Azimuth has the authority to own property and carry on business, to execute and deliver this Agreement and the other instruments and documents required or contemplated hereby, to perform the obligations hereunder, and to consummate this Agreement. This Agreement has been duly executed and delivered by Azimuth and constitutes a legal, valid, and binding obligation enforceable in accordance with its terms as will any other documents required or contemplated hereby to be executed by Azimuth, subject only to its ratification by Azimuth's and EVRM's Boards of Directors. c. Title to the Assets. Azimuth has good and marketable title to the Sold and Leased Assets, and at Closing, they shall be free and clear of all liens, claims, encumbrances, charges, restrictions and other burdens, except as disclosed in this Agreement; provided, that any file or record referred to in Section 1.01 (e) above will be conveyed to GSI when such written instructions therefor are received by Azimuth, for a period of Ninety (90) days following Closing. After that time Azimuth shall have no further obligation to GSI in this regard. d. Right to Use of Name. Azimuth has good title and possesses complete ownership of the trade name "Azimuth," free and clear of any claims, charges, liens, encumbrances or restrictions which would interfere with Azimuth's obligations hereunder. e. Absence of Violations, Compliance. To the best of the knowledge of Azimuth, after diligent inquiry, the use of the Assets in its Laboratory Business does not constitute a violation of any applicable zoning, building, environmental or other ordinances, regulations, codes or other laws. Azimuth complies in all material respects with all other laws applicable to it and its business, properties and relationships including without limitation any negligent, or wrongful acts or omissions arising on or before the Closing and, at Closing, will have complied with any applicable bulk transfer laws. f. Consents. No third party consent or agreements of any party, judicial, governmental, creditor, lender or otherwise, is necessary for the execution and delivery of this Agreement and the other instruments and documents required or contemplated hereby. g. Litigation. There is no litigation, claim, arbitration, governmental investigation or other proceeding pending or threatened which affects the Assets or which may impair the ability of Azimuth to perform the obligations contained in this Agreement. h. Payment of Taxes and Proration. Azimuth has properly filed all returns that are required to be filed by it which relate to the Assets with any government authority, and all taxes, fees, and other governmental charges related thereto have or will be paid by Azimuth except the personal property taxes related to the Assets which are due in December, 2000 and which shall be paid by Azimuth. i. Indemnity of GSI. Azimuth hereby indemnifies and holds GSI harmless from any claims of any nature related to or arising out of: (i) any liabilities of Azimuth; (ii) any responsibility for the disposal of any waste or hazardous chemicals, including all costs and attorneys fees in connection therewith, j. Financial Statements. The financial statements of the Laboratory Business attached hereto as Exhibit "D" are true and correct, and none of the assets contained in the most recent balance sheet thereof has been sold or otherwise conveyed by Azimuth; nor has Azimuth or EVRM made a distribution or paid a dividend within the past twelve months. k. Material Accuracy. None of the agreements, covenants, representations or warranties contained in this Agreement or in any Exhibit hereto pursuant to this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. 3.02 Representations and Warranties of GSI. GSI hereby represents and warrants to Azimuth as follows: a. Formation and Organization. GSI is a corporation duly formed and validly existing and in good standing under the laws of the State of New York. b. Authority, Binding Effect. GSI has the authority to own property and carry on business, to execute and deliver this Agreement and the other instruments and documents required or contemplated hereby, to perform the obligations hereunder, and to consummate this Agreement. This Agreement has been duly executed and delivered by GSI and constitutes a legal, valid, and binding obligation enforceable in accordance with its terms as will any other documents required or contemplated hereby to be executed by GSI subject only to ratification by GSI's Board of Directors. c. Litigation. There is no litigation, claim, obligation, proceeding, investigation pending or threatened or any other thing which may impair GSI's ability to perform any of its obligations contained in this Agreement. ARTICLE IV - COVENANTS 4.01 Covenants of Azimuth. a. Documents at Closing. At Closing, Azimuth will provide the following documents to GSI: (i) Bills of Sale for the Sold Assets and the Leased Assets, the latter of which is to be deposited with the said escrow agent; (ii) Ratification of this Agreement by Azimuth's and EVRM's Board of Directors and appropriate authorizations of its signatories, and such other authorizations as may be required to validate the transactions contemplated hereby; (iii) Written opinion of Azimuth's counsel in the form attached hereto as Exhibit "E"; b. Noncompetition. For a period of Three (3) years following Closing within the State of South Carolina, neither Azimuth nor EVRM shall, directly or indirectly, (i) engage in the Industrial Safety and Hygiene laboratory business; (ii) solicit in competition with GSI any Laboratory Business Clients or accept business from any of them in competition with GSI; or (iii) without the consent of GSI, solicit any person who is or has been employed by GSI or encourage any such person to leave the employ of GSI. c. Notwithstanding any provision herein to the contrary: (i) Nothing herein is intended, nor shall it be deemed, to impair Azimuth's continued engagement in the Consultative Business, including the performance of consultative services for Laboratory Business Clients. (ii) Should Azimuth convey all or any portion of the Consultative Business, it will acquire a noncompetitive agreement from the purchaser(s) in such transaction preventing such purchaser(s) from competing with the Laboratory Business in South Carolina for a three year period and which will include a provision permitting Azimuth to assign the right to enforce such provision. Azimuth hereby assigns its rights to enforce such provision to GSI, effective at Closing. 4.02 Covenants of GSI. a. Noncompetition. For a period of Three (3) years following Closing within the State of South Carolina, GSI shall not, directly or indirectly; (i) engage in any business competitive with an Industrial Safety and Hygiene consultative business; (ii) solicit in competition with the Consultative Business any Consultative Business Clients or accept Industrial Safety and Hygiene consulting business from any of them; or (iii) without the consent of Azimuth, solicit any person who is or has been employed by the Consultative Business or a purchaser thereof or encourage any such person to leave the employ thereof. b. Reporting. GSI shall submit to EVRM at the beginning of each month following Closing a report of receivables and receipts from Laboratory Business Clients for the preceding month, each of which shall include: copies of all invoices to, and a breakdown of all receipts from, Laboratory Business Clients for the preceding month; a breakdown of GSI's payments of Rent for the preceding month; and such other information as EVRM may reasonably request. EVRM or its representatives may inspect all records related to GSI's revenues at any time during normal business hours upon 2 days notice. ARTICLE V - MISCELLANEOUS For purposes of this Article V, the word "party" shall be deemed to include EVRM and Azimuth jointly and severally, as the applicable context may require, on the one hand, and GSI on the other. 5.01 Survival of Representations. The following shall survive the Closing: (a) all representations and warranties contained herein; (b) all provisions containing covenants to be performed subsequent to the Closing. 5.02 Injunctive Relief; Costs of Actions. The parties agree that failure by GSI on the one hand, or Azimuth or EVRM on the other, to comply with the provisions of 4.02(a) or Section 4.01(b) of this Agreement, respectively, will cause irreparable damage to the other party that may not be compensated adequately by monetary damages. Accordingly, the parties agree that, in the event of breach or threatened breach of the terms of either provision, the non-defaulting party shall be entitled to injunctive or other preliminary or equitable relief in addition to such other remedies as may be available to it for such breach or threatened breach, including damages. In the event of any action at law or in equity to enforce the provisions of this Agreement, the unsuccessful party shall pay to the other all costs and expenses so incurred, including attorneys' fees. 5.03 Brokerage Fees. The parties each represent and warrant that no statement or representation has been made to anyone which would incur liability for any broker's or finder's fees or commissions payable in connection with this Agreement. If any finder's fee or brokerage or other commission is claimed by any person to be due on the basis of any statement or representation alleged to have been made by any party, that party alleged to have so made the statement or representation shall indemnify and hold harmless the other party from and reimburse the other party for any loss, cost, expense, or liability in connection with any such claim. 5.04 Expenses. The parties shall pay their own expenses incurred in connection with this Agreement, including the fees of any attorneys, accountants, consultants or others engaged by them. 5.05 Notices. All notices and other communications to be given hereunder shall be in writing and shall be deemed to have been given when personally delivered, or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: a. If to Azimuth or EVRM: Envirometrics, Inc. 9229 University Blvd. Charleston, SC 29406 b. If to GSI: GAL Services, Inc. d/b/a/ Galson Laboratories 6601 Kirkville Road East Syracuse, NY 13057-0369 Communications sent by other means shall be deemed operative only upon actual receipt. Addresses may be changed by either party upon written notice to the other given as provided herein. 5.06 Binding Effect. All of the terms of this Agreement shall be binding upon and shall inure to the benefit of the respective successors and assigns of the parties hereto. 5.07 Assignment. This Agreement may not be assigned by either party without the consent of the other party, whose consent will not be unreasonably withheld; provided, Azimuth may assign its rights to enforce the provisions of Section 4.02 above to a purchaser of the Consultative Business, including the enforcement rights set forth in Section 5.02 above. 5.08 Choice of Laws. This Agreement shall be construed and enforced in accordance with the laws of the State of South Carolina without regard to its conflicts of laws provisions. 5.09 Waiver. The waiver of any right under this Agreement by any party hereto in any particular instance or instances shall not, unless so specified by such party, be construed as or constitute a continuing waiver. 5.10 Entire Agreement. This Agreement contains the entire agreement and understanding of the parties. There are no representations or warranties made by any party hereto and relied upon by any other party hereto except as set forth herein. 5.11 Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions hereof shall not be affected thereby. 5.12 Amendment. This Agreement may not be amended or supplemented except by a writing signed by the party against whom such amendment or supplementation is sought to be enforced. 5.13 Parties. The terms "EVRM," "Azimuth" and "GSI" herein shall mean and include any successors-in-interest of either party. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective authorized signatories as of the date first above written. Azimuth, Incorporated 'Azimuth' __________________________ By: ________________________________ Witness Walter H. Elliott III, Chief Executive Officer Envirometrics, Inc. 'EVRM' __________________________ By: ________________________________ Witness Walter H. Elliott III, Chief Executive Officer GAL Services, Inc. d/b/a/ Galson Laboratories 'GSI' __________________________ By:_________________________________ Witness F. Joseph Unangst, President EX-27 10 ART 5 FDS FOR 1ST QTR 10-QSB 2000
5 3-MOS DEC-31-2000 MAR-31-2000 44,423 0 50,348 (5,000) 4,000 114,943 930,848 877,505 179,051 406,305 0 0 717,985 3,640 (1,038,685) 179,051 0 0 0 0 0 0 852 0 0 5,965 (139,143) 0 0 (133,178) 0 0
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