-----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, Gxhfwj3XefjRG0f6UD3geD89a7dHWDAFlgUzfczaJQKRRj0pK0T1wSmzbheytc8M 3iY7gtQyEeaJAx2y49dPsA== 0000917253-96-000003.txt : 19961205 0000917253-96-000003.hdr.sgml : 19961205 ACCESSION NUMBER: 0000917253-96-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960820 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENVIROMETRICS INC /DE/ CENTRAL INDEX KEY: 0000917253 STANDARD INDUSTRIAL CLASSIFICATION: 3823 IRS NUMBER: 570941152 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-23892 FILM NUMBER: 96617954 BUSINESS ADDRESS: STREET 1: 4055 FABER PL DR STREET 2: STE 201 CITY: CHARLESTON STATE: SC ZIP: 29405 BUSINESS PHONE: 8035539456 MAIL ADDRESS: STREET 1: 4055 FABER PL DR STREET 2: STE 201 CITY: CHARLESTON STATE: SC ZIP: 29405 10QSB 1 ENVIROMETRICS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934 For the quarterly period ended June 30, 1996 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 (Zip Code) Registrant's telephone number, including area code: (803) 553-9456 Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] As of July 31, 1996 the Registrant had outstanding 2,500,203 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 Sheets at June 30, 1996 and December 31, 1995 1 Condensed Statements of Operations for the Three Months and Six Months Ended June 30, 1996 and 1995 2 Condensed Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Conditions 5-10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports 11 Signature 12 ENVIROMETRICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 1996 and December 31, 1995
June 30, 1996 December 31, 1995 ASSETS (Unaudited) (Audited) CURRENT ASSETS Cash $ 35,694 $ 53,143 Cash restricted 26,345 125,644 Trade receivables less allowance for doubtful accounts of $73,130 and $86,000 989,351 1,191,910 Other receivables, including amounts due from stockholders of $43,055 and $57,435 96,427 81,480 Inventories 550,164 563,981 Prepaid expenses 84,474 111,437 _________ _________ TOTAL CURRENT ASSETS 1,782,455 2,127,595 OTHER ASSETS Deposits 17,746 15,972 Organization and loan costs 52,155 6,739 Goodwill and acquisition costs 0 623,153 License agreements 43,001 28,000 Other 76,326 59,816 _______ _______ 189,228 733,680 PROPERTY AND EQUIPMENT 2,754,082 2,724,157 Less accumulated depreciation (1,189,123) (1,088,397) 1,564,959 1,635,760 _________ __________ TOTAL ASSETS 3,536,642 4,497,035
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable $ 734,445 $ 246,480 Notes payable stockholders 24,844 24,844 Current maturities of long-term debt 325,821 914,847 Accounts payable 1,133,012 965,155 Accrued expenses 391,547 454,957 _________ _________ Total Current Liabilities 2,609,669 2,606,283 Long Term Debt 802,276 597,363 Stockholder's Equity Common stock par value $.001 per share Authorized 10,000,000 shares Issued and outstanding - 2,500,203 shares 2,500 2,500 Additional paid-in capital 5,125,442 5,117,942 Accumulated deficit (5,003,245) (3,827,053) _________ __________ Total Stockholders' Equity 124,697 1,293,389 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,536,642 $4,497,035 See Notes to Condensed Financial Statements
1 ENVIROMETRICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Three months ended Six months ended June 30 June 30 __________________ _________________ 1996 1995 1996 1995 _______ ________ _______ _______ Net sales Services $ 737,857 $ 926,462 $1,539,686 $1,892,422 Products 461,610 670,563 1,184,087 1,230,880 ________ ________ _________ __________ 1,199,467 1,597,025 2,723,773 3,123,302 Cost of goods sold Services 593,712 656,658 1,176,935 1,378,572 Products 321,183 351,017 833,422 698,951 ________ _______ _________ _________ 914,895 1,007,675 2,010,357 2,077,523 ________ _________ _________ __________ Gross profit 284,572 589,350 713,416 1,045,779 Other revenue 420 7,435 533 29,361 Operating expenses Sales and marketing 91,311 154,462 185,574 317,766 General and administrative 332,198 318,656 693,707 645,885 Research and development 48,430 71,263 110,262 141,606 Shipping and receiving 23,226 17,144 41,317 35,367 Quality control 3,798 8,605 7,540 17,644 Depreciation and amortization 54,168 64,538 118,823 128,085 Amortization of goodwill 614,938 0 614,938 0 _______ ________ ________ ________ Operating loss (883,077) (37,883) (1,058,212) (211,483) Financial expense (75,131) (48,477) (117,979) (92,315) ______ ______ ________ _______ Net loss (958,208) (86,360) (1,176,191) (303,798) Weighted average number of common shares outstanding 2,500,203 2,451,302 2,500,203 2,348,407 Loss per share $ (.383) $ (.035) $ (.470) $ (.129) See Notes to Condensed Financial Statements
2 ENVIROMETRICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995 Cash Flow From Operating Activities: Loss From Operations $ (1,176,191) $ (303,798) __________ ________ Adjustments To Reconcile Net Income to Net Cash Provided by Operating Activities Depreciation 110,608 110,462 Amortization 644,224 34,550 (Recoveries for doubtful accounts (12,870) (10,765) Non-cash expense paid by issuance of warrants 7,500 0 (Gain) from equipment disposal (5,818) Increase (Decrease) From Changes: Cash, restricted 99,299 611,953 Receivables 200,482 (429,441) Inventory 13,817 (66,150) Prepaid expenses 26,963 6,899 Accounts payable and accrued expenses 104,447 (14,306) _______ _______ Net Cash Provided by (Used In ) Operating Activities 12,461 (60,596) _______ _______ Cash Flow From Investing Activities: Purchase of property and equipment (33,989) (52,780) Increase in deposits, organization and loan and acquisition costs (83,263) (413) Increase in other assets (16,510) (77,226) _______ _______ (133,762) (130,419) Cash Flow From Financing Activities: Proceeds from borrowings on short-term notes 277,884 584,825 Principal payments on short-term notes (18,140) (529,963) Proceeds from borrowings on long-term notes 0 14,952 Principal payments on long-term notes (155,892) (78,420) Net proceeds from sale of stock 0 257,814 ________ ________ Net Cash Provided From Financing Activities 103,852 249,208 _______ ________ Increase (Decrease) in Cash (17,449 58,193 Cash at Beginning of Year 53,143 3,295 _______ _______ Cash at End of Period $ 35,694 $ 61,488 See Notes to Condensed Financial Statements
3 Envirometrics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (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, for the year ended December 31, 1995. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to present fairly the consolidated financial position, results of operations and changes in cash flow for the interim periods. All such adjustments are of a normal recurring nature. (2) Net loss per common share is computed using the weighted average number of common shares outstanding, after giving effect for the 1 for 2 reverse split effective with the initial public offering. (3) On May 13, 1996 the Company entered into a two year financing arrangement with Reservoir Capital Corporation. Under the terms of the agreement, the Company will offer to sell to Reservoir Capital Corporation the eligible trade accounts receivable at an approved advance rate. On that date Reservoir Capital Corporation advanced approximately $233,000 on behalf of the Company. The Company immediately reduced one of its bank notes by approximately $50,000. The Company intends to utilize the remaining funds to reduce its trade accounts payable. (4) The mortgage on the property of approximately $600,000 which was included in current liabilities was refinanced in July 1996 and accordingly a portion was reclassified to long-term debt at June 30, 1996. (5) The Company is in the process of disposing of the civil engineering service group during the third quarter of 1996. 4 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The following discussion should be read in conjunction with the attached condensed consolidated financial statements and with the Company's audited financial statements, and notes thereto, for the fiscal year ended December 31, 1995. RESULTS OF OPERATIONS Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1995 Sales and revenue for the second quarter of 1996 of $1,199,500 decreased by 24.9% or $398,000 from the second quarter of 1995 which were $1,597,000. The Service group decreased its sales by 20.3% or $188,600 to $737,900 and the Products group lost revenues of $209,000 (31.2%) and reported $461,600 for the second quarter of 1996 as compared to $670,600 for the second quarter of 1995. The Consultative Services group reported $183,800 (62.6%) less revenues; the Laboratory reported $13,000 (9.3%) more revenues, the Air Quality Division reported $16,200 (34.0%) less revenues; and the Environmental Consulting and Engineering and Civil Engineering and Surveying Division experienced a slight decrease in revenues of $1,600 compared to the same quarter in 1995. Cost of goods sold and direct service costs decreased by 9.2% or $93,000 to $915,000 for the second quarter of 1996 as compared to $1,008,000 reported for the second quarter of 1995. The Services Division reduced its direct service costs by $62,900 (9.6%) and reported $593,700 for the second quarter of 1996 as compared to $656,600 for the first quarter of 1995. The Products group decreased its cost of good sold by 8.5% or $29,800 to $321,183 for 1996 as compared to $351,000 for the first quarter of 1995. The gross margins for the quarter ended June 30, 1996 decreased by $305,000, which amounted to a 51.7% decrease, to $285,000 for the second quarter of 1996 as compared to $589,000 for the quarter ended June 30, 1995. The Services Division recorded a significant decrease of 46.6% or $125,700 in its gross margin for the first quarter of 1996 as compared to the first quarter of The Products Division experienced a 56.0% or $179,100 reduction in its gross margin for the first quarter of 1996 as compared to the first quarter of 1995. The Products Division has experienced significant declines in the gross margins on its air sampling cassettes products due to an agreement with a major customer. Percentage comparisons of gross margins reported by the company are as follows: Period Total Products Services 1st Quarter 1996 28.1% 29.1% 27.3% 1st Quarter 1995 29.9% 40.9% 23.0% Other operating revenue decreased by $7,000 to $400 for the second quarter ended June 30, 1996 as compared to $7,400 for the quarter ended June 30, 1995. This decrease is attributable to a change in the way the Company recorded service charges for 1995. For 1996 the Company records service charges as revenue when collected rather than when applied to customer accounts. 5 Operating expenses were $533,000 higher and amounted to $1,168,100 for the quarter ended June 30, 1996, as compared to $634,700 reported for the quarter ended June 30, 1995. Included in the second quarter 1996 operating expenses is the write-off of $615,000 of goodwill related to the civil engineering service group acquisition made on November 30, 1994. The operating expenses for the second quarter of 1996, excluding the one time charge of $615,000 would have been $553,000 which is $82,000 lower than the $635,000 reported for the quarter ended June 30, 1995. Sales and marketing expenses decreased by $63,200, a 40.9% decrease over the same period in 1995. The reduction in sales personnel and related cost savings at the Products Division, which resulted from the agreement with Zellweger Analytics, Inc. for the distribution of the ACT product line amounted to $63,500. General and administrative costs increased by $13,500 to $332,200 for the quarter ended June 30, 1996, as compared to $318,700 reported for the quarter ended June 30, 1995. Research and development costs decreased by $22,800, a 32.0% reduction over the same period in 1995, to $48,400 for the quarter ended June 30, 1996 from $71,300 for the quarter ended June 30, 1995. This decrease is due to a reduction in personnel and restructuring of costs. A reduction of $4,800 in costs related to quality control was also the result of a reduction in personnel in the first quarter of 1996 as compared to 1995. Shipping and receiving costs increased by $6,100 to $23,200 for the quarter ended June 30, 1996 as compared to $17,100 for the quarter ended June 30, 1995. Depreciation and amortization costs decreased by $10,400 to $54,200 for the second quarter of 1996 as compared to $64,500 for the quarter ended June 30, 1995. The Company incurred an operating loss of $883,000 for the second quarter of 1996 as compared to an operating loss of $38,000 for the second quarter of 1995. Included in the 1996 operating loss is the write-off of approximately $615,000 of unamortized goodwill related to the civil engineering service group acquisition made on November 30, 1994. The operating loss for the second quarter of 1996, excluding the one time charge of $615,000 would have been $268,000 which is $230,000 higher than the operating loss recorded for the second quarter of 1995. No interest income was recorded for the second quarter ended June 30, 1996 as compared to $200 recorded for the quarter ended June 30, 1995. Interest expense was $59,200 for the second quarter of 1996 as compared to $37,700 for the second quarter of 1995. The increase of $21,500 is related to higher interest rates and additional borrowings for the second quarter of 1996 as compared to the second quarter of 1995. Amortization of loan costs for the quarter ended June 30, 1996 was $15,900 which was $4,900 higher than the quarter ended June 30, 1995 which was $11,000. The increase is related to additional borrowings for the second quarter of 1996 as compared to the second quarter of 1995. 6 The Company incurred a net loss of $958,200 for the second quarter of 1996 as compared to a net loss of $86,400 for the second quarter of 1995. Included in the second quarter 1996 net loss is the write-off of approximately $615,000 of unamortized goodwill related to the civil engineering service group acquisition made on November 30, 1994. The net loss for the second quarter of 1996, excluding the one time charge of $615,000 would have been $343,000 which is $257,000 higher than the $86,000 reported for the second quarter ended June 30, 1995. Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995 Sales and revenues for the first six moths of 1996 of $2,723,800 were approximately $399,500 or 12.8% less than the first six months of 1995 which were $3,123,300. The Service group decreased its sales by 18.6% or $352,700 to $1,539,700 as compared to $1,892,400 for the first six months of 1995 and the Products group lost revenues of 3.8% or $46,800 and reported $1,184,100 for the first six months of 1996 as compared to $1,230,900 for the first six months of 1995. The Consultative Services group reported $327,000 (56.2%) less revenues; the Laboratory reported $48,800 (13.0%) less revenues; the Air Quality Division reported $32,200 (52.3%) more revenues; and the Environmental Consulting and Engineering and Civil Engineering and Surveying Division experienced a slight decrease in revenues of $9,100 compared to the same quarter in 1995. Cost of goods sold and direct service costs decreased by 3.2% or $67,100 to $2,010,400 for the first six months of 1996 as compared to $2,077,500 reported for the first six months of 1995. The Services Division reduced its direct service costs by $201,600 (14.6%) and reported $1,176,900 for the first six months of 1996 as compared to $1,378,600 for the first quarter of 1995. The Products group increased its cost of good sold by $134,500 or 19.2%, to $833,400 for 1996 as compared to $699,000 for the first six months of 1995. The gross margins for the first six months ended June 30, 1996 decreased by $332,400, a decrease of 31.8%, to $713,400 as compared to $1,045,800 for the six months ended June 30, 1995. The Services Division recorded a significant decrease of 29.4% or $151,100 in its gross margin for the first six months of 1996 as compared to the first six months of 1995. The Products Division experienced a 34.0% decrease or $181,300 reduction in its gross margin for the first six months of 1996 as compared to the first six months of 1995. The Products Division has experienced significant declines in the gross margins on its air sampling cassettes products due to an agreement with a major customer. Percentage comparisons of gross margins reported by the company are as follows: Period Total Products Services 1st Six Months 1996 26.2% 29.6% 23.6% 1st Six Months 1995 33.5% 43.2% 27.2% Other operating revenue decreased by $7,000 to $400 for the six months ended June 30, 1996 as compared to $7,400 for the six month ended June 30, 1995. This decrease is attributable to a change in the way the Company recorded service charges for 1995. For 1996 the Company records service charges as revenue when collected rather than when applied to customer accounts. 7 Operating expenses were $485,800 higher and amounted to $1,772,200 for the six months ended June 30, 1996, as compared to $1,286,400 reported for the six months ended June 30, 1995. The operating expenses for the first six months of 1996, excluding the one time charge of $615,000 would have been $1,157,200 which is $129,200 lower than the $1,286,400 reported for the first six months ended June 30, 1995. Sales and marketing expenses decreased by $132,200. The reduction in sales personnel and related cost savings at the Products Division, which resulted from the agreement with Zellweger Analytics, Inc. for the distribution of the ACT product line amounted to $117,900. General and administrative costs increased by $47,800 to $693,700 for the six months ended June 30, 1996, as compared to $645,900 reported for the six months ended June 30, 1995. Research and development costs decreased by $31,300 to $110,300 for the six months ended June 30, 1996 from $141,600 for the six months ended June 30, 1995. This decrease is due to a reduction in personnel and restructuring of costs. A reduction of $10,100 in costs related to quality control was also the result of a reduction in personnel in the first quarter of 1996 as compared to 1995. Shipping and receiving costs increased by $5,900 to $41,300 for the quarter ended June 30, 1996 as compared to $35,400 for the six months ended June 30, 1995. Depreciation and amortization costs decreased by $9,300 to $118,800 for the first six months of 1996 as compared to $128,100 for the quarter ended June 30, 1995. The Company incurred an operating loss of $1,058,200 for the six months ended June 30, 1996 as compared to an operating loss of $211,200 for the six months ended June 30, 1995. Included in the 1996 operating loss is the write - - -off of approximately $615,000 of unamortized goodwill related to the civil engineering service group acquisition made on November 30, 1994. The operating loss for the six months ended June 30, 1996, excluding the one time charge of $615,000 would have been $443,200 which is $232,000 higher than the operating loss recorded the six months ended June 30, 1995. Interest income decreased by $4,000 to $1,400 for 1996 as compared to $5,400 for the six months ended June 30, 1995. This decrease is attributable to the use of the restricted cash remaining from the initial public offering in the first quarter of 1995 to reduce debt. Interest expense was $98,300 for the first six months of 1996 as compared to $80,800 for the first six months of 1995. The increase of $17,500 is related to higher interest rates and additional borrowings for the six months ended June 30, 1996 as compared to the six moths ended June 30, 1995. Amortization of loan costs for the six months ended June 30, 1996 was $21,000 which was $4,100 higher than the six months ended June 30, 1995 which was $16,900. The increase is related to additional borrowings for the first six months of 1996 as compared to the first six months of 1995. The Company incurred a net loss of $1,176,200 for the six months ended June 30, 1996 as compared to a net loss of $303,500 for the six months ended June 30, 1995. Included in the six months ended June 30, 1996 net loss is the write-off of approximately $615,000 of unamortized goodwill related to the civil engineering service group acquisition made on November 30, 1994. The net loss for the first six months of 1996, excluding the one time charge of $615,000 would have been $561,200 which is $257,700 higher than the $303,500 reported for the first six months of 1995. FINANCIAL CONDITION The Company's financial condition continued to deteriorate during the first six months of 1996 due principally to continued operating losses and the write- off of the unamortized goodwill resulting from an acquisition made in 1994. 8 The Consultative Services Division experienced a significant reduction in sales revenues and the trade receivables from that group are down to $160,000 at June 30, 1996 from $251,000 at December 31, 1995. The Engineering Services Division experienced an improvement in the collection of its trade receivables for the first six months of 1996. As of June 30, 1996 the Company had a net working capital deficiency of $827,200, including restricted cash of $26,345 which collateralized borrowings under a loan agreement with a financial institution. This deficiency is an improvement over the first quarter March 31, 1996 deficiency of $1,030,893, due to the reclassification of the mortgages from a current liability to long-term upon the refinancing which was completed by July 31, 1996. Effective January 1, 1996 the Company, through its Products Division subsidiary, entered into a two year Master Distribution Agreement with Zellweger Analytics, Inc. Zellweger has become the exclusive national and international distributor of the Company's proprietary passive air monitoring technology, known as the ACT Monitoring Card System(tm). Zellweger will be responsible for all sales and marketing activity of the system. The Company has already experienced a decrease in sales and marketing costs as a result of the agreement. Under the Master Distribution Agreement quarterly payments totaling $675,000 are to be made at the beginning of each calendar quarter for 1996 based on forecasted sales. A total of $236,250 has been received for the first and second quarters of 1996. Quarterly payments for forecasted sales for 1997 are expected to be determined during the fourth quarter of 1996. During August 1996 the Company disposed of its Engineering Services Division. This group, which was acquired during 1994, had not performed as planned, and the refocus of the operating activities to laboratory services and promotion of the ACT product line discussed above are the significant potential revenue drivers identified by management The Company is actively looking for a buyer to purchase its real property and has executed a letter of intent to dispose of a lot located near one of its owned locations. In addition, the Company has entered into a five year lease with a tenant to occupy the space where the Products Division was formerly located. The Products Division moved its manufacturing facility to another location, outsourced its warehousing operation to a professional warehouse shipping company and moved its sales and administrative staff into the same location as the remaining Service and Laboratory Division during August 1996. This move is expected to reduce overall costs by $3,000 to $4,000 a month. The Company's corporate and financial operations were moved to vacant office space at its laboratory facility thus making all the space previously occupied available for immediate subletting. These moves place all administrative and professional operations in a single location which will reduce expenses and substantially improve efficiency. In January 1996 the Company modified two of its loan agreements which were due and extended the due dates to January 15, 1997. In addition, on February 26, 1996 The United States Company loaned $150,000 to the Company for an initial 30 day. Subsequent to its due date the note was amended and extended to October 30, 1996. Richard H. Guilford, Chairman of the Board of Directors of the Company, Maurizio F. Giabbai, Ph.D., a Director of the Company, and Elsie L. Rose, CPA, Treasurer of the Company, are Principals in The United States Company. 9 On May 13, 1996 the Company entered into a two year financing arrangement with Reservoir Capital Corporation. Under the terms of the agreement, the Company will offer to sell to Reservoir Capital Corporation the eligible trade accounts receivable of two of its subsidiaries at an approved advance rate. On that date Reservoir Capital Corporation advanced approximately $233,000 on behalf of the Company. The Company immediately reduced one of its bank notes by approximately $50,000. The Company intends to utilize the remaining funds to reduce its trade accounts payable. At the same time an officer of the Company replaced $40,000 of a bank note payable by advancing funds at an interest rate of .5% over the prime rate charged by BB&T. On July 27, 1996 the Company refinanced its mortgages held by NationsBank. The new mortgages are for a period of two years, based on a 15 year amortization and carry interest at 12.5%. Cash savings from this refinancing are expected to approximate $7,000 per month. In March, 1996, The Company initiated a program, through its Laboratory, to support the American Industrial Hygiene Association (AIHA) Foundation ("The Foundation"). The Foundation is an education fund that will endow a national scholarship for graduate students in industrial hygiene. The fundraising goal of the Foundation is $1.5 million . The Laboratory conducted a 12,000 piece mail solicitation to AIHA members during the month of April 1996. The expected response from this mailing, a follow-up campaign and exhibition efforts at the AIHA conference in May 1996 is estimated to be 1-2% of total membership which approximates a 50% increase in the current number of laboratory clients. To date this program has generated a 10% increase in the laboratory customer base. In addition, the Company has initiated or is in the process of implementing several programs and actions which it believes will result in improved efficiency and reporting, and additional profitable operations. These include: * Specific targeted marketing programs designed to generate quick revenue realization have been implemented. These programs are intended to support those areas of the business where process capacity is available without incremental cost increases to match revenue increases. * In the second quarter, the Company launched The PointSource Program, a new marketing program for the industrial hygiene industry which is designed to network Certified Industrial Hygiene firms together to provide them with greater buying power and resulting price discounts for purchase of services from the Company. The program also anticipates greater insurance purchasing power and cross-client referral systems. To date, the program has generated thirteen candidate participants representing approximately $750,000 in purchasing power. Management believes that with the implementation of the programs listed above, the restructure of its debt and mortgages during the first seven months of 1996, the addition of the credit facility in the second quarter of 1996, the disposition of the engineering group and the Master Distribution Agreement effective January 1, 1996 all are significant positive steps in meeting the Company's immediate liquidity needs and stabilizing the revenues of the Company. In addition the cost reductions implemented in the first quarter of 1996 showed improved trends for the second quarter of 1996. 10 PART III. OTHER INFORMATION Item 1. Legal Proceedings None Item 6. Exhibits and Reports on Form 8-K None Reports on Form 8-K None 11 SIGNATURES Pursuant to the registration 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. (Registrant) Date: August 19, 1996 By: s/Richard D. Bennett Richard D. Bennett, MSPH, CIH Chief Executive Officer, President Signing on behalf of the registrant and as principal financial officer -----END PRIVACY-ENHANCED MESSAGE-----