-----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, F4DXh/gcrOsdUZkiQ9YVedL5YZKCBonnriASt2yu8yEggvuHot5QgwySa899l5R7 WOG1frA2CxgxMGSUXLiAUQ== 0000917253-97-000006.txt : 19970825 0000917253-97-000006.hdr.sgml : 19970825 ACCESSION NUMBER: 0000917253-97-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97661090 BUSINESS ADDRESS: STREET 1: 9229 UNIVERSITY BLVD CITY: CHARLESTON STATE: SC ZIP: 29406 BUSINESS PHONE: 8035539456 MAIL ADDRESS: STREET 1: 9229 UNIVERSITY BLVD CITY: CHARLESTON STATE: SC ZIP: 29406 10QSB 1 ENVIROMETRICS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934 For the quarterly period ended June 30, 1997 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: (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 [] NO [X] As of August 12, 1997 the Registrant had outstanding 2,612,626 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 March 31, 1997 and December 31, 1996 2-3 Condensed Statements of Operations for the First Quarter ended March 31, 1997 and 1996 4 Condensed Statements of Cash Flows for the First Quarter ended March 31, 1997 and 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Conditions 7-13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 5. Other Information 14 Item 6. Exhibits and Reports 14 Signature 15 ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 1997 and December 31, 1996
June 30, 1997 December 31, 1996 ASSETS (Unaudited) (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 54,709 $ 29,604 Current portion of notes receivable 98,809 104,562 Trade receivables less allowance for doubtful accounts of 1997 $23,453; 1996 $26,353 224,255 364,458 Other receivables, including amounts due from stockholders 1997 and 1996 $33,035 23,466 18,400 Inventories 55,074 287,541 Prepaid expenses 64,812 87,867 -------- -------- TOTAL CURRENT ASSETS 521,125 892,432 -------- -------- OTHER ASSETS AND INTANGIBLES Deposits 29,116 30,737 Notes receivable 646,479 696,745 Organization and loan costs, net of accumulated amortization 1997 $41,208; 1996 $40,372 45,088 31,801 License and distribution agreements net of accumulated amortization 1997 $11,000; 1996 $8,000 19,000 22,000 Other 132,827 110,511 ------- ------- 872,510 891,794 ------- ------- PROPERTY AND EQUIPMENT Furniture and equipment 1,098,228 1,240,727 Vehicles 44,034 88,991 --------- --------- 1,142,262 1,329,718 Less accumulated depreciation and amortization (938,872) (961,431) --------- --------- 203,390 368,287 --------- --------- $1,597,025 $2,152,513
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 31,351 $ 80,762 Current maturities of long-term debt 294,503 273,428 Accounts payable 561,044 853,674 Accrued expenses 622,318 612,551 --------- --------- TOTAL CURRENT LIABILITIES 1,509,216 1,820,415 --------- --------- LONG-TERM DEBT, less current maturities 626,297 602,585 ---------- ---------- STOCKHOLDERS' EQUITY Common stock par value $.001; authorized 10,000,000 shares; issued 1997 - 2,612,626 shares; 1996 - 2,471,626 shares 2,613 2,472 Additional paid-in capital 5,101,276 5,101,417 Retained deficit (5,642,377) (5,374,376) ---------- ---------- ( 538,488) ( 270,487) ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,597,025 $2,152,513 ========== ========== See Notes to Condensed Financial Statements
ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE QUARTER ENDED JUNE 30, 1997 and 1996
THREE MONTHS ENDED SIX MONTHS ENDED June 30, June 30, June 30, June 30, 1997 1996 1997 1996 --------- -------- ------- -------- NET SALES AND SERVICE REVENUE Services $ 229,773 $ 737,857 $ 525,318 $1,539,686 Products 222,326 461,610 613,907 1,184,087 ---------- --------- ---------- ---------- 452,099 1,199,467 1,139,225 2,723,773 ---------- --------- ---------- ---------- COST OF GOODS SOLD AND DIRECT SERVICE COSTS Services 154,208 593,712 331,338 1,176,935 Products 176,282 321,183 452,986 833,422 ---------- ---------- ---------- ---------- 330,490 914,895 784,324 2,010,357 ---------- ---------- ---------- ---------- GROSS PROFIT 121,609 284,572 354,901 713,416 --------- ---------- ---------- ---------- OTHER OPERATING REVENUE (3,509) 420 6,244 533 --------- ---------- ---------- ---------- OPERATING EXPENSES Sales and marketing 21,074 91,311 72,165 185,574 General and admin 202,007 332,198 368,908 693,707 Research and development 51,334 48,430 93,017 110,262 Shipping and receiving 4,211 23,226 10,114 41,317 Quality control - 3,798 - 7,540 Depreciation and amortization 27,535 54,168 59,736 118,823 --------- --------- ---------- ---------- 306,161 553,131 603,940 1,157,223 Write-off of goodwill - 614,938 - 614,938 --------- --------- ---------- ---------- 306,161 1,168,069 603,940 1,772 161 --------- ---------- ---------- ---------- OPERATING LOSS (188,061) (883,077) (242,795) (1,058,212) --------- ---------- ---------- ---------- FINANCIAL INCOME (EXPENSE) Interest income 15,315 - 30,706 1,414 Interest expense (14,654) (59,214) (46,812) (98,322) Gain (loss) on disposition 1,650 - 1,650 - of product line Amortization of loan costs (5,375) (15,917) (10,750) (21,071) -------- ---------- ---------- ---------- (3,064) (75,131) (25,206) (117,979) -------- ---------- ---------- ---------- NET LOSS $ (191,125) $ (958,208) $(268,001) $ 1,176,191) ========= ========== ========== ========== Weighted average number of common shares outstanding 2,612,626 2,500,203 2,542,516 2,500,203 ========== ========== ========== ========== Net loss per common share$ (0.073) $ (0.383) $ (0.105) $ (0.470) ========= ========== ========== ========== Dividends per common share$ - $ - $ - $ - ========= ========== ========== ========== See Notes to Condensed Consolidated Financial Statements
ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SECOND QUARTER ENDED JUNE 30, 1997 AND 1996
June 30, 1997 June 30, 1996 (Unaudited) (Unaudited) Cash Flow From Operating Activities: Net (loss) $ ( 268,001) $(1,176,191) Adjustments To Reconcile net income (loss) to net cash used in operating activities Depreciation 59,769 110,608 Amortization 10,750 644,224 Provision (recoveries for doubtful accounts) - (12,870) Non-cash expense paid by issuance of warrants - 7,500 (Gain) loss on disposal of equipment (1,650) (5,818) Change in assets and liabilities: Decrease in cash, restricted - 99,299 Decrease in accounts receivable 140,203 200,482 Decrease in inventory 181,395 13,817 Decrease in prepaid expenses 23,055 26,963 Increase(decrease)in accounts payable and accrued expenses (126,891) 104,447 --------- ---------- Net cash provided by operating activities 18,630 12,461 --------- ---------- Cash Flow From Investing Activities: Purchase of property and equipment - (33,989) Collection of note receivable 56,019 - Cash received on disposition of product line 5,100 - Loan on assets sold in connection with disposition of asb prod line 454 - Book value of assets sold in connection with disposition of asb prod line, net of cash paid to third party (5,554) - (Increase) in deposits, organization and loan and acquisition costs - (83,263) (Increase) in other assets (44,920) (16,510) --------- ---------- Net cash used in investing activities 11,099 (133,762) Cash Flows From Financing Activities: Proceeds from borrowings on short-term notes 25,000 277,884 Principal payments on short-term notes, net (29,624) (18,140) Principal payments on long-term borrowing - (155,892) --------- ---------- Net cash (used in) provided by financing activities (4,624) 103,852 --------- ---------- Net (decrease) increase in cash and cash equivalents 25,105 (17,449) Cash and cash equivalents, beginning 29,604 53,143 -------- ---------- Cash and cash equivalents, ending $ 54,709 $ 35,694 ========= ========== Supplemental Disclosure of Cash Flows Information Cash payments for interest $ 41,258 $ 32,647 ========= ========== Disposition of asbestos product line Book value of inventory (65,200) - Book value of equipment (96,326) - Loss on disposition of above 454 - Cash paid to third party 155,972 - --------- ---------- Cash received $ (5,100) $ - ========= ========== Supplemental Disclosure of Non Cash Financing Activities Issuance of common stock for warrants $ 141 $ - ========= ========== See Notes to Condensed Consolidated Financial Statements
Envirometrics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements June 30. 1997 (1) The unaudited condensed financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements of the Company, and notes thereto, should be read in conjunction with the audited financial statements and related notes included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995. The Company has not completed its audit of the consolidated financial statements for the year ended December 31, 1996 and has not filed Form 10-KSB for the year ended December 31, 1996. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to present fairly the consolidated financial position, results of operations and changes in cash flow for the interim periods. All such adjustments are of a normal recurring nature. (2) Net loss per common share is computed using the weighted average number of common shares outstanding, after giving effect for the 1 for 2 reverse split effective with the initial public offering in 1994. (3) 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. On December 5, 1996, The United States Company loaned $50,000 to the Company. The note is due in December 1997 and the Company is required to pay interest only monthly. Two Directors of the Company are officers of The United States Company. (3) The Company disposed of the Environmental Consulting and Engineering and Civil Engineering and Surveying Division during the third quarter of 1996. (4) All real property was disposed of during December 31, 1996, and the Company entered into a five year leasing agreement (containing options to extend) with the Buyer. The first and second mortgages were paid off and the Company took a $230,000 note (Due no later than December 31, 1998) from the Buyer. The buyer pays interest only monthly at 10%. The note is secured by the real estate. (5) The Company sold its asbestos product line (inventory and equipment) to a large customer during May 1997 for $161,072 cash. Proceeds from the disposition were used to reduce vendor trade amounts. (6) The Company's common stock and warrants were deleted from The Nasdaq SmallCap Market(tm) on December 3, 1996 for failure to meet the capital and surplus requirement for continued listing. The Company is listed on the OTC-Bulletin Board. (7) On April 1, 1997 the Company issued 125,000 shares of its common stock to The United States Company in exchange for 640,000 warrants to purchase its common stock. On that same date the Company issued 5,000 shares of common stock to Walter H. "Skip" Elliott, III, President and CEO, 5,000 shares of common stock to Elsie L. Rose, Treasurer, 5,000 shares of common stock to Robin A. Bowers, Secretary at that date, and 1,000 shares of common stock to another employee. Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996 Sales for the second Quarter of 1997 amounted to $452,100 which were $747,400 (62.3%)lower than the $1,199,500 reported for the second Quarter of 1996. The Service group decreased its sales by 68.9% or $508,100 to $229,800 and the Products group lost revenues of $239,300 (51.8%)and reported $222,300 for the Three months ended June 30, 1997 as compared to $461,600 for the Three months ended June 30, 1996. Included in the Service group revenue reduction of $508,100 is a decrease of $436,800 related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division which was disposed at July 31, 1996. The Services group reported $71,300 less revenues for the second Quarter of 1997 as compared to the second Quarter of 1996. The reason for the reduction in the Products group revenue is related to the decrease in activity in asbestos air monitoring in the industry and the disposition of this product line during May 1997. Cost of goods sold and direct service costs decreased by 63.9% or $584,400 to $330,500 for the second Quarter of 1997 as compared to $914,900 reported for the second Quarter of 1996. The Services Division reduced its direct service costs by $439,500 (74.0%) and reported $154,200 for the second Quarter of 1997 as compared to $593,700 for the second Quarter of 1996. Included in the Service group direct service costs reduction of $439,500 is a decrease of $368,200 related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division which was disposed at July 31, 1996. The Products group decreased its cost of good sold by $144,900 or 45.1%, to $176,300 for 1997 as compared to $321,200 for the second Quarter of 1996 due to the non stockpiling of air monitoring cassettes by one large customer. The gross profit for the second Quarter ended June 30, 1997 decreased by $163,000, a decrease of 57.3%, to $121,600 as compared to $284,600 for the Three months ended June 30, 1996. The Services Division recorded a decrease of 47.6% or $68,600 in its gross profit for the second Quarter of 1997 as compared to the second Quarter of 1996. The Service group gross profit reduction of $68,600 is attributable to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division which was disposed at July 31, 1996. The Products Division experienced a significant decrease of 67.2% or a $94,400 reduction in its gross profit for the second Quarter of 1997 as compared to the second Quarter of 1996. The Services Division reported a 32.9% gross margin for the second Quarter of 1997 as compared to a 19.5% margin for the same Quarter in 1996. The reason for the significantly improved gross margin in the Services Division and the $68,600 decrease in the amount of gross profit reported by that division is related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed at July 31, 1996, and the efficiency gained from downsizing of personnel and reduction of nonbillable expenses, including compensation. The Products Division reported a 20.7% gross margin for the second Quarter of 1997 as compared to a 30.4% margin for the same Quarter in 1996. Percentage comparisons of gross margins reported by the company are as follows: [C] [C] [C] [C] Period Total Products Services 2nd Quarter 1997 26.9% 20.7% 32.9% 2nd Quarter 1996 23.7% 30.4% 19.5% Percentage comparisons of gross margins reported by the company excluding the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed at July 31, 1996, are as follows: [C] [C] [C] [C] Period Total Products Services 2nd Quarter 1997 26.9% 20.7% 32.9% 2nd Quarter 1996 28.3% 30.4% 25.1% Other operating expense was $3,500 for the Quarter ended June 30, 1997 as compared to $400 of revenue for the Quarter ended June 30, 1996. Operating expenses were $861,900 lower and amounted to $306,200 for the Three months ended June 30, 1997, as compared to $1,168,100 reported for the Three months ended June 30, 1996. The operating expenses for the second Quarter of 1996 included $696,800 of expenses related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996. Operating expenses for the second Quarter of 1996 included a one time charge of $615,000 related to the write-off of goodwill related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division. Sales and marketing expenses decreased by $70,200, which savings were mostly attributable to the decline in sales for 1997, and the agreement with Zellweger Analytics, Inc. for the distribution of the ACT product line in 1996. General and administrative costs decreased by $130,200 to $202,000 for the Three months ended June 30, 1997, as compared to $332,200 reported for the Three months ended June 30, 1996. Included in the second Quarter 1996 general and administrative expenses is approximately $20,800 of consulting fees and expenses that were related to a contract that was terminated in August 1996 and $57,900 of amounts attributable to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996. A portion of the decrease is due to a reduction in personnel and restructuring of costs. Research and development costs increased by $2,900 to $51,300. Shipping and receiving costs decreased by $19,000 to $4,200 for the Three months ended June 30, 1997 as compared to $23,200 for the Three months ended June 30, 1996. This decline is related to the decrease in sales reported above. A reduction of $3,800 in costs related to quality control was the result of a reduction in personnel which occurred in the first Quarter of 1996. Depreciation and amortization costs decreased by $26,600 for the second Quarter ended June 30, 1997 as compared to 1996 of which $23,900 was attributable the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996. The Company incurred an operating loss of $188,100 for the Three months ended June 30, 1997 as compared to an operating loss of $883,100 for the Three months ended June 30, 1996. The operating loss for the Three months ended June 30, 1996 would have been $254,700, excluding the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996. Interest income for the Quarter ended June 30, 1997 was $15,300 and no interest income was recorded for the Quarter ended June 30, 1996. Interest income in 1997 resulted from interest earned on a note that was exchanged in connection with the disposition of the Environmental Consulting and Engineering and Civil Engineering and Surveying Division completed on July 31, 1996 and a mortgage note that was recorded as a result of the sale of the real property in December 1996. Interest expense of $14,700 for the Three months ended June 30, 1997 was $44,500 lower than the amount reported for the second Quarter of 1996 which was $59,200. The decrease in interest expense is attributable to reduced borrowing under the Company's asset based lending arrangement and the payoff of the mortgages in December 1996 when the real estate was sold. Amortization of loan costs for the second Quarter of 1997 was $5,400 and was $10,500 lower than the $15,900 reported for the Quarter ended June 30, 1996. The Company incurred a net loss of $191,100 for the Three months ended June 30, 1997 as compared to a net loss of $958,200 for the Three months ended June 30, 1996. The net loss for the second Quarter of 1996, excluding the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996 would have been $323,300 which is $634,900 lower than the $958,200 reported for the second Quarter of 1996. Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996 Sales for the first six months of 1997 amounted to $1,139,200 which were $1,584,600 (58.2%)lower than the $2,723,800 reported for the first six months of 1996. The Service group decreased its sales by 65.9% or $1,014,400 to $525,300 and the Products group lost revenues of $570,200 (48.2%)and reported $613,900 for the six months ended June 30, 1997 as compared to $1,184,100 for the six months ended June 30, 1996. Included in the Service group revenue reduction of $1,014,400 is a decrease of $869,900 related to the Environmental consulting and Engineering and Civil Engineering and Surveying Division which was disposed at July 31, 1996. The Consultative Services and Air Quality groups reported $144,500 less revenues for the first six months of 1997 as compared to the first six months of 1996. The reason for the reduction in the Products group revenue is related to the decrease in activity in the asbestos air monitoring in the industry and the disposition of this product line during May 1997. Cost of goods sold and direct service costs decreased by 61.0% or $1,226,000 to $784,300 for the first six months of 1997 as compared to $2,010,300 reported for the first six months of 1996. The Services Division reduced its direct service costs by $845,600 (71.8%) and reported $331,300 for the first six months of 1997 as compared to $1,176,900 for the first six months of 1996. Included in the Service group direct service costs reduction of $1,226,000 is a decrease of $652,800 related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division which was disposed at July 31, The Products group decreased its cost of good sold by $380,400 or 45.6%, to $453,000 for 1997 as compared to $833,400 for the first six months of 1996 due to the non stockpiling of air monitoring cassettes by one large customer. The gross profit for the first six months ended June 30, 1997 decreased by $358,500, a decrease of 50.3%, to $354,900 as compared to $713,400 for the six months ended June 30, 1996. The Services Division recorded a significant decrease of 46.5% or $168,800 in its gross profit for the first six months of 1997 as compared to the first six months of 1996. Included in the Service group gross profit reduction of $168,800 is a decrease of $217,200 related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division which was disposed at July 1, 1996. Excluding the decrease from the disposition of the Engineering and Civil Engineering and Surveying Division, the gross profit for the remaining services increased by $48,400. The Products Division experienced a significant decrease of 54.1% or a $189,700 reduction in its gross profit and reported $160,900 of gross profit for the first six months of 1997 as compared to the $350,600 for the first six months of 1996. The Services Division reported a 36.9% gross margin for the second quarter of 1997 as compared to a 23.6% margin for the same quarter in 1996. The reason for the significantly improved gross margin in the Services Division and the $168,800 decrease in the amount of gross profit reported by that division is related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed at July 31, 1996, and the efficiency gained from downsizing of personnel and reduction of nonbillable expenses, including compensation. The Products Division reported a 26.2% gross margin for the second quarter of 1997 as compared to a 29.6% margin for the same quarter in 1996. Percentage comparisons of gross margins reported by the company are as follows: [C] [C] [C] [C] Period Total Products Services 1st Six Months 1997 31.2% 26.2% 36.9% 1st Six Months 1996 26.2% 29.6% 23.6% Percentage comparisons of gross margins reported by the company excluding the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed at July 31, 1996, are as follows: [C] [C] [C] [C] Period Total Products Services 1st Six Months 1997 31.2% 26.2% 36.9% 1st Six Months 1996 26.8% 29.6% 21.7% Other operating revenue was $6,200 for the first six months ended June 30, 1997 as compared to $500 for the first six months ended June 30, 1996. Operating expenses were $1,168,200 lower and amounted to $604,000 for the six months ended June 30, 1997, as compared to $1,772,200 reported for the six months ended June 30, 1996. The operating expenses for the first six months of 1996 included $801,300 of expenses related the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996. Operating expenses for the first six months of 1996 included a one time charge of $615,000 related to the write-off of goodwill related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division. Sales and marketing expenses decreased by $113,400, which savings were mostly attributable to the decline in sales for 1997, and the agreement with Zellweger Analytics, Inc. for the distribution of the ACT product line in 1996. General and administrative costs decreased by $324,800 to $368,900 for the six months ended June 30, 1997, as compared to $693,700 reported for the six months ended June 30, 1996. Included in the second quarter 1996 general and administrative expenses is approximately $79,300 of consulting fees and expenses that were related to a contract that was terminated in August 1996 and $139,800 of amounts attributable to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996. A portion of the decrease is due to a reduction in personnel and restructuring of costs. Research and development costs decreased by $17,200 to $93,000. Shipping and receiving costs decreased by $31,200 to $10,200 for the six months ended June 30, 1997 as compared to $41,300 for the six months ended June 30, 1996. This decline is related to the decrease in sales reported above. A reduction of $7,500 in costs related to quality control was the result of a reduction in personnel in the second quarter of 1996. Depreciation and amortization costs decreased by $59,100 for the second quarter ended June 30, 1997 as compared to 1996 of which $46,600 was attributable the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996. The Company incurred an operating loss of $242,800 for the six months ended June 30, 1997 as compared to an operating loss of $1,058,200 for the six months ended June 30, 1996, which included a one time charge of $615,000 related to the write-off of goodwill related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division. The operating loss for the six months ended June 30, 1996 would have been $473,400, excluding the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996. Interest income for the six months ended June 30, 1997 was $29,300 higher than the amount recorded for 1996. Interest income in 1997 resulted from interest earned on a note that was exchanged in connection with the disposition of the Environmental Consulting and Engineering and Civil Engineering and Surveying Division completed on July 31, 1996 and a mortgage note that was recorded as a result of the sale of the real property in December 1996. Interest expense of $46,800 for the six months ended June 30, 1997 was $51,500 lower than the amount reported for the first six months of 1996 which was $98,300. The decrease in interest expense is attributable to reduced borrowing under the Company's asset based lending arrangement and the payoff of the mortgages in December 1996 when the real estate was sold. Amortization of loan costs for the first six months of 1997 was $10,800 and was $10,300 lower than the $21,100 reported for the first six months ended June 30, 1996. The Company incurred a net loss of $268,000 for the six months ended June 30, 1997 as compared to a net loss of $1,176,200 for the six months ended June 30, 1996, which included a one time charge of $615,000 related to the write-off of goodwill related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division. The net loss for the first six months of 1996, excluding the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996 would have been $578,800 which is $597,400 lower than the $1,176,200 reported for the first six months of 1996. FINANCIAL CONDITION The Company's financial condition continued to deteriorate during the first Six months of 1997 due principally to continued operating losses, and the Company is experiencing severe cash flow problems. The working capital deficiency has increased from $928,000 at December 31, 1996 to $988,100 at June 30, 1997. The Company has been negotiating with several vendors to restructure accounts payable and certain lenders appear willing to restructure debt since the Company has not been able to meet its obligations timely. In January 1997, the Company entered into agreements with several lenders that ties payment of debts to actual collections from notes receivable and related interest payments received. The Services Division experienced a reduction in sales revenues and the trade receivables from that group are down to $133,400 at June 30, 1997 from $207,400 at December 31, 1996. The Products Division reduced inventories by $232,400 to $55,100 from $287,500 at December 31, 1996 as a result of reduced sales of products and the sale of the asbestos product line to a major customer during May of 1997. During January 1997 the Company, through its Products Division subsidiary, terminated its two year Master Distribution Agreement with Zellweger Analytics, Inc. (Zellweger) for non performance. The Company is currently in discussions with Zellweger to reach agreement on the prepaid purchase deposit in excess of $480,000 which is recorded as deferred revenue and included in accrued liabilities at June 30, 1997 and December 31, 1996. In April 1997, the Company was successful in subleasing its office space at Faber Place to another Company for one year. This will result in savings of approximately $3,000 per month in rent. The Company has been experiencing a reduction in facility costs since it disposed of its real estate in December 1996. The Company executed a five year lease on its University Boulevard location after the sale of the real estate, and has reduced its monthly cash outlay by approximately $7,000. The Company receives interest income in 1997 of approximately $5,000 per month from two notes receivable executed during 1996, related to the disposition of the Environmental Consulting and Engineering and Civil Engineering and Surveying Division on July 31, 1996 and sale of the real estate in December 1996. The Company sold its air sampling cassettes products line, including equipment and inventory, for $161,072, to a major customer during May The total amount of cash received by the Company was $5,100 and $155,972 was paid to a vendor. This transaction was part of management's strategy to eliminate unprofitable or marginally profitable services and products. The Company has a factoring agreement with Reservoir Capital Corporation (Reservoir) which advances funds based on invoicing for sales of the Products Division. The Company intends to pursue a release of the second lien on accounts receivable, held by the Small Business Administration (SBA) as collateral against debt on invoicing of the laboratory and consultative division, which are not currently factored, and to continue its factoring arrangement with Reservoir. There is no assurance that the Company can be successful in obtaining a release of the accounts receivable by the SBA, and the Company will realize a cash flow reduction if it is unable to negotiate such an arrangement. The Company believes there is adequate collateral to secure the SBA loans, considering other assets that also secure the SBA debt. The Company intends to expand its consultative services, including outsourcing, and is in discussions with another company to jointly market a broad base of services including health and safety services beginning in the second quarter of 1997. In addition, the Company is looking to grow its laboratory services base through aggressive marketing, identifying potential merger partners (other industrial hygiene laboratories) to increase revenues and streamline or reduce costs. The Company plans to pursue the refinancing of certain loans, amounting to approximately $300,000 from related parties and stockholders and included in current maturities of long-term debt, by the third quarter of 1997. PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 5. Other Information On June 11, 1997, Robin A. Bowers, Secretary, tendered her resignation as an officer of the Company. As of this date, no replacement has been elected. Item 6. Exhibits and Reports Exhibit 10.13 Asset Purchase Agreement by and between Envirometrics Products Company and Multi-Metrics, Inc. 10.14 Letter of Resignation by Robin A. Bowers SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENVIROMETRICS, INC. Date: August 14, 1997 Walter H. Elliott, III -------------------------------- Walter H. Elliott, III President and CEO
EX-27 2 ART 5 FDS FOR 1ST QTR 10-QSB 1997
5 6-MOS DEC-31-1997 JUN-30-1997 54,709 0 346,530 56,488 55,074 521,125 1,142,262 938,872 203,390 1,509,216 626,297 0 0 2,613 (541,101) 1,597,025 452,099 452,099 330,490 636,651 0 0 (3,064) (191,125) 0 (191,125) 0 0 0 (191,125) (.073) (.073)
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