-----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, M59qRn67semOfM92piPnJmJkNaIejYDAuj0NtFIQTJYVj3d7roMNn+mwqAtEJ4hT UsDNgKxcGLCOb72YSeXbHg== 0000917253-97-000007.txt : 19971126 0000917253-97-000007.hdr.sgml : 19971126 ACCESSION NUMBER: 0000917253-97-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 000-23892 FILM NUMBER: 97715161 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 September 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 November 11, 1997 the Registrant had outstanding 2,487,626 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 September 30, 1997 and December 31, 1996 2-3 Condensed Statements of Operations for the Third Quarter ended September 30, 1997 and 1996 4 Condensed Statements of Cash Flows for the Third Quarter ended September 30, 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 September 30, 1997 and December 31, 1996
September 30, 1997 December 31, 1996 ASSETS (Unaudited) (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 53,523 $ 29,604 Current portion of notes receivable 100,548 104,562 Trade receivables less allowance for doubtful accounts of 1997 $23,453; 1996 $26,353 199,708 364,458 Other receivables, including amounts due from stockholders 1997 and 1996 $33,035 23,968 18,400 Inventories 42,541 287,541 Prepaid expenses 48,438 87,867 -------- -------- TOTAL CURRENT ASSETS 468,726 892,432 -------- -------- OTHER ASSETS AND INTANGIBLES Deposits 28,616 30,737 Notes receivable 620,680 696,745 Organization and loan costs, net of accumulated amortization 1997 $58,527; 1996 $40,372 15,255 31,801 License and distribution agreements net of accumulated amortization 1997 $12,500; 1996 $8,000 17,500 22,000 Other 146,823 110,511 ------- ------- 828,874 891,794 ------- ------- PROPERTY AND EQUIPMENT Furniture and equipment 1,098,227 1,240,727 Vehicles 44,034 88,991 --------- --------- 1,142,261 1,329,718 Less accumulated depreciation and amortization (960,216) (961,431) --------- --------- 182,045 368,287 --------- --------- $1,479,645 $2,152,513 ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 30,161 $ 80,762 Current maturities of long-term debt 332,521 273,428 Accounts payable 555,320 853,674 Accrued expenses 652,429 612,551 --------- --------- TOTAL CURRENT LIABILITIES 1,570,431 1,820,415 --------- --------- LONG-TERM DEBT, less current maturities 553,382 602,585 ---------- ---------- STOCKHOLDERS' EQUITY Common stock par value $.001; authorized 10,000,000 shares; issued 1997 - 2,487,626 shares; 1996 - 2,471,626 shares 2,488 2,472 Additional paid-in capital 5,102,277 5,101,417 Retained deficit (5,748,933) (5,374,376) ---------- ---------- ( 644,168) ( 270,487) ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,479,645 $2,152,513 ========== ========== See Notes to Condensed Financial Statements
ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 1997 and 1996
THREE MONTHS ENDED NINE MONTHS ENDED Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1997 1996 1997 1996 --------- -------- ------- -------- NET SALES AND SERVICE REVENUE Services $ 205,345 $ 467,948 $ 730,663 $2,007,634 Products 97,436 318,595 711,343 1,502,682 ---------- --------- ---------- ---------- 302,781 786,543 1,442,006 3,510,316 ---------- --------- ---------- ---------- COST OF GOODS SOLD AND DIRECT SERVICE COSTS Services 149,171 364,065 480,509 1,541,000 Products 31,295 236,790 484,281 1,070,212 ---------- ---------- ---------- ---------- 180,466 600,855 964,790 2,611,212 ---------- ---------- ---------- ---------- GROSS PROFIT 122,315 185,688 477,216 899,104 --------- ---------- ---------- ---------- OTHER OPERATING REVENUE 12,069 2,515 18,313 3,048 --------- ---------- ---------- ---------- OPERATING EXPENSES Sales and marketing 21,373 61,000 93,538 246,574 General and admin 151,492 167,979 520,400 861,686 Research and development 26,996 48,171 120,013 158,433 Shipping and receiving 164 18,050 10,278 59,367 Quality control - 2,233 - 9,773 Depreciation and amortization 27,164 56,408 86,900 175,231 --------- --------- ---------- ---------- 227,189 353,841 831,129 1,511,064 Write-off of goodwill - - - 614,938 --------- --------- ---------- ---------- 227,189 353,841 831,129 2,126,002 --------- ---------- ---------- ---------- OPERATING LOSS (92,805) (165,638) (335,600) (1,223,850) --------- ---------- ---------- ---------- FINANCIAL INCOME (EXPENSE) Interest income 14,756 6,435 45,462 7,849 Interest expense (19,638) (35,146) (66,450) (133,468) Gain (loss) on disposition of subsidiary - 124,553 - 124,553 Gain (loss) on disposition (3,494) - (1,844) - of product line Amortization of loan costs (5,375) (25,378) (16,125) (46,449) -------- ---------- ---------- ---------- (13,751) 70,464 (38,957) (47,515) -------- ---------- ---------- ---------- NET LOSS $ (106,556) $ (95,174) $(374,557) $ 1,271,365) ========= ========== ========== ========== Weighted average number of common shares outstanding 2,592,246 2,443,679 2,559,274 2,481,155 ========== ========== ========== ========== Net loss per common share $ (0.041) $ (0.039) $ (0.146) $ (0.512) ========= ========== ========== ========== Dividends per common share$ - $ - $ - $ - ========= ========== ========== ========== See Notes to Condensed Consolidated Financial Statements
ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THIRD QUARTER ENDED SEPTEMBER 30, 1997 AND 1996
Sept. 30, 1997 Sept. 30, 1996 (Unaudited) (Unaudited) Cash Flow From Operating Activities: Net (loss) $ ( 374,557) $(1,271,365) Adjustments To Reconcile net income (loss) to net cash used in operating activities Depreciation 86,900 151,805 Amortization 16,125 684,813 Provision (recoveries for doubtful accounts) - (12,869) Non-cash expense paid by issuance of warrants - 7,500 (Gain) loss on disposal of equipment 3,450 (680) (Gain) loss on disposal of subsidiary - (124,553) (Gain) from settlement of vendor debt (1,556) Change in assets and liabilities: Decrease in cash, restricted - 125,644 Decrease in accounts receivable 170,318 139,317 Decrease in inventory 179,800 172,324 Decrease in prepaid expenses 39,429 58,490 Increase(decrease)in accounts payable and accrued expenses (100,948) 189,981 --------- ---------- Net cash provided by operating activities 18,961 120,407 --------- ---------- Cash Flow From Investing Activities: Purchase of property and equipment - (64,395) Collection of note receivable 80,079 22,466 Cash received on disposition of product line 5,100 - Proceeds from sale of equipment 454 26,555 Book value of assets sold in connection with disposition of asb prod line, net of cash paid to third party (5,554) - (5,554) - (Increase) in deposits, organization and loan and acquisition costs 2,121 (69,210) (Increase) in other assets (36,531) (20,975) --------- ---------- Net cash used in investing activities 45,669 (105,559) Cash Flows From Financing Activities: Proceeds from borrowings on short-term notes 25,000 327,884 Principal payments on short-term notes, net (65,711) (18,140) Principal payments on long-term borrowing - (362,430) --------- ---------- Net cash (used in) provided by financing activities (40,711) (52,686) --------- ---------- Net (decrease) increase in cash and cash equivalents 23,919 (37,838) Cash and cash equivalents, beginning 29,604 53,143 -------- ---------- Cash and cash equivalents, ending $ 53,523 $ 15,305 ========= ========== 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, net $ 16 $ - ========= ========== See Notes to Condensed Consolidated Financial Statements
ENVIROMETRICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 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. During September 1997 The United States Company tendered 125,000 shares back to the Company. (8) During October 1997 the Company settled employment agreements with two employees at termination of their employment by agreeing to grant warrants for each to purchase 50,000 shares of Company common stock. No amounts have been recorded in the financial statements. Three Months Ended September 30, 1997 Compared to Three Months Ended September 30, 1996 Sales for the third Quarter of 1997 amounted to $302,800 which were $483,800 (61.5%)lower than the $786,600 reported for the third Quarter of 1996. The Service group decreased its sales by 56.1% or $262,600 to $205,300 and the Products group lost revenues of $221,200 (69.4%)and reported $97,400 for the Three months ended September 30, 1997 as compared to $318,600 for the Three months ended September 30, 1996. Included in the Service group revenue reduction of $262,600 is a decrease of $133,100 related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division which was disposed at July 31, 1996. The remaining Services group reported $129,500 less revenues for the third Quarter of 1997 compared to the third 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 70.0% or $420,400 to $180,500 for the third Quarter of 1997 as compared to $600,900 reported for the third Quarter of 1996. The Services Division reduced its direct service costs by $214,900 (59.0%) and reported $149,200 for the third Quarter of 1997 as compared to $364,100 for the third Quarter of 1996. Included in the Service group direct service costs reduction of $214,900 is a decrease of $109,700 related to the Environmental Consulting and Engineering and Surveying Division which was disposed at July 31, 1996. The Products group decreased its cost of goods sold by $205,500 or 86.8%, to $31,300 for 1997 as compared to $236,800 for the third Quarter of 1996 due to the disposition of the asbestos air monitoring product line in May 1997. The gross profit for the third Quarter ended September 30, 1997 decreased by $63,400, a decrease of 34.1%, to $122,300 as compared to $185,700 for the Three months ended September 30, 1996. The Services Division recorded a decrease of 45.9% or $47,700 in its gross profit for the third Quarter of 1997 as compared to the third Quarter of 1996. $23,500 of the Service group gross profit reduction of $47,700 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 decrease of 19.2% or a $15,700 reduction in its gross profit for the third Quarter of 1997 as compared to the third Quarter of 1996. The Services Division reported a 27.4% gross margin for the third Quarter of 1997 as compared to a 22.2% margin for the same Quarter in 1996. The reason for the significantly improved gross margin in the Services Division and the $47,700 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 67.9% gross margin for the third Quarter of 1997 as compared to a 25.7% margin for the same Quarter in 1996 as a result of the disposition of the asbestos air monitoring product line in May 1997, leaving the ACT product line which has significantly higher margins. Percentage comparisons of gross margins reported by the company are as follows: [S] [C] [C] [C] Period Total Products Services 3rd Quarter 1997 40.4% 67.9% 27.4% 3rd Quarter 1996 23.6% 25.7% 22.2% 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: [S] [C] [C] [C] Period Total Products Services 3rd Quarter 1997 40.4% 67.9% 27.4% 3rd Quarter 1996 24.6% 25.7% 23.5% Other operating revenue was $12,100 for the Quarter ended September 30, 1997 as compared to $2,500 of revenue for the Quarter ended September 30, 1996. Operating expenses were $126,700 lower and amounted to $227,200 for the Three months ended September 30, 1997, as compared to $353,800 reported for the Three months ended September 30, 1996. The operating expenses for the third Quarter of 1996 included $45,400 of expenses related the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996. Sales and marketing expenses decreased by $39,600, which savings were mostly attributable to the decline in sales for 1997, and the agreement with Zelweger Analytics, Inc. for the distribution of the ACT product line in 1996. General and administrative costs decreased by $16,500 to $151,500 for the Three months ended September 30, 1997, as compared to $168,000 reported for the Three months ended September 30, 1996. General and administrative costs decreased by $56,700 excluding amounts attributable to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, which was disposed on July 31, 1996 and the one time reduction in expense of $80,500 for the final settlement with the former CEO. Included in the third Quarter 1996 general and administrative expenses is approximately $15,000 of consulting fees and expenses that were related to a contract that was terminated in August 1996. Research and development costs decreased by $21,200 to $27,000. Shipping and receiving costs decreased by $17,900 to $200 for the Three months ended September 30, 1997 as compared to $18,100 for the Three months ended September 30, 1996. This decline is related to the decrease in sales reported above. A reduction of $2,200 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 deceased overall by $29,200 but ongoing activities realized an increase of $3,600 for the third Quarter ended September 30, 1997 as compared to 1996 of which $32,800 of expense was attributable to 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 $92,800 for the Three months ended September 30, 1997 as compared to an operating loss of $165,600 for the Three months ended September 30, 1996. The operating loss for the Three months ended September 30, 1996 would have been $152,200, 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 September 30, 1997 was $14,800 compared to $6,400 of interest income recorded for the Quarter ended September 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 $19,600 for the Three months ended September 30, 1997 was $15,500 lower than the amount reported for the third Quarter of 1996 which was $35,100. 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 ofloan costs for the third Quarter of 1997 was $5,400 and was $20,000 lower than the $25,400 reported for the Quarter ended September 30, 1996. The Company incurred a net loss of $106,600 for the Three months ended September 30, 1997 as compared to a net loss of $95,200 for the Three months ended September 30, 1996. The net loss for the third 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 $76,900 which is $18,200 lower than the $95,200 reported for the third Quarter of 1996. Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30, 1996 Sales for the first Nine months of 1997 amounted to $1,442,000 which were $2,068,300 (58.9%)lower than the $3,510,300 reported for the first Nine months of 1996. The Service group decreased its sales by 63.6% or $1,277,000 to $730,700 and the Products group lost revenues of $791,300 (52.7%)and reported $711,300 for the Nine months ended September 30, 1997 as compared to $1,502,600 for the Nine months ended September 30, 1996. Included in the Service group revenue reduction of $1,277,000 is a decrease of nearly $1,000,000 ($999,500) 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 $277,500 less revenues for the first Nine months of 1997 as compared to the first Nine 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 63.1% or $1,646,400 to $964,800 for the first Nine months of 1997 as compared to $2,611,200 reported for the first Nine months of 1996. The Services Division reduced its direct service costs by $1,060,500 (68.8%) and reported $480,500 for the first Nine months of 1997 as compared to $1,541,000 for the first Nine months of 1996. Included in the Service group direct service costs reduction of $1,060,500 is a decrease of $758,000 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 goods sold by $585,900 or 54.8%, to $484,300 for 1997 as compared to $1,070,200 for the first Nine months of 1996 due to the non stockpiling of air monitoring cassettes by one large customer and the disposition of the asbestos air monitoring product line in May 1997. The gross profit for the first Nine months ended September 30, 1997 decreased by $421,900, a decrease of 46.9%, to $477,200 as compared to $899,100 for the Nine months ended September 30, 1996. The Services Division recorded a significant decrease of 46.4% or $216,500 in its gross profit for the first Nine months of 1997 as compared to the first Nine months of 1996. Included in the Service group gross profit reduction of $216,500 is a decrease of $241,400 related to the Environmental Consulting and Engineering and Civil Engineering and Surveying Division which was disposed at July 31, 1996. Excluding the decrease from the disposition of the Environmental Consulting and Engineering and Civil Engineering and Surveying Division, the gross rpofit for the remaining services increased by $24,900. The Products Division experienced a significant decrease of 47.5% or a $205,400 reduction in its gross profit and reported $227,100 of gross profit for the first Nine months of 1997 as compared to the $432,500 for the first Nine months of 1996. The Services Division reported a 34.2% gross margin for the third quarter of 1997 as compared to a 23.2% margin for the same quarter in 1996. The reason for the significantly improved gross margin in the Services Division and the $216,500 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 31.9% gross margin for the third quarter of 1997 as compared to a 28.8% margin for the same quarter in 1996. Percentage comparisons of gross margins reported by the company are as follows: [S] [C] [C] [C] Period Total Products Services 1st Nine Months 1997 33.1% 31.9% 34.2% 1st Nine Months 1996 25.6% 28.8% 23.2% 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: [S] [C] [C] [C] Period Total Products Services 1st Nine Months 1997 33.1% 31.9% 34.2% 1st Nine Months 1996 26.2% 28.8% 22.3% Other operating revenue was $18,300 for the first Nine months ended September 30, 1997 as compared to $3,000 for the first Nine months ended September 30, 1996. Operating expenses were $1,294,900 lower and amounted to $831,100 for the Nine months ended September 30, 1997, as compared to $2,126,000 reported for the Nine months ended September 30, 1996. The operating expenses for the first Nine months of 1996 included $838,500 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 first Nine 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 $153,000, 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 $341,300 to $520,400 for the Nine months ended September 30, 1997, as compared to $861,700 reported for the Nine months ended September 30, 1996. Included in the third quarter 1996 general and administrative expenses is approximately $86,800 of consulting fees and expenses that were related to a contract that was terminated in August 1996 and $180,500 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 $38,400 to $120,000. Shipping and receiving costs decreased by $49,100 to $10,300 for the Nine months ended September 30, 1997 as compared to $59,400 for the Nine months ended September 30, 1996. This decline is related to the decrease in sales reported above. A reduction of $9,800 in costs related to quality control was the result of a reduction in personnel in the third quarter of 1996. Depreciation and amortization costs decreased by $88,300 for the third quarter ended September 30, 1997 as compared to 1996 of which $43,000 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 $335,600 for the Nine months ended September 30, 1997 as compared to an operating loss of $1,223,900 for the Nine months ended September 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 Nine months ended September 30, 1996 would have been $625,600, excluding the Environmental Consulting and Engineering and Civil Engineering and Surveying division, which was disposed on July 31, 1996. Interest income for the Nine months ended September 30, 1997 was $37,600 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 $66,500 for the Nine months ended September 30, 1997 was $67,000 lower than the amount reported for the first Nine months of 1996 which was $133,500. 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 Nine months of 1997 was $16,100 and was $30,300 lower than the $46,400 reported for the first Nine months ended September 30, 1996. The Company incurred a net loss of $374,600 for the Nine months ended September 30, 1997 as compared to a net loss of $1,271,400 for the Nine months ended September 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 Nine 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 $655,700 which is $615,600 lower than the $1,271,400 reported for the first Nine months of 1996. FINANCIAL CONDITION The Company's financial condition continued to deteriorate during the first Nine 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 $1,101,700 at September 30, 1997. Included in the working capital deficiency are approximately $300,000 in related party debt which terms are expected to be extended and the prepaid purchase deposit from Zellweger Analytics, Inc. in excess of $480,000 which is recorded as deferred revenue and included in accrued liabilities at September 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 $143,400 at September 30, 1997 from $207,400 at December 31, 1996. The Products Division reduced inventories by $232,200 to $56,100 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 conducting 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 September 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 1997. 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 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 1998. 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 fourth quarter of 1997. Item 1. Legal Proceedings Item 5. Other Information Item 6. Exhibits and Reports Exhibit 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: November 12, 1997 Walter H. Elliott, III -------------------------------- Walter H. Elliott, III President and CEO
EX-27 2 ART 5 FDS FOR 3RD QTR 10-QSB 1997
5 9-MOS DEC-31-1997 SEP-30-1997 53,523 0 300,771 23,453 42,541 877,312 1,142,261 960,216 1,479,645 1,570,431 553,382 0 0 2,488 (646,656) 1,479,645 1,442,006 1,442,006 964,790 964,790 785,323 0 66,450 (374,557) 0 (374,557) 0 0 0 (374,557) (.146) (.146)
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