-----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, BFfzmCJxwIGjB6rUZuefL7N39LrTsapu+oMcwsy01lKYbTPVByLb6mfU3Yk1Lxma jW83Wa9F8lSJaZGCxZYmLw== 0000917253-99-000008.txt : 19990901 0000917253-99-000008.hdr.sgml : 19990901 ACCESSION NUMBER: 0000917253-99-000008 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 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: 99693911 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, 1999 Commission file Number 0-23892 ENVIROMETRICS, INC. (Exact name of registrant as specified in its charter.) DELAWARE 57-0941152 (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification No.) 9229 UNIVERSITY BOULEVARD CHARLESTON, SC 29406 (Address of principal executive offices) Registrant's telephone number, including area code: (843) 553-9456 Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ ] NO [X] As of June 30, 1999 the Registrant had outstanding 3,012,686 shares of common Stock. Transitional small business disclosure format (check one): YES [ ] NO [X] INDEX PART I. FINANCIAL INFORMATION Page # Item 1. Financial Statements Condensed Consolidated Balance Sheet at June 30, 1999 and December 31, 1998 2 Condensed Statement of Operations for the Second Quarter ended June 30, 1999 and 1998 3 Condensed Statement of Cash Flows for the Second Quarter ended June 30, 1999 and 1998 4 Notes to Consolidated Financial Statements 5-6 Item 2.Management's Discussion and Analysis of Results of Operations and Financial Conditions 7-1 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 5. Other Information 13 Item 6. Exhibits and Reports 13 Signature 13 ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 1999 and December 31, 1998
June 30, 1999 December 31, 1998 ASSETS (Unaudited) (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 273,704 $ 40,934 Current portion of notes receivable 418,294 Trade receivables less allowance for doubtful accounts 1999 $5,000 and 1998 $5,000 137,646 183,155 Other receivables 22,213 Prepaid expenses 34,369 38,830 -------- -------- TOTAL CURRENT ASSETS 445,719 703,426 -------- -------- OTHER ASSETS AND INTANGIBLES Deposits 3,079 2,951 Due from shareholders 23,005 23,005 Other 31,121 31,373 ------- ------- 57,205 57,329 ------- ------- PROPERTY AND EQUIPMENT Furniture and equipment 987,470 984,635 Vehicles 9,490 9,490 --------- --------- 996,960 994,125 Less accumulated depreciation and amortization (921,368) (900,800) --------- --------- 75,592 93,325 --------- --------- $ 578,516 $ 854,080 ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ $ 10,149 Current maturities of long-term debt $ 23,802 $ 241,156 Accounts payable 214,880 242,895 Accrued expenses 152,014 138,652 --------- --------- TOTAL CURRENT LIABILITIES 390,696 632,852 --------- --------- LONG-TERM DEBT, less current maturities 85,230 94,400 ---------- ---------- STOCKHOLDERS' EQUITY Common stock par value $.001; authorized 10,000,000 shares; issued 1999 and 1998 - 3,012,686 shares 3,013 3,013 Preferred stock, no par value; authorized 2,500,000 shares; issued 1999 and 1998 - 353,518 shares 3,535 3,535 Additional paid-in capital 5,764,498 5,764,498 Retained earnings(deficit) (5,668,455) (5,644,218) ---------- ---------- 102,591 126,828 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 578,515 $ 854,080 ========== ========== See Notes to Condensed Financial Statements
ENVIROMETRICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1999 and 1998
THREE MONTHS ENDED SIX MONTHS ENDED June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ------- -------- --------- -------- NET SERVICE REVENUE Consultative $ 164,455 $77,211 $ 364,749 $ 150,104 Laboratory 115,921 104,891 201,272 230,740 -------- -------- -------- -------- 280,376 182,102 566,021 380,844 DIRECT SERVICE COSTS Consultative 106,221 42,883 200,645 85,463 Laboratory 89,629 94,703 170,851 172,297 --------- -------- --------- --------- 195,850 137,586 371,496 257,760 ---------- ---------- ---------- ---------- GROSS PROFIT 84,526 44,516 194,525 123,084 ---------- ---------- ---------- ---------- 30.1% 24.4% 34.4% 32.3% OTHER OPERATING REVENUE 715 9,258 3,654 20,653 ---------- ---------- ---------- ---------- OPERATING EXPENSES Sales and marketing 4,864 12,235 16,114 22,184 General and administrative 88,376 97,529 173,263 195,760 Depreciation and amortization 9,701 11,856 20,560 23,712 --------- --------- --------- --------- 102,941 121,620 209,937 241,656 --------- --------- --------- --------- OPERATING INCOME (LOSS) (17,700) (67,846) (11,758) (97,919) --------- --------- --------- --------- FINANCIAL INCOME (EXPENSE) Interest income 2,432 15,525 4,275 27,329 Interest expense (925) (12,255) (3,448) (21,921) Gain (loss) on disposition of property - 99 - (9,121) Gain (loss) on vendor balances negotiated 5,028 284,801 26,199 284,306 Other - - 25 3,747 Amortization of loan costs - (4,505) - (9,880) -------- --------- -------- --------- 6,535 283,665 27,051 274,460 -------- ---------- -------- ---------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS (11,165) 215,819 15,293 176,541 DISCONTINUED OPERATIONS - (26,103) - (26,103) -------- -------- -------- -------- NET INCOME (LOSS) $(11,165) $189,716 $ 15,293 $ 150,438 ========= ======== ======= ========== Weighted average number of common shares outstanding 3,012,686 2,671,,292 3,012,686 2,670,599 ========== ========== ========== ========== Net earnings (loss) per common share $(0.004) $ 0.071 $ 0.005 $ (0.056) ========= ========== ========= ========== 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, 1999 AND 1998
June 30,1999 June 30,1998 Cash Flows From Operating Activities: Net income (loss) $ 15,293 $ 150,438 Adjustments To Reconcile net income (loss) Depreciation 20,567 23,712 Amortization - 9,880 Loss on disposal of equipment - 9,121 Net (gain) loss on vendor balances negotiated (26,199) (284,306) Change in assets and liabilities: Decrease in accounts receivable 67,722 26,478 Decrease in inventory - 2,317 Decrease in prepaid expenses 4,461 30,041 Decrease in accounts payabl and accrued expenses (27,984) (25,343) -------- --------- Net cash provided by operating activities 53,860 (57,662) --------- --------- Cash Flows From Investing Activities: Collection of note receivable 218,294 50,267 Cash received on disposition of product line - 3,400 Purchase of furniture and equipment (2,835) - Decrease in notes receivable 218,294 - (Increase) decrease in deposits (128) 20,164 Decrease in other assets 252 (5,171) --------- --------- Net cash provided by investing activities 215,583 68,660 --------- -------- Cash Flows From Financing Activities: Proceeds from borrowings on short-term notes - 20,000 Principal payments on long-term borrowing (36,673) (60,079) -------- --------- Net cash used in financing activities (36,673) (40,079) --------- ---------- Net increase (decrease) in cash and cash equivalents 232,770 (29,081) Cash and cash equivalents, beginning 40,934 54,096 --------- ---------- Cash and cash equivalents, ending $ 273,704 $ 25,015 ========= ========== Supplemental Disclosure of Cash Flows Information Cash payments for interest $ 926 $ 5,128 ========= ========== Supplemental Disclosure of Cash Flows Information Issuance of common stock for debt conversion $ $ 68,082 ========= ========= Issuance of preferred stock for debt conversion $ $ 422,379 ========= ========= See Notes to Condensed Consolidated Financial Statements
ENVIROMETRICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30-June-99 (1) The unaudited condensed financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements of the Company, and notes thereto, should be read in conjunction with the audited financial statements and related notes included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995. The Company has not completed its audits of the consolidated financial statements for the years ended December 31, 1998,1997 and 1996 and has not filed form 10-KSB for the years ended December 31, 1998,1997 and 1996. The Company intends to complete its required financial statement audits and file required forms 10-KSB no later than November 1999 to meet the requirements of the OTC-Bulletin Board to retain its listing status. The Company may be deleted from the OTC-Bulletin Board if it is not in compliance with listing requirements by December 1999. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to present fairly the consolidated financial position, results of operations and changes in cash flow for the interim periods. All such adjustments are of a normal recurring nature. (2) Net loss per common share is computed using the weighted average number of common shares outstanding, after giving effect for the 1 for 2 reverse split effective with the initial public offering in 1994. (3) Shakespeare Partners, LTD, whose general partner is a stockholder of the Company, had outstanding notes payable due from the Company amounting to $200,000 at December 31, 1998. No interest was paid by the Company during 1998 or year to date 1999. Approximately $149,700 of debt was converted to 74,878 preferred shares which have dividend and preference in liquidation rights. In December 1998 the Company entered into an agreement with Shakespeare Partners, LTD and its General Partner to sell its note receivable from Trico Incorporated amounting to $364,427 for $260,000 which resulted in a loss to the Company of $104,427 and was recorded in December 1998. The Company received $60,000 in cash during December 1998 and reduced the outstanding $200,000 note payable balance to zero in January 1999. The United States Company converted 100% of its outstanding notes payable during 1998. No interest was paid during 1998. Approximately $85,000 of debt was converted to 111,648 preferred shares which have dividend and preference in liquidation rights. $124,100 was forgiven by the United States Company. Two Directors of the Company are officers of the United States Company. The Secretary and Treasurer is a Principal in The United States Company. The President and CEO converted 100% of his outstanding notes payable during 1998. No interest was paid during 1998. Approximately $17,700 (original debt plus accrued interest) was converted to 8,835 preferred shares which have dividend and preference in liquidation rights. An officer converted $4,500 of accrued salary to 2,250 preferred shares in December 1998 which have dividend and preference in liquidation rights. In addition to the related party transactions discussed above, approximately $171,812 of vendor debt was converted to 85,907 preferred shares during 1998 which have dividend and preference in liquidation rights. (4) The Company had a $218,294 note receivable from the Buyer of its real property in December 1996 which was paid in January 1999. (5) The Company's common stock and warrants were deleted from The Nasdaq SmallCap Market(tm) on December 3, 1996 for failure to meet the capital and surplus requirement for continued listing. The Company is listed on the OTC-Bulletin Board. (6) On April 1, 1997 the Company issued 125,000 shares of its common stock to The United States Company in exchange for 640,000 warrants to purchase its common stock. On that same date the Company issued 5,000 shares of common stock to Walter H. ""Skip"" Elliott, III, President and CEO, 5,000 shares of common stock to Elsie L. Rose, Treasurer, 5,000 shares of common stock to Robin A. Bowers, Secretary at that date, and 1,000 shares of common stock to another employee. The Company issued 125,000 shares to Shakespeare Partners Ltd. in connection with a prior loan. On June 29, 1998 the Company granted 700,000 options to purchase common stock to its Directors and Officers. (7) During October 1997 the Company settled employment agreements with two employees at termination of their employment by agreeing to grant warrants for each to purchase 50,000 shares of Company common stock. No amounts have been recorded in the financial statements. (8) During 1998 the Company issued 180,287 shares of common stock in connection with the negotiation and settlement of vendor trade payable balances. (9) At June 30, 1999 the Company had accrued $39,530 in dividends on the preferred shares discussed above. The Company intends to request delay in payment of these amounts. Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998 The following financial information reports operating trends for the Company for 1999 for the remaining operating subsidiary compared to 1998. Net service revenue for the Consultative Service group which is comprised of health and safety consulting, for the second quarter of 1999 amounted to $164,400 which was $87,200 (113.0%) higher than the $77,200 reported for the second quarter of 1998. One customer accounted for $57,000 in 1999 second quarter revenue. Net service revenue for the Laboratory Service group, which is comprised of the industrial hygiene laboratory for the second quarter of 1999 amounted to $115,900 which was $11,000 (10.5%) higher than the $104,900 reported for the second quarter of 1998. Consultative direct service costs increased by 147.4% or $63,300 to $106,200 for the first quarter of 1999 as compared to $42,900 reported for the second quarter of 1998 due to the significant increase in Consultative Service revenue noted above and related purchase of outside services. Laboratory direct service costs decreased by 5.4% or $5,100 to $89,600 for the second quarter of 1999 as compared to 94,700 reported for the second quarter of 1998. The reduced costs are attributable to lower Laboratory revenue and the cessation of lease costs connected to laboratory equipment. The gross profit for the second quarter ended June 30, 1999 increased by $40,000 an increase of 89.9%, to $84,500 as compared to $44,500 for the three months ended June 30, 1998. The Company reported a 30.1% gross margin for the second quarter of 1999 as compared to a 24.4% margin for the second quarter in 1998. The reason for the increase in gross margin is related to the fixed costs nature of staff compensation in consultative operations in connection with the work related to the single large customer discussed above. More of the second quarter work for this single customer was labor related as compared to the addition of outside laboratory analysis costs absorbed in the first quarter. Percentage comparisons of gross margins reported by the company are as follows: Period Total Consultative Laboratory 2nd Quarter 1999 30.1% 35.4% 22.7% 2nd Quarter 1998 24.4% 44.5% 9.7% Other operating revenue was $700 for the quarter ended June 30, 1999 as compared to $9,200 for the quarter ended June 30, 1998. Operating expenses were $18,700 lower and amounted to $102,900 for the three months ended June 30, 1999, as compared to $121,600 reported for the three months ended June 30, 1998. Sales and marketing expenses decreased by $7,400. General and administrative costs decreased by $9,100 to $88,400 for the three months ended June 30, 1998. This decrease is primarily attributable to a reduction in personnel costs and facilities and equipment costs. Depreciation and amortization costs decreased overall by $2,200 due to older equipment being fully depreciated and not replaced. The Company incurred an operating loss of $17,700 for the three months ended June 30, 1999 as compared to an operating loss of $67,800 for the three months ended June 30, 1998. The significant improvement is due to the Consultative group's increase in revenue, due to a significant project in the first six months of 1999 as compared to 1998. Interest income for the quarter ended June 30, 1999 was $2,400 compared to $15,500 of interest income recorded for the quarter ended June 30, 1998. The decrease of $13,100 is due to the reduction in the principal balance outstanding for two notes receivable. One note that was executed during 1996 in connection with the disposition of the Environmental Consulting and Engineering and Civil Engineering and Surveying Division was used to pay off a shareholder loan in January 1999. The second note was collected in January 1999. Interest expense of $900 for the three months ended June 30, 1999 was $11,300 lower than the amount reported for the second quarter of 1998 which was $12,200, die to the transactions noted above. The Company recorded a net gain of $5,000 for the second quarter of 1999 on vendor trade payables and notes payable that were negotiated. Loan costs were fully amortized at the end of the second quarter of 1999. Amortization of loan costs for the second quarter of 1998 was $4,500. The Company reported income before discontinued operations of $11,200 for the three months ended June 30, 1999 as compared to income before discontinued op- erations of $215,800 for the three months ended June 30, 1998. Discontinued operations for 1998 related to the products group and amounted to a loss of $26,100. The loss before discontinued operations for the three months ended June 30, 1999 would have been $16,200 which is $52,800 lower than the loss before discontinued operations of $69,000 for the three months ended June 30, 1998, excluding the gain on vendor balances negotiated. A net loss was recorded for the second quarter ended June 30, 1999 of $11,200 which is 105.2% lower than the net income reported for the second quarter ended June 30, 1998 which was $189,700. Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998 The following financial information reports operating trends for the Company for 1999 for the remaining operating subsidiary compared to 1998. Net service revenue for the Service group, which is comprised of the industrial hygiene laboratory and the health and safety consulting, for the first six months of 1999 amounted to $566,000 which was $185,200 (48.6%) higher than the $380,800 reported for the first six months of 1998. The increase is attributable to a large project begun in the fourth quarter of 1998. Consultative service revenue for the six months ended June 30, 1999 was $364,700 or 143.0% higher that the $150,100 reported for the six months ended June 30, 1998. One customer accounted for $158,000 of the first six months of 1999 revenue. Laboratory service revenue for the six months ended June 30, 1999 decreased by $29,400 as compared to $230,700 for the six months ended June 30, 1998. This decrease is due to reduced laboratory sample volume. Direct service costs increased by 44.1% or $113,700 to $371,500 for the first six months of 1999 as compared to $257,800 reported for the first six months of 1998. The consultative group experienced higher direct service costs from the use of outside laboratories used in conjunction with the large client project discussed above and the use of subcontractors. The gross profit for the six months ended June 30, 1999 increased by $71,400, an increase of 58.0%, to $194,500 as compared to $123,100 for the six months ended June 30, 1998. The increase is due to the large client project discussed above. The Company reported a 34.4% gross margin for the first six months of 1999 as compared to a 32.3% margin for the same period in 1998. The reason for the increase in gross margin in the Services Division is due to the consulta- tive group project discussed above. Percentage comparisons of gross margins reported by the company are as follows: Period Total Consultative Laboratory 1st Six Months 1999 34.4% 45.0% 15.1% 1st Six Months 1998 32.3% 43.1% 25.3% Other operating revenue was $3,600 for the six months ended June 30, 1999 as compared to $20,600 of revenue for the six months ended June 30, 1998. Most of the decrease was due to refunds and reimbursements related to insurance and rent. Operating expenses were $31,700 lower and amounted to $209,900 for the six months ended June 30, 1999, as compared to $241,600 reported for the six months ended June 30, 1998. Sales and marketing expenses decreased by $6,100 which was attributable to a reduction in staff in 1998. General and administrative costs decreased by $22,500 to $173,300 for the six months ended June 30, 1999, as compared to $195,800 reported for the six months ended June 30, 1998. The decreased costs are attributable to salary reallocations, travel expenses incurred in connection with trying to find potential merger candidates in 1998, and an increase in maintenance costs on older equipment and leasehold improvements. Depreciation and amortization costs decreased overall by $3,100. The Company incurred an operating loss of $11,700 for the six months ended June 30, 1999 as compared to operating loss of $97,900 for the six months ended June 30, 1998 due to the reasons discussed above. Interest income for the six months ended June 30, 1999 was $4,300 compared to $27,300 of interest income recorded for the six months ended June 30, 1998. The decrease in interest income is due to earnings from the note receivable in 1998 which was collected in January 1999. Interest expense of $3,400 for the six months ended June 30, 1999 was $18,500 lower than the amount reported for the first six months of 1998 which was $21,900. The decrease in interest expense is attributable to conversion of long-term debt to equity at June 30, 1998. TheCompany recorded a net gain of $26,200 for the six months ended June 30, 1999 on vendor trade payables and notes payable that were negotiated as compared to $284,300 gain on vendor trade payables and notes payable that were negotiated in 1998. The Company reported income before discontinued operations of $15,300 for the six months ended June 30, 1999 as compared to income before discontinued operations of $176,500 for the six months ended June 30, 1998. Discontinued operations for 1998 related to the products group and amounted to a loss of $26,100. The loss before discontinued operations for the six months ended June 30, 1999 would have been $10,900 which is $96,900 lower than the loss before discontinued operations of $107,800 for the six months ended June 30, 1998, excluding the gain on vendor balances negotiated. Net income for 1999 was $15,300, or $135,100 lower than the $150,400 reported for 1998. The decrease is attributed to the negotiated gain on trade and notes payable and other items discussed above. FINANCIAL CONDITION The Company's financial condition continued to improve during the first six months of 1999 due principally to the collection of a note receivable, stronger collections of trade receivables and negotiation of trade payable balances with vendors. The company had cash on hand in excess of $273,700 at June 30, 1999. The company intends to use cash for working capital, complete its debt mediation, pursue complimentary joint ventures and potential mergers, and purchase certain equipment and personal computers. Working capital has decreased by $15,600 from $70,600 at December 31, 1998 to $55,000 at June 30, 1999 due to payments on older vendor debt and payment of an accrued salary. Trade accounts receivable decreased approximately $45,600 to $137,600 at June 30, 1999 from $183,200 at December 31, 1998. Part of the decrease is attributable to lower laboratory revenues and collections of accounts with higher outstanding balances at December 31, 1998. RECENT DEVELOPMENTS In September 1998 the Company, through its wholly owned subsidiary, Azimuth, Inc. (Azimuth), entered into a strategic alliance with PHT Services, Ltd. (PHTS) for the marketing and selling of environmental, health and safety services to health care organizations in South Carolina. The alliance between Azimuth and PHTS was formalized under a contract that outlines the environmental, health and safety services PHTS will market to its clients. Azimuth and PHTS will share the revenue generated. During November 1998 the Company received its first engagement under this arrangement. In November 1998 the Company, through its wholly owned subsidiary, Azimuth, Inc. (Azimuth), entered into a strategic alliance with Enviro-Guard, Ltd. to cross sell services into the respective customer bases of each company. Enviro-Guard has a complete service line for medical environmental monitoring, including medical gas systems evaluation and decontamination. The alliance will compliment the existing menu of services offered by Azimuth to hospitals. The alliance between Azimuth and Enviro-Guard was formalized under a contract that outlines the services to be provided by each company. GENERAL OVERVIEW The Company believes there exists a synergy between the core competencies of its operating subsidiary and the Workers' Compensation market (i.e. Agencies, Claims' Management, and Claims' Administration). In 1994, the total Workers' Compensation market, including medical benefits, disability and survivor benefits, administration costs, lost productivity and other miscellaneous occupational health and service costs, was estimated at $121 billion. Traditionally, the participants in this market approach the control of these costs from a reactive mode, trying to minimize the cost after the injury has occurred. Envirometrics, Inc. is exploring this market from the vantage of conducting a strategic roll-up of companies in its current Occupational Health and Safety market and consolidating these together with companies that operate in the Workers' Compensation market. The combination of occupational health and safety with workers' compensation products lends itself to program selling in addition to cross selling opportunities to a higher level of management not typically accessible to the stand alone occupational health and safety company and would provide more of a preventative solution to workers' compensation costs. The Company is currently identifying merger and acquisition candidates in these two markets to further this strategic plan. However no letters of intent or other contractual terms have been reached with any companies in connection with pursuing management's strategic plan, and there is no guarantee that any merger or roll-up transactions will occur in the future. The information provided in this overview contains forward looking statements that involve risks and uncertainties, including the failure of the Company to find appropriate consolidation and/or roll-up partners, or the inability to close consolidation and/or roll-up transactions if agreements are entered into with such partners, and the failure of any consummated consolidated and/or roll-up transaction to result in successful business operations for the Company. Statements made in this overview that are not historical facts are forward looking statements that are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The Company's actual results and outcome of the aforementioned plan could differ significantly from those discussed herein. YEAR 2000 Historically, certain computer programs were written using two digits rather that four to define the applicable year. Accordingly, the Company's software may recognize a date using "00" as 1900 reather than the year 2000, which could result in computer systems failures or miscalculations, commonly referred to as the Year 2000 ("Y2K") issue. The Y2K issue can arise at any point in the Company's supply, lab analysis processing, and financial applications. Incomplete or untimely resolution of the Y2K issue by the company, key suppliers, customers and other parties could have a material adverse effect on the company's results of operations, financial condition and cash flows. The Company has developed a plan to modify its information technology to recognize the Year 2000 and has, to the extent necessary, begun analyzing and converting, where necessary, its critical data processing systems. Since many of the Company's systems and software are relatively new, management does not expect Year 2000 issues related to its own internal systems to be significant and does not anticipate that it will incur significant operating expenses or be required to invest heavily in computer systems improvements to be Year 2000 compliant. The Company estimates that it may have to replace three to five desktop personal computers used in its laboratory operations and is incorporating that plan into its capital budget. The Company has initiated formal communications with certain of its significant lab equipment suppliers and service providers to determine the extent to which the Company's systems may be vulnerable to embedded technology such as microcontrollers. The Company currently expects the project to be completed in the third quarter of 1999. There can be no guarantee that the systems of suppliers or other companies on which the Company relies will be converted in a timely manner and will not have a material adverse effect on the Company's systems. To date the Company has not developed a formal contingency plan. The Company believes it is taking the steps necessary regarding Year 2000 compliance with respect to matters within its control. However, no assurance can be given that the Company's systems will be made Year 2000 compliant in a timely manner or that the Year 2000 problem will not have a material adverse effect on the Company's business, prospects, financial condition and results of operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings - None Item 5. Other Information - None Item 6. Exhibits and Reports - None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENVIROMETRICS, INC. Date: August 16, 1999 Walter H. Elliott, III _______________________ Walter H. Elliott, III President and CEO
EX-27 2 ART 5 FDS FOR 2ND QTR 10-QSB 1999
5 6-MOS DEC-31-1999 JUN-30-1999 273,704 0 137,646 (5,000) 0 445,719 996,960 921,368 578,516 390,696 0 0 3,535 3,013 102,591 578,515 566,021 569,675 371,496 371,496 209,937 0 3,448 15,293 0 15,293 0 0 0 15,293 .005 .005
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