-----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, RlWnChbpsIWQeTVL2DCZdniDIAVEtEK8XN3TAnqNDir/0q3yXhfxHzKujLfaIfV6 Z+dz+dr+kKNDhdAQBJvS/A== 0000889812-00-001900.txt : 20000426 0000889812-00-001900.hdr.sgml : 20000426 ACCESSION NUMBER: 0000889812-00-001900 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 20000425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIKONICS INC /NY/ CENTRAL INDEX KEY: 0000814932 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 132759466 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-16034 FILM NUMBER: 608304 BUSINESS ADDRESS: STREET 1: 370 NORTH STREET CITY: TETERBOR STATE: NJ ZIP: 07608 BUSINESS PHONE: 2016418077 MAIL ADDRESS: STREET 1: 370 NORTH STREET CITY: TETERBORO STATE: NJ ZIP: 07608 10QSB 1 CURRENT REPORT U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended: September 30, 1999 ------------------- [ ] TRANSITION REPORT UNDER SECTION TO 13 OR 15 (d) OF THE EXCHANGE ACT For the transition period from _________ to _________ Commission File Number O-16034 ------- VIKONICS, INC. ------------------------------------------ (Exact name of small business issuer as specified in its charter) New York 13-2759466 -------- ---------- (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 370 North Street Teterboro, New Jersey 07608 -------------------------------------------- (Address of principal executive offices) (201) - 641-8077 (Issuer's telephone number) NONE ----------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: Number of shares outstanding at April 17, 2000: 2,933,431 shares of common stock, par value $ .02 per share. Transitional Small Business Disclosure Format (Check one): Yes No X ----- ---- VIKONICS, INC. INDEX PART I Financial Statements Page No. Item 1 - Financial Statements (Unaudited) Balance Sheets: September 30 and March 31, 1999 3-4 Statements of Operations For Three Months Ended September 30, 1999 and 1998 5 For Six Months Ended September 30, 1999 and 1998 6 Statements of Cash Flows For Six Months Ended September 30, 1999 and 1998 7 Notes to Financial Statements 8-9 Item 2 - Management's Discussion and Analysis or Plan of Operation 10-11 PART II: Other Information 12 Signatures 13 2 VIKONICS, INC. BALANCE SHEETS ASSETS (UNAUDITED)
September 30,1999 March 31,1999 CURRENT ASSETS: Cash $ 134,748 $ 30,219 Accounts receivable (less allowance for doubtful accounts of $10,000) 112,063 211,931 Inventories (Note 2) 94,861 114,417 Prepaid expenses and other current assets 17,205 16,468 --------- --------- TOTAL CURRENT ASSETS 358,877 373,035 --------- --------- EQUIPMENT AND FIXTURES - AT COST: Machinery and equipment 400,085 376,996 Furniture and fixtures 67,437 67,437 --------- --------- Less, accumulated depreciation and 467,522 444,433 amortization (442,297) (441,991) --------- --------- EQUIPMENT AND FIXTURES - NET 25,225 2,442 --------- --------- OTHER ASSETS 1,200 1,200 --------- --------- $ 385,302 $ 376,677 ========= =========
3 See notes to financial statements. VIKONICS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' (DEFICIT) (UNAUDITED)
September 30, 1999 March 31, 1999 ------------------ -------------- CURRENT LIABILITIES: Notes and loans payable (Note 3) $ 717,728 $ 717,728 Accounts payable 278,489 253,859 Accrued expenses and other current 1,316,460 1,328,517 liabilities (Note 4) Deferred service income 32,953 52,226 ----------- ----------- TOTAL CURRENT LIABILITIES 2,345,630 2,352,330 ----------- ----------- SHAREHOLDERS' (DEFICIT): Preferred stock - $1 par value: Authorized - 2,000,000 shares Issued and outstanding - none Common stock - $.02 par value: Authorized - 10,000,000 shares Issued and outstanding - 2,933,431 58,669 58,669 Paid-in capital 5,641,094 5,641,094 Retained (deficit) (7,660,091) (7,675,416) ----------- ----------- TOTAL SHAREHOLDERS' (DEFICIT) (1,960,328) (1,975,653) ----------- ----------- $ 385,302 $ 376,677 =========== ===========
See notes to financial statements. 4 VIKONICS, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) 1999 1998 ---- ---- SALES - NET $ 439,712 $ 564,030 COST OF GOODS SOLD 277,980 327,853 --------- --------- GROSS PROFIT 161,732 236,177 --------- --------- COSTS AND EXPENSES: Engineering, research and development 56,817 65,034 Marketing and sales 37,517 34,907 General and administrative 78,184 104,851 Depreciation and amortization 153 -- Interest expense 13,822 10,440 --------- --------- TOTAL COSTS AND EXPENSES 186,493 215,232 --------- --------- NET (LOSS) INCOME $ (24,761) $ 20,945 ========= ========= (LOSS) INCOME PER SHARE (Note 6) - Basic and Diluted $ (.01) $ .01 ========= ========= See notes to financial statements. 5 VIKONICS, INC. STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) 1999 1998 ---- ---- SALES - NET $ 916,697 $ 863,517 COST OF GOODS SOLD 526,993 523,472 --------- --------- GROSS PROFIT 389,704 340,045 --------- --------- COSTS AND EXPENSES: Engineering, research and development 116,347 126,638 Marketing and sales 71,902 69,073 General and administrative 161,478 198,176 Depreciation and amortization 306 -- Interest expense 24,346 22,434 --------- --------- TOTAL COSTS AND EXPENSES 374,379 416,321 --------- --------- NET INCOME (LOSS) 15,325 $ (76,276) ========= ========= INCOME (LOSS) PER SHARE (Note 6) - Basic and Diluted $ .01 $ (.03) ========= ========= See notes to financial statements. 6 VIKONICS, INC. STATEMENTS OF CASH FLOWS FOR SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) 1999 1998 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 15,325 $ (76,276) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 306 -- Changes in assets and liabilities: Decrease (increase) in: Accounts receivable 99,868 (151,841) Inventories 19,556 (1,447) Prepaid expenses and other current assets (737) 29,893 Increase (decrease) in: Accounts payable 24,630 102,311 Accrued expenses and other liabilities (12,057) 117,035 Deferred service income (19,273) (10,148) --------- --------- Net cash provided by operating activities 127,618 9,527 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment and fixtures - net (23,089) -- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of short term notes -- 5,587 Repayment of debt -- (21,160) --------- --------- Net cash used for financing activities -- (15,573) INCREASE (DECREASE) IN CASH 104,529 (6,046) CASH - MARCH 31 30,219 10,328 --------- --------- CASH - SEPTEMBER 30 $ 134,748 $ 4,282 ========= ========= See notes to financial statements. 7 VIKONICS, INC. NOTES TO FINANCIAL STATEMENTS Note 1. - Financial Statements The financial statements include the accounts of the Company and Vikonics Canada Inc., its wholly-owned subsidiary, an entity without any activity during the periods presented. In the opinion of the Company, the accompanying unaudited financial statements contain all necessary adjustments which are all of a normal recurring nature for the fair presentation of its financial position as of September 30, 1999, the results of operations for the three and six months ended September 30, 1999 and 1998, and changes of cash flows for the six months ended September 30, 1999 and 1998. The results of operations for the three and six months ended September 30, 1999 are not necessarily indicative of the results to be expected for the full year. Note 2. - Inventories Inventories consisted of the following: September 30,1999 March 31, 1999 ----------------- -------------- Raw materials $ 30,094 $ 42,360 Work-in-process 2,366 5,633 Finished goods 62,401 66,424 ------------ ------------ TOTAL $ 94,861 $ 114,417 ============ ============ Note 3. - Notes and Loans Payable; Legal Proceeding Notes and loans payable consists of: September 30, 1999 March 31, 1999 ------------------ --------------- Amounts due to private investors, directors, and legal counsel. $ 717,728 $ 717,728 ------------ ------------ On June 30, 1993, the Company entered into an amended agreement with private investors that provided the Company with a loan in the amount of $200,000 repayable in one year together with an interest rate of 9% annum. In addition, the amended agreement granted the investors two-year options to purchase an aggregate of 400,000 shares of common stock at an exercise price of $4.75 per share. In July 1993, one of the private investors assigned $20,000 of the loan along with options to purchase 40,000 shares of common stock to one of the Company's directors, who has since resigned from the board. Additionally, two of the former directors provided the Company with loans aggregating $120,000 during the months of August and September 1993 payable on demand with an interest rate of 9% per annum. 8 On June 24, 1994, the Company entered into an agreement with the above private investors, former directors, and the Company's retained legal counsel. Pursuant to the agreement the due date for the investors and former directors loans and fees payable $(250,000) to legal counsel were extended until the first to occur of (i) June 30, 1996, (ii) a public financing by the Company, or (iii) a private financing of the Company of not less than $2,500,000. As June 30, 1996 date has been reached, such amounts are now due. While the Company does not have the ability to pay the amounts due to private investors, former directors and legal counsel, it has attempted to renegotiate the terms of payment of these obligations. On September 17, 1998 the private investors filed a lawsuit in the Superior Court of New Jersey for the total principal amount of $200,000 together with accrued interest of $103,000. On June 15, 1999 a Judgment by Default against the Company was entered in the Superior Court of New Jersey, Bergen County. The Company will seek a satisfactory resolution of this judgment. There can be no assurance, however, that the Company will be able to resolve the judgment. The failure to do so will cause the Company to cease as a going concern. Additionally, at September 30, 1999, the Company had a remaining balance of $147,728 that was lent to the Company by two then directors during the Company's second fiscal quarter of 1995. Both loans are payable on demand with interest at 9% per annum. Note 4. - Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: September 30, 1999 March 31, 1999 ------------------ -------------- Accrued warranty expense $ 38,000 $ 38,000 Accrued salaries, wages, and taxes 460,892 517,005 Accrued professional fees 25,000 30,000 Accrued officers' salaries 171,228 171,228 Accrued interest 579,830 546,678 Other 41,510 25,606 ----------- ---------- $ 1,316,460 $1,328,517 =========== ========== Note 5. - Income Taxes At September 30, 1999 the Company had net operating loss carryforwards available amounting to approximately $7.2 million which will expire between 2001 and 2013. There is a remote possibility that net operating loss carryforwards of approximately $500,000 may not be available. There are no significant differences in the recognition of income and expenses for tax and financial reporting purposes. Federal income taxes normally provided for the six months ended September 30, 1999 and the three months ended September 30, 1998 have been offset by the effects of the reduction of the valuation allowance. Note 6. - Income (Loss) Per Share Basic and diluted per share data is based on the weighted average number of common shares outstanding. Common stock equivalents would be anti-dilutive and, therefore, were not included in the diluted per share computations. 9 Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Results of Operations The Company's net sales for the three months ended September 30, 1999 decreased $124,000 (22%) compared to the same period a year ago. This decrease is due to sales in the fiscal 1999 2nd quarter to a commercial company for a local school system project without corresponding revenues earned from this customer during the current fiscal 2nd quarter. For the six months ended September 30, 1999 net sales increased $53,000 (6%), compared to the corresponding period last year due to sales of approximately $283,000 to the U.S. General Services Administration for a domestic United States Air Force security system upgrade during the first six months of fiscal 2000. Gross profits as a percentage of net sales for the three months ended September 30, 1999 was 37% compared to 42% during the same period a year ago. For the six months ended September 30, 1999, the gross profit percentage was 43% compared to 39% during the same period a year ago. The decrease in gross margin for the three months ended September 30, 1999 is due to the underabsorption of manufacturing overhead costs caused by the lower sales volume. The increase in gross margin for the six months ended September 30,1999 is due primarily to the favorable effect of a high volume of Vikonics manufactured equipment and services sold versus the lower margin of resold purchased equipment and services sold during the previous fiscal 1999 six month period. Engineering, research and development expenses for three and six months ended September 30,1999 were $57,000 and $116,000, respectively, a decrease of 13% ($8,000) and 8% ($8,000) versus the expenses incurred during the same periods a year ago. These decreases are the result of a reduction in engineering consulting expenditures during the current fiscal year. Marketing and sales expenses for three and six months ended September 30, 1999 were $38,000 and $72,000, respectively, an increase of 8% ($3,000) and 4% ($3,000) versus the expenses incurred during the same periods a year ago, due to an increase in General Service Administration Federal Supply Contract fees. General and administrative expenses for the three and six months ended September 30, 1999 were $ 78,000 and $161,000, respectively, a decrease of 25% ($27,000) and 19% ($37,000) versus the expenses incurred during the same periods a year ago. The variation is due to reductions in insurance and administrative payroll costs and payroll tax penalty and interest charges. The net (loss) for the three months ended September 30, 1999 was ($25,000) compared to net income of $21,000 a year ago. The net income for the six months ended September 30, 1999 was $15,000 compared to a net (loss) of ($76,000) a year ago, due to the factors regarding revenue and expenses described above. The future viability of the Company will depend upon the Company's success in raising revenue levels, maintaining low cost levels and, if necessary, raising additional financing. In addition, the future viability of the Company depends on the outcome of the legal proceeding described under Liquidity and Capital Resources. Liquidity and Capital Resources The Company's continued existence is dependent upon its ability to obtain contract awards which, in the aggregate, will provide significant revenues in the immediate future. While there can be no assurance of favorable results, the Company remains optimistic about obtaining these potential contract awards. To date, there has been no adverse effect on the Company's ability to perform on any of its contracts due to its limited working capital. The Company has also been able to maintain a satisfactory relationship with the majority of its suppliers and has been able to substitute for dissatisfied vendors, when necessary. For any large contract that the Company might be awarded in the future where working capital might hamper its ability to perform, the 10 Company would attempt to negotiate adequate terms and delivery with the customer and/or, if necessary, obtain required financing. There can be no assurance, however, that the Company would be successful in these efforts. The working capital deficit on September 30, 1999 was ($1,987,000) compared to ($1,979,000) on March 31, 1999. The increase in the working capital deficit is primarily due to the purchase of capital equipment during the six months ended September 30,1999. At September 30, 1999 the Company had $ 135,000 in cash, compared to $30,000 in cash at March 31, 1999. Accounts receivable decreased by $100,000 during the six months ended September 30, 1999 due to the reduced sales level and accelerated cash receipt collections achieved during the current 2000 fiscal quarter. Notes and loans payable of $718,000 at September 30, 1999 consists of amounts due to private investors, former directors, and legal counsel. Pursuant to the agreement the due date for the investors and former directors loans and fees payable $(250,000) to legal counsel were extended until the first to occur of (i) June 30, 1996, (ii) a public financing by the Company, or (iii) a private financing of the Company of not less than $2,500,000. As June 30, 1996 date has been reached, such amounts are now due. While the Company does not have the ability to pay the amounts due to private investors, former directors and legal counsel, it has attempted to renegotiate the terms of payment of these obligations. On September 17, 1998 the private investors filed a lawsuit in the Superior Court of New Jersey for the total principal amount of $200,000 together with accrued interest of $103,000. On June 15, 1999 a Judgment by Default against the Company was entered in the Superior Court of New Jersey, Bergen County. The Company will seek a satisfactory resolution of this judgment. There can be no assurance, however, that the Company will be able to resolve the judgment. The failure to do so will cause the Company to cease as a going concern. Accounts payable of $278,000 at September 30, 1999 are $24,000 higher than the balance of $254,000 at March 31, 1999 due to the timing of certain vendor payments. Accrued expenses and other current liabilities at September 30, 1999 of $1,316,000 are $13,000 lower than the $1,329,000 at March 31, 1999. The decrease is primarily due to payments made against accrued payroll taxes for the six months ended September 30, 1999. In total, the net cash provided by operating activities was $128,000 for the six months ended September 30, 1999, as compared to $10,000 for the six months ended September 30, 1998. The Company purchased approximately $3,000 of engineering computer equipment and expended $20,000 during the 2nd fiscal 2000 quarter upgrading its operational computer system. No other significant capital expenditures are planned at this time. 11 Part II - Other Information Item 6 - Exhibits and Reports on Form 8-K None 12 Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned there unto duly authorized. Vikonics, Inc. (Registrant) April 24, 2000 /s/ John J. Strong ---------------------------- John J. Strong President (duly authorized officer and principal financial officer) 13 -----END PRIVACY-ENHANCED MESSAGE-----