-----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, GLPBHz7H7RNXLD/zl5WA0vHwIyQOyjQsJJUkBuGEwN9vEUehO7Pn2yaDswH6Qbom 7RUBfzX/je54dsF4z1Ue3A== 0000889812-98-000432.txt : 19980218 0000889812-98-000432.hdr.sgml : 19980218 ACCESSION NUMBER: 0000889812-98-000432 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NONE 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: 10-Q SEC ACT: SEC FILE NUMBER: 000-16034 FILM NUMBER: 98538341 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 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended: December 31, 1997 Commission File Number ------------------------ O-16034 ------- VIKONICS, INC. ------------------------------------------------------ (Exact Name of Registrant as specified in its Charter) New York 13-2759466 - --------------------------------------- ----------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 370 North Street Teterboro, New Jersey 07608 - --------------------------------------- ----------------------------------- (Address of Principal Executive Offices) (Zip Code) (201) 641-8077 None - --------------------------------------- ----------------------------------- (Registrant's Telephone Number Former name, former address and including area code) former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------------ ------------ Number of shares outstanding at February 3, 1998: 2,933,431 shares of common stock, par value $.02 per share. VIKONICS, INC. INDEX PART I Financial Information PAGE NO. Item 1 - Financial Statements (Unaudited) Balance Sheets: December 31 and March 31, 1997 3-4 Statements of Operations For Three Months Ended December 31, 1997 and 1996 5 For Nine Months Ended December 31, 1997 and 1996 6 Statements of Cash Flows For Nine Months Ended December 31, 1997 and 1996 7 Notes to Financial Statements 8-9 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10-11 PART II: Other Information 12 Signatures 13 2 VIKONICS, INC. BALANCE SHEETS ASSETS (UNAUDITED)
DECEMBER 31, 1997 MARCH 31, 1997 ------------------ -------------- CURRENT ASSETS: Cash $ 29,511 $ 52,149 Accounts receivable (less allowance for doubtful accounts of $20,000) 363,842 300,607 Inventories (Note 2) 117,941 129,610 Prepaid expenses and other current assets 43,544 96,021 --------------- --------------- TOTAL CURRENT ASSETS 554,838 578,387 --------------- --------------- EQUIPMENT AND FIXTURES - AT COST: Machinery and equipment 373,943 373,943 Furniture and fixtures 67,437 67,437 Autos 19,838 19,838 --------------- --------------- 461,218 461,218 Less accumulated depreciation and amortization 461,005 460,365 --------------- --------------- EQUIPMENT AND FIXTURES - NET 213 853 --------------- --------------- OTHER ASSETS 1,200 1,220 --------------- --------------- $ 556,251 $ 580,460 =============== ===============
See notes to financial statements. 3 VIKONICS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' (DEFICIT) (UNAUDITED)
DECEMBER 31, 1997 MARCH 31, 1997 ----------------- -------------- CURRENT LIABILITIES: Notes and loans payable (Note 3) $ 737,507 $ 825,956 Accounts payable 209,825 253,816 Accrued expenses and other current liabilities (Note 4) 1,054,927 902,276 Deferred service income 32,427 49,204 --------------- --------------- TOTAL CURRENT LIABILITIES 2,034,686 2,031,252 --------------- --------------- 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 shares 58,669 58,669 Paid-in capital 5,641,094 5,641,094 Retained (deficit) (7,178,198) (7,150,555) --------------- --------------- TOTAL SHAREHOLDERS' (DEFICIT) (1,450,792) (1,478,435) --------------- --------------- $ 556,251 $ 580,460 =============== ===============
See notes to financial statements. 4 VIKONICS, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
1997 1996 ---- ---- SALES - NET $ 344,492 $ 455,059 COST OF GOODS SOLD 216,113 206,054 ------------- ------------ GROSS PROFIT 128,379 249,005 ------------- ------------ COSTS AND EXPENSES: Engineering, research and development 54,426 61,072 Marketing and sales 28,749 61,209 General and administrative 99,470 110,501 Depreciation and amortization 214 268 Interest expense 17,388 14,653 ------------- ------------ TOTAL COSTS AND EXPENSES 200,247 247,703 ------------- ------------ NET (LOSS) INCOME $ (71,868) $ 1,302 ============= ============ (LOSS) INCOME PER SHARE (Note 6) $ (.02) $ --- ============= ============
See notes to financial statements. 5 VIKONICS, INC. STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
1997 1996 ---- ---- SALES - NET $ 1,345,775 $ 1,087,327 COST OF GOODS SOLD 728,996 564,551 ------------- ------------ GROSS PROFIT 616,779 522,776 ------------- ------------ COSTS AND EXPENSES: Engineering, research and development 173,029 156,804 Marketing and sales 135,840 140,101 General and administrative 286,703 295,466 Depreciation and amortization 640 671 Interest expense 48,210 39,282 ------------- ------------ TOTAL COSTS AND EXPENSES 644,422 632,324 ------------- ------------ NET (LOSS) $ (27,643) $ (109,548) ============= ============ (LOSS) PER SHARE (Note 6) $ (.01) $ (.04) ============= ============
See notes to financial statements. 6 VIKONICS, INC. STATEMENTS OF CASH FLOWS FOR NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
1997 1996 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) $ (27,643) $ (109,548) Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation and amortization 640 671 Changes in assets and liabilities: Decrease (increase) in: Accounts receivable (63,235) (94,592) Inventories 11,669 4,412 Prepaid expenses and other current assets 52,477 45,395 Other assets 20 -- Increase (decrease) in: Accounts payable (43,991) (44,056) Accrued expenses and other liabilities 152,651 263,384 Deferred service income (16,777) (13,699) ------------- ------------ Net cash provided by operating activities 65,811 51,967 ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt (88,449) (54,340) ------------- ------------ (DECREASE) IN CASH (22,638) (2,373) CASH - MARCH 31 52,149 24,559 ------------- ------------ CASH - DECEMBER 31 $ 29,511 $ 22,186 ============= ============
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 December 31, 1997, the results of operations for the three and nine months ended December 31, 1997 and 1996, and changes of cash flows for the nine months ended December 31, 1997 and 1996. The results of operations for the three and nine months ended December 31, 1997 are not necessarily indicative of the results to be expected for the full year.
NOTE 2. - INVENTORIES Inventories consisted of the following: DECEMBER 31, 1997 MARCH 31, 1997 ----------------- -------------- Raw materials $ 44,928 $ 48,818 Work-in-process 32,131 36,021 Finished goods 40,882 44,771 -------------- -------------- TOTAL $ 117,941 $ 129,610 ============== ============== NOTE 3. - NOTES AND LOANS PAYABLE Notes and loans payable consists of: DECEMBER 31, 1997 MARCH 31, 1997 ----------------- -------------- Notes payable bearing interest at 9.72% per annum, with the last installment due in 1997. This note is secured by equipment with a net book value of approximately $0 $ 17,500 $ 40,000 Amounts due to private investors, directors, and legal counsel. 717,728 717,728 Unsecured installment notes payable. 2,279 68,228 -------------- -------------- $ 737,507 $ 825,956 ============== ==============
8 On June 30, 1993, the Company entered into an amended agreement with private investors which 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 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. 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 is attempting to renegotiate the terms of payment of these obligations. There can be no assurance, however, that the Company will be successful in these efforts. In addition, the exercise period of the investors' options to purchase 400,000 shares of common stock were extended three years and the exercise price was reduced to $1.50. Included in this agreement were the grant of five year warrants to one of the former directors and the legal firm to purchase such number of shares of common stock of the Company as is equal to the aggregate dollar amount of loans to made ($150,000) by that former director and unpaid legal fees ($250,000) at an exercise price of $1.00 per share. There was no value attached to these warrants. Additionally, at December 31, 1997, the Company has a remaining balance of $147,728 which 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:
December 31, 1997 March 31, 1997 ----------------- -------------- Accrued warranty expense $ 33,000 $ 33,000 Accrued salaries, wages, and taxes 428,818 307,303 Accrued professional fees 90,000 128,919 Accrued officers' salaries 171,228 190,878 Accrued interest 160,604 130,058 Other 171,277 112,118 --------------- ------------ $ 1,054,927 $ 902,276 =============== ============
NOTE 5. - INCOME TAXES At December 31, 1997 the Company had net operating loss carryforwards available amounting to approximately $6.7 million which will expire between 2001 and 2011. 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 three months ended December 31, 1996 have been offset by the effects of the reduction of the valuation allowance. NOTE 6. - (LOSS) PER SHARE In 1997 and 1996, the effect of the shares issuable upon the exercise of the Company's common stock equivalents would be anti-dilutive, therefore, were not included in the per share computation. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company's net sales for the three months ended December 31, 1997 decreased $ 111,000 (24%) compared to the corresponding period last year. The decrease is primarily due to the lack of new contract awards during the current fiscal quarter ended December 31, 1997 to replace the revenue earned of approximately $ 225,000 during the corresponding year ago quarter on a now completed U.S. Government Agency contract. The Company's net sales for the nine months ended December 31, 1997 increased $ 258,000 (24%) compared to the nine months ended December 31, 1996. The increase is primarily due to revenues earned for the nine months ended December 31, 1997 of approximately $500,000 from a U.S. Government contract, and equipment shipments of $145,000 for a contract in Kuwait. Gross profit as a percentage of net sales was 37% for the three months ended December 31, 1997 versus 55% during the same period a year ago. For the nine months ended December 31, 1997, the gross profit percentage was 46% versus 48% for the corresponding period last year. The gross margin for the three months ended December 31, 1997 is lower compared to the corresponding year ago period due to differences in sales mix and the underabsorption of overhead expenses resulting from the current three month period low sales volume. Engineering, research and development expenses for the three months ended December 31, 1997 were $54,000, a decrease of 11% ($7,000) versus the expenses incurred for the three month period ended December 31, 1996 due to staff reduction during the current year. Engineering, research and development expenses for the nine months ended December 31, 1997 were $173,000, an increase of 10% ($16,000) from the amount of expenses incurred during the same period a year ago. This is the result of increased product development efforts during the first six months of the current year. Marketing and sales expenses for three and nine months ended December 31, 1997 were $29,000 and $136,000, respectively, a decrease of 53% ($32,000) and 3% ($4,000) versus the expenses incurred during the same periods a year ago, due primarily to a decrease in sales commissions and marketing costs. General and administrative expenses for the three and nine months ended December 31, 1997 were $99,000 and $287,000, respectively, a decrease of 10% ($11,000) and 3% ($9,000) versus the expenses incurred during the same periods a year ago. The net loss for the three and nine months ended December 31, 1997 was ($72,000) and ($28,000) respectively, compared to net income of $1,302 and a net loss of ($110,000) for the corresponding periods a year ago. 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. 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, and the continued forebearance of its creditors. 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 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. 10 The working capital (deficit) on December 31, 1997 was ($1,480,000) compared to ($1,453,000) on March 31, 1997. The increase in the working capital (deficit) is primarily due to the $28,000 net loss for the nine months ended December 31, 1997. On December 31, 1997, the Company had $29,511 in cash compared to $52,149 at March 31, 1997. Accounts receivable increased by $63,000 during the nine months ended December 31, 1997, due to a disproportionate amount of billings occurring in the later half of the fiscal quarter ending December 31, 1997. Notes and loans payable of $737,000 at December 31, 1997 consist of $2,000 unsecured installment notes payable used to finance the Company's insurance premiums, $17,000 of equipment installment notes and $718,000 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 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 is attempting to renegotiate the terms of payment of these obligations. There can be no assurance, however, that the Company will be successful in these efforts. Legal action by one or more of the foregoing creditors of the Company to collect the amounts owed would likely have a material adverse affect on the Company. Accounts payable of $210,000 at December 31, 1997 are comparable to the balance of $254,000 at March 31, 1997. Accrued expenses and other current liabilities at December 31, 1997 of $1,055,000 are $153,000 greater than the $902,000 at March 31, 1997. The increase is primarily due to an increase in accrued payroll taxes for the nine months ended December 31, 1997. In total, the net cash provided by operating activities was $66,000 for the nine months ended December 31, 1997, as compared to $52,000 for the nine months ended December 31, 1996. The Company has no significant capital expenditure plans at this time. 11 PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K None 12 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. VIKONICS, INC. -------------- (Registrant) February 4,1998 /s/ John J. Strong -------------------------------- John J. Strong President (duly authorized officer and principal financial officer) 13 -----END PRIVACY-ENHANCED MESSAGE-----