-----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, AFqk9AfXfukocoY/BiBpL5GnxT94MRKI9WGk6Beg5fUE2TVA3GIGurGsLG8oW2UK gdkuzsuu9gnczutzQwbLiQ== 0000889812-99-000588.txt : 19990222 0000889812-99-000588.hdr.sgml : 19990222 ACCESSION NUMBER: 0000889812-99-000588 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990219 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: 99545965 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 QUARTERLY 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: December 31, 1998 ---------------------------- / / 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 February 12, 1999: 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: December 31 and March 31, 1998 3-4 Statements of Operations For Three Months Ended December 31, 1998 and 1997 5 For Nine Months Ended December 31, 1998 and 1997 6 Statements of Cash Flows For Nine Months Ended December 31, 1998 and 1997 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)
December 31,1998 March 31,1998 ---------------- ------------- CURRENT ASSETS: Cash $ 20,773 $ 10,328 Accounts receivable (less allowance for doubtful accounts of $30,000) 162,632 263,479 Inventories (Note 2) 92,780 93,740 Prepaid expenses and other current assets 30,175 76,551 ------------------ ----------------- TOTAL CURRENT ASSETS 306,360 444,098 ------------------ ----------------- EQUIPMENT AND FIXTURES - AT COST: Machinery and equipment 373,943 373,943 Furniture and fixtures 67,437 67,437 Autos --- 19,838 ------------------ ----------------- 441,380 461,218 Less, accumulated depreciation and amortization 441,380 461,218 ------------------ ----------------- EQUIPMENT AND FIXTURES - NET --- --- ------------------ ----------------- OTHER ASSETS 1,200 1,200 ------------------ ----------------- $ 307,560 $ 445,298 ================== =================
See notes to financial statements. 3 VIKONICS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' (DEFICIT) (UNAUDITED)
December 31, 1998 March 31, 1998 ----------------- -------------- CURRENT LIABILITIES: Notes and loans payable (Note 3) $ 768,315 $ 790,014 Accounts payable 188,404 205,847 Accrued expenses and other current liabilities (Note 4) 1,185,501 1,086,940 Deferred service income 31,152 55,711 ------------------ ----------------- TOTAL CURRENT LIABILITIES 2,173,372 2,138,512 ------------------ ----------------- 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) (7,565,575) (7,392,977) ------------------ ----------------- TOTAL SHAREHOLDERS' (DEFICIT) (1,865,812) (1,693,214) ------------------ ----------------- $ 307,560 $ 445,298 ================== =================
See notes to financial statements. 4 VIKONICS, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997 (UNAUDITED)
1998 1997 ---- ---- SALES - NET $ 395,544 $ 344,492 COST OF GOODS SOLD 257,096 216,113 --------------- ---------------- GROSS PROFIT 138,448 128,379 --------------- ---------------- COSTS AND EXPENSES: Engineering, research and development 51,630 54,426 Marketing and sales 33,753 28,749 General and administrative 130,228 99,470 Depreciation and amortization --- 214 Interest expense 19,159 17,388 --------------- ---------------- TOTAL COSTS AND EXPENSES 234,770 200,247 --------------- ---------------- NET (LOSS) $ (96,322) $ (71,868) =============== ================ (LOSS) PER SHARE (Note 6) - Basic and Diluted $ (.03) $ (.02) =============== ================
See notes to financial statements. 5 VIKONICS, INC. STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997 (UNAUDITED)
1998 1997 ---- ---- SALES - NET $ 1,259,061 $ 1,345,775 COST OF GOODS SOLD 780,568 728,996 --------------- ---------------- GROSS PROFIT 478,493 616,779 --------------- ---------------- COSTS AND EXPENSES: Engineering, research and development 178,268 173,029 Marketing and sales 102,826 135,840 General and administrative 328,404 286,703 Depreciation and amortization --- 640 Interest expense 41,593 48,210 --------------- ---------------- TOTAL COSTS AND EXPENSES 651,091 644,422 --------------- ---------------- NET (LOSS) $ (172,598) $ (27,643) =============== ================ (LOSS) PER SHARE (Note 6) - Basic and Diluted $ (.06) $ (.01) =============== ================
See notes to financial statements. 6 VIKONICS, INC. STATEMENTS OF CASH FLOWS FOR NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997 (UNAUDITED)
1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (172,598) $ (27,643) Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation and amortization --- 640 Changes in assets and liabilities: Decrease (increase) in: Accounts receivable 100,847 (63,235) Inventories 960 11,669 Prepaid expenses and other current assets 46,376 52,477 Other assets --- 20 Increase (decrease) in: Accounts payable (17,443) (43,991) Accrued expenses and other liabilities 98,561 152,651 Deferred service income (24,559) (16,777) ---------------- ---------------- Net cash provided by operating activities 32,144 65,811 ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment and fixtures - net --- --- ---------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of short term notes 5,587 --- Repayment of debt (27,286) (88,449) ---------------- ---------------- Net cash used for financing activities (21,699) (88,449) INCREASE (DECREASE) IN CASH 10,445 (22,638) CASH - MARCH 31 10,328 52,149 ---------------- ---------------- CASH - DECEMBER 31 $ 20,773 $ 29,511 ================ ================
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, 1998, the results of operations for the three and nine months ended December 31, 1998 and 1997, and changes of cash flows for the nine months ended December 31, 1998 and 1997. The results of operations for the three and nine months ended December 31, 1998 are not necessarily indicative of the results to be expected for the full year. Note 2. - Inventories
Inventories consisted of the following: December 31, 1998 March 31, 1998 ------------------ ----------------- Raw materials $ 28,620 $ 29,200 Work-in-process 8,586 8,826 Finished goods 55,574 55,714 ----------------- ------------------ TOTAL $ 92,780 $ 93,740 ================= ==================
Note 3. - Notes and Loans Payable; Legal Proceeding Notes and loans payable consists of:
December 31, 1998 March 31, 1998 ----------------- --------------- Notes payable bearing interest a 9.72% per annum, with the last installment due in 1998. This note is secured by equipment with a net book value of approximately $0. $ ------ $ 10,000 Amounts due to private investors, directors, and legal counsel. 717,728 717,728 Unsecured installment notes payable. 50,587 62,286 ------------------ ----------------- $ 768,315 $ 790,014 ================== =================
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 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. 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. 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. Furthermore, 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. As the aforementioned June 30, 1996 date has been reached, the amounts owing to the investors, former directors and counsel are past due. On September 17, 1998 the private investors filed a lawsuit in the Superior Court of New Jersey for the principal amount of $ 200,000, plus unpaid interest ($93,000 at September 1, 1998). While the Company does not have the ability to pay the amounts due to these private investors, or the former directors and legal counsel, it will seek to renegotiate the terms of payment of these obligations. There can be no assurance, however, that the Company will be successful in these efforts. The failure to do so would have a material adverse affect on the business of the Company and its ability to continue as a going concern. Additionally, at December 31, 1998, the Company had 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, 1998 March 31, 1998 ----------------- -------------- Accrued warranty expense $ 33,000 $ 33,000 Accrued salaries, wages, and taxes 447,605 445,059 Accrued professional fees 35,000 32,500 Accrued officers' salaries 171,228 171,228 Accrued interest 431,498 353,319 Other 67,170 51,834 ---------------- --------------- $ 1,185,501 $ 1,086,940 ================ ===============
Note 5. - Income Taxes At December 31, 1998 the Company had net operating loss carryforwards available amounting to approximately $7.0 million which will expire between 2001 and 2012. 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. Note 6. - (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 December 31, 1998 increased $ 51,000 (15%) compared to the same period a year ago due to an increase in the current fiscal third quarter sales to the City of New York and U.S. Department of the Treasury. For the nine months ended December 31, 1998 net sales decreased $ 87,000 (6%), compared to the corresponding period last year due to a relatively high revenue level achieved last year from a government contract at Fort Meade, Maryland without corresponding revenues earned from this customer during the first nine months of fiscal 1999. Gross profit as a percentage of net sales for the three months ended December 31, 1998 was 35% compared to 37% during the same period a year ago. For the nine months ended December 31, 1998, the gross profit percentage was 38% compared to 46% during the same period a year ago. The decrease in gross margin for the three and nine months ended December 31, 1998 is due to the adverse effect of a larger volume of resold purchased equipment versus higher margin Vikonics manufactured equipment and services sold during the previous fiscal 1998 nine month period. Engineering, research and development expenses for three months ended December 31,1998 were $ 52,000, a decrease of 5% ($ 2,800) due to reduced outside programming costs . Engineering, research and development expenses for the nine months ended December 31, 1998 were $ 178,000, an increase of 3% ($ 5,200) due to product development efforts during the first six months of the current 1999 fiscal year. Marketing and sales expenses for the three and nine months ended December 31, 1998 were $ 34,000 an increase of 17% ($ 5,000) versus the expenses incurred during the same period a year ago, due primarily to increased salary and commission expense. Marketing and sales expenses for the nine months ended December 31, 1998 were $ 103,000, a decrease of 24% ($33,000) compared to those costs incurred during the nine month period ended December 31, 1997, due primarily to a decrease in consulting fees. General and administrative expenses for the three and nine months ended December 31, 1998 were $ 130,000 and $ 328,000, respectively, an increase of 31% ($ 31,000) and 15% ($ 42,000) versus the expenses incurred during the same periods a year ago. The variation is due to increases in payroll tax non-payment penalties, interest and service charges. The net loss for the three months ended December 31, 1998 was $ (96,000) compared to net loss of $ (72,000) a year ago. The net (loss) for the nine months ended December 31, 1998 was $ (173,000) compared to net loss of $ (28,000) 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 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, 1998 was ($1,867,000) compared to ($1,694,000) on March 31, 1998. The increase in the working capital deficit is primarily due to the loss incurred for the nine months ended December 31,1998. At December 31, 1998 the Company had $ 21,000 in cash, compared to $10,000 in cash at March 31, 1998. Accounts receivable decreased by $ 101,000 during the nine months ended December 31, 1998 due to accelerated cash receipt collections achieved during the current 1999 fiscal quarter without a corresponding increase in revenue. Notes and loans payable of $768,000 at December 31, 1998 consist of $50,000 unsecured installment, notes payable used to finance the Company's insurance premiums, 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 the June 30, 1996 date has been reached, the amounts owing to the investors, former directors and counsel are past due. On September 17, 1998 the private investors filed a lawsuit in the Superior Court of New Jersey for the principal amount of $ 200,000, plus unpaid interest ($93,000 at September 1, 1998). While the Company does not have the ability to pay the amounts due to these private investors, or the former directors and legal counsel, it will seek to renegotiate the terms of payment of these obligations. There can be no assurance, however, that the Company will be successful in these efforts. The failure to do so would have a material adverse affect on the business of the Company and its ability to continue as a going concern. Accounts payable of $189,000 at December 31, 1998 are $ 17,000 less than the balance of $206,000 at March 31, 1998 due simply to the timing of certain vendor payments. Accrued expenses and other current liabilities at December 30, 1998 of $1,186,000 are $ 99,000 greater than the $1,087,000 at March 31, 1998. The increase is primarily due to an increase in accrued payroll tax non- payment penalties and interest for the nine months ended December 31, 1998. In total, the net cash provided by operating activities was $ 32,000 for the nine months ended December 31, 1998, as compared to $ 66,000 for the nine months ended December 31, 1997. The Company has no significant capital expenditure plans at this time. The Company has assessed the state of its year 2000 preparedness and has determined that the potential consequences of year 2000 issues will not materially affect the Company's business, results of operations or financial condition. 11 Part II - Other Information Item 1.- Legal Proceedings 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 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. On June 24, 1994, the Company entered into an agreement with the above private investors and others wherein the due date for the loans 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 the June 30, 1996 date has been reached, the amounts owing to the investors, former directors and counsel are past due. On September 17, 1998 the private investors filed a lawsuit in the Superior Court of New Jersey ( Randolph N. Reynolds, Arthur H. Sweeney Jr., Manny Weiss and Lilian Weiss vs. Vikonics Inc. ) for the principal amount of $ 200,000, plus unpaid interest ($93,000 at September 1, 1998). While the Company does not have the ability to pay the amounts due to these private investors, or the former directors and legal counsel, it will seek to renegotiate the terms of payment of these obligations. There can be no assurance, however, that the Company will be successful in these efforts. The failure to do so would have a material adverse affect on the business of the Company and its ability to continue as a going concern. (See Note 3 to financial statements) 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) February 18, 1999 /s/ John J. Strong -------------------------------- John J. Strong President (duly authorized officer and principal financial officer) 13 -----END PRIVACY-ENHANCED MESSAGE-----