SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarter Ended March 31, 1997 Commission File No. 1-7939
------------------------- -------
VICON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK STATE 11-2160665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
89 Arkay Drive, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 952-2288
(Former name, address, and 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
At March 31, 1997, the registrant had outstanding 2,802,728 shares of Common
Stock, $.01 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
3/31/97 3/31/96
Net sales........................... $12,327,871 $10,855,627
Costs and expenses:
Cost of goods sold................ 8,935,576 8,107,322
Selling, general & admin.
expenses........................ 2,699,230 2,417,914
Relocation expense................ 225,129 -
Interest expense.................. 260,985 184,967
Unrealized foreign
exchange gain................... - (5,012)
----------- -----------
Total costs and expenses....... 12,120,920 10,705,191
Income before income taxes.......... 206,951 150,436
Provision for
income taxes.................... 41,000 25,000
----------- -----------
Net income.......................... $ 165,951 $ 125,436
=========== ===========
Net income per share $ .06 $ .05
=== ===
Weighted average number of
shares outstanding and
equivalent shares 2,939,024 2,762,828
See Notes to (Condensed) Consolidated Financial Statements.
2
<PAGE>
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended
3/31/97 3/31/96
Net sales........................... $23,625,645 $21,368,095
Costs and expenses:
Cost of goods sold................ 17,052,542 15,914,178
Selling, general & admin.
expenses........................ 5,420,425 4,775,855
Relocation expense................ 225,129 -
Interest expense.................. 524,933 420,338
Unrealized foreign
exchange gain................... (33,623) (19,384)
----------- -----------
Total costs and expenses....... 23,189,406 21,090,987
Income before income taxes.......... 436,239 277,108
Provision for
income taxes.................... 55,000 50,000
----------- -----------
Net income.......................... $ 381,239 $ 227,108
=========== ===========
Net income per share $ .13 $ .08
=== ===
Weighted average number of
shares outstanding and
equivalent shares 2,893,674 2,762,828
See Notes to (Condensed) Consolidated Financial Statements.
3
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS 3/31/97 9/30/96
CURRENT ASSETS
Cash............................................ $ 271,378 $ 205,876
Accounts receivable (less allowance
of $526,000 at March 31, 1997 and
$396,000 at September 30, 1996)............... 9,283,139 8,635,020
Other receivables............................... 100,024 71,819
Inventories:
Parts, components, and materials.............. 2,889,182 2,175,408
Work-in-process............................... 2,665,058 1,391,552
Finished products............................. 10,807,387 11,135,798
----------- -----------
16,361,627 14,702,758
Prepaid expenses................................ 547,376 529,631
----------- -----------
TOTAL CURRENT ASSETS............................ 26,563,544 24,145,104
- --------------------
Property, plant and equipment................... 14,192,502 13,640,198
Less: accumulated depreciation................. (10,867,251) (10,606,013)
----------- -----------
3,325,251 3,034,185
Other assets.................................... 1,117,283 905,327
----------- -----------
TOTAL ASSETS.................................... $31,006,078 $28,084,616
- ------------ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings under revolving credit agreement..... $ 1,292,767 $ 959,583
Current maturities of long-term debt............ 175,602 203,719
Accounts payable:
Related party................................. 7,498,933 7,457,482
Other......................................... 2,692,821 1,811,730
Accrued wages and expenses...................... 1,749,246 1,229,087
Income taxes payable............................ 145,913 87,205
Deferred gain on sale and leaseback............. - 332,100
------------ -----------
TOTAL CURRENT LIABILITIES 13,555,282 12,080,906
- -------------------------
Long-term debt:
Related party................................. 1,918,080 2,262,005
Other......................................... 5,531,653 4,166,881
Deferred gain on sale and leaseback............. - 101,893
Other long-term liabilities..................... 473,866 504,776
SHAREHOLDERS' EQUITY
Common stock, par value $.01.................... 28,027 28,027
Capital in excess of par value.................. 9,394,163 9,423,089
Retained earnings (deficit)..................... 97,628 (283,611)
------------ -----------
9,519,818 9,167,505
Less Treasury stock 25,400 shares, at cost...... - (82,901)
Foreign currency translation adjustment......... 7,379 (116,449)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 9,527,197 8,968,155
- -------------------------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 31,006,078 $28,084,616
- ------------------------------------------ ============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
4
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
3/31/97 3/31/96
Cash flows from operating activities:
Net income..................................... $ 381,239 $ 227,108
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization................ 398,315 335,947
Amortization of sale and leaseback........... (433,993) (166,050)
Unrealized foreign exchange gain............. (33,623) (19,384)
Change in assets and liabilities:
Accounts receivable.......................... (578,417) (585,249)
Other receivables............................ (28,206) 13,086
Inventories.................................. (1,586,331) (1,538,560)
Prepaid expenses............................ (8,813) (33,460)
Other assets................................. (211,956) (93,895)
Accounts payable............................ 906,467 1,304,196
Accrued wages and expenses................... 510,530 (346,606)
Income taxes payable......................... 54,844 50,711
Other liabilities........................... (30,909) (16,517)
--------- ---------
Net cash used in operating activities..... (660,853) (868,673)
--------- ---------
Cash flows from investing activities:
Capital expenditures, net of
minor disposals........................... (631,447) (249,979)
--------- ----------
Net cash used in investing activities.... (631,447) (249,979)
--------- ----------
Cash flows from financing activities:
Net borrowings under new credit and
security agreement......................... 1,388,755 3,011,904
Repayments of U.S. revolving credit
agreement.................................. - (2,800,000)
Repayment of promissory note to related party (200,000) -
Increase (decrease) in borrowings under U.K.
revolving credit agreement................. 290,400 (102,516)
Repayments of other debt..................... (178,259) (203,965)
---------- ----------
Net cash provided by (used in)
financing activities...................... 1,300,896 (94,577)
---------- ----------
Effect of exchange rate changes on cash.......... 56,906 85,048
---------- ----------
Net increase (decrease) in cash.................. 65,502 (1,128,181)
Cash at beginning of year........................ 205,876 1,151,850
---------- ----------
Cash at end of period............................ $ 271,378 $ 23,669
=========== ==========
See Notes to (Condensed) Consolidated Financial Statements.
5
<PAGE>
VICON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1997
Note 1: Basis of Presentation
The accompanying unaudited (condensed) consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ended September 30, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended September 30, 1996.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months Ended March 31, 1997 Compared with March 31, 1996
Net sales for the quarter ended March 31, 1997 were $12.3 million compared with
$10.9 million in the corresponding quarter last year. The increase was due
principally to incremental sales of several newly introduced engineered systems
products. The backlog of orders increased $.4 million during the quarter to $4.8
million at March 31, 1997.
Gross profit margins for the quarter increased to 27.5% compared with 25.3% in
the corresponding quarter one year ago. The margin increase was due principally
to increased sales of higher margin products, particularly new proprietary
digital video products.
Operating expenses for the current quarter increased to $2.9 million compared
with $2.4 million in the corresponding quarter last year. The increase was due
to higher sales and promotion related expenses. Also during the quarter,
$225,000 of moving expenses were incurred to relocate all U.S. operations to a
new facility. Interest expense increased by approximately $76,000 to $261,000
during the current year quarter principally as a result of increased bank
borrowings to support working capital growth.
The increase in pretax income of approximately $57,000 was principally due to
higher sales and gross margins, offset in part by increased operating expenses.
Results of Operations
Six Months Ended March 31, 1997 Compared with March 31, 1996
Net sales for the six months ended March 31, 1997 were $23.6 million compared
with $21.4 million in the corresponding period last fiscal year. The increase
was due principally to incremental sales of new digital video products and
related intelligent peripheral devices.
Gross profit margins for the six months ended March 31, 1997 were 27.8% compared
with 25.5% in the corresponding period last year. The margin improvement was due
to increased sales of higher margin products, particularly new proprietary
digital video products.
Operating expenses for the six months ended March 31, 1997 increased to $5.6
million compared with $4.8 million in the corresponding period last year. The
increase was due to higher sales and promotion related expenses. The Company
also incurred $225,000 of relocation expenses as noted above. Interest expense
increased by $105,000 to $525,000 as the level of bank borrowings increased to
support working capital growth.
During the current period, the Company recorded an unrealized foreign exchange
gain of $34,000 compared with a $19,000 gain in the corresponding period last
year. These gains result from the revaluation of a yen denominated mortgage
obligation into U.S. dollars.
The increase in pretax income of $159,000 was due to higher sales and gross
margins, offset in part by increased operating expenses.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND FINANCIAL CONDITION
March 31, 1997 Compared with September 30, 1996
Working capital increased $.9 million to $13.0 million at March 31, 1997. The
increase was principally a result of increased long term bank borrowings used to
finance higher inventory levels.
Accounts receivable increased $.6 million to $9.3 million at March 31, 1997, due
to higher sales levels. Inventories increased $1.7 million to $16.4 million at
March 31, 1997 as a result of increased levels of parts and work-in-process
related to production of a new dome camera product line. Total accounts payable
increased $.9 million to approximately $10.2 million at March 31, 1997 in order
to finance the higher inventory levels.
The Company maintains an overdraft facility and term mortgage loan of 1.1
million pounds sterling (approx. $1.8 million) in the U.K. to support working
capital requirements. At March 31, 1997, approximately $1,293,000 was borrowed
against these facilities.
In February 1997, the Company's bank loan agreement was amended to increase
maximum borrowings from $5.5 million to $6.5 million, subject to an availability
formula based on accounts receivable and inventories. Further, the term of the
agreement was extended to January 31, 1999. Borrowings under such agreement
amounted to approximately $5.5 million at March 31, 1997 compared with $4.1
million at September 30, 1996. The increase was used principally to finance
higher inventory levels and capital additions. Concurrent with the foregoing
amendment, a $2,000,000 secured promissory note with Chugai Boyeki Co., Ltd., a
related party, was modified to require installments of $200,000 upon execution,
$360,000 in July 1998 and the balance of $1,440,000 upon maturity in July 1999.
The Company believes that its bank loan agreements and other sources of credit
provide adequate funding to meet its near term cash requirements.
8
<PAGE>
PART II
ITEM 1 - LEGAL PROCEEDINGS
The Company has no material outstanding litigation.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting was held on April 24, 1997.
The following directors were elected at the meeting:
Kenneth M. Darby
Peter F. Neumann
Kazuyoshi Sudo
The terms of the following directors continued after the meeting:
Peter F. Barry
Milton F. Gidge
Donald N. Horn
Michael D. Katz
W. Gregory Robertson
Arthur D. Roche
Arthur V. Wallace
The matters voted upon at the meeting and the results of each vote are as
follows:
Nominees Withhold
For Directors: For Authority
Mr. Darby 2,656,137 15,714
Mr. Neumann 2,352,730 319,121
Mr. Sudo 2,656,012 15,839
Approval of the 1996
Incentive Stock Option
Plan, covering 200,000
shares of Common Stock 1,852,848 819,003
Approval of the 1996
Non-Qualified Stock
Option Plan for Outside
Directors, covering
50,000 shares of
Common Stock 1,538,197 1,133,654
Ratification of
Auditors 2,650,321 21,530
9
<PAGE>
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
No Form 8-K was required to be filed during the current quarter.
Exhibit
Numbers Description
10 Material Contracts
(.1) Credit and Security Agreement between the
Registrant and IBJ Schroder Bank and Trust
Company, Second Amendment dated February 5, 1997.
10
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 13, 1997
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
11
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 13, 1997
VICON INDUSTRIES, INC.
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
11
<PAGE>
SECOND AMENDMENT AGREEMENT
among
VICON INDUSTRIES, INC.
and
IBJ SCHRODER BANK & TRUST COMPANY
Amending the Credit Agreement among
VICON INDUSTRIES, INC
and IBJ SCHRODER BANK & TRUST COMPANY, dated as of December 27, 1995, as amended
by the First Amendment Agreement, dated as of August 19, 1996
Dated as of February 5, 1997
<PAGE>
THIS SECOND AMENDMENT AGREEMENT dated as of February 5,1997 (this
"Amendment") among VICON INDUSTRIES, INC., a New York corporation (the
"Borrower") and IBJ SCHRODER BANK & TRUST COMPANY, a New York banking
corporation (the "Bank"),
W I T N E S S E T H:
WHEREAS, the Borrower and the Bank have entered into a Credit Agreement
dated as of December 27, 1995, as amended by that First Amendment Agreement,
dated as of August 19, 1996 (collectively, the "Agreement"; the terms defined in
the Agreement are used in this Amendment as in the Agreement unless otherwise
defined in this Amendment); and
WHEREAS, the Borrower desires, and the Bank is willing on the terms and
conditions set forth below, to modify certain terms of the Agreement in order
to, among other things, increase the Commitment;
NOW, THEREFORE, in consideration of the mutual premises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrower and the Bank have agreed to amend the
Agreement as hereinafter set forth:
SECTION 1. Amendment to Agreement. The Agreement is, subject to the
satisfaction of the conditi9ns to effectiveness set forth in Section 2 hereof,
hereby amended as follows:
(a) The definitions of "Applicable Margin," "Commitment" and "Formula
Amount" 1.01 (Defined Terms) of the Agreement are amended to read in their
entirety as follows:
"'Applicable Margin' shall mean, with respect to any Loan, one
percent (1.0%) per annum."
"'Commitment' shall mean the Bank's commitment to make Loans prior
to the Commitment Expiration Date up to the maximum aggregate
principal amount equal to (i) prior to the Second Amendment
Effective Date, $5,500,000 and (ii) on and after the Second
Amendment Effective Date, $6,500,000 at any time outstanding, as
referred to in Section 2.01(a)."
"'Commitment Expiration Date" shall mean (i) prior to the Second
Amendment Effective Date, December 31, 1997 and (ii) on and
after the Second Amendment Effective Date, January 31, 1999."
"'Formula Amount' shall mean, as at any date at which the same is
to be determined, an amount equal to the sum of (a) 80 per cent of
the amount of Eligible Accounts Receivable as at such date, plus
(b) (i) prior to the Second Amendment Effective Date, 25 per cent
and (ii) on and after the Second
<PAGE>
Amendment Effective Date, 30 per cent of the value of Eligible Inventory
consisting of finished goods of the Borrower, provided, however, that the amount
calculated pursuant to (b) shall not exceed $3,000,000; and minus such reserve
as deemed necessary or appropriate by the Bank to reflect any contingencies, or
the consequences of any breach or contravention of laws, including without
limitation, Environmental Laws and laws related to OSHA, by the Borrower. The
Bank may, in its sole discretion, at any time or times upon three Business Days'
prior notice to the Borrower, increase or decrease the ratio of its advances
against Eligible Accounts Receivable or Eligible Inventory, or both, and, in the
event that any such ratio shall be decreased for any reason, such decrease shall
become effective immediately for purposes of calculating the maximum amount of
new Loans hereunder and the maximum amount of Loans which may be outstanding
hereunder. The Borrower acknowledges that such changes in the ratio of advances
against Eligible Accounts Receivable and Eligible Inventory may require the
immediate prepayment of Loans by the Borrower."
"Interest Coverage Ratio" shall mean, for any period for which the
same is to be determined, the ratio of (a) earnings from
continuing operations of the Borrower before interest, taxes,
depreciation and amortization (excluding amortization of gain on
sale and leaseback transactions) for such period, provided.
however that the calculation of such earnings for the Period
1/1/97 - 3/31/97 shall exclude the amount of losses incurred with
respect to moving expenses related to the Borrower's new corporate
offices not to exceed [$175,000] (which represents losses) in the
aggregate, to (b) the interest expense of the Borrower for such
period net of all intercompany interest, determined in accordance
with GAAP.
(b) Section 1.01 (Defined Terms) of the Agreement is hereby amended by
adding the following definitions in the proper alphabetical order:
"'Second Amendment' shall mean the Second Amendment Agreement
dated as of February 5, 1997 between the Borrower and the Bank."
"'Second Amendment Effective Date' shall mean the date on which
the conditions in Section 2 of the Second Amendment are satisfied
or waived by the Bank."
(c) Subsection (b) of Section 2.07 (Optional Prepayments of the Loans)
is hereby amended to read in its entirety as follows:
"(b) The Borrower may, upon at least ten Business Days' prior
written notice to the Bank, elect to terminate or permanently
reduce the Commitment not more than once during any Fiscal Quarter
in an amount not less than $250,000 with such additional
increments in integral multiples of $100,000; provided. however
that (i) any reduction of the Commitment shall be accompanied by
prepayment of Loans, together with accrued interest on the amount
prepaid to the date of such prepayment, to the extent (if any)
that the aggregate principal amount of the Loans then outstanding
exceeds the amount of the Commitment as then reduced, (ii) any
such termination of the Commitment shall be accompanied by
prepayment in lull of all Loans then outstanding; together with
accrued interest thereon to the date of such prepayment and any
unpaid commitment fee then accrued under Section 2.11(b) hereof,
and by payment of a fee ("Commitment Reduction Fee") equal to two
per cent of the amount so reduced or terminated in the first
twelve months following the date of execution and delivery of this
Agreement, and equal to one-half of one percent of the amount so
reduced or terminated for the period beginning December 27, 1996
through the Commitment Expiration Date."
<PAGE>
(d) Subsection (c) of Section 7.01 (Indebtedness) of the Agreement is
hereby amended to read in its entirety as follows:
"(c) Indebtedness of the Borrower which is unsecured (or secured
by the Liens referred to in Section 7.02(c) and (d)) and incurred
in the normal course of business in connection with installment
purchases or Capitalized Leases of equipment or fixed assets, in
an aggregate amount not exceeding $400,000 at any one time
outstanding.
(e) Schedule 7.08 (Issuances and Dispositions of Securities) is hereby
amended by adding the information contained on Exhibit A hereto to
the end thereof.
(f) Subsection (A) of Section 9.03 (Net Income) of the Agreement is
hereby amended by adding the following proviso to the end thereof:
",provided. however that the calculation of Net Income for the
Period 1/1/97-3/31/97 shall exclude the amount of losses incurred
with respect to moving expenses related to the Borrower's new
corporate offices not to exceed [$175,000] (which represents
losses) in the aggregate."
(g) Section 9.05 (Maximum Capital Expenditures) of the Agreement is
hereby amended in its entirety to read as follows"
"During each Fiscal Year including, without limitation, Fiscal
Year 1998, Capital Expenditures shall not exceed $500,000 per
Fiscal Year, provided, however, that during Fiscal Year 1997,
Capital Expenditures shall not exceed $1,000,000."
SECTION 2. Conditions to Effectiveness. This Amendment shall become
effective only upon the satisfaction or waiver of all of the following
conditions precedent:
(a) The Borrower and the Bank shall have duly executed and delivered this
Amendment (whether the same or different copies) and the Bank shall have
received a copy of this Amendment signed by the Borrower;
(b) The Borrower and the Subordinated Lenders shall have duly executed and
delivered the First Amendment No. 1 and Consent to Subordination Agreement
("Subordination Agreement Amendment"), dated as of the date hereof (whether the
same or different copies), substantially in the form attached hereto as Exhibit
B and the Bank shall have received a copy or copies of such Subordination
Agreement Amendment signed by the Borrower and the Subordinated Lenders;
<PAGE>
(c) The Borrower shall have duly executed and delivered the Second
Amended and Restated Revolving Credit Note, dated as of the date hereof,
substantially in the form attached hereto as Exhibit C;
(d) The Bank shall have received the fees and expense reimbursements
referred to in Section 5 hereof; and
(e) The Bank shall have received such other documents, opinions,
approvals or appraisals as the Bank may reasonably request.
SECTION 3. Representations and Warranties. In order to induce the Bank to
enter into this Amendment, the Borrower hereby represents and warrants to the
Bank that (i) it has the lull power, capacity, right and legal authority to
execute, deliver and perform its obligations under this Amendment and the other
Related Documents to which it is a party, and the Borrower has taken all
appropriate action necessary to authorize the execution and delivery of; and the
performance of its obligations under this Amendment and the other Related
Documents to which it is a party, (ii) this Amendment, the Agreement (as amended
by this Amendment) and the other Related Documents constitute legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization or moratorium or similar laws affecting the rights of
creditors generally, (iii) the representations and warranties contained in the
Agreement and in each of the other Related Documents to which it is a party are
true and correct on and as of the date hereof as though made on and as of such
date, except for changes which have occurred and which were not prohibited by
the terms of the Agreement, (iv) no Default or Event of Default has occurred and
is continuing, or would result from the execution, delivery and performance by
the Borrower of this Amendment, the Agreement (as amended by this Amendment) or
any of the other Related Documents to which it is a party, and (v) the Borrower
is not in default in the payment or performance of any of its obligations under
any mortgage, indenture, security agreement, contract, undertaking or other
agreement or instrument to which it is a party or which purports to be binding
upon it or any of its properties or assets, which default would have a material
adverse effect on the management, business, operations, properties, assets or
condition (financial or otherwise) of the Borrower, (vi) the Borrower is in
compliance with all applicable statutes, laws, rules, regulations, orders and
judgments, the contravention or violation of which would have a material adverse
effect on the management, business, operations, properties, assets or condition
(financial or otherwise) of the Borrower, (vii) no material adverse change in
the business or assets, or in the condition (financial or otherwise) of the
Borrower, and (viii) no litigation or administrative proceeding of or before any
court or governmental body or agency is now pending, nor, to the best knowledge
of the Borrower upon reasonable inquiry, is any such litigation or proceeding
now threatened against the Borrower or any of its properties, nor, to the best
knowledge of the Borrower upon reasonable inquiry, is there a valid basis for
the initiation of any such litigation or proceeding, which if adversely
determined (after giving effect to all applicable insurance coverage then in
existence) would have a material adverse effect on the business, assets or
condition (financial or otherwise) of the Borrower;
<PAGE>
SECTION 4. Reference to and Effect on the Documents. (A) Each reference
in the Agreement to "this Agreement", '1hereunder", "hereof', "herein" or words
of like import, and each reference to the Agreement in the Related Documents
other than the Agreement, shall mean and be a reference to the Agreement as
amended hereby.
(B) Except as specifically amended hereby, the Agreement and all other
Related Documents, and all other documents, agreements, instruments or writings
entered into in connection therewith, shall remain in lull force and effect and
are hereby ratified, confirmed and acknowledged by the Borrower. The amendments
set forth above are limited precisely as written and shall not be deemed to (i)
be a consent to any waiver or modification of any other term or condition of the
Agreement or any document delivered pursuant thereto or (ii) prejudice any right
or rights which the Bank may now or in the future have in connection with the
Agreement or the other Related Documents.
(C) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Bank under any of the
Related Documents, nor constitute a waiver or modification of any provision of
any of the Related Documents, nor a waiver of any now existing or hereafter
arising Defaults of Events of Default.
SECTION 5. Fees and Expenses. (A) The Borrower hereby agrees to pay, or
cause to be paid to, the Bank a non-refundable amendment fee of$l0,000.
(13) The Borrower hereby agrees to pay the Bank on demand for all costs,
expenses, charges and taxes (other than any income taxes relating to income of
the Bank), including, without limitation, all reasonable fees and disbursements
of counsel, incurred by the Bank in connection with the preparation,
negotiation, administration and enforcement of this Amendment and the other
Related Documents to be delivered hereunder.
SECTION 6. Governing Law. This Amendment and the rights and obligations
of the parties hereunder shall be governed by and construed and interpreted in
accordance with the substantive laws of the State of New York, without regard
for its conflict of laws principles.
SECTION 7. Headings. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
SECTION 8. Successors. This Amendment shall be binding upon the successors,
assigns, heirs, executors and administrators of the parties hereto.
SECTION. 9. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Amendment by signing any such
counterpart.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
VICON INDUSTRIES, INC.
IBJ SCHRODER BANK & TRUST COMPANY
By:
Name:
Title:
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1997
<PERIOD-END> MAR-31-1997 MAR-31-1997
<CASH> 271,378 271,378
<SECURITIES> 0 0
<RECEIVABLES> 10,456,850 10,456,850
<ALLOWANCES> (526,311) (526,311)
<INVENTORY> 16,361,627 16,361,627
<CURRENT-ASSETS> 26,563,544 26,563,544
<PP&E> 15,309,785 15,309,785
<DEPRECIATION> (10,867,251) (10,867,251)
<TOTAL-ASSETS> 31,006,078 31,006,078
<CURRENT-LIABILITIES> 13,555,282 13,555,282
<BONDS> 7,923,599 7,923,599
0 0
0 0
<COMMON> 28,027 28,027
<OTHER-SE> 9,499,170 9,499,170
<TOTAL-LIABILITY-AND-EQUITY> 31,006,078 31,006,078
<SALES> 12,327,871 23,625,645
<TOTAL-REVENUES> 0 0
<CGS> 8,935,576 17,052,542
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,859,359 5,501,931
<LOSS-PROVISION> 65,000 110,000
<INTEREST-EXPENSE> 260,985 524,933
<INCOME-PRETAX> 206,951 436,239
<INCOME-TAX> 41,000 55,000
<INCOME-CONTINUING> 165,951 381,239
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 165,951 381,239
<EPS-PRIMARY> .06 .13
<EPS-DILUTED> .06 .13
</TABLE>
