30
27
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 0-11057
VICON FIBER OPTICS CORP. _
(Name of Small Business Issuer in Its Charter)
Delaware 13-2615925 _
(State of Incorporation) (IRS Employer Identification No.)
90 Secor Lane, Pelham Manor, New York 10803
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number (914) 738-5006
Securities registered pursuant to Section 12(b) of the Act:None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Check whether the Issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months, and (2) has been subject to such filing requirements
for the past 90 days. YES X NO______
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B which is not contained in this
form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. ____
Issuer's revenues for the year ended December 31, 1995:
$2,776,022.
Aggregate market value of the voting stock held by non-affiliates
of the Registrant as of December 31, 1995: $7,298,057.
Number of common shares outstanding on December 31, 1995:
8,340,636
Page 1 of 30 Pages
Exhibit Index appears at page 29
PART I
Item 1. Description of Business
General
Vicon Fiber Optics Corp. (the "Company") was incorporated in
1969 and currently derives the majority of its revenue from the
manufacture and sale of fiber optic illuminating systems and
components for use in conjunction with dental equipment and
instruments utilizing fiber optic elements.
Fiber optics are glass fibers through which light is
transmitted. Each fiber is composed of an inner glass core with
one index of refraction, covered by an outer glass cladding or
coating with a higher index of refraction. The difference in the
index of refraction between the core glass and the outside coat
ing glass that forms the optical fiber substantially reduces the
dissipation of the light energy from the filament. Optical
fibers may be bundled or employed singly, depending on their
intended use.
There are two basic types of fiber optic bundles: unoriented
fiber bundles and oriented or coherent fiber bundles. Unoriented
fiber bundles are used for the transmission of light for
illumination; oriented bundles are used for the transmission of
images ("Image Bundles").
Unoriented fiber optic illuminating systems and components
have been and currently are the type manufactured and utilized by
the Company in its dental products. Unoriented fiber optic
components consist of a bundle or cable of thousands of
unoriented glass fibers to conduct, optically, light from a
source (the "illuminator") to the place where needed, overcoming
obstacles between the light source and the specific area to be
illuminated regardless of the curvature or other normal distor
tion of the fiber cable needed to avoid such obstacles. The use
of the fiber optic cable permits the transmission of light to its
illuminating end without any corresponding transmission of elec
tricity and without any significant transmission of heat. Ac
cordingly, fiber optic illuminating systems are suitable for
providing illumination under circumstances where the absence of
heat and electricity is desirable and where the area to be illumi
nated is relatively inaccessible to conventional means of
illumination, such as in dentistry.
An Image Bundle is a bundle in which each individual
filament in the bundle has the same spatial relationship to all
the other fibers in the bundle at one end of the bundle as it has
at the other end. This allows the transmission of an image from
one end of the Image Bundle to the other without substantial
distortion. Image Bundles are used to transmit images in
industrial and medical inspection scopes.
Company's History in the Dental Field
The fiber optics first applied to dental instrumentation
were external attachments to standard instruments used by
dentists, such as the mirror, handpiece (commonly known to the
dental patient as the "drill") and evacuator. This type of
system was introduced into the dental market simultaneously by
four manufacturers, among them the Company. All the systems
provide much needed light, however, the external attachments and
the multiplicity of cables made them awkward and difficult to
use.
To remedy this problem, the Company developed two products:
(i) handpiece tubing incorporating a fiber optic bundle, thereby
eliminating the need for a separate fiber optic cable for the
handpiece, and (ii) coiled fiber optic tubing, which reduced
substantially the excess play found in conventional fiber optic
tubing previously used with diagnostic instruments. Design
patents have been granted to the Company on both developments.
After many years of work with original equipment manu
facturers of dental instruments, the Company also developed a
suitable design incorporating the Company's fiber optic elements
directly into the handpiece, with an ability to be coupled to the
remaining components of the Company's system.
Prior to 1981 the Company marketed, under its own name and
label, its illumination system consisting of an illuminator,
fiber optic handpiece tubing and various illuminating instruments
such as the mirror, cheek retractor and transilluminator
nationally through distributors of dental products. From 1981 to
the present, the Company has marketed its illumination systems
and fiber optic elements to manufacturers and distributors of
dental equipment on a private label, joint venture and original
equipment (OEM) basis.
Company's Current Fiber Optic Dental Products
Currently, the Company manufactures two dental illuminators,
one that is mounted away from the dental work area. The second
consists of two modules with a small light module mounted under a
utility tray in the dental work area and a power module mounted
away from the work area. The light in both illuminators is air
activated when the handpiece or instrument is removed from its
console hanger.
Both illuminators are composed of a cooling fan, a rheostat
and a high intensity halogen projection lamp that focuses the
light onto three fiber optic cables. The light is transmitted
through the fiber optic cables in the handpiece tubing that
interfaces with the fiber optic element in the handpiece.
Instruments and attachments are illuminated with one fiber
optic cable (primary probe) which is interchangeable with a tran
silluminator (used for the back illumination of teeth), an il
luminating mirror, a cheek retractor providing general illumina
tion, and an evacuator clip for illuminating a suction tip.
Decorative Fiber Optics Products
The Company manufactures a line of decorative fiber optic
lamps under the tradename "Fantasia Products." The Company
commenced production and national sales of the lamps in 1995.
Joint Venture Agreement
In 1992, the Company entered into a Joint Venture Agreement
with a Corporation from Anshan, China. The Joint Venture
Company, Anshan Vicon Fiber Optic Products Ltd., a Chinese
corporation, will manufacture certain of the Company's products.
The manufacturing of these products in China will significantly
reduce the cost of these products to Vicon. During 1993, Vicon
effected a technology transfer to the joint venture company in
China. The manufacturing facility in China is presently in the
development stage.
Raw Materials.
All components of the Company's fiber optic illuminating
systems other than the fiber optic cables, which the Company
manufactures with its own equipment, are manufactured for the
Company by others and assembled by the Company at its plant.
Many of these components (such as the light source and control
module) are items inventoried by their manufacturers, and such
items or their equivalent are available from several sources.
Other components, such as the housing and certain of the
instrumentation for these systems, are made to the Company's
plans and specifications by their respective manufacturers. In
most cases, essential tooling for these components is owned by
the Company. The Company uses only one source for each of these
components, but believes that alternative or supplementary
sources can readily be obtained. None of the Company's suppliers
is affiliated with the Company and the Company has no contractual
relationship with any of them except for purchase orders issued
from time to time. The Company believes that an adequate and
reliable supply of raw materials is and will continue to be
available for the manufacture its products.
Patents.
The Company owns ten patents in the United States and
corresponding rights abroad related to the dental products aspect
of its business. The Company believes that patent protection is
useful, but is not a crucial factor in its business. The
Company's patents have not yet been tested judicially and,
accordingly, there can be no assurance as to either the validity
or scope of its patent protection. Furthermore, new technological
discoveries by others may reduce the utility of the Company's
patents.
Distribution and Sales.
During 1995 one customer purchased approximately 29% of the
Company's products, another customer purchased 18% and a third
customer purchased 18%. The loss of any one or more of these
three largest customers by the Company would have a material
adverse effect on the Company's business. In 1995, approximately
1% of the Company's sales were to foreign customers.
As of December 31, 1995, the Company had a sales backlog of
approximately $841,000. The Company believes that the backlog
represents firm orders as of that date. As of December 31, 1994
the Company had a backlog of approximately $1,243,000. The
Company believes that the decreased backlog is due primarily to
the timing of orders from customers.
Competition
The Company believes it is one of the leading domestic
manufacturers of fiber optic components and illuminating systems
for use in the dental industry and of decorative fiber optic
lamps.. While the Company has little direct competition for its
products, there are a few other domestic manufacturers that
produce similar products for the same markets as the Company.
The Company depends on its propietary manufacturing techniques
and abilities to design and manufacture products for the specific
needs of its customers at competitive prices with a high degree
of quality and service to enable the Company to maintain market
share.
Employees
The Company has 25 full-time employees, of whom two are
executives, two are engineers, two are administrative, with the
balance consisting of production employees. A pool of workers
adequate to accommodate projected sales volume is available
locally. The Company considers its relations with its employees
good.
Item 2. Description of Property
The Company's offices and plant are located at 90 Secor
Lane, Pelham Manor, New York, where the Company leases a total of
approximately 10,500 square feet. The Company has approximately
two and one-half years remaining on a five year renewable lease
of the space, which it intends to renew. The building is a two
story, modern, fireproof concrete block structure. The aggregate
annual rental paid by the Company in 1995 was approximately
$67,000.
The Company believes that the facilities currently in use
are suitable and adequate for its business.
Item 3. Legal Proceedings
The Company or its property is not a party or subject to any
pending legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security
holders during 1994.
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
(a) Price Range of Common Stock
Set forth below in tabular form for the quarterly periods
indicated are the high and low bid prices of Vicon Common Stock
in the over-the-counter market as quoted by the National
Quotation Bureau, Inc., or by market makers.
Bid Prices
Low High
1994 First Quarter 1/8
1/4
Second Quarter 1/8
1/4
Third Quarter 1/8
1/4
Fourth Quarter 1/8
1/4
1995 First Quarter
1/8 5/16
Second Quarter
1/4 1/2
Third Quarter
5/16 1 1/2
Fourth Quarter
3/8 1 3/8
Such over-the-counter market quotations reflect inter-dealer
prices without retail mark up, mark down or commission and may
not necessarily represent actual transactions.
(b) Approximate Number of Equity Security Holders
Approximate Number Of Record
Title of Class Holders as of
December 31, 1995
Common Stock, $.01 par value 1038
(c) Dividend Policy
Holders of Common Stock of the Company are entitled to a pro
rata share of any dividends when, as and if declared by the Board
of Directors and to share pro rata in any such distributions
available for holders of Common Stock upon liquidation of the
Company. There have been no cash dividends paid since the
inception of the Company and the Company's anticipated capital
requirements are such that it intends to follow a policy of
retaining earnings in order to finance growth of the business.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition of Vicon
Vicon gauges its liquidity and financial stability by the
measurements as shown in the following table:
At
December 31,
1995
1994
Working Capital $1,911,935
$1,515,510
Current Ratio 8.43 to 1
5.99 to 1
Shareholders' Equity $2,155,068
$1,590,425
Net Income $ 564,643 $
247,142
The increase in working capital during 1995 was due to net
income for the year and a decrease in the current portion of long-
term debt.
The increase in shareholders' equity during 1995 was due to
net income for the year.
Results of Operations
Year ended December 31, 1995 Compared to Year Ended December 31,
1994
Net sales for the year ended December 31, 1995 as compared
to 1994 increased by approximately $801,000. Management
attributes this to increased demand in the marketplace for the
Company's products.
Cost of sales increased to 58.4% for 1995 compared to cost
of sales of 51.4% in 1994. Management attributes this to an
increase in sales of lower gross profit margin products.
Selling, general and administrative expenses increased to
$484,244 in 1995 as compared to $422,842 in 1994, an increase of
$61,402. Management attributes this to increased expenses
required for the marketing and administration of the increased
sales.
Item 7. Financial Statements
VICON FIBER OPTICS CORP.
FINANCIAL STATEMENTS
FORM 10-KSB ITEM 7
YEAR ENDED DECEMBER 31, 1995
VICON FIBER OPTICS CORP.
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report F-3
Financial Statements:
Balance Sheet - December 31, 1995 F-4 - F-5
Financial Statements for each of the two years in the
period ended December 31, 1995:
Statements of Operations F-6
Statements of Shareholders' Equity F-7
Statements of Cash Flows F-8
Notes to Financial Statements F-9 - F-17
F-2
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
Vicon Fiber Optics Corp.
Pelham Manor, New York
We have audited the Balance Sheet of Vicon Fiber Optics
Corp. as of December 31, 1995 and the related Statements of
Operations, Shareholders' Equity and Cash Flows for each of the
two years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Vicon Fiber Optics Corp. as of December 31, 1995 and the
results of its operations and its cash flows for each of the two
years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
Sheft Kahn & Company LLP
CERTIFIED PUBLIC ACCOUNTANTS
March 6, 1996
Jericho, New York
F-3
VICON FIBER OPTICS CORP.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 858,681
Accounts receivable - Net of allowance for
uncollectible accounts of $1,549 621,499
Inventories (Note 3) 669,830
Prepaid expenses and other current assets 19,295
Total Current Assets 2,169,305
PROPERTY, PLANT AND EQUIPMENT - Net of
accumulated depreciation and
amortization (Note 4) 95,848
OTHER ASSETS:
Deferred income taxes (Note 6) 92,649
Excess of cost over net assets of
businesses acquired 308,960
Deposits
109,559
Investment in joint venture (Note 9) 26,515
Cash surrender value of life insurance contract
33,827
Total Other Assets 571,510
TOTAL ASSETS $2,836,663
See accompanying Notes to Financial Statements.
F-4
VICON FIBER OPTICS CORP.
BALANCE SHEET
DECEMBER 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 194,572
Income taxes payable (Note 6) 33,586
Current portion of long-term debt (Note 5)
29,212
Total Current Liabilities 257,370
LONG-TERM DEBT (Note 5) 424,225
Total Liabilities 681,595
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock - authorized 20,000,000 shares,
$.01 par value, issued and outstanding
8,340,636 shares 83,406
Additional paid-in capital 5,925,921
Deficit
( 3,854,259)
Total Shareholders' Equity 2,155,068
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$2,836,663
See accompanying Notes to Financial Statements.
F-5
VICON FIBER OPTICS CORP.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
1995 1994
SALES $2,776,022 $1,974,683
COST OF GOODS SOLD 1,622,534 1,014,604
GROSS MARGIN 1,153,488 960,079
OTHER COSTS (INCOME) AND EXPENSES:
Selling, general and administrative expenses 484,244
422,842
Interest expense 44,358 91,204
Interest income ( 49,908)( 23
,354)
TOTAL OTHER COSTS (INCOME) AND
EXPENSES 478,694 490,692
INCOME BEFORE PROVISION FOR INCOME
TAXES AND EXTRAORDINARY ITEM 674,794 469,387
PROVISION FOR INCOME TAXES (Note 6) 236,857 195
,245
INCOME BEFORE EXTRAORDINARY ITEM 437,937 274,142
EXTRAORDINARY ITEM (NET OF INCOME
TAXES OF $72,841) (NOTE 11) 126,706
- -
NET INCOME $ 564,643 $ 274,142
INCOME PER COMMON SHARE:
INCOME BEFORE EXTRAORDINARY ITEM $ .05 $
.03
EXTRAORDINARY ITEM $ .01$
- -
NET INCOME $ .06 $
.03
AVERAGE NUMBER OF SHARES USED
IN COMPUTATION 8,340,636 8,340,636
See accompanying Notes to Financial Statements.
F-6
VICON FIBER OPTICS CORP.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
TOTAL
ADDITIONAL SHARE-
COMMON PAID-IN HOLDERS'
STOCK CAPITAL
DEFICIT EQUITY
Balance - January 1, 1994 $83,406 $5,925,921 ($4,693,044) $1,316,283
NET INCOME - - 274,142 274,142
Balance - December 31, 1994 83,406 5,925,921 ( 4,418,902) 1,590,425
NET INCOME - - 564,643 564,643
Balance-December 31, 1995 $83,406 $5,925,921 ($3,854,259) 2,155,068
See accompanying Notes to Financial Statements.
F-7
VICON FIBER OPTICS CORP.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 564,643 $ 274,142
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 37,959 42,728
Gain on extinguishment of debt ( 148,006) -
(Increase) in accounts receivable ( 298,449)( 164,76
5)
(Increase) in inventory ( 208,844)( 41,0
26)
(Increase) decrease in prepaid expenses
and other current assets ( 5,153) 3,896
Decrease in deferred income taxes 309,698 174,651
Increase in accounts payable and
accrued expenses 34,602 3,747
(Decrease) in income taxes payable ( 12,312)( 3
,341)
Total Adjustments ( 290,505) 15,8
90
Net Cash Provided by Operating Activities 274,138
290,032
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ( 123,577)
( 61,597)
(Increase) in cash surrender value of life insurance
contract ( 11,386)( 10
,439)
Net Cash (Used in) Investing Activities ( 134,963)
( 72,036)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt ( 301,404)( 123,7
86)
Net Cash (Used in) Financing Activities ( 301,404)
( 123,786)
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ( 162,229) 94,210
CASH AND CASH EQUIVALENTS - Beginning 1,020,910 926,700
CASH AND CASH EQUIVALENTS - End $ 858,681 $1,020,910
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the years for:
Interest $ 44,358 $ 93,320
Income taxes $ 9,584 $ 23,935
See accompanying Notes to Financial Statements.
F-8
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies followed
by the Company in the preparation of the accompanying
financial statements is set forth below:
a) Cash and Cash Equivalents:
For the purpose of the statement of cash flows, the
Company considers cash and cash equivalents to include
cash on hand, amounts due from banks, and any other
highly liquid debt instruments purchased with a
maturity of three months or less.
b) Inventories:
Inventories are valued at the lower of cost (on a
first-in, first-out basis) or market.
c) Property, Plant and Equipment:
Property, plant and equipment is stated at cost.
Depreciation of property, plant and equipment is
computed on the straight-line basis for financial
reporting purposes and on an accelerated basis for
income tax purposes over the estimated useful lives
of the related assets. Cost and the related
accumulated depreciation are deducted from the
accounts on retirement or disposal and any resulting
gain or loss is reflected in income. Betterments and
major renewals or replacements are capitalized.
d) Excess of Cost Over Net Assets of Businesses Acquired:
Represents the excess of cost over net assets of
acquired companies. These amounts are being amortized
over forty years.
e) Revenue Recognition:
Revenue is recognized on sales of products, generally
at the time of shipment.
F-9
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
f) Use of Estimates:
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities
at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from
those estimates.
g) Deferred Income Taxes:
The Company has recorded a deferred tax asset of
$92,649, reflecting the benefit of loss carryforwards,
which expire in varying amounts between 2002 and 2005.
Realization is dependent on generating sufficient
taxable income prior to expiration of the loss
carryforwards. Although realization is not assured,
management believes it is more likely than not that
all of the deferred tax asset will be realized. The
amount of the deferred tax asset considered
realizable, however, could be reduced in the near term
if estimates of future taxable income during the
carryforward period are reduced.
h) Financial Instruments:
The carrying values of all assets and liabilities
deemed to be financial instruments in accordance with
SFAS No. 107 approximate their respective fair values.
Current market rates were used, together with credit
worthiness and collateral, where applicable.
i) Primary and Fully Diluted Earnings Per Share:
Net income per share is computed by dividing the net
income for the year by the weighted average number of
shares of common stock outstanding during the period.
Common stock equivalents for primary and fully diluted
earnings per share resulted in less than a 3% dilution
and have been excluded.
F-10
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - MAJOR CUSTOMERS AND EXPORT SALES
Major customers of the Company, expressed as a percentage
of sales, are summarized as follows:
Year Ended December 31,
Customer 1995 1994
A
17.80% 17.61%
B
* 12.74
C
17.80 *
D
* 13.58
E
28.97 28.24
64.57% 72.17%
* - Less than 10 percent of sales.
Export sales, expressed as a percentage of sales are
summarized as follows:
Year Ended December 31,
Geographic Area
1995 1994
Europe 1.20%
1.19% South
America 2.94
.76
North America
- - -
4.14% 1.95%
NOTE 3 - INVENTORIES
The composition of inventories at December 31, 1995 and
1994 is as follows:
1995 1994
Raw materials $554,032 $370,071
Work-in-process 19,588 64,097
Finished goods 96,210 26,818
$669,830$460,986
F-11
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1995 is
summarized as follows:
USEFUL
LIFE
Machinery and equipment $ 491,621 3-10 years
Furniture, fixtures and
office equipment 168,228 2-10 years
Leasehold improvements 346,126
Lease term
1,005,975
Accumulated depreciation
and amortization 910,127
$ 95,848
Depreciation and amortization expense for the years ended
December 31, 1995 and 1994 amounted to $25,835 and
$30,616, respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt at December 31, 1995 consists of the
following:
Amounts due to the former Chairman
of the Board and President of Saxton (a)
$304,937
10% convertible subordinated notes (b) 141,000
Notes payable - Other 7,500
453,437
Less: Current portion 29,212
$424,225
F-12
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT (Continued)
(a) In December 1989, pursuant to a stipulation of
compromise and settlement, Vicon agreed to pay a
total of $950,000 as follows:
i)$100,000 to the former President of Saxton on
January 1, 1990
ii) Commencing
January 1, 1990 and monthly thereafter until
December 1, 1997, $5,500 per month to the former
Chairman of the Board of Saxton
iii) Commencing January 1, 1998 and monthly
thereafter until December 1, 2000, $8,944 per
month to the former Chairman of the Board of
Saxton
In December 1989, the Company recorded a liability of
$489,590 representing the present value of such
payments discounted for interest imputed at 15
percent per annum.
(b) In 1992, the Company issued $91,000 of convertible
notes and $50,000 during 1993, which are due in 1997.
The notes bear interest at 10% per annum and are
convertible into shares of the Company's stock at a
purchase price of $.75 per share.
In December 1994 the Company established a credit
facility with Marine Midland Bank, whereby the Company
may borrow up to $500,000 for working capital purposes
and an additional $250,000 for support of trade service
products. The credit facility requires monthly payments
of interest, computed at the bank's prime rate. The
credit lines are secured by an investment account
maintained with the bank.
Aggregate annual maturities applicable to long-term debt
are as follows:
Year Ending
December 31, Amount
1996 $ 29,212
1997 166,202
1998 73,551
1999
85,374
2000 99,098
$453,437
F-13
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES
Under the provisions of SFAS 109 the Company recognizes
deferred tax assets and liabilities for future tax
consequences of events that have been previously
recognized in the financial statements or income tax
returns. The measurement of deferred tax assets and
liabilities is based on provisions of the enacted tax
laws, and the effects of future changes in tax laws or
rates are not anticipated. The net difference between
the provision for income taxes and income taxes currently
payable is reflected in the balance sheet as deferred
income taxes. Deferred tax assets and liabilities are
classified as current and non-current based on the
classification of the related asset or liability for
financial reporting purposes or based on the expected
reversal date for deferred income taxes not related to an
asset or liability.
Deferred income taxes consist of the following at
December 31, 1995:
Benefit of net operating loss carryforwards
$92,649
Valuation allowance -
Deferred Income Taxes - Net $92,649
The valuation allowance decreased $44,705 during the year
ended December 31, 1995.
The provision for income taxes for the years ended
December 31, 1995 and 1994 consisted of the following:
1995
1994
Current - State $ 5,186 $ 20,594
Deferred:
Federal 263,020 139,181
State 41,492 35,470
Total Deferred 304,512 174,651
Total $309,698 $195,245
F-14
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES (Continued)
A reconciliation of income tax expense computed at
statutory rates to above amounts at effective rates is as
follows:
1995 1994
Income tax expense at
statutory rates $223,991 $159,592
State and local, net of
federal benefit 68,225 20,197
Non-deductible expenses 17,482 15,456
Income tax expense at
effective rates $309,698 $195,245
Net operating loss
carryforwards are available to the Company in the
approximate amount of $465,000, which expire in years
through 2005.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Leases
On August 1, 1993, the Company renegotiated its lease
and is now obligated under the terms of a new lease,
expiring on July 31, 1998, which calls for a base annual
rent of $66,780 plus real estate tax escalations. The
total rent expense under operating leases charged to
operations for the years ended December 31, 1995 and 1994
was $66,780 in each year.
The Company also has a lease on office equipment for $223
per month through November 1996 and three auto leases
totaling $1,199 per month through February 1998.
NOTE 8 - STOCK OPTION PLAN
Effective May 11, 1984, the 1984 Stock Option Plan for
Incentive Stock Options and Non Qualified Options (the
"Plan") was adopted.
The Plan provides for granting to key employees, and
others who are not employees but have made or are
expected to make contributions to the success of the
Company, the option to purchase Company common stock.
Options for an aggregate of up to 400,000 shares of
common stock may be granted under the plan.
F-15
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - STOCK OPTION PLAN (Continued)
The exercise price of each Incentive Stock Option granted
under the Plan will be determined by the Stock Option
Committee (Committee) on the date of grant, but will not
be less than 100 percent of the fair market value of the
common stock on the date of grant. Such options will
expire on the date established by the Committee, but if
no such date is established, then expiration will be five
years after the date of grant.
Non Qualified Stock Options may be granted at prices less
than the fair market value of the shares on the date of
grant, as the Committee may determine. Such options may
be granted for periods of up to ten years.
Information with respect to options under the above plan
follows:
Option Price
Shares
Per Share Aggregate Outstanding
December 31,
1995 and 1994 55,000 $.875 to $2.25 $55,0
00
At December 31, 1995 and 1994, exercisable options
totalled 55,000 shares. At December 31, 1995, options
for the purchase of 225,000 shares were available for
future grant.
NOTE 9 - JOINT VENTURE AGREEMENT
On March 17, 1992, the Company entered into a joint
venture agreement with China Anshan Television
Broadcasting Equipment Group Company, in accordance with
the Foreign Joint Venture Enterprise Ordinance of the
People's Republic of China and other related statutes.
The Company has a 25% interest in the joint venture. The
joint venture company, Anshan Vicon Fiber Optic Products,
Ltd., a Chinese corporation located at Anshan, Liao Ning
Province, People's Republic of China, will manufacture
certain of the Company's products. The manufacturing of
these products in China should significantly reduce the
cost of these products to Vicon. During 1993, Vicon
effected a technology transfer to the joint venture
company in China. The manufacturing facility in China is
presently in the development stage.
The Company has accounted for its investment using the
equity method of accounting. During 1993 the Company
sold certain manufacturing equipment to the joint
venture. The Company reduced the resultant gain from
such sale by 25%, with a corresponding reduction in their
investment, based on their ownership percentage.
F-16
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 10 -FAIR VALUES OF FINANCIAL INSTRUMENTS
Disclosure of fair value information about certain
financial instruments, whether or not recognized in the
balance sheet for which it is practicable to estimate
that value, is required by Statement of Financial
Accounting Standards (SFAS) 107, Disclosure About Fair
Value of Financial Instruments. The following methods
and assumptions were used in estimating fair values:
Cash and cash equivalents: The carrying amount reported
in the balance sheet approximates fair value.
Short and long-term debt: The carrying amounts of the
Company's borrowings under it revolving credit
agreements, as well as all short-term borrowings,
approximate their fair values. The fair values of the
Company's long-term debt were estimated using discounted
cash flow analysis, based on the Company's current
incremental borrowing rates for similar arrangements.
The carrying amounts and fair values of the Company's
financial instruments at December 31, 1995 are as
follows:
Carrying
AmountsFair Value
Cash and cash equivalents $858,681 $858,681
Short and long-term debt 453,437 453,437
NOTE 11 -EXTRAORDINARY ITEM
During the year ended December 31, 1995 the Company
entered into an agreement with Northern Financial Equity
Group, Ltd., as successor to the Bank of Hartford,
whereby the Company paid $72,009 as full satisfaction of
debt in the amount of $120,015. Also, the Company
retired $100,000 convertible subordinated notes plus
accrued interest, which had not been tendered for
conversion or payment for a period 5 years subsequent to
the conversion date. the Company has accounted for these
transactions as an extraordinary item, in accordance with
SFAS No. 76.
F-17
Item 8. Disagreements with Accountants on Accounting and
Financial
Disclosure
None.
PART III
Item 9. Directors and Executive Officers
LEONARD SCRIVO
Director, President, Chief Executive Officer and Treasurer
of the Company. Director and Officer since 1969. Age 58.
LES WASSER
Director, Secretary and Controller of the Company.
Certified Public Accountant. Director since June 1990. Age 52.
STANLEY A. YOUDELMAN
Director, oral and maxillofacial surgeon, chief of oral
surgery at St. Johns Episcopal Hospital in Smithtown, NY,
Professor of Clinical Dentistry at the Dental School of the Stony
Brook Division of the State University of New York. Director of
Selvac Corporation. Director since December 1991. Age 55.
Item 10. Executive Compensation
Leonard Scrivo, the Company's President, Chief Executive
Officer and Treasurer received cash compensation of $84,651 in
1995. This amount includes $1,974 in life insurance premiums
paid by the Company on behalf of Mr. Scrivo. Total cash
compensation for all executive officers as a group for 1995 was
$133,161.
Directors' Compensation
No director receives any compensation for attending
Board meetings.
Item 11. Security Ownership and Certain Beneficial Owners and
Management
The following table sets forth as of December 31, 1995 the
shares of Common Stock of the Company owned by each director of
the Company, the officers and directors of the Company as a group
and each person known to the Company to own 5% or more of the
outstanding shares of Common Stock of the Company:
Number of
Approximate % of
Name Shares Owned
Outstanding Shares
Leonard Scrivo(1)(2) 987,978
12.3%
Les Wasser(1)(2) 145,000
1.8%
Stanley A. Youdelman(2)(3) 41,600
0.5%
All officers and directors
as a group
(three persons) 1,174,578
14.6%
Donald J. Unger(4) 980,000
12.2%
Carol Cooper 596,378
7.4%
(1) Officer of the Company.
(2) Director of the Company.
(3) Includes 6,750 shares owned by members of his family in
which Dr. Youdelman disclaims any beneficial interest.
(4) Includes 200,000 shares owned by members of his family
in which Mr. Unger disclaims any beneficial interest.
Item 12. Certain Relationships and Related Transactions
None.
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a)(1) Financial Statements
The following statements of Vicon Fiber Optics Corp. are
included in Part II, Item 7:
Page
Audit Report of Sheft Kahn & Company
11
Financial Statements
Balance Sheet - December 31, 1995
12-13
Statements of Operations -
Years ended December 31, 1995 and 1994
14
Statements of Shareholders Equity --
Years ended December 31, 1995 and
1994 15
Statements of Cash Flows --
Years ended December 31, 1995 and
1994 16
Notes to Financial Statements
17-25
(b) No Reports on Form 8-K were filed during 1994.
(c) Exhibits
3.1 Articles of Incorporation, as
amended
(filed as Exhibit 3.1 to Form 10,
Registration No. 0-11057, filed on June 13,
1983, and incorporated herein by reference.)
3.2 By-laws (filed as Exhibit 3.2 to
Form 10,
Registration No. 0-11057, incor
porated herein by reference).
4.1 Certificate for Common Stock,
$.10 par value (filed as Exhibit 4.1 to Form
10, Registration No. 0-11057, incorporated
herein by reference).
4.2 Certificate for Convertible
Subordinated Notes, due December 31, 1986,
and Agreement (filed as Exhibit 4.2 to Form
10, Registration No. 0-11057, incorporated
herein by reference).
4.3 Warrant to Purchase Common Stock,
$.10 par value (expiring December 31, 1986)
(filed as Exhibit 4.3 to Form 10, Registra
tion No. 0-11057, incorporated herein by
reference).
4.4 Form of 12% Convertible Subor
dinated Note (filed as Exhibit 4.4 to
Company's Annual Report on Form 10-K for the
year ended December 31, 1986 (the "1986
10-K"), incorporated herein by reference).
4.6 Certificate of Amendment of Certificate of
Incorporation to increase the authorized
capital stock
of the Company to twenty million shares
and to change
the par value to $.01 per share. (filed
as Exhibit 4.6
to the 1992 Form 10-KSB).
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
VICON FIBER OPTICS CORP.
By _/s/Leonard
Scrivo_____________ Leonard Scrivo,
President
Date March 28, 1995
_
In accordance with Exchange Act, this report has been signed
below by the following persons on behalf of registrant and in the
capacities and on the dates indicated.
Signature Title
Date
/s/Leonard Scrivo President (Chief March
28, 1995
LEONARD SCRIVO Executive Officer),
Treasurer and Director
/s/Les Wasser Director
March 28, 1995
LES WASSER Secretary
Controller
/s/Stanley A. Youdelman Director March
28, 1995
STANLEY A. YOUDELMAN
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 858681
<SECURITIES> 0
<RECEIVABLES> 621499
<ALLOWANCES> 0
<INVENTORY> 669830
<CURRENT-ASSETS> 2169305
<PP&E> 1005975
<DEPRECIATION> 910127
<TOTAL-ASSETS> 2836663
<CURRENT-LIABILITIES> 257370
<BONDS> 0
<COMMON> 83406
0
0
<OTHER-SE> 2071662
<TOTAL-LIABILITY-AND-EQUITY> 2836663
<SALES> 2776022
<TOTAL-REVENUES> 2825930
<CGS> 1622534
<TOTAL-COSTS> 1622534
<OTHER-EXPENSES> 484244
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44358
<INCOME-PRETAX> 674794
<INCOME-TAX> 236857
<INCOME-CONTINUING> 437937
<DISCONTINUED> 0
<EXTRAORDINARY> 126706
<CHANGES> 0
<NET-INCOME> 564643
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
