<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission File Number 0-11057
VICON FIBER OPTICS CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 13-2615925
(State of Incorporation) (IRS Employer Identification No.)
90 Secor Lane, Pelham Manor, NY 10803
(Address of principal executive offices)
Issuer's telephone number (914)-738-5006
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 (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 [ ]
The number of shares outstanding of each of the issuers classes of common
equity, as the latest practicable date is:
Common Stock, $.01 per value 8,679,069 Shares outstanding at
September 30, 1999
<PAGE>
PART I
ITEM 1
VICON FIBER OPTICS CORP.
FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1999
<PAGE>
VICON FIBER OPTICS CORP.
TABLE OF CONTENTS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION> <CAPTION
PART I. FINANCIAL INFORMATION >
PAGE NO.
<S> <C>
Item 1. Financial Statements
Balance Sheets as of September 30, 1999 1-2
and December 31, 1998
Statements of Operations For the Three and 3
Nine Months Ended September 30, 1999 and 1998
Statements of Cash Flows For the Nine Months 4
Ended September 30, 1999 and 1998
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis 6
of Financial Condition and Results of Operations
PART II
Item 1-5 not applicable, Item 6 7
</TABLE>
<PAGE>
VICON FIBER OPTICS CORP.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION> <CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $436,021 $254,580
Accounts receivable - net of 534,350 776,538
allowance for uncollectible
accounts
Inventories (Note 2) 1,566,184 1,625,200
Prepaid expenses and other current 11,346 25,017
assets
Deferred income taxes 30,646 31,821
---------- ----------
Total Current Assets 2,578,547 2,713,156
---------- ----------
PROPERTY, PLANT AND EQUIPMENT -
net of accumulated depreciation
and amortization 400,459 425,262
---------- ----------
OTHER ASSETS:
Excess of cost over net assets of
businesses acquired 263,627 272,687
Deposits 4,487 4,487
Investment in joint venture 26,515 26,515
Cash surrender value of life
insurance contract 89,859 77,435
Investment 500,000 500,000
---------- ----------
Total Other Assets 884,488 881,124
---------- ----------
TOTAL ASSETS: $3,863,494 $4,019,542
========== ==========
</TABLE>
See Notes To Financial Statements
<PAGE>
VICON FIBER OPTICS CORP.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION> <CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $118,809 $566,011
Income taxes payable 98,979 103,423
Current portion of long-term debt 87,988 85,374
----------- ----------
Total Current Liabilities 305,776 754,808
LONG-TERM DEBT 384,508 99,098
Deferred income tax payable 59,289 56,995
----------- ----------
TOTAL LIABILITIES 749,573 910,901
----------- ----------
SHAREHOLDERS' EQUITY:
Common stock - authorized 20,000,000
shares,
$.01 par value, issued and outstanding 86,790 86,790
8,679,069 shares
Additional paid-in capital 6,139,288 6,139,288
Deficit (3,013,720) (2,976,812)
Deferred stock incentive (98,437) (140,625)
---------- ----------
Total Shareholders' Equity 3,113,921 3,108,641
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' $3,863,494 $4,019,542
EQUITY
========== ==========
</TABLE>
See Notes To Financial Statements
<PAGE>
VICON FIBER OPTICS CORP.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION> <CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
SALES $570,044 $1,056,972 $1,576,414 $2,495,419
COST OF GOODS SOLD 349,628 660,476 961,613 1,509,229
------- --------- --------- ---------
GROSS MARGIN 220,416 396,496 614,801 986,190
OTHER COSTS (INCOME) AND
EXPENSES:
Selling, general and
Administrative expenses 250,808 220,105 618,650 652,665
Research and development 19,119 13,514 21,386 53,332
Interest expense 5,692 11,561 19,405 31,322
Interest income (4,319) (3,893) (6,765) (19,194)
------- ------- ------- -------
TOTAL OTHER COSTS (INCOME) AND 271,300 241,287 652,676 718,125
EXPENSES
INCOME (LOSS) BEFORE PROVISION (50,884) 155,209 (37,875) 268,065
FOR INCOME TAXES
PROVISION FOR INCOME TAXES (8,353) 32,105 (967) 82,211
(Note 3)
-------- -------- -------- --------
NET INCOME (LOSS) ($42,531) $123,104 ($36,908) $185,854
======== ======== ======== ========
INCOME PER COMMON SHARE: $0.00 $0.01 $0.00 $0.01
AVERAGE NUMBER OF SHARES USED 8,679,069 8,806,730 8,679,069 8,804,152
IN COMPUTATION
</TABLE>
See Notes to Financial Statements
<PAGE>
VICON FIBER OPTICS CORP.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION> NINE MONTHS ENDED
SEPTEMBER 30
<S> <C> <C>
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(36,908) $185,854
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 52,860 54,060
(Increase) decrease in accounts receivable 242,188 26,823
(Increase) decrease in inventory 59,016 (145,505)
(Increase) decrease in prepaid expenses and
other current assets 13,671 7,723
Increase (decrease) in accounts payable and
accrued expenses (447,202) (19,714)
Decrease in deferred income taxes 1,175 1,840
Capital stock issued for expenses 14,063
Increase (decrease) in deferred income taxes
payable 2,294 (16,273)
Increase (decrease) in income taxes payable (4,444) (128,353)
-------- --------
Total Adjustments (80,442) (205,336)
-------- --------
Net Cash Provided (Used) By Operating Activities (117,350) (19,482)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (18,997) (87,680)
Increase in cash surrender value of
life insurance contract (12,424) (12,487)
Investment -- (500,000)
-------- --------
Net Cash (Used In) Investing Activities (31,421) (600,167)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (64,504) (104,123)
Increase in long-term debt 352,528 --
Decrease in deferred stock incentive 42,188 --
-------- --------
Net Cash Provided By (used in) Financing
Activities 330,212 (104,123)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 181,441 (723,772)
CASH AND CASH EQUIVALENTS - Beginning 254,580 834,169
-------- --------
CASH AND CASH EQUIVALENTS - End $436,021 $110,397
======== ========
</TABLE>
See Notes to Financial Statements
<PAGE>
VICON FIBER OPTICS CORP.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION> NINE MONTHS ENDED
SEPTEMBER 30
<S> <C> <C>
1999 1998
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $19,405 $31,322
------- -------
Income taxes -- $225,000
------- -------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1999
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim financial
statements of Vicon Fiber Optics Corp. (the company) contain all adjustments
necessary to present fairly the Company's financial position as of September
30, 1999 and December 31, 1998 and the results of operations and cash flows for
the nine months ended September 30, 1999 and 1998.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements included in its Annual Report on Form 10-KSB for
the year ended December 31, 1998, which is incorporated herein by reference.
NOTE 2 - INVENTORIES
The composition of inventories is:
<TABLE>
<CAPTION> SEPTEMBER 30, 1999 DECEMBER 31, 1998
(Unaudited)
<S> <C> <C>
Raw Materials $904,366 $1,065,611
Work-in-process 138,995 91,890
Finished goods 522,823 467,699
---------- ----------
$1,566,184 $1,625,200
========== ==========
</TABLE>
NOTE 3 - 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.
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Net Sales:
Net sales for the nine months ended September 30, 1999 compared to the
same period in 1998 decreased by $919,005. Management attributes this
principally to decreased sales of the Company's fiber optic dental video
components due to downsizing and acquisitions among the Company's customers
that resulted in a temporary delay in orders from these customers.
Cost of Sales:
Cost of sales for the nine months ended September 30, 1999 was 61%,
compared to 60% for the same period in 1998. Management attributes this to
fixed manufacturing overhead being absorbed by lower sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months ended
September 30, 1999 decreased to $618,650 from $652,665 for the same period in
1998. Included in the 1999 expenses are costs in the amount of $51,262 that
are directly attributable to a 1999 private placement. Excluding the private
placement costs, the selling, general and administrative expenses would have
been $567,388. Management attributes this decrease to a broad reduction in
expenses required to administer the decreased sales.
YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs having been written
using two digits, rather then four, to define the applicable year. Software
programs and hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a major system failure or miscalculations causing disruptions
of operations, including a temporary inability to engage in normal business
activities.
Based on recent assessments, the Company has determined that its critical
software (primarily widely-used software packages) and all of its critical
business systems, including manufacturing instrumentation, are already year
2000 compliant and no material expenditures are required. Nevertheless,
throughout 1999, assessment, testing and remediation, if necessary, will
continue.
The Company has initiated communications with third parties with whom the
Company has material business relationships to determine the extent of their
remediation of the year 2000 issue. However, there can be no guarantee that
the non-compliance of other companies will not have an adverse effect on the
Company's operations.
Although no assurance can be given that there will be no interruption of
operations in the year 2000, the Company believes that it has reasonably
assessed all of its systems in order to ensure that the Company will not suffer
any material adverse effect from the year 2000 issue.
Financial Condition of the Company: The Company gauges its liquidity and
financial stability by the measurements as shown in the following table:
<TABLE>
<CAPTION> September 30 December 31
1999 1998
(Unaudited)
<S> <C> <C>
Working capital $2,272,771 $1,958,348
Current ratio 8.43 to 1 3.59 to 1
Shareholders' equity $3,113,921 $3,108,641
</TABLE>
PART II
Item 6, Exhibit 11
VICON FIBER OPTICS CORP.
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
<S> <C> <C> <C> <C>
1999 1998 1999 1998
Basic:
Average shares outstanding 8,679,069 8,662,665 8,679,069 8,574,024
based on the treasury stock
method using average market
price * 144,065 * 230,128
--------- --------- --------- ---------
Diluted 8,679,069 8,806,730 8,679,069 8,804,152
========= ========= ========= =========
Net Income (Loss) ($42,531) $123,104 $(36,908) $185,854
========= ========= ========= =========
Per share amount - basic and
diluted
$0.00 $0.01 $0.00 $0.02
========= ========= ========= =========
*Anti-dilutive
</TABLE>
<PAGE>
SIGNATURE
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.
VICON FIBER OPTICS CORP.
(Registrant)
Date: November 15, 1999 /s/Leonard Scrivo
LEONARD SCRIVO,
President, Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 436021
<SECURITIES> 0
<RECEIVABLES> 534350
<ALLOWANCES> 0
<INVENTORY> 1566184
<CURRENT-ASSETS> 2578547
<PP&E> 989182
<DEPRECIATION> 588723
<TOTAL-ASSETS> 3863494
<CURRENT-LIABILITIES> 305776
<BONDS> 0
0
0
<COMMON> 86790
<OTHER-SE> 3027131
<TOTAL-LIABILITY-AND-EQUITY> 3863494
<SALES> 1576414
<TOTAL-REVENUES> 1583179
<CGS> 961613
<TOTAL-COSTS> 961613
<OTHER-EXPENSES> 640036
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19405
<INCOME-PRETAX> (37875)
<INCOME-TAX> (967)
<INCOME-CONTINUING> (36908)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36908)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
