UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1999
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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, 1999: $2,486,164.
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of December 31, 1999: $12,573,734.
Number of common shares outstanding on December 31, 1999: 8,679,069
Page 1 of 39 Pages
Exhibit Index appears at Page 39
<PAGE>
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
coating 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") specific area to be illuminated regardless of the
curvature or other normal distortion of the fiber cable needed to avoid such
obstacles. The use of the fiber optic cable permits the transmission of
electricity and without any significant transmission of heat. Accordingly,
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 illuminated 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.
Page 2 of 39 Pages
<PAGE>
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 manufacturers 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 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 transilluminator (used for
the back illumination of teeth), an illuminating mirror, a cheek retractor
providing general illumination, and an evacuator clip for illuminating a
suction tip.
Page 3 of 39 Pages
<PAGE>
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.
Manufacturing in China
The Company manufactures its line of decorative fiber optic lamps in two
excellent manufacturing facilities in southern China. The Company is also
involved in a joint venture with a corporation from Anshan China. The joint
venture company, Anshan Vicon Fiber optic Products, Ltd., is a Chinese
corporation.
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. Their respective
manufacturers make other components, such as the housing and certain of the
instrumentation for these systems, to the Company's plans and specifications.
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 product 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.
Page 4 of 39 Pages
<PAGE>
Distribution and Sales
During 1999 one customer purchased approximately 16% of the Company's
products, another customer purchased 14% and another two customers purchased 8%.
The loss of any one or more of these four largest customers by the Company
would have a material adverse effect on the Company's business. In 1999,
5% of the Company's sales were to foreign customers.
As of December 31, 1999, the Company had a sales backlog of approximately
$525,000. The Company believes that the backlog represents firm orders as of
that date. As of December 31, 1998 the Company had a backlog of
approximately $490,000. The Company believes that the increased 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 proprietary 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 three are executives, two are
engineers, and one is 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.
Investment
On July 2, 1998, the Company acquired 250,000 shares of common stock
(approximately 9%) of American Entertainment Group, Inc. ("AEG"), doing
business as "Another Universe.com.", at $2.00 per share, for a total of
$500,000.00 in cash. As of December 31, 1999, it has been determined that
the investment in AEG has become worthless and the Company has taken a one-
time charge against earnings for the full cost of the investment.
Page 5 of 39 Pages
<PAGE>
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 approximately 10,500 square feet, but has
made modifications to the facility that provide a total of approximately
17,500 square feet of working area. The Company has approximately one and
one-half year remaining on a three-year lease of space. The building is a
two story, modern, fireproof concrete block structure. The aggregate annual
rental paid by the Company in 1999 was approximately $90,863.
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 material
legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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.
<TABLE>
<S> <C> <C>
Bid Prices
Low High
1998 First Quarter 7/8 1 1/8
Second Quarter 1 1 1/2
Third Quarter 5/8 1 7/8
Fourth Quarter 1/2 25/32
1999 First Quarter 11/16 1 3/16
Second Quarter 27/32 1 7/32
Third Quarter 9/16 27/32
Fourth Quarter 15/32 1 3/4
</TABLE>
Page 6 of 39 Pages
<PAGE>
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, 1999
Common Stock, $.01 par value 1300
(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:
<TABLE>
<S> <C> <C>
1999 1998
Working Capital $2,174,909 $1,958,348
Current Ratio 7.43 to 1 3.59 to 1
Shareholders' Equity $2,536,001 $3,108,641
Net Income (Loss) ($628,890) $115,009
</TABLE>
The decrease in working capital during 1999 was due to net loss for the year,
less expenditures for capital equipment and long-term debt becoming due
within one year.
The decrease in shareholders' equity during 1999 was due to net loss for the
year.
Page 7 of 39 Pages
<PAGE>
Results of Operations
Year ended December 31, 1999 Compared to Year Ended December 31, 1998
Net sales for the year ended December 31, 1999 as compared to 1998 decreased
by 26%. Management attributes this primarily to mergers and acquisitions
within the dental video component industry resulting in the Company's major
video dental customers substantially reducing their orders.
Cost of sales percentage increased to 72.5% for 1999 compared to 60.7% in
1998. Management attributes this to fixed manufacturing overhead being
spread out over lower sales volume.
Selling, general and administrative expenses decreased to $829,073 in 1999 as
compared to $1,037,890 in 1998, a decrease of $208,817. Management
attributes this to a general decrease in the costs of marketing and
administrative expenses.
Item 7. Financial Statements
VICON FIBER OPTICS CORP.
FINANCIAL STATEMENTS
FORM 10-KSB ITEM 7
YEAR ENDED DECEMBER 31, 1999
Page 8 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report F-3
Financial Statements:
Balance Sheet - December 31, 1999 F-4 - F-5
Financial Statements for each of the two years in the
period ended December 31, 1999:
Statements of Income F-6
Statements of Shareholders' Equity F-7
Statements of Cash Flows F-8
Notes to Financial Statements F-9 - F-25
F-2
Page 9 of 39 Pages
<PAGE>
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, 1999 and the related Statements of Income, Shareholders' Equity
and Cash Flows for each of the two years in the period ended December 31,
1999. 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, 1999 and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1999, in conformity with generally accepted accounting principles.
Sheft Kahn & Company LLP
CERTIFIED PUBLIC ACCOUNTANTS
March 16, 2000
Jericho, New York
F-3
Page 10 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
<TABLE>
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
<CAPTION>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 354,379
Accounts receivable - Net of allowance for
uncollectible accounts of $7,500 652,971
Inventories (Note 3) 1,356,276
Prepaid expenses and other current assets 98,026
Deferred income taxes (Note 6) 51,626
Total Current Assets 2,513,278
PROPERTY, PLANT AND EQUIPMENT - Net of
accumulated depreciation and
amortization (Note 4) 383,625
OTHER ASSETS:
Excess of cost over net assets of
businesses acquired 260,607
Deposits 4,487
Investment in joint venture (Note 9) 26,515
Cash surrender value of life insurance contract 96,027
Investment (Note 13) 0
Total Other Assets 387,636
TOTAL ASSETS $3,284,539
</TABLE>
See accompanying Notes to Financial Statements.
F-4
Page 11 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
<TABLE>
BALANCE SHEET
DECEMBER 31, 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Current portion of long-term debt (Note 5) $ 102,006
Accounts payable and accrued expenses 174,327
Income taxes payable (Note 6) 62,036
Total Current Liabilities 338,369
LONG-TERM DEBT (Note 5) 347,492
Deferred income taxes payable (Note 6) 62,677
Total Liabilities 748,538
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock - authorized 20,000,000 shares,
$.01 par value, issued and outstanding
8,679,069 shares 86,790
Additional paid-in capital 6,139,288
Deficit ( 3,605,702)
Deferred stock incentive (Note 8) ( 84,375)
Total Shareholders' Equity 2,536,001
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,284,539
</TABLE>
See accompanying Notes to Financial Statements.
F-5
Page 12 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
<TABLE>
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
<CAPTION>
1999 1998
<S> <C> <C>
SALES $2,475,032 $3,348,149
COST OF GOODS SOLD 1,795,514 2,030,914
GROSS MARGIN 679,518 1,317,235
OPERATING EXPENSES:
Selling, general and administrative expenses
(Note 12) 829,073 1,037,890
Research and development 32,335 56,136
TOTAL OPERATING EXPENSES 861,408 1,094,026
INCOME (LOSS) FROM OPERATIONS ( 181,890) 223,209
OTHER INCOME (EXPENSES)
Interest expense ( 38,065) ( 38,872)
Interest income 11,132 20,585
Loss on worthlessness of investment ( 500,000) -
TOTAL OTHER INCOME (EXPENSES) ( 526,933) ( 18,287)
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES ( 708,823) 204,922
PROVISION FOR INCOME TAXES (Note 6) ( 79,933) 89,913
NET INCOME (LOSS) ($ 628,890) $ 115,009
INCOME (LOSS) PER COMMON SHARE:
BASIC AND DILUTED ($ .07) $ .01
AVERAGE NUMBER OF SHARES USED
IN COMPUTATION:
BASIC 8,679,069 8,600,476
DILUTED 8,679,069 8,891,488
</TABLE>
See accompanying Notes to Financial Statements.
F-6
Page 13 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
<TABLE>
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE TWO YEARS ENDED DECEMBER 31, 1999
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL
ADDITIONAL DEFERRED SHARE-
COMMON PAID-IN STOCK HOLDERS'
STOCK CAPITAL DEFICIT INCENTIVE EQUITY
Balance - January 1,
1998 $85,290 $5,972,038 ($3,091,821)$ - $2,965,507
Net Income - - 115,009 - 115,009
Issuance of Common Stock 1,500 167,250 - ( 140,625) 28,125
Balance - December 31,
1998 86,790 6,139,288 ( 2,976,812) ( 140,625) 3,108,641
Net (Loss) - - ( 628,890) - ( 628,890)
Amortization of stock
incentive - - - 56,250 56,250
Balance - December 31,
1999 $86,790 $6,139,288 ($3,605,702) ($ 84,375)$2,536,001
</TABLE>
See accompanying Notes to Financial Statements.
F-7
Page 14 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
<TABLE>
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($628,890) $115,009
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 71,214 77,005
(Increase) decrease in accounts receivable 123,567 203,545
(Increase) in inventory 268,924 ( 348,676)
(Increase) decrease in prepaid expenses
and other current assets ( 73,009) ( 5,983)
(Increase) decrease in deferred income taxes ( 14,123) 12,081
(Decrease) increase in accounts payable and
accrued expenses ( 391,684) 203,916
Increase (decrease) in income taxes payable ( 41,387) ( 147,168)
Total Adjustments ( 56,498) ( 5,280)
Net Cash Provided by (Used in) Operating
Activities ( 685,388) 109,729
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ( 17,497) ( 77,221)
(Increase) in cash surrender value of life insurance
contract ( 18,592) ( 16,671)
Investment in American Entertainment 500,000 ( 500,000)
Net Cash Provided by (Used in) Investing
Activities 463,911 ( 593,892)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt ( 85,374) ( 123,551)
Investment in common stock - 168,750
Increase in deferred stock incentive 56,250 ( 140,625)
Increase in long-term debt 350,400 -
Net Cash Provided by (Used in) Financing
Activities 321,276 ( 95,426)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 99,799 ( 579,589)
CASH AND CASH EQUIVALENTS - Beginning 254,580 834,169
CASH AND CASH EQUIVALENTS - End $354,379 $254,580
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the years for:
Interest $ 38,065 $ 38,872
Income taxes $ 50,000 $ 225,000
</TABLE>
See accompanying Notes to Financial Statements.
F-8
<PAGE>
Page 15 of 39 Pages
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
Vicon Fiber Optics Corp. (the "Company") was incorporated in 1969 and
derives the majority of its revenues 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.
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.
F-9
Page 16 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Continued)
e)Revenue Recognition:
Revenue is recognized on sales of products, generally at the time
of shipment.
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)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.
h)Earnings Per Common Share:
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" in 1998. Basic earnings
per share is calculated using the average number of shares of
common stock outstanding during the year. Diluted earnings per
share is computed on the basis of the average number of common
shares outstanding plus the effect of outstanding stock options
using the "treasury stock method" and convertible debentures
using the "if-converted" method. Common stock equivalents
consist of stock options.
i)Accounting for Investments:
Investments in which the Company has less than a 20% interest are
carried at cost. Dividends received are included in other
income.
F-10
Page 17 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - MATTERS OF ECONOMIC INFLUENCE
Major customers of the Company, expressed as a percentage of sales,
are summarized as follows:
Year Ended December 31,
Customer 1999 1998
A 15.80% 29.63%
B 14.10 14.18
C 8.10 11.69
D 7.80 7.60
E 5.60 7.50
51.40% 70.60%
Export sales (excluding North America), expressed as a percentage of
sales are summarized as follows:
Year Ended December 31,
Geographic Area 1999 1998
Europe 4.5% 1.3%
Brazil - .5
4.5% 1.8%
Suppliers
The Company uses only one source for some of its components, but
believes that alternative or supplementary sources can readily be
obtained. None of the Company's suppliers are 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 it
products.
NOTE 3 - INVENTORIES
The composition of inventories at December 31, 1999 is as follows:
Raw materials $ 964,163
Work-in-process 57,665
Finished goods 334,448
$1,356,276
F-11
Page 18 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1999 is summarized as
follows:
Estimated
Useful
Life
Machinery and equipment $491,426 3-10 years
Furniture, fixtures and
office equipment 134,023 2-10 years
Leasehold improvements 362,292 Useful Life or Lease
987,741 term, whichever is
shorter
Accumulated depreciation
and amortization 604,116
$383,625
Depreciation and amortization expense for the years ended December
31, 1999 and 1998 amounted to $59,134 and $64,925, respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt at December 31, 1999 consists of the following:
Note payable - Textron (A) $ 15,400
Debentures payable (B) 335,000
Amounts due to the former Chairman
of the Board and President of Saxton (C) 99,098
Less: Current portion 102,006
$347,492
(A) Note payable - Textron represents a five-year note for the
purchase of equipment. The note bears interest at 14.349%
and will be paid at the rate of $411 per month.
F-12
Page 19 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT (Continued)
(B) Debentures - These are 8% convertible notes due August 2, 2002.
Interest will be paid semi-annually until conversion or
maturity. The notes may be converted at the rate of $1 for one
common share but in increments of no less than $1,000.
(C) 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.
Aggregate annual maturities applicable to long-term debt are as
follows:
Year Ending
December 31, Amount
2000 $102,006
2001 3,103
2002 338,298
2003 3,493
2004 2,598
$449,498
In December 1994 the Company established a credit facility with
Marine Midland Bank. Effective September 1998, the Credit Facility
was increased to $2,000,000, the line of credit will maintain a
sublimit of $1,000,000 to be used for direct debt drawdowns and
$300,000 sublimit to be used for standby Letters of Credit. The
credit facility requires monthly payments of interest, computed at
the bank's prime rate. The credit lines are secured by an invest-
ment account maintained with the bank. At December 31, 1999, the
Company had $2,000,000 unused lines of credit to be drawn as
needed.
F-13
Page 20 of 39 Pages
<PAGE>
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, 1999:
Temporary differences arising from the following:
Classified As
Short - Long -
Deferred Term Term
Type Amount Tax Assets (Liability)
Depreciation $173,844 ($62,677) $ - ($62,677)
Reserve for bad debts 7,500 2,704 2,704 -
Section 263A costs 85,000 30,646 30,646 -
Obsolete inventory 50,692 18,276 18,276 -
($11,051) $51,626 ($62,677)
F-14
Page 21 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES (Continued)
The provision for income taxes for the years ended December 31, 1999
and 1998 consisted of the following:
1999 1998
Current - Federal ($63,967) $ 74,418
Current - State ( 10,456) 12,992
Under (over) accrual adjustment 8,613 ( 9,578)
Total Current ( 65,810) 77,832
Total Deferred ( 14,123) 12,081
Total ($79,933) $ 89,913
A reconciliation of income tax (benefit) expense computed at
statutory rates to above amounts at effective rates is as follows:
1999 1998
Income tax expense at
statutory rates ($71,000) $ 63,170
State and local, net of
federal benefit ( 6,515) 7,121
Non-deductible expenses
and over-under accrual 11,705 7,541
Current Income tax expense at
effective rates ($65,810) $ 77,832
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Leases
On July 31, 1998, the Company renegotiated its lease and is now
obligated under the terms of a new lease, expiring on July 31, 2001,
which calls for annual rent of $89,040. The total rent expense under
operating leases charged to operations for the years ended December
31, 1999 and 1998 was $90,293 and $87,730, respectively.
The Company also has three leases totaling $1,378 per month through
January 2001.
F-15
Page 22 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
As at December 31, 1999, the future lease expenditures are as
follows:
2000 $101,984
2001 52,899
2002 - Thereafter -
$154,883
Letters of Credit
As at December 31, 1999, the Company had no outstanding letters.
Employment Agreement
The Company has entered into an employment contract with its
President/Chief Executive Officer through 2003, providing for base
salary equal to his current base salary with annual cost of living
adjustments.
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 provided for granting to key employees and others who were
not employees but had made or were 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 have been granted under the plan.
At a Special Board of Directors meeting held on March 20, 1996, the
Board of Directors adopted the 1996 Incentive Stock Option Plan for
Key Employees (the "1996 Plan"), which was ratified by the
stockholders on May 30, 1996. Subject to adjustment as provided
below, 1,000,000 shares of Common Stock (the "Shares") will be
available for issuance under the 1996 Plan. No awards under the Plan
("Awards") may be granted after March 20, 2006. Awards may be (1)
incentive stock options ("ISOs") within the meaning of Section 422 of
the Internal Revenue Service of 1986, as amended (the "Code"), (2)
non-qualified stock options, or (3) shares subject to certain
restrictions ("restricted stock").
F-16
Page 23 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - STOCK OPTION PLAN (CONTINUED)
The purchase price of Shares covered by an Award ("Options") will be
100% of the fair market value of the Common Stock on the date of the
grant. The fair market value of a share of Common Stock will be the
simple average of the high and low sales prices on the date of grant.
The term of each Option will be determined by the Committee, but
cannot be more than 10 years from the date of the grant. If the
original term is less than ten years from the date of grant, the term
may be extended prior to expiration, with the approval of the
employee, but not beyond 10 years from the date of original grant.
The vesting period and all other terms and conditions of each Option
will be determined by the Committee; provided that, except as
described below, no Option may be exercised prior to the completion
of at least six (6) months of continuous employment from the date of
grant. The Committee may impose restrictions, including a holding
period, on Shares received upon the exercise of Options.
Restricted Stock - Awards of restricted stock are subject to such
restrictions as the Committee determines, including, but not limited
to: a vesting schedule based upon the recipient's continuous
employment and conditions based on performance requirements. Except
as described below, no restricted stock Award may vest in whole or in
part prior to the completion of the number of years of continuous
employment after the date of grant established by the Committee, and
restricted stock Awards shall be forfeited to the extent any
restriction is not met. Until all conditions associated with
restricted stock are met, restricted stock may not be sold, pledged,
or otherwise disposed of. Except for these limitations, recipients
of restricted stock are entitled to all rights of a Stockholder,
including the right to vote and receive dividends or other
distributions on such restricted stock.
If the employment of a recipient of a restricted stock Award
terminates by reason of death, total and permanent disability,
retirement, or discharge other than for cause before all applicable
restrictions have been met, the Committee may remove the
restrictions.
During 1998, the Company issued an aggregate of 150,000 shares of
common stock to five key employees. The Company accounted for the
issuance of restricted stock with an estimated fair value of $169,000
by recording as current compensation of $27,375 and deferred
compensation of $140,625 to be recognized over the three year
restriction on the stock.
F-17
Page 24 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - STOCK OPTION PLAN (CONTINUED)
The 1996 Plan terminates on March 20, 2006. The Board of Directors
may at any time terminate, amend or modify the 1996 Plan. However,
stockholder approval is required for amendments which materially
increase the benefits to Award recipients, increase the aggregate
number of Shares which may be issued under the 1996 Plan, or
materially modify eligibility requirements.
The Committee may at any time amend the terms of any Award, including
accelerating the date of exercise of any Option, terminating stock
restrictions, or converting the Option into a non-qualified Option;
but no such amendment may materially adversely affect a recipient's
rights without his consent.
Awards may provide for the adjustment of the number and class of
Shares covered by the Award, Options prices, and the number of Shares
as to which Options are exercisable in the event of stock dividends,
stock splits, recapitalization, reorganizations, or other changes in
the capitalization of the Corporation. The number and class of Shares
available under the 1996 Plan may also be adjusted in the event of
any such change in capitalization.
Certain Federal Income Tax Consequences
An employee to whom an ISO is granted will not recognize income at
the time of grant or exercise of the ISO (except that the alternative
minimum tax may apply), and no federal income tax deduction will be
allowable to the Corporation upon the grant or exercise of the ISO.
When the employee sells shares received upon the exercise of an ISO
more than one year after the date of exercise and more than two years
after the date of grant of the ISO, the employee will normally
recognize a long-term capital gain or loss equal to the difference,
if any, between the sale price of such Shares and the option exercise
price. If the employee does not hold such Shares for these periods,
when the employee sells such Shares the employee will recognize
ordinary compensation income and possibly capital gain or loss in
such amounts as are prescribed by the Code and the regulations
thereunder. Subject to applicable provisions of the Code and the
regulations thereunder, in the event of a disposition prior to the
end of the statutory holding periods noted above, the Corporation
will generally be entitled to a federal income tax deduction in the
amount of such ordinary compensation income.
F-18
Page 25 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - STOCK OPTION PLAN (CONTINUED)
An employee to whom a non-qualified stock option (which is treated as
an option for federal income tax purposes) is granted will not
recognize income at the time of grant of such option. When the
employee exercises such option, the employee will recognize ordinary
compensation income equal to the difference, if any, between the
option price paid and the fair market value, as of the date of
exercise, of the Shares received by the employee. The tax basis of
such Shares to such employee will be equal to the fair market value
on the date of exercise, and the employee's holding period for such
Shares will commence on the date on which the employee recognized
taxable income in respect of such shares. Subject to applicable
provisions of the Code and the regulations thereunder, the
Corporation will generally be entitled to a federal income tax
deduction in respect of non-qualified stock options in an amount
equal to the ordinary compensation income recognized by the employee.
Any compensation includable in the gross income of an employee in
respect of a non-qualified option will be subject to appropriate
federal income and employment taxes.
At the Special Board of Directors meeting held on March 20, 1996, the
Board granted 50,000 stock options with an exercise price $.96 to
Leonard Scrivo and 165,000 stock options with an exercise price of
$.87 to various other employees. At the March 20, 1996 meeting, the
Board of Directors, as part of a consulting agreement, also granted
non-qualified options to Stanley A. Youdelman to purchase 20,000
Shares at $.87 per share. On June 28, 1996 the Company granted
options to purchase 125,000 shares at $.875 and on July 5, 1996 the
Company sold options to purchase 175,000 shares for $1,750.
As of April 1, 1998, five year warrants to purchase 100,000 shares
each of common stock of the Company at $1.00 per share were issued to
Messrs. Allan Borkowski, Robert Figliozzi, Michael Funke, Thomas
Furey, Jr., Mike Scrivo and Kenneth Zimmerman upon their election as
directors of the Company.
In April 1998, five year warrants to purchase 100,000 shares each of
common stock of the Company at $1.00 per share were issued to Messrs.
Allan Borkowski, Robert Figliozzi, James Leonard, and Dr. Stanley
Youdelman, in consideration for entering into consulting agreements
by each of the above individuals.
In April 1998, five year warrants to purchase an aggregate of 435,000
common shares of the Company at prices of $1.00 to $1.10 were issued
to three officers and two former employees.
In April 1999, five year warrants to purchase 700,000 shares of common
stock at $1.00 per share were issued to the following: Zackary Liebman
and Barry Hawk - 125,000 each, Allan Borkowski and Robert Figliozzi
- 100,000 each, James Leonard, Michael Scrivo, Michael Funke, Thomas
Furey, Jr., and Kenneth Zimmerman - 50,000 each.
F-19
Page 26 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - STOCK OPTION PLAN (CONTINUED)
The following summarizes the stock options outstanding under these
plans as of December 31, 1999:
Number Per Share
Of Option
Date Granted Shares Price Expiration
March 1996 185,000 .87 2001
March 1996 50,000 .96 2001
June 1996 300,000 .875 2001
April 1998 1,285,000 1.00 2003
April 1998 150,000 1.10 2003
April 1999 700,000 1.00 2004
2,670,000
The following summarizes the activity of shares under option for the
two years ended December 31, 1999:
Number Per Share
Of Option
Shares Price Value
Balance - January 1,
1998 535,000 $. 87 - $.875 $ 471,450
Granted 1,435,000 1.00 - 1.10 1,450,000
Exercised - - -
Expired - - -
Cancelled - - -
Balance - December 31,
1998 1,970,000 .87 - 1.10 1,921,450
Granted 700,000 1.00 700,000
Exercised - - -
Expired - - -
Cancelled - - -
Balance - December 31,
1999 2,670,000 $ .87 - $1.10 $2,621,450
F-20
Page 27 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - STOCK OPTION PLAN (CONTINUED)
Pro Forma Disclosure
The Company has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation", issued in October 1995. Accordingly,
compensation cost has been recorded based on the intrinsic value of
the option only. The Company recognized $56,250 and $28,125
compensation cost in 1999 and 1998, respectively, for stock-based
employee compensation awards. The pro forma compensation cost, net
of income taxes, for stock-based employee compensation awards was
$1,274,009 and $641,794 in 1999 and 1998, respectively. If the Company
had elected to recognize compensation cost based on the fair value of
the options granted at grant date as prescribed by SFAS No. 123, net
income and earnings per share would have been changed to the pro
forma amounts indicated in the table below:
1999 1998
As Reported Pro Forma As Reported Pro Forma
Net income ($628,890) ($1,902,899) $115,009 ($526,785)
Diluted earnings
per share ($.07) ($.22) $.01 ($.06)
The above pro forma amounts, for purposes of SFAS No. 123, reflect
the portion of the estimated fair value of awards earned in 1999 and
1998. For purposes of pro forma disclosures, the estimated fair
value of the options is amortized over the options' vesting period
(for stock options). The effects on pro forma disclosures of
applying SFAS 123 are not likely to be representative of the effects
on pro forma disclosures of future years. Because SFAS 123 is
applicable only to options granted subsequent to August 31, 1995, the
effect will not be fully reflected until 2000.
F-21
Page 28 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - STOCK OPTION PLAN (CONTINUED)
The Company used the Black-Scholes model to value stock options for
pro forma presentation. The assumptions used to estimate the value
of the options included in the pro forma amounts and the weighted
average estimated fair value of options granted are as follows:
Stock Option Plan Shares
1999 1998
Average expected life (years) 2.63 3.3
Expected volatility 149.84% 143.89%
Risk-free interest rate
(zero coupon U.S. Treasury
note) 6.6% 5.6%
Weighted average fair value
at grant - Exercise price
equal to market price $.72 $.49
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, the Black-
Scholes model requires the input of highly subjective assumptions,
including the expected stock price volatility and option life.
Because the Company's stock options granted to employees have
characteristics significantly different from those of traded options,
and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion,
existing models do not necessarily provide a reliable measure of the
fair value of its stock options granted to employees. For purposes
of this model, no dividends have been assumed.
F-22
Page 29 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
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.
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.
F-23
Page 30 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Short and long-term debt: The carrying amounts of the Company's
borrowings under its 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, 1999 are as follows:
Carrying
Amounts Fair Value
Cash and cash equivalents $354,379 $354,379
Short and long-term debt 449,498 449,498
NOTE 11 - CONCENTRATION OF CREDIT RISK
The Company invests its excess cash in deposits with HSBC Bank. The
investment generally matures within six months and; therefore, is
subject to little risk. The Company has not incurred losses related
to this investment. As at December 31, 1999, $283,644 was invested
at an interest rate which varies daily. Deposits with HSBC Bank are
insured under the FDIC for up to $500,000.
NOTE 12 - UCC OBLIGATION
During 1998, an action was commenced against a customer of the
Company for selling the Company's manufactured products, allegedly
infringing on Plaintiff's patents covering "illuminator or dental
handpiece". According to Counsel for the Company, in accordance with
the Uniform Commercial Code, the Company, as the manufacturer, was
obligated to indemnify and hold the customer harmless from any
damages and settlement amounts incident to the litigation.
Subsequent to December 31, 1998, the Company settled its obligation
for $100,000 and recorded a charge to general and administrative
expenses.
F-24
Page 31 of 39 Pages
<PAGE>
VICON FIBER OPTICS CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 13 - INVESTMENT IN AMERICAN ENTERTAINMENT GROUP, INC.
On July 2, 1998, the Company acquired 250,000 shares of common stock
(approximately 9%) of American Entertainment Group, Inc. ("AEG") at
$2.00 per share for a total of $500,000 in cash. The Company does
business as "Another Universe" through two subsidiaries. One
operates six retail stores and the other is an internet retailer and
direct response marketer of entertainment-themed collectibles,
licensed products and gifts. It was anticipated that Another
Universe would incorporate Vicon's Fantasia product line of
decorative fiber optics lamps into its marketing programs.
As of December 31, 1999, AEG has sustained significant losses and has
a significant deficit. In January of 2000, the Company sold off its
internet and direct response marketing subsidiary. The Company has,
therefore, determined that the value of its investment is $-0-.
F-25
Page 32 of 39 Pages
<PAGE>
Item 8. Disagreements with Accountants on Accounting and Financial
Disclosure
None.
PART III
Item 9. Directors and Executive Officers
Leonard Scrivo, Age 62: Director, President, Chief Executive Officer and
Treasurer of the Company. Director and Officer since 1969.
Les Wasser, Age 56: Director, Secretary and Controller of the Company.
Certified Public Accountant. Director since June 1990.
Michael Scrivo, Age 34: Director, Vice-President Operations. Director since
April 23, 1998. Employed by the Company since 1988. Son of Leonard Scrivo.
Allan Borkowski, Age 59: Director since April 23, 1998. Business and
financial consultant for more than the past five years. Principal
stockholder and President of ASB Consultants, Inc. a privately held business
consulting firm. Since June, 1982 he has been Chairman and Chief Executive
Officer of Optivest Technologies Corp., a privately held business development
company. Formerly, Chairman of the Board of Selvac Corp. through June 1996
and Director of Mehl/Biophile International Corp. until February 1997.
Robert J. Figliozzi, Age 62: Director since April 23, 1998. Executive Vice
President of Mehl/ Biophile International Corp. from April 1997 to July 1998.
>From August 1994 to April 1997, Vice President of World Fuel Corporation, an
aviation and fueling services corporation listed on the New York Stock
Exchange. Prior thereto, he was Senior Managing Director and Director of
Research of Stamford Securities Corporation, a brokerage firm and member of
the New York Stock Exchange
Michael J. Funke, Age 56: Director since April 23, 1998. Editor/Publisher of
the MJF/Ruta Financial Newsletter. Private investment consultant and
financial advisor since 1992. Consultant to the Company since July 1996.
Employed 1967-1992 by IBM in numerous management and consulting positions.
MBA from The Wharton School.
Thomas E. Furey, Jr. Age 59: Director since April 23, 1998. Employed by IBM
since 1963. Presently worldwide general manager for technology development,
architecture and implementation for the Olympic Games. Prior to this
position he was general manager of IBM's Worldwide Network Computing
Solutions Unit and has been a leader in the development of IBM's most
advanced hardware and software systems.
Page 33 of 39 Pages
<PAGE>
Kenneth Zimmerman, Age 48: Director since April 23, 1998. Founder and Chief
Executive Officer, President and sole stockholder of Kenar Enterprises, Ltd.,
a privately held women's apparel manufacturer and retailer for the past
twenty-one years, which has declared bankruptcy. Director of Chic by H.I.S.,
Inc. listed on the New York Stock Exchange.
Zachary Liebman, Age 40: Director. Elected to the Board at a special meeting
of the Board of Directors on December 15, 1998. Mr. Liebman is a Managing
Director in Crestwood Capital Group Corp., which is a consulting firm in
assisting emerging growth companies in raising capital, management placements
and marketing strategies. Mr. Liebman is a partner in Arthur Miller's Talent
Management, Inc., an agency dealing with casting for industrial films and
movies.
Barry Hawk. Elected to the Board at a special meeting of the Board of
Directors on December 15, 1998. Mr. Hawk is presently the Vice President of
Corporate Development for Ferro Foods, Corp., a large specialty food and
restaurant supplier serving the Northeast and Mid-Atlantic region. Mr. Hawk
is a Founder and Managing Director of Crestwood Capital Group, Corp. In that
capacity, he advises companies on investment banking, strategic planning,
corporate finance, mergers and acquisitions. Mr. Hawk has developed an
expertise in innovative financing techniques and structures for both public
and private companies. Prior to that, Mr. Hawk served as President of Win
Capital Corp., an N.A.S.D. member Broker/Dealer with three offices
nationwide. Mr. Hawk graduated from Yeshiva University with Honors with a
BA. in Political Science and Economics and from the University of Maryland
School of Law.
Item 10. Executive Compensation
A. The following summary compensation table sets forth information
concerning the annual and long-term compensation for the years ended December
31, 1998, 1997 and 1996, of those persons who were, (i) serving as the chief
executive officer of the Company or acting in a similar capacity during the
year ended December 31, 1998 and (ii) the other most highly compensated
executive officers of the Company, whose annual base salary and bonus
compensation was in excess of $100,000 (the named executive officers):
<TABLE>
<S> <C> <C> <C>
Annual Long-Term Incentive
Compensation Plans
Restricted Stock
Name and Principal Position Year Total $ (1) Shares(#) Options(#)
Leonard Scrivo 1999 $109,000 0 0
President, CEO 1998 116,192 75,000 150,000
Chairman of the Board 1997 101,481 0 0
</TABLE>
Page 34 of 39 Pages
<PAGE>
A. Option grants in last fiscal year for named executive officers:None
B. Options exercised during the last fiscal year: None.
C. Fiscal year end option values for named executive officers:
<TABLE>
<S> <C> <C>
Unexercised Value of Unexcercised in-
Name Options (#) the-money Options ($)
Leonard Scrivo 200,000 $137,000
</TABLE>
Directors' Compensation
No director receives any compensation for attending Board meetings.
Employment Contracts of Named Executive Officers
An employment agreement was entered into as of April 3, 1998 between the
Corporation and Leonard Scrivo for a term of five years, with a
provision after a change in control, providing for the payment to Mr.
Scrivo of base salary equal to his current base salary, with annual
minimum adjustments of 5% plus a percentage equal to increase in the
CPI.
Item 11. Security Ownership and Certain Beneficial Owners and Management
The following table sets forth as of December 31, 1999 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:
Page 35 of 39 Pages
<PAGE>
<TABLE>
<S> <C> <C>
Name Number of Approximate % of
Shares Owned Outstanding Shares
Leonard Scrivo 1,042,978 12.0%
Les Wasser 130,000 1.5%
Michael Scrivo (1) 155,000 1.8%
Allan Borkowski (2)(3) 241,000 2.8%
Robert Figliozzi (2) 0 0%
Michael J. Funke (4) 30,100 0.3%
Thomas E. Furey, Jr. (1) 20,000 0.2%
Kenneth Zimmerman (1) 0 0%
Zachary Liebman (6) 0 0%
Barry Hawk (6) 0 0%
Directors and Executive 1,619,078 18.7%
Officers as a group
(1)(2)(3)(4)(5)
Donald J. Unger 980,000 11.3%
Joseph Cooper 557,478 6.4%
* less than 1%
(1) Does not include warrants currently exercisable to purchase 150,000
shares of common stock.
(2) Does not include warrants exercisable to purchase 300,000 shares of
common stock at $1.00 per share.
(3) Includes 80,000 shares owned by members of his family in which Mr.
Borkowski disclaims any beneficial interest.
(4) Does not include warrants exercisable to purchase 325,000 shares of
common stock.
(5) Includes 200,000 shares owned by members of his family in which Mr.
Unger disclaims any beneficial interest.
(6) Does not include warrants exercisable to purchase 125,000 shares of
common stock at $1.00 per share.
Page 36 of 39 Pages
<PAGE>
Item 12. Certain Relationships and Related Transactions: None
PART IV
Item 13. Exhibits and Reports on Form 8-K
None.
(a)(1) Financial Statements
The following statements of Vicon Fiber Optics Corp. are included in Part
II, Item 7:
</TABLE>
<TABLE>
<S> <C>
Page
Audit Report of Sheft Kahn & Company LLP 10
Financial Statements:
Balance Sheet - December 31, 1999 11-12
Statements of Operations - Years ended
December 31, 1999 and 1998 13
Statements of Shareholders Equity -
Years ended December 31, 1999 and 1998 14
Statements of Cash Flows - Years ended
December 31, 1999 and 1998 15
Notes to Financial Statements 16-32
</TABLE>
(a) Form 8-K filed July 17, 1998 incorporated herein by reference.
(b) Exhibits
Page 37 of 39 Pages
<PAGE>
<TABLE>
<S> <C>
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, incorporated 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,
Registration No. 0-11057, incorporated herein by
reference).
4.4 Form of 12% Convertible Subordinated 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).
</TABLE>
Page 38 of 39 Pages
<PAGE>
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 April , 2000
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 April , 2000
LEONARD SCRIVO Executive Officer),
Treasurer and Director
/s/Les Wasser Director
LES WASSER Secretary, Controller
/s/Michael Scrivo Director, Vice-
MICHAEL SCRIVO President Operations
/s/Zachary Liebman Director
Zachary Liebman
/s/ Robert J. Figliozzi Director
ROBERT J. FIGLIOZZI
/s/ Michael J. Funke Director
MICHAEL J. FUNKE
Page 39 of 39 Pages
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
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<ALLOWANCES> 7500
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0
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<OTHER-EXPENSES> 532335
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<INCOME-PRETAX> (708823)
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