U.S. 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 March 31, 1999.
SONEX RESEARCH, INC.
Incorporated in the State of Maryland
23 Hudson Street
Annapolis, Maryland 21401
Telephone Number: (410) 266-5556
IRS Employer Identification No. 52-1188993
Commission file number 0-14465
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
YES [x] NO [ ]
There were 17,774,018 shares of the Issuer's $.01 par value Common Stock
outstanding at April 30, 1999.
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SONEX RESEARCH, INC. FORM 10-QSB
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Index to unaudited financial statements presented on pages 3 to 9:
Balance sheets as of March 31, 1999 and December 31, 1998
Statements of operations, accumulated deficit and comprehensive
income/(loss) for the three- month periods ended March 31, 1999 and 1998
Statements of paid-in capital for the period from January 1, 1997 through
March 31, 1999
Statements of cash flows for the three-month periods ended March 31, 1999
and 1998
Notes to financial statements
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<PAGE>
SONEX RESEARCH, INC. FORM 10-QSB
SONEX RESEARCH, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
March 31, December 31,
ASSETS 1999 1998
------------ ------------
Current assets
Cash and equivalents $ 179,201 $ 336,458
Marketable securities, available-
for-sale 29,460 29,460
Accounts receivable, including unbilled
costs and estimated earnings on uncompleted
contracts of $25,690 in 1998 93,470 102,485
Prepaid expenses 28,079 28,837
Loans to officers and employees 22,500 27,500
------------ ------------
Total current assets 352,710 524,740
Patents and technology, net of accumulated
amortization of $66,868 in 1999 and
$63,718 in 1998 241,477 243,600
Property and equipment, net of accumulated
depreciation of $409,378 in 1999 and
$407,128 in 1998 34,218 34,532
------------ ------------
Total assets $ 628,405 $ 802,872
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current liabilities
Accounts payable and other accrued liabilities $ 57,147 $ 46,979
Accrued subcontract costs on uncompleted contracts 16,456
Deferred compensation 772,604 765,516
------------ ------------
Total current liabilities 829,751 828,951
------------ ------------
Stockholders' equity/(deficit)
Preferred stock, $.01 par value - 2,000,000
shares issued; 1,540,001 shares outstanding 15,400 15,400
Common stock, $.01 par value - shares issued
and outstanding: 17,662,518 in 1999 and
17,642,860 in 1998 176,625 176,429
Additional paid-in capital 20,232,055 20,209,503
Accumulated other comprehensive income,
representing unrealized increase in value of
marketable securities 29,460 29,460
Accumulated deficit (20,654,886) (20,456,871)
------------ ------------
Total stockholders' equity/(deficit) (201,346) (26,079)
------------ ------------
Total liabilities and stockholders' equity $ 628,405 $ 802,872
============ ============
The accompanying notes are an integral part of the financial statements.
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SONEX RESEARCH, INC. FORM 10-QSB
SONEX RESEARCH, INC.
CONDENSED STATEMENTS OF OPERATIONS, ACCUMULATED DEFICIT
AND COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
Three months ended March 31,
----------------------------
1999 1998
---- ----
Revenue
Development contracts $ 38,800 $ 52,205
Subcontracts 20,772
------------ ------------
38,800 72,977
------------ ------------
Costs and expenses
Research and development 156,597 128,288
Cost of subcontracts 19,220
General and administrative 83,404 72,598
------------ ------------
240,001 220,106
------------ ------------
Net loss from operations (201,201) (147,129)
Other income and expense
Investment and other income 3,186 4,006
Gain on sale of marketable securities
------------ ------------
Net loss (198,015) (143,123)
Accumulated deficit
Beginning of period (20,456,871) (20,186,509)
------------- ------------
End of period $(20,654,886) $(20,329,632)
============ ============
Net loss per share $.01 $.01
==== ====
Weighted average number of common
shares outstanding 17,642,435 17,475,378
============ ============
Comprehensive income/(loss):
Net loss $ (198,015) $ (143,123)
Other comprehensive income - unrealized
gains on marketable securities:
Arising during the period
Reclassification of gains
reported in income
------------- ------------
Total comprehensive income/(loss) $ (198,015) $ (143,123)
============ ============
The accompanying notes are an integral part of the financial statements.
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SONEX RESEARCH, INC. FORM 10-QSB
SONEX RESEARCH, INC.
CONDENSED STATEMENTS OF PAID-IN CAPITAL
(Unaudited)
Price Preferred stock Common stock Additional
per ($.01 par value) ($.01 par value) paid-in
share Shares Amount Shares Amount capital
----- --------- ------ ---------- ------- ----------
Note: Retroactive effect has been given to all previously declared stock splits.
Balance, January 1, 1997 1,550,001$15,500 16,214,020$162,140 $19,165,535
January through December
option exercises $.50 352,834 3,528 172,889
January through June
option exercises .75 17,000 170 12,580
March for cash .75 775,519 7,755 573,884
October -
conversion (.35 to 1) (10,000) (100) 28,571 286 (186)
December for services 1.00 5,962 60 5,902
Compensation - stock options 104,456
--------- ------ ---------- ------- ----------
Balance, December 31, 1997 1,540,001 15,400 17,393,906 173,939 20,035,060
January through December -
option exercises .50 181,500 1,815 88,935
March - for services .625 20,000 200 12,300
June - for services .75 7,949 80 5,882
September - for services .44 26,813 268 11,463
December - for services .50 12,692 127 6,219
Compensation - stock options 5,000
Compensation - grant of
stock options 11,161
--------- ------ ---------- ------- ----------
Balance, December 31, 1998 1,540,001 15,400 17,642,860 176,429 20,209,503
March - for services .44 20,975 210 9,098
Correction of stock ledger (1,317) (13) 13
Compensation - stock options 6,000
Compensation - grant of
stock options 7,440
--------- ------ ---------- ------- ----------
Balance, March 31, 1999 1,540,001$15,400 17,662,518$176,625 $20,232,055
========= ====== ========== ======= ===========
The accompanying notes are an integral part of the financial statements.
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SONEX RESEARCH, INC. FORM 10-QSB
SONEX RESEARCH, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
-------------------------
1999 1998
---- ----
Cash flows from operating activities
Net loss $ (198,015) $ (143,123)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation 2,250 3,000
Amortization of patents and technology 3,150 3,600
Compensation - stock options 7,440 11,161
Current charges paid in stock or options 15,308 12,500
Gain on sale of marketable securities
(Increase) decrease in accounts receivable 9,015 170,000
(Increase) decrease in prepaid expenses 758 4,439
Increase (decrease) in accrued liabilities 800 (94,320)
------------ -----------
Net cash used in operating activities (159,294) (32,043)
------------ -----------
Cash flows from investing activities
Proceeds from sales of marketable securities
(Increase) decrease in loans to employees 5,000
Acquisition of property (1,936) (5,651)
Additions to patents and technology (1,027) (98)
------------ ----------
Net cash provided by (used in) investing activities 2,037 (5,749)
------------ ----------
Cash flows from financing activities
Issuance of stock - private placement
Issuance of stock - exercise of options 81,250
------------ ----------
Net cash provided by financing activities 0 81,250
------------ ----------
Increase (decrease) in cash (157,257) 43,458
Cash
Beginning of period 336,458 355,582
------------ ----------
End of period $ 179,201 $ 399,040
============ ==========
The accompanying notes are an integral part of the financial statements.
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SONEX RESEARCH, INC. FORM 10-QSB
SONEX RESEARCH, INC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - The Company
- --------------------
Sonex Research, Inc. has developed a proprietary technology, known as the
Sonex Combustion System (SCS), which improves the combustion of fuel in internal
combustion engines through modification of the pistons in large engines or the
cylinder heads in small engines. The Company expects to license several
applications of its technology and is commercially exploiting other applications
itself.
Note 2 - Presentation of Financial Statements
- ---------------------------------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, these financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three-month
period ended March 31, 1999 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1999. For further information,
reference is made to the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1998.
Note 3 - Patents and Technology
- -------------------------------
The costs associated with the filing of patent applications are deferred.
Amortization is recorded on a straight-line basis over the remaining legal life
of patents, commencing in the year in which the patent is granted. Costs related
to patent applications which ultimately fail to result in the grant of a patent,
either through rejection by patent authorities or through abandonment by the
Company, are charged to operations at the time such determination is made.
Note 4 - Deferred Compensation
- -----------------------------
In order to help conserve the Company's limited cash resources, certain
of the Company's employees for several years have voluntarily deferred receipt
of payment of significant portions of their authorized annual salaries upon
request by the Board of Directors. By agreement with the Company, these
individuals have consented to the deferral of payment of amounts so accumulated
until the Company has received licensing revenue of at least $2 million or at
such earlier date as the Board of Directors determines that the Company's cash
flow is sufficient to allow such payment. Since January 1, 1997, however, there
has been no further deferral of salary requested of the Company's non-executive
employees.
The conditions that would require repayment of deferred amounts have yet
to occur. From time to time, however, portions of such deferred amounts have
been paid through the issuance to the employees of shares, or discounted options
to purchase shares, of the Company's common stock. As of March 31, 1999, an
aggregate of $727,604 of wages so deferred by current and former employees
remained unpaid and has been recorded as deferred compensation on the Company's
balance sheet.
Note 5 - Income Taxes
- ---------------------
The Company has not incurred any federal or state income taxes since its
inception due to operating losses. At December 31, 1998, the Company had net
operating loss ("NOL") and capital loss carryforwards of approximately $17.2
million available to offset future taxable income. If certain substantial
changes in the Company's ownership should occur, there would be an annual
limitation on the amount of the carryforwards which can be utilized. The
Company's tax loss carryforwards are summarized as follows:
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SONEX RESEARCH, INC. FORM 10-QSB
Expiration NOL's Capital
---------- ----- -------
1999 $ 900,078
2000 1,105,399
2001 1,748,874 $ 201,681
2002 1,837,965 133,400
2003 1,344,816 365,147
2003 - 2012 9,180,907
2018 433,915
------------ ---------
$ 16,551,954 $ 700,228
============ =========
Note 6 - Stockholders' Equity
- -----------------------------
Authorized capital stock
The Company is presently authorized to issue 48 million shares of $.01
par value common stock and 2 million shares of $.01 par value convertible
preferred stock. All of the authorized shares of preferred stock, along with
common stock purchase warrants, were issued for $2 million in February 1992 (the
"Preferred Stock Investment") to a small number of individuals who qualified as
"accredited investors" pursuant to Rule 501 of Regulation D of the Securities
Act of 1933 (the "Act") and to Proactive Partners, L.P. and certain of its
affiliates ("Proactive"), who became the largest beneficial owner of the
Company's common stock by virtue of the acquisition of the convertible preferred
stock and common stock purchase warrants.
The preferred stock has priority in liquidation over the common stock,
but it carries no stated dividend. The holders of the preferred stock, voting as
a separate class, have the right to elect that number of directors of the
Company which represents a majority of the total number of directors. The
preferred stock is convertible at any time at the option of the holder into
common stock at the rate of $.35 per share of common stock. As of March 31,
1999, a total of 459,999 shares of preferred stock had been converted into
1,314,278 shares of common stock.
Stock options
The Company maintains a non-qualified stock option plan (the "Plan")
which has made available for issuance a total of 7.5 million shares of common
stock following an increase of 2.5 million shares authorized by the Board of
Directors in December 1998. All directors, full-time employees and consultants
to the Company are eligible for participation. Option awards are determined at
the discretion of the Board of Directors. Upon a change in control of the
Company, all outstanding options granted to employees and directors become
vested with respect to those options which have not already vested. Options
outstanding expire at various dates through December 2008.
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board (APB) Opinion No. 25.
Under APB No. 25, compensation cost is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of grant over the
exercise price of the option granted. Compensation cost for stock options, if
any, is recognized ratably over the vesting period. In its complete annual
financial statements presented in its Form 10-KSB, the Company provides
additional pro forma disclosures as required under Statement of Financial
Accounting Standards No. 123 - "Accounting for Stock-Based Compensation" as if
the fair value based method of accounting had been applied to the Company's
stock option grants made subsequent to 1994.
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SONEX RESEARCH, INC. FORM 10-QSB
Common stock reserved for future issuance
At March 31, 1999, a total of 17,355,273 shares of common stock were
reserved by the Company for issuance for the following purposes:
Purpose # of shares
----------------------------- -----------
Currently exercisable warrants:
Exercisable at $.35 per share, expiring in February 2000 571,428
Exercisable at $.375 per share, expiring in June 2000 595,000
Exercisable at $.50 per share, expiring in June 2000 595,000
Exercisable at $.75 per share, expiring in
June 1999 1,048,536
February 2000 3,098,214
December 2000 340,000
February 2002 167,759
March 2002 220,000
----------
6,635,937
Currently exercisable options, average exercise price
of $.52 per share 3,391,966
Granted options becoming exercisable in the future 464,750
Options available for future grants 2,462,617
Conversion of preferred stock 4,400,003
----------
Total shares reserved 17,355,273
==========
Note 7 - Commitments
- --------------------
The Company occupies its office and laboratory facility on a
month-to-month basis under the terms of an operating lease agreement pursuant to
which the property owner is required to provide thirty days notice if he wants
the Company to vacate the premises. The lease provides for monthly rent of
$3,500, and requires the Company to pay all property related expenses. The
Company will seek to negotiate a new long-term lease for its facility or search
for an alternative location in the event that an agreement cannot be reached for
the existing premises. Management believes that the resolution of the
uncertainty with respect to the facility will not result in a significant
interruption in the operations of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements
- --------------------------
Sections of this Report, as well as all publicly disseminated material
about the Company, contain information in the form of "forward-looking"
statements within the meaning of the Private Securities Litigation Act of 1995
(the "Act"). Such statements are based on current expectations, estimates,
projections and assumptions by management with respect to, among other things,
trends affecting the Company's financial condition or results of operations and
the impact of competition. Such statements are not guarantees of future
performance and involve risks and uncertainties, all of which are difficult to
predict and many of which are beyond the control of the Company. In order to
obtain the benefits of the "safe harbor" provisions of the Act for any such
forward-looking statements, the Company cautions shareholders, investors and
prospective investors about significant factors which, among other things, have
in some cases affected the Company's actual results and are in the future likely
to affect the Company's actual results and cause them to differ materially from
those expressed in any such forward-looking statements. Accordingly, readers are
cautioned not to place undue reliance on such forward-looking statements.
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SONEX RESEARCH, INC. FORM 10-QSB
Description of the business
- ---------------------------
Sonex Research, Inc. ("Sonex" or the "Company") is engaged in the
research, development and commercialization of a proprietary technology (the
"Sonex Combustion System", "SCS" or "Ultra Clean Burn(TM) technology") which
improves the combustion of fuel in engines through modification of the pistons
in large engines or the cylinder heads in small engines. The SCS process, which
has no moving parts, produces lower overall emissions at all engine speeds,
particularly soot in diesel engines, and is self-driven by the combustion
process.
The Company's competition comes from the extensive research departments
of the world's major vehicle and engine manufacturers as well as independent
engine testing firms. Although the experience and financial resources of its
competitors far exceed those of the Company, management believes that the SCS
can provide significant advantages over the competition on price and
performance. Due to the highly competitive nature of the world's automotive and
truck industries, in connection with its contracts and/or demonstration programs
with such manufacturers the Company is required to execute joint secrecy and
disclosure agreements that expressly prohibit the public disclosure of the
customers' names and other significant information. Failure by Sonex to maintain
this strict level of confidentiality would jeopardize the relationship of the
Company with its customers.
The SCS for direct-injected (DI) turbocharged diesel truck engines is
being commercialized through cooperative programs with some of the largest
foreign multi-national diesel engine manufacturers in the world. The goal of
such programs is to execute broad agreements with the diesel engine
manufacturers and their piston suppliers for industrial production of Sonex
pistons under license from the Company. The demonstration process involves many
stages, from proof of concept using screw-assembled prototype pistons fabricated
in-house by Sonex, to working with piston suppliers for the fabrication of
finished pre-production pistons that will be used in field trials and
durability, manufacturing optimization, and other tests required before the
start of full series production.
In separate demonstration programs, three of these manufacturers have
verified and accepted that the SCS can substantially reduce particulate
emissions at future NOx (oxides of nitrogen) levels in a DI turbocharged diesel
engine for medium duty trucks while maintaining fuel consumption and power. A
joint engine application program involving one of these foreign engine
manufacturers, its component suppliers, and an independent engine testing firm,
has been ongoing for several months. In this program, the Company's most recent
advanced design innovation for DI diesel engines, referred to as the "SCS-AD",
is being evaluated with the stated objective of meeting future stringent
emissions limits with no exhaust aftertreatment devices. Also, testing of the
SCS-AD is about to be completed at Sonex on an engine for a second manufacturer,
following which the engine and the SCS pistons are to be shipped to the
manufacturer for evaluation. Progress with a third international engine
manufacturer, however, has slowed as a result of unfavorable economic and
business conditions abroad. The U.S. patent for the SCS-AD invention issued in
January 1999.
The Company's interaction with the U.S. diesel engine industry has
increased following the November 1998 $1 billion settlement with the
Environmental Protection Agency (EPA) and the Department of Justice to settle
allegations that the companies used "defeat devices" that allowed their engines
to emit more pollution on the road than in certification tests in order to
achieve performance benefits. Sonex is awaiting an official response to its
proposal submitted earlier this year to the EPA, the Justice Department, and the
diesel engine manufacturers, calling for a cooperative effort to demonstrate
that a new engine design variable exists in the piston-based SCS, complementary
to modern diesel technology, allowing in-cylinder reduction of emissions as an
alternative to exhaust aftertreatment. In the meantime, management has already
visited several U.S. diesel engine manufacturers with the objective of
accelerating the start of cooperative programs for application of the SCS to
medium- and heavy-duty diesel truck engines that are the subject of the
settlement as well as to other diesel engines for future production models of
light trucks and sport utility vehicles.
In addition to diesel truck engine applications, the Company also has
successfully applied a patented starting system and modified combustion chamber
design to the conversion of reliable, lightweight, spark-ignited (SI),
two-stroke, gasoline fueled engines of various sizes used in small, remotely
controlled unmanned aerial vehicles (UAV's) by the military, to start and
operate on JP5/JP8 standard military fuels (also referred to as "heavy fuels").
- 10 -
<PAGE>
SONEX RESEARCH, INC. FORM 10-QSB
As heavy fuels are less volatile than gasoline, in addition to the UAV market,
the Company is exploring a wide range of sustained commercial utility engine
applications for its heavy fuel conversion technology to reduce the hazards
associated with the storage of gasoline in buildings and on boats.
As of March 31, 1999, the Company had five full-time employees and
engaged the part-time services of three consultants on a regular basis.
Additional information on the Company's business, its technology, and its
management can be found in the Company's 1998 Annual Report on Form 10-KSB.
Financial position and liquidity
- --------------------------------
As of March 31, 1999, the Company had available cash and equivalents of
approximately $180,000, marketable securities valued at approximately $30,000,
and accounts receivable of approximately $94,000, including receivables from the
U.S. Government of approximately $37,000. In April 1999 the Company's president
exercised options for the purchase of 112,500 shares of the Company's common
stock, providing the Company with additional funds totaling $56,250.
Management cannot predict whether the Company will be successful in
obtaining market acceptance of its technology and/or in negotiations with
respect to licenses and royalty revenues. Based upon current and projected
spending levels, however, management believes that available resources and
expected revenue from current and potential contracts and other expected cash
receipts will be sufficient to fund operations at least through December 31,
1999. In the absence of the realization of significant revenues, additional
capital may be necessary to fund operations beyond 1999. There can be no
assurance, however, that additional financing, if required, will be available
when needed or, if available, that its terms will be favorable or acceptable to
the Company.
Results of operations
- ---------------------
A net loss from operations of $201,201 was recorded for the first three
months of 1999, as compared to $147,129 for the corresponding period in 1998, an
increase of $54,072, or 37%. The increase in the loss was due to lower revenue
in 1999 versus 1998, coupled with an increase in personnel costs from 1998 to
1999 resulting primarily from greater use of the services of consultants.
Revenue and cost of subcontracts:
Three months ended March 31
---------------------------
1999 1998
---- ----
Government/defense prime contracts $ 38,800 $ 52,205
Commercial contracts 0 0
--------- ----------
38,800 52,205
Revenue from government/defense sub-contracts 0 20,772
--------- ----------
Total revenue $ 38,800 $ 72,977
========= ==========
Cost of government/defense sub-contracts $ 0 $ 19,220
========= ==========
Since 1997 the Company has obtained several military contracts for its
small engine, heavy fuel technology, an application that has been developed only
in the last few years. All contracts to date in this area have involved the
conversion of commercial gasoline fueled engines used in UAV's and the like.
Revenue earned in connection with the Company's DI diesel engine piston
technology is subject to the negotiated amount, if any, that an engine
manufacturer is willing to provide in funding to partially offset the
development costs incurred by the Company in applying its technology to one of
the manufacturer's engines.
Management is unable to predict future changes to development and
demonstration contract revenue because the amounts earned to date under previous
contracts have been determined through negotiations with individual
manufacturers based upon the level of effort required and the level of funding,
if any, that each manufacturer has been willing to commit. Management
anticipates, however, that future revenue may also include consulting fees
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<PAGE>
SONEX RESEARCH, INC. FORM 10-QSB
earned while working together with manufacturers to optimize the results
achieved on a particular manufacturer's engine, and, ultimately, license fees
and royalty revenue once the Company's technology is placed into production
engines by manufacturers. The future amounts of such other types of revenue,
however, cannot be reasonably estimated.
Research and development (R&D) expenses:
R&D expenses for the first three months of the year increased by $28,309,
or 22%, from $128,288 in 1998 to $156,597 in 1999, primarily as a result of an
increase in personnel costs and project parts and supplies. The increase in the
largest expense category, personnel costs, from $86,732 in 1998 to $109,338 in
1999, resulted from an increase in the wage rates of technical personnel
beginning in 1999 and a higher amount of overtime pay, as well as from an
increase in the compensation and expenses of the consultant who serves as the
Company's R&D supervisor and corporate liaison in Europe. This individual, a
former officer of the Company, is compensated primarily in the form of
restricted stock or stock options for services performed in Europe based on
part-time service, while for time spent in Annapolis he receives cash
compensation, a portion of which is deferred, for full-time service. He was
asked to spend considerably more time in Annapolis in the first quarter of 1999
as opposed to 1998.
Project parts and supplies for the quarter increased from $10,149 in 1998
to $19,507 in 1999 due to greater expenditures for research not performed under
contract, particularly with respect to the Company's heavy fuel engine work, as
well as a result of a major purchase of testing fuel in the first quarter of
1999. In addition to fuel, project parts and supplies include engine parts and
other items used or consumed in engine testing and in the machine shop. Related
costs fluctuate by period depending on the number and type of engines being
tested and the timing of purchases of certain items.
General and administrative (G&A) expenses:
G&A expenses for the first quarter increased by $10,806, or 15%, from
$72,598 in 1998 to $83,404 in 1999, as a decrease in professional fees of nearly
$3,000 was more than offset by higher personnel costs, which rose from $41,983
in 1998 to $55,787 in 1999, or $13,804. The increase in personnel costs related
almost entirely to an increase in the use of consulting services, particularly
those of an individual who has been assisting the Company since late in 1998 in
regard to business opportunities for the SCS heavy fuel engine technology, and
to the execution in the first quarter of 1999 of a consulting agreement with the
president of the Company, who is engaged on a part-time basis, to reflect an
increase in the level of services provided.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
4 Instruments defining the rights of security holders (contained
in the Articles of Incorporation and By-laws, as amended,
filed with the 1992 Annual Report on Form 10-KSB)
(b) Reports on Form 8-K: None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
SONEX RESEARCH, INC.
(Registrant)
/s/ George E. Ponticas
----------------------------
by: George E. Ponticas
Chief Financial Officer
May 14, 1999
- 12 -
<PAGE>
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<ARTICLE> 5
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 179,201
<SECURITIES> 29,460
<RECEIVABLES> 93,470
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 352,710
<PP&E> 443,596
<DEPRECIATION> 409,378
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<BONDS> 0
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15,400
<COMMON> 176,625
<OTHER-SE> (24,721)
<TOTAL-LIABILITY-AND-EQUITY> 628,405
<SALES> 38,800
<TOTAL-REVENUES> 38,800
<CGS> 0
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