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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarterly Period Ended: June 30, 2000
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/ / TRANSITION REPORT UNDER SECTION TO 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission File Number O-16034
VIKONICS, INC.
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(Exact name of small business issuer as specified in its charter)
New York 13-2759466
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(State or other jurisdiction
of incorporation or organization) (I.R.S. Employer Identification No.)
370 North Street Teterboro, New Jersey 07608
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(Address of principal executive offices)
(201) - 641-8077
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(Issuer's telephone number)
NONE
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(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: Number of shares outstanding at
July 31, 2000: 2,933,431 shares of common stock, par value $.02 per share.
Transitional Small Business Disclosure Format (Check one): Yes No X
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VIKONICS, INC.
INDEX
PART I Financial Statements Page No.
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Item 1 - Financial Statements (Unaudited)
Balance Sheets:
June 30 and March 31, 2000 3-4
Statements of Operations
For Three Months Ended June 30, 2000 and 1999 5
Statements of Cash Flows
For Three Months Ended June 30, 2000 and 1999 6
Notes to Financial Statements 7-8
Item 2 - Management's Discussion and Analysis or Plan of
Operation 9-10
PART II: Other Information 11
Signatures 12
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VIKONICS, INC.
BALANCE SHEETS
ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 2000 March 31, 2000
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<S> <C> <C>
CURRENT ASSETS:
Cash $ 9,177 $ 20,680
Accounts receivable (less allowance for doubtful
accounts of $10,000) 152,948 170,498
Inventories (Note 2) 79,032 87,657
Prepaid expenses and other current assets 18,085 18,497
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TOTAL CURRENT ASSETS 259,242 297,332
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EQUIPMENT AND FIXTURES - AT COST:
Machinery and equipment 402,735 402,735
Furniture and fixtures 67,437 67,437
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470,172 470,172
Less, accumulated depreciation and amortization (449,646) (448,116)
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EQUIPMENT AND FIXTURES - NET 20,526 22,056
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OTHER ASSETS 1,200 1,200
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$ 280,968 $ 320,588
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</TABLE>
See notes to financial statements.
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VIKONICS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 2000 March 31, 2000
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<S> <C> <C>
CURRENT LIABILITIES:
Notes and loans payable (Note 3) $ 717,728 $ 717,728
Accounts payable 258,358 253,869
Accrued expenses and other current liabilities (Note 4) 1,418,727 1,359,203
Deferred service income 22,944 46,423
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TOTAL CURRENT LIABILITIES 2,417,757 2,377,223
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SHAREHOLDERS' (DEFICIT):
Preferred stock - $1 par value:
Authorized - 2,000,000 shares
Issued and outstanding - none
Common stock - $.02 par value:
Authorized - 10,000,000 shares
Issued and outstanding - 2,933,431 58,669 58,669
Paid-in capital 5,641,094 5,641,094
Accumulated (deficit) (7,836,552) (7,756,398)
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TOTAL SHAREHOLDERS' (DEFICIT) (2,136,789) (2,056,635)
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$ 280,968 $ 320,588
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</TABLE>
See notes to financial statements.
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VIKONICS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
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SALES - NET $ 248,030 $ 476,985
COST OF GOODS SOLD 142,412 249,013
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GROSS PROFIT 105,618 227,972
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COSTS AND EXPENSES:
Engineering, research and development 54,670 59,530
Marketing and sales 38,877 34,385
General and administrative 80,171 83,294
Depreciation and amortization 1,530 153
Interest expense 10,524 10,524
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TOTAL COSTS AND EXPENSES 185,772 187,886
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NET (LOSS) INCOME $ (80,154) $ 40,086
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(LOSS) INCOME PER SHARE (Note 6) -
Basic and Diluted $ (.03) $ .01
========= =========
See notes to financial statements.
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VIKONICS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(80,154) $ 40,086
Adjustments to reconcile net (loss) income to net
Cash (used for) provided by operating activities:
Depreciation and amortization 1,530 153
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable 17,550 (93,443)
Inventories 8,625 9,091
Prepaid expenses and other current assets 412 (6,473)
Increase (decrease) in:
Accounts payable 4,489 33,046
Accrued expenses and other liabilities 59,524 39,094
Deferred service income (23,479) (8,763)
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Net cash (used for) provided by operating activities (11,503) 12,791
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and fixtures - net -- (2,555)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of short term notes -- --
Repayment of debt -- --
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Net cash used for financing activities -- --
(DECREASE) INCREASE IN CASH (11,503) 10,236
CASH - MARCH 31 20,680 30,219
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CASH - JUNE 30 $ 9,177 $ 40,455
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See notes to financial statements.
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VIKONICS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. - Financial Statements
The financial statements include the accounts of the Company and Vikonics Canada
Inc., its wholly-owned subsidiary, an entity without any activity during the
periods presented.
In the opinion of the Company, the accompanying unaudited financial statements
contain all necessary adjustments which are all of a normal recurring nature for
the fair presentation of its financial position as of June 30, 2000, the results
of operations for the three months ended June 30, 2000 and 1999, and changes of
cash flows for the three months ended June 30, 2000 and 1999.
The results of operations for the three months ended June 30, 2000 are not
necessarily indicative of the results to be expected for the full year.
Note 2. - Inventories
<TABLE>
<CAPTION>
Inventories consisted of the following: June 30, 2000 March 31, 2000
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<S> <C> <C>
Raw materials $ 39,694 $ 44,962
Work-in-process 9,381 12,275
Finished goods 29,957 30,420
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TOTAL $ 79,032 $ 87,657
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</TABLE>
Note 3. - Notes and Loans Payable
Notes and loans payable consists of:
<TABLE>
<CAPTION>
June 30, 2000 March 31, 2000
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<S> <C> <C>
Amounts due to private investors, directors, and legal
counsel $ 717,728 $ 717,728
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</TABLE>
On June 30, 1993, the Company entered into an amended agreement with private
investors which provided the Company with a loan in the amount of $200,000
repayable in one year together with an interest rate of 9% annum. In July 1993,
one of the private investors assigned $20,000 of the loan along with options to
purchase 40,000 shares of common stock to one of the Company's directors, who
has since resigned from the board.
Additionally, two of the former directors provided the Company with loans
aggregating $120,000 during the months of August and September 1993 payable on
demand with an interest rate of 9% per annum.
On June 24, 1994, the Company entered into an agreement with the above private
investors, former directors, and the Company's retained legal counsel. Pursuant
to the agreement the due date for the investors and former directors loans and
fees payable $(250,000) to legal counsel were extended until the first to occur
of (i) June 30, 1996, (ii) a public financing by the Company, or (iii) a private
financing of the Company of not less than
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$2,500,000. As June 30, 1996 date has been reached, such amounts are now due.
While the Company does not have the ability to pay the amounts due to private
investors, former directors and legal counsel, it has attempted to renegotiate
the terms of payment of these obligations.
On September 17, 1998 the private investors filed a lawsuit in the Superior
Court of New Jersey for the total principal amount of $200,000 together with
accrued interest of $103,000. On June 15, 1999 a Judgment by Default against the
Company was entered in the Superior Court of New Jersey, Bergen County.
The Company will seek a satisfactory resolution of this judgment. There can be
no assurance, however, that the Company will be able to resolve the judgment.
The failure to do so will cause the Company to cease as a going concern.
Additionally, at June 30, 2000, the Company had a remaining balance of $147,728,
which was lent to the Company by two then directors during the Company's second
fiscal quarter of 1995. Both loans are payable on demand with interest at 9% per
annum.
Note 4. - Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
June 30, 2000 March 31, 2000
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Accrued warranty expense $ 38,000 $ 38,000
Accrued salaries, wages, and taxes 500,950 457,328
Accrued professional fees 47,500 40,000
Accrued officers' salaries 171,228 171,228
Accrued interest 613,402 593,878
Other 47,647 58,769
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$ 1,418,727 $ 1,359,203
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Note 5. - Income Taxes
At June 30, 2000 the Company had net operating loss carryforwards available
amounting to approximately $7.3 million, which will expire between 2001 and
2013. There is a remote possibility that net operating loss carryforwards of
approximately $500,000 may not be available. There are no significant
differences in the recognition of income and expenses for tax and financial
reporting purposes. Federal income taxes normally provided for the three months
ended June 30, 1999 have been offset by the effects of the reduction of the
valuation allowance.
Note 6. - Income (Loss) Per Share
Basic and diluted per share data is based on the weighted average number of
common shares outstanding. Common stock equivalents would be anti-dilutive and,
therefore, were not included in the diluted per share computations.
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Item 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
Results of Operations
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The Company's net sales for the three months ended June 30, 2000 were $ 248,000
a decrease of $229,000 or 48.0% from the $477,000 of net sales reported for the
same period a year ago. The decrease is due to sales of approximately $185,000
during the first quarter of fiscal 2000 to the U.S. General Services
Administration for a security system upgrade at a domestic United States Air
Force Base, without corresponding revenues earned from this customer during the
first quarter of fiscal 2001.
Gross profits as a percentage of net sales for the three months ended June 30,
2000 was 42.6% compared to 47.8% during the same period a year ago. The decrease
is primarily due to the lower absorption of overhead expenses in the current
year period due to the reduced sales level.
Engineering, research and development expenses of $55,000 in the quarter ended
June 30, 2000 were 8.3% lower than the $60,000 incurred during the corresponding
quarter in the previous year. This was due to a reduction of part time
engineering staff during the fiscal 2001 first quarter.
Marketing and sales expenses were $39,000 for the three months ended June 30,
2000. This represented an increase of 14.7% from the $34,000 incurred during
fiscal 1999 quarter. This increase was the result of increased travel and
telephone expenses and General Services Administration ("GSA") fees on the
Company's GSA Schedule sales.
General and administrative expenses of $80,000 in the current year quarter were
essentially the same as those expenses incurred during the same period last
year.
Net loss for the three months ended June 30, 2000 was ($80,000) compared to net
income of $40,000 a year ago due to the factors regarding revenue and expenses
described above.
The future viability of the Company will depend upon the Company's success in
raising revenue levels, maintaining low cost levels and, if necessary, raising
additional financing.
Liquidity and Capital Resources
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The Company's continued existence is dependent upon its ability to obtain
contract awards which, in the aggregate, will provide significant revenues in
the immediate future. While there can be no assurance of favorable results, the
Company remains optimistic about obtaining these potential contract awards.
To date, there has been no adverse effect on the Company's ability to perform on
any of its contracts due to its limited working capital. The Company has also
been able to maintain a satisfactory relationship with the majority of its
suppliers and has been able to substitute for dissatisfied vendors, when
necessary. For any large contract that the Company might be awarded in the
future where working capital might hamper its ability to perform, the Company
would attempt to negotiate adequate terms and delivery with the customer and/or,
if necessary, obtain required financing. There can be no assurance, however,
that the Company would be successful in these efforts.
The working capital deficit on June 30, 2000 was ($2,159,000) compared to
($2,080,000) on March 31, 2000. The increase in the working capital deficit is
primarily due to the loss incurred for the three months ended June 30, 2000. At
June 30, 2000 the Company had $9,000 in cash, compared to $21,000 at March 31,
2000.
Accounts receivable decreased by $ 18,000 in the three months ended June 30,
2000 due to the lower sales level in the first fiscal 2001 quarter.
Notes and loans payable of $718,000 at June 30, 2000 consists of amounts due to
private investors, former directors, and legal counsel.
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Pursuant to the agreement the due date for the investors and former directors
loans and fees payable $(250,000) to legal counsel were extended until the first
to occur of (i) June 30, 1996, (ii) a public financing by the Company, or (iii)
a private financing of the Company of not less than $2,500,000. As June 30, 1996
date has been reached, such amounts are now due. While the Company does not have
the ability to pay the amounts due to private investors, former directors and
legal counsel, it has attempted to renegotiate the terms of payment of these
obligations.
On September 17, 1998 the private investors filed a lawsuit in the Superior
Court of New Jersey for the total principal amount of $200,000 together with
accrued interest of $103,000. On June 15, 1999 a Judgment by Default against the
Company was entered in the Superior Court of New Jersey, Bergen County.
The Company will seek a satisfactory resolution of this judgment. There can be
no assurance, however, that the Company will be able to resolve the judgment.
The failure to do so will cause the Company to cease as a going concern.
Accounts payable of $258,000 at June 30, 2000 are comparable to the $254,000 at
March 31, 2000. Accrued expenses and other current liabilities at June 30, 2000
of $1,419,000 are 4.4% greater than the $1,359,000 at March 31, 2000. The
variance is due to an increase in accrued payroll taxes, payroll tax penalties
and interest for the three months ended June 30, 2000.
In total, the net cash (used for) operating activities was ($ 12,000) for the
three months ended June 30, 2000, as compared to $13,000 provided by operating
activities for the three months ended June 30, 1999.
The Company has no significant capital expenditures plans at this time.
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Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
None
11
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Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Vikonics, Inc.
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(Registrant)
August 4, 2000 /s/ John J. Strong
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John J. Strong
President
(duly authorized officer
and principal financial officer)
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