<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission File Number 0-19705
LINKON CORPORATION
------------------
(Exact name of small business issuer as specified in its charter)
Nevada 13-3469932
------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
140 Sherman Street,
Fairfield, Connecticut 06430
----------------------------
(Address of principal executive offices)
(203) 319-3175
------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at June 10, 1996
- ------------------------- ----------------------------
Common Stock, Par Value $.001 Per Share 10,753,252
----------
Transitional Small Business Disclosure Format Check one):
Yes ; No X
---- ----
<PAGE>
LINKON CORPORATION
------------------
FORM 10-QSB
QUARTERLY REPORT
For the Three Months Ended April 30, 1996
<TABLE>
<CAPTION>
Page to Page
------------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheet - April 30, 1996 and 1995
and January 31, 1996 3 - 4
Statements of Operations - Three Months
Ended April 30, 1996 and 1995 5
Statements of Cash Flows - Three Months
Ended April 30, 1996 and 1995 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations 8 - 9
Exhibit I - Calculation of Earnings per Share 10
PART II. Other Information 11
Signatures 12
</TABLE>
<PAGE>
LINKON CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
A S S E T S
-----------
<TABLE>
<CAPTION>
April 30, April 30, January 31,
1996 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Current Assets
- --------------
Cash and Cash Equivalents $ 5,272 $ 90,478 $ 522,569
Certificate of Deposit 64,869 61,135 63,934
Accounts Receivable (Net of Allowance) 674,936 1,265,199 611,387
Notes Receivable 51,000 51,000 51,000
Other Receivables 37,917 103,931 51,213
Inventory 862,447 944,053 888,655
Prepaid Expenses 33,267 11,400 27,406
---------- ----------- -----------
Total Current Assets 1,729,708 2,527,196 2,216,164
---------- ----------- -----------
Machinery & Equipment
- ---------------------
Machinery & Equipment, at cost 1,051,359 923,782 1,046,008
Equipment under Capital Leases 156,965 156,965 156,965
---------- ----------- -----------
1,208,324 1,080,747 1,202,973
Less: Accumulated Depreciation 737,005 570,270 696,283
---------- ----------- -----------
Machinery & Equipment, Net 471,319 510,477 506,690
---------- ----------- -----------
Other Assets
- ------------
Software (Net of Amortization) 945,182 777,719 928,148
Investments, at cost 375,665 375,062 375,182
Prepaid Financing Costs 36,599 47,056 39,213
Deferred Offering Costs -- 49,019 --
Security Deposits 7,695 19,234 19,931
Organization Costs (Net of
Amortization) -- -- --
---------- ----------- -----------
Total Other Assets 1,365,141 1,268,090 1,362,474
---------- ----------- -----------
$3,566,168 $4,305,763 $4,085,328
========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this report.
- 3 -
<PAGE>
LINKON CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
April 30, April 30, January 31,
1996 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
Current Liabilities
- -------------------
Accounts Payable $ 881,230 $ 869,440 $ 1,004,125
Bank Loan Payable 22,730 30,000 30,230
Taxes Payable 18,108 13,615 18,108
Capital Leases Payable -
Current Portion -- 2,278 --
Interest Payable 133,750 66,259 100,000
Officers' Salary Payable 7,272 7,272 7,272
---------- ---------- -----------
Total Current Liabilities 1,063,090 988,864 1,159,735
---------- ---------- -----------
Long Term Liabilities
- ---------------------
Notes Payable, Net 1,255,144 1,287,155 1,251,265
---------- ---------- -----------
Total Long Term Liabilities 1,255,144 1,287,155 1,251,265
---------- ---------- -----------
Commitments and Contingencies -- -- --
- -----------------------------
Stockholders' Equity
- --------------------
Common Stock, $.001 Par Value,
25,000,000 shares authorized,
10,753,252 shares issued and
outstanding (1996),
8,599,716 shares issued and
outstanding (1995) 10,754 8,600 10,754
Capital in Excess of Par Value 9,129,970 6,983,722 9,129,970
Retained Earnings (Accumulated Deficit) (7,892,790) (4,962,578) (7,466,396)
---------- ---------- ----------
Total Stockholders' Equity 1,247,934 2,029,744 1,674,328
---------- ---------- ----------
$3,566,168 $4,305,763 $4,085,328
========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
- 4 -
<PAGE>
LINKON CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended April 30, Ended April 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Revenues $ 404,213 $ 705,694
Cost of Goods Sold 175,260 270,369
---------- ----------
Gross Margin On Sales 228,953 435,325
---------- ----------
Selling, General and
Administrative Expenses 471,776 532,784
Research and Development 140,456 170,758
---------- ----------
612,232 703,542
---------- ----------
Operating Loss ( 383,279) (268,217)
---------- ----------
Other Income (Expense)
- ----------------------
Interest Income 1,631 2,840
Gain on Foreign Currency
Translation ( 217) 1,070
Interest Expense ( 39,006) ( 28,363)
---------- ----------
( 37,592) ( 24,453)
---------- ----------
Loss Before Income Taxes ( 420,871) (292,670)
Income Taxes 5,523 --
---------- ----------
Net Loss $( 426,394) $ (292,670)
========== ==========
Loss Per Share $ (.04) $ (.03)
========== ==========
Weighted Average Number of Shares
Outstanding 10,753,252 8,599,716
========== ==========
Fully Diluted Loss Per Share $ (.04) $ (.03)
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
- 5 -
<PAGE>
LINKON CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended April 30,
1996 1995
------------- ---------------
<S> <C> <C>
Cash Flows From Operating Activities:
- ------------------------------------
Net Income (Loss) $( 426,394) $( 292,670)
Add: Adjustments to Reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation & Amortization 44,601 43,612
Changes in Assets and Liabilities:
Increase in Certificate of Deposit ( 935) ( 863)
(Increase) Decrease in Accounts Receivable ( 63,549) ( 338,132)
(Increase) Decrease in Other Receivables 13,296 ( 6,672)
(Increase) Decrease in Inventory 26,208 170,156
(Increase) Decrease in Prepaid Expense ( 5,861) 46
Increase in Software ( 17,034) ( 57,955)
Increase in Prepaid Financing Costs 2,614 --
Increase in Deferred Offering Costs -- ( 20,000)
(Increase) Decrease in Security Deposits 12,236 6,446
Increase (Decrease) in Accounts Payable ( 122,895) 69,211
Increase (Decrease) in Officers Salary
Payable -- ( 60)
Increase in Interest Payable 33,750 22,500
Increase (Decrease) in Taxes Payable -- 1,420
----------- -----------
Net Cash Used in Operating Activities ( 503,963) ( 402,961)
----------- -----------
Cash Flows From Investing Activities:
- ------------------------------------
Cash Paid to Purchase Equipment ( 5,351) ( 94,207)
Investment in Non-Marketable Securities ( 483) ( 237)
----------- -----------
Net Cash Provided by (Used in) Investing Activities ( 5,834) ( 94,444)
----------- -----------
Cash Flows from Financing Activities:
- ------------------------------------
Proceeds from Sale of Common Stock -- --
Principal Payments on Debt ( 7,500) --
Principal Payments Under Capital Lease Obligations -- ( 4,305)
----------- -----------
Net Cash Provided by (Used in) Financing Activities ( 7,500) ( 4,305)
----------- -----------
Net Increase (Decrease) in Cash ( 517,297) ( 501,710)
Cash and Cash Equivalents at Beginning of Year 522,569 592,188
----------- -----------
Cash and Cash Equivalents at End of Period $ 5,272 $ 90,478
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this report.
- 6 -
<PAGE>
LINKON CORPORATION
------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
APRIL 30, 1996
--------------
1) In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments, (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of
April 30, 1996 and 1995, and January 31, 1996, and the results of operations
for the three month periods ended April 30, 1996 and 1995 and cash flows for
the three month periods ended April 30, 1996 and 1995.
The accounting policies followed by the Company are set forth in Note 3 to
the Company's financial statements in the Linkon Corporation. Annual
Report - January 31, 1996.
2) ANALYSIS OF STOCKHOLDERS' EQUITY:
---------------------------------
<TABLE>
<CAPTION>
Capital
Outstanding in Excess Accumulated
Shares Amount of Par Value Deficit
----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
Balance January 31, 1996 10,753,252 $10,754 $9,129,970 $(7,466,396)
Loss for Three Months
Ended April 30, 1996 -- -- -- ( 426,394)
----------- ------- ---------- -----------
Balance - April 30, 1996 10,753,252 $10,754 $9,129,970 $(7,892,790)
=========== ======= ========== ===========
</TABLE>
3) SUBSEQUENT EVENTS:
-----------------
On June 6, 1996, the Company sold its investment in Concentric Network
Corporation for approximately $1,020,000. The Company will report a capital
gain in its second quarter of approximately $675,000 as a result of this
transaction.
- 7 -
<PAGE>
LINKON CORPORATION
------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------------------------------------------
Net Loss
- --------
The Company reported a net loss of $426,394 for the first three months of
fiscal 1997 as compared to a net loss of $292,670 for the same period during
the prior year. This was due to decreased sales levels resulting from a delay
in the release of the Company's FC4000/TM/ Maestro/TM/ System, which was
partially offset by planned decreases in operating expenses. While the net
loss on a period to period comparison increased 46%, the net loss decreased 59%
from the previous quarter ended January 31, 1996.
Revenues
- --------
For the three months ended April 30, 1996 revenues decreased approximately
$301,500 from the three month period ended April 30, 1995, a decrease of 43%.
This was entirely the result of decreased sales of the Company's products
resulting from a delay in the release of the Company's FC4000/TM/ Maestro/TM/
System. Revenues for the three months ended April 30, 1996 increased
approximately $167,000 from the three month period ended January 31, 1996, an
increase of 70%.
During the three months ended April 30, 1996, the Company added a new Vice
President of Operations. No change was made to the administrative staff during
the three months ended April 30, 1996. As the Company grows or as finances
will permit, additional sales, administrative, technical and customer service
staff will be hired. Subject to adequate financing, efforts have been made and
implemented to maintain a streamlined operation utilizing external support
arrangements where practicable or necessary.
Cost of sales
- -------------
Cost of goods sold, consisting of parts, supplies and manufacturing costs for
the Company's hardware and software products, constituted approximately 43% and
38% of revenues for the three months ended April 30, 1996 and 1995
respectively. Management attributes the change in cost of goods sold to the
changes in the mixture of products sold. The Company anticipates that its cost
of goods sold will remain in the 30-40% of revenues range. The cost of goods
sold varies with each product line, with software having little or no material
cost (approximately 5-10%). The primary costs incurred by the Company are for
materials and equipment relating to its hardware products, which also carry
lower profit margins than the Company's software products. The Company
manufactures and assembles all hardware through contracted third party suppliers
under the direct supervision of the Company's management. Management anticipates
opportunities for increased gross profit from research and development projects
aimed at increasing efficiency while decreasing cost. Gross profit margins for
the Company's hardware and software products, currently in the 55% - 65% range,
may not, however, materially change with increased revenues (notwithstanding
anticipated lower costs of production), due to anticipated increased market
competition.
- 8 -
<PAGE>
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses decreased 11% from approximately
$533,000 to approximately $472,000 from April 30, 1995 to April 30, 1996.
Management attributes this decrease in selling, general and administrative
expenses to planned reductions in operating expenses including the closing of
the Company's New York City office. Selling, general and administrative expenses
for the three months ended April 30, 1996 and 1995 constituted approximately
117% and 75% of sales for such periods, respectively. This increase for fiscal
1997 when compared with fiscal 1996 was due primarily to reduced sales levels,
which was partially offset by the reduction of expenses.
Research, Development and Software
- ----------------------------------
The Company incurred research, development and software costs of approximately
$158,000 and $323,000 for the three month periods ended April 30, 1996 and 1995
respectively. These amounts consist of internal salaries, outside consulting
services, equipment and fixed overhead costs. The Company expects research,
development and software costs to increase in future periods as finances permit.
Liquidity and Capital Resources
- -------------------------------
To date, the Company has funded operations principally from receipt of proceeds
from the private placements of debt and equity securities, the exercise of
warrants, interest income earned from the investment of the proceeds in interest
earning assets and revenues from operations. As a result of a delay in the
release of the Company's new Maestro/TM/ system, the Company's revenues and cash
flow took a marked drop in the second half of fiscal 1996. The Company is still
feeling the effects of this delay, but anticipates that the current year's
operations will provide the Company with sufficient operating capital to meet
the Company's obligations.
On June 6, 1996, the Company sold its investment in Concentric Network
Corporation for approximately $1,020,000. The Company will report a capital gain
in its second quarter of approximately $675,000 as a result of this transaction.
Management believes it has sufficient resources available to meet its liquidity
needs for the next year. Management believes that long-term liquidity needs will
be met from increased hardware and software sales as well as additional
financing from investors either through private placements of the Company's
securities, exercise of outstanding warrants, or borrowing from outside third
parties. Due to the planned introduction of new and improved products and the
anticipated growth related to, among other things, the manufacturing of hardware
and software products and the expansion of operations, management anticipates
there will be a continuing trend and need for cash resources. Such demand on the
Company's resources will require the Company, in the long term, to obtain
additional financing and increased sales volume to meet anticipated commitments
for raw materials and personnel.
- 9 -
<PAGE>
PART 1. FINANCIAL INFORMATION EXHIBIT I
-------------------------------
LINKON CORPORATION
------------------
CALCULATION OF EARNINGS PER SHARE
---------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
April 30, 1996 April 30, 1995
-------------- --------------
<S> <C> <C>
Loss for the Period $( 426,394) $(292,670)
========== =========
Weighted Number of Shares Outstanding 10,753,252 8,599,716
========== =========
Loss Per Share: $ (.04) $ (.03)
========== =========
</TABLE>
- 10 -
<PAGE>
LINKON CORPORATION
------------------
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibit - Calculation of Earnings per Share - Exhibit I.
b. Reports on Form 8-K - There were no reports on Form 8-K
filed for the three months ended April 30, 1996.
- 11 -
<PAGE>
LINKON CORPORATION
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LINKON CORPORATION
Registrant
DATED: June 11, 1996 /s/ Lee W. Hill
----------------------------
BY: LEE W. HILL
CHIEF EXECUTIVE OFFICER
DATED: June 11, 1996 /s/ Kenneth S. Weiner
----------------------------
BY: KENNETH S. WEINER
CHIEF FINANCIAL OFFICER
- 12 -
<PAGE>
LINKON CORPORATION
------------------
INDEX TO EXHIBITS
-----------------
c. Exhibits
Exhibit
No. Description of Document
------- -----------------------
27 Financial Data Schedule for the period ended
April 30, 1996
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> APR-30-1996
<CASH> 5,272
<SECURITIES> 64,869
<RECEIVABLES> 1,027,587
<ALLOWANCES> 263,734
<INVENTORY> 862,447
<CURRENT-ASSETS> 1,729,708
<PP&E> 1,208,324
<DEPRECIATION> 737,005
<TOTAL-ASSETS> 3,566,168
<CURRENT-LIABILITIES> 1,063,090
<BONDS> 1,255,144
0
0
<COMMON> 10,754
<OTHER-SE> 1,237,180
<TOTAL-LIABILITY-AND-EQUITY> 3,566,168
<SALES> 404,213
<TOTAL-REVENUES> 404,213
<CGS> 175,260
<TOTAL-COSTS> 175,260
<OTHER-EXPENSES> 612,232
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,006
<INCOME-PRETAX> (420,871)
<INCOME-TAX> 5,523
<INCOME-CONTINUING> (426,394)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (426,394)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
