<PAGE> 1
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 1999
[ ] 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)
<TABLE>
<S> <C>
NEVADA 13-3469932
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
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.
<TABLE>
<S> <C>
CLASS OUTSTANDING AT JUNE 17, 1999
COMMON STOCK, PAR VALUE $.001 PER SHARE 13,666,478
==========
</TABLE>
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES ; NO X
<PAGE> 2
LINKON CORPORATION
FORM 10-QSB
QUARTERLY REPORT
FOR THE THREE MONTHS ENDED APRIL 30, 1999
<TABLE>
<CAPTION>
Page to Page
------------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet - April 30, 1999 and 3-4
January 31, 1999
Consolidated Statements of Operations - Three Months
Ended April 30, 1999 and 1998 5
Consolidated Statements of Cash Flows - Three Months
Ended April 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Exhibit I - Calculation of Earnings per Share 11
PART II. Other Information 12
Item 1 Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE> 3
PART 1- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LINKON CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
A S S E T S
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1999 1999
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 83,736 $ 376,596
Accounts Receivable (Net of Allowance) 30,271 191,358
Notes Receivable -- --
Other Receivables -- --
Inventory 614,352 879,366
Prepaid Expenses 8,969 20,496
----------- -----------
Total Current Assets 737,328 1,467,816
----------- -----------
MACHINERY & EQUIPMENT
Machinery & Equipment, at cost 1,629,967 1,629,018
Less: Accumulated Depreciation (1,278,467) (1,227,467)
----------- -----------
Machinery & Equipment, Net 351,500 401,551
----------- -----------
OTHER ASSETS
Software (Net of Amortization) 875,306 894,845
Investments, at cost 25,000 25,000
Prepaid Financing Costs 5,228 7,843
Security Deposits 18,563 18,563
----------- -----------
Total Other Assets 924,097 946,251
----------- -----------
$ 2,012,925 $ 2,815,618
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
3
<PAGE> 4
LINKON CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1999 1999
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 1,358,405 $ 1,341,743
Notes Payable-Current 825,000 559,678
Customer Advance Deposits 21,000 216,128
Accrued Salaries -- --
Taxes Payable -- 1,000
Interest Payable 90,599 54,245
Accrued Expenses 218,510 369,495
------------ ------------
Total Current Liabilities 2,513,514 1,783,707
------------ ------------
LONG TERM LIABILITIES
Notes Payable, Net 1,037,217 1,020,094
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common Stock, $.001 Par Value,
24,900,000 shares authorized,
13,666,478 shares issued and
outstanding 13,667 13522
Preferred Stock, $.001 Par Value
1,000,000 shares authorized,
none issued and outstanding
Capital in Excess of Par Value 11,872,579 11,717,549
Retained Earnings (Accumulated Deficit) (13,424,052) (12,477,836)
Total Stockholders' Equity (1,537,806) (746,765)
------------ ------------
$ 2,012,925 $ 2,815,618
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
4
<PAGE> 5
LINKON CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED APRIL 30, ENDED APRIL 30,
1999 1998
------------ ------------
<S> <C> <C>
Gross Revenues $ 396,101 $ 868,623
Cost of Goods Sold - Product 288,377 544,052
- Software amortization 96,120 96,120
------------ ------------
384,497 640,172
------------ ------------
Gross Margin On Sales 11,604 228,451
Selling, General and
Administrative Expenses 785,342 784,396
Research and Development 97,233 79,855
------------ ------------
882,575 864,251
------------ ------------
Operating Income (Loss) (870,971) (635,800)
OTHER INCOME (EXPENSE)
Interest Income 279 1,775
Interest Expense (75,524) (49,108)
------------ ------------
(75,245) (47,333)
------------ ------------
Income(Loss) Before Income Taxes (946,216) (683,133)
Income Taxes -- 1,000
------------ ------------
Income (Loss)Before Extraordinary Item (946,216) (684,133)
Extraordinary item - net gain on pay off
of note payable -- 109,914
------------ ------------
Net Income(Loss) $ (946,216) $ (574,219)
============ ============
Earnings(Loss)per share
Before extraordinary item ($ 0.07) ($ 0.06)
Extraordinary Item -- $ 0.01
------------ ------------
Net Earnings(Loss) ($ 0.07) ($ 0.05)
------------ ------------
Average shares outstanding 13,519,854 11,502,502
------------ ------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
5
<PAGE> 6
LINKON CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)- Before Extraordinary Item $ (946,216) $ (684,133)
Add: Adjustments to Reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation & Amortization 179,565 155,414
Stock and Warrants issued for services 75,000 --
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 161,087 (532,483)
(Increase) Decrease in Other Receivables -- 1,972
(Increase) Decrease in Inventory 265,014 (176,029)
(Increase) Decrease in Prepaid Expenses 11,527 (23,141)
(Increase) Decrease in Software (76,581) (83,186)
(Increase) Decrease in Prepaid Financing Cost 2,615 2,615
(Increase) Decrease in Security Deposits -- (1,431)
Increase (Decrease) in Accounts Payable 16,662 63,197
Increase (Decrease) in Accrued Expenses (150,985) (143,410)
Increase (Decrease) in Interest Payable 36,354 (220,327)
Increase (Decrease) in Accrued Salaries -- 45,000
Increase (Decrease) in Customer Deposits (195,128) (90,349)
Increase (Decrease) in Taxes Payable (1,000) (377)
----------- -----------
Net Cash Used in Operating Activities (622,086) (1,686,668)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash Paid to Purchase Equipment (949) (42,328)
Investment in Non-Marketable Securities -- (25,000)
----------- -----------
Net Cash Provided by (Used in) Investing Activities (949) (67,328)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Common Stock 80,175 1,817,076
Proceeds from issuance of Note Payable 300,000 1,100,000
Principal payments on Notes Payable (50,000) (900,000)
----------- -----------
Net Cash Provided by (Used in) Financing Activities 330,175 2,017,076
-----------
Net Increase (Decrease) in Cash (292,860) 263,080
Cash and Cash Equivalents at Beginning of Period 376,596 511,961
----------- -----------
Cash and Cash Equivalents at End of Period $ 83,736 $ 775,041
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this report.
6
<PAGE> 7
LINKON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999
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, 1999 and
1998, and January 31, 1999, and the results of operations for the three month
periods ended April 30, 1999 and 1998 and cash flows for the three month periods
ended April 30, 1999 and 1998.
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 on
Form 10-KSB for the fiscal year ended January 31, 1999.
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, 1999 13,521,578 $ 13,522 $ 11,717,549 $(12,477,836)
Issuance of 129,900 $ 130 $ 80,045 --
Common Stock, Net of
Expenses
Value assigned to stock and 15,000 15 74,985 --
Warrants issued for services
Loss for Three Months
Ended April 30, 1998 -- -- -- (946,216)
------------ ------------ ------------ ------------
Balance - April 30, 1999 13,666,478 $ 13,667 $ 11,872,579 $(13,424,052)
============ ============ ============ ============
</TABLE>
3) FINANCING OF OPERATIONS:
See Management's Discussion and Analysis- Liquidity and Capital Resources as to
the Company's need for additional capital and any plans for the future financing
of its operations.
4)VALUE ASSIGNED TO WARRANTS
See Management's Discussion and Analysis- Liquidity and Capital Resources,
Issuance of Notes Payable/Gain on Payoff of Note Payable, as to issuance of
warrants.
7
<PAGE> 8
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On May 10, 1999, Linkon Corporation (hereinafter referred to as "Linkon" or the
"Company") laid off all but one employee due to the fact that the Company has
run out of cash. While the Company still hopes to attract equity capital, rehire
employees and continue its business plan, and while the Company's officers are
actively endeavoring to raise equity capital, there can be no assurances that it
will be able to do so. The remainder of this Item 1 describes the Company's
business on the assumption that the Company will be able to continue its
operations.
NET INCOME (LOSS)
The Company reported a net loss of $946,216 for the first
three months of fiscal 1999 as compared to a net loss of $574,219 for the same
period during the prior year. This increase in the net loss reported by the
Company was due to the following factors:
Revenues decreased from $868,623 in the first three months of
fiscal 1999 to $396,101 in the same three months of fiscal 2000. This is
discussed more fully under the section entitled "Revenues" below.
Gross Margin decreased from 26% in the first three months of
fiscal year 1999 to 3% in the same three months of fiscal year 2000. This is
more fully discussed under the section entitled "Cost of Goods Sold" below.
REVENUES
For the three months ended April 30, 1999 revenues decreased
by $472,522 from the three month period ended April 30, 1998, a decrease of 54%.
This decrease was due mainly to a loss of sales activity from AT&T and Sequel,
which combined provided approximately 69% of the Company's revenues in Fiscal
1999. The Company's total order backlog as of April 30, 1999 was approximately
$6,000, and as of June 18, 1999 was approximately $192,000. Substantially the
entire backlog is for products scheduled to be shipped during the second quarter
of fiscal 1999.
COST OF GOODS SOLD
Cost of goods sold for products, consisting of parts, supplies
and manufacturing costs for the Company's hardware and software products,
including software amortization, were $384,497 and $640,173, or 97% and 74% of
revenues, for the three months ended April 30, 1999 and 1998, respectively.
Excluding software amortization, Cost of goods sold for products, consisting of
parts, supplies and manufacturing costs for the Company's hardware and software
products were $288,377 and $544,053, or 73% and 63% of revenues, for the three
months ended April 30, 1999 and 1998, respectively.
Management attributes the increase in cost of goods sold as a
percentage of revenues to sales discounts provided to customers to stimulate
sales in a highly competitive market. The cost of goods sold varies with each
product line, with software having less material cost than hardware. The primary
costs incurred by the Company are for materials and equipment relating to its
hardware products. The Company manufactures and assembles all hardware through
contracted third party suppliers under the direct supervision of the Company's
management.
While management continues to believe that its products can
ultimately be sold with higher margins, management realizes the need to gain
market share for its products and will, for the near term, continue to be
aggressive in its pricing policy. However, management also believes that the
cost of sales will go down as customers begin to order enhanced software
features, which features carry significantly lower costs as a percentage of
revenues than the Company's hardware products, as well as a result of
manufacturing and research and development projects aimed at increasing
efficiency while reducing cost.
Software amortization costs for the three months ending April
30, 1999 and 1998, were $96,120 and $96,120,
8
<PAGE> 9
respectively. These amounts were 24% and 11% of revenues for the three months
ending April 30, 1999 and 1998, and are included in the Cost of Goods Sold total
percentage of 97% and 74% for the above periods being presented.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, General and Administrative expenses for the
three months ended April 30, 1999 and 1998 were
$785,342 and $784,396, respectively, essentially unchanged. This constituted
approximately 198% and 90% of revenues for the three months ended April 30, 1999
and 1998, respectively. Selling, General and Administrative expenses will be
greatly reduced going forward unless and until the Company is able to rehire its
workforce.
RESEARCH, DEVELOPMENT AND SOFTWARE
The Company incurred total research, development and software
costs of approximately $170,133 and $152,755 for the three months ended April
30, 1999 and 1998, respectively. It is the policy of the Company to capitalize
research and development costs that are incurred subsequent to the establishment
of technological feasibility to produce the finished product. For the periods
ending April 30, 1999 and 1998 the amounts capitalized were $72,900 for both
periods. The increase in research and development costs was primarily due to
increases in staffing to support the continued development efforts on the
LinkNetTM product line. These amounts consist of internal salaries, outside
consulting services, equipment and fixed overhead costs. Research and
Development expenses will be greatly reduced going forward unless and until the
Company is able to rehire its personnel.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements to date have been
to fund losses from operations. In addition, from time to time the Company has
required capital to fund increases in inventory of certain products necessary
for the Company to sell such products. The Company has funded its capital
requirements through the receipt of proceeds from private placements of
convertible debt and equity (see below), the exercise of warrants, interest
earned from the investment of such proceeds in interest earning assets,
factoring facilities (see below) and revenues from operations. During the three
months ended April 30, 1999 the net cash deficit from operating activities was
approximately $622,086, net cash provided by financing activities was $330,175,
and net cash used for investment activities was approximately $1,000. This
resulted in a net decrease in cash during the three months ended April 30, 1999
of approximately $293,000, decreasing the Company's cash and cash equivalents
from approximately $377,000 as of January 31, 1999 to approximately $84,000 as
of April 30, 1999. As of April 30, 1999, the Company's working capital position
(current assets minus current liabilities) was negative by approximately
$1,776,000 as compared to January 31, 1999 when it was negative by approximately
$1,074,473. As of June 18, 1999, the Company had cash on hand of approximately
$25,000. By any measure, the Company is currently insolvent.
The Company needs to raise cash through financing activities
(presumably through the sale of equity securities and/or convertible debt,
and/or the sale or licensing of its technology) in the very near future in order
to be able to fund its continuing losses and recommence its operations. In fact,
if the Company is not able to raise a substantial amount of new capital by the
end of June, 1999, it will probably have little choice other than allowing its
assets to be seized by creditors or seeking protection under federal bankruptcy
law.
During the period of 2/1/99 and 4/30/99, the Company has raised approximately
$380,000 through a combination of stock option and warrant exercises($80,000)
and short term debt financing($300,000).
The Company does not currently contemplate any significant
capital expenditures during fiscal 2000.
The Company's ability to have adequate capital for the fiscal
year ending on January 31, 2000 and periods thereafter (including the ability to
repay the $1,100,000 due to the RG Fund in April 2000) will be dependent upon
the Company's ability to both raise additional capital and, after recommencing
operations, gain market acceptance of its products and/or raise additional
capital.
The Company does not believe that, except as stated herein,
any contingencies exist which would have a material adverse effect on the
Company's financial condition, future operating results or liquidity.
9
<PAGE> 10
YEAR 2000 ISSUES
The "Year 2000 Issue" results from computer programs being written using two
digits, instead of four, to define a given year. Programs running time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000, which could result in disruptions to various activities and operations,
miscalculations and even system failures.
The Company believes, after investigation, that all software and hardware
products that it is currently in the process of manufacturing (directly or
through vendors) are Year 2000 compliant. However, the Company usually sells
such products "bundled" with hardware and software components obtained from
third party vendors. Due to the lay-off of personnel, the Company is not
currently able to continue its investigation and written inquiry of its
suppliers as to whether all of these bundled components are Year 2000 compliant,
and that all such components are Year 2000 compliant, or will after modification
be compliant, during the first half of fiscal 2000. The Company believes, after
investigation, that its own software operating systems are Year 2000 compliant.
The Company has successfully completed an upgrade to the Escape platform sold to
its largest customer, AT&T, for Y2K compliance. Funds for such costs have not
been reserved for, and therefore as expended, will have a direct negative impact
on the Company's future income.
If, however, the Company, its suppliers and other third parties with whom the
Company maintains business relations are unable to resolve any arising Year 2000
problems in a timely manner, risk to the Company's financial condition could
result. In addition, in the event that the economy as a whole is materially and
adversely effected by widespread interruptions, or by failures of key
infrastructure providers (such as banks and utilities), or in the event that the
computer and software industry are disrupted generally by Year 2000 glitches, it
is likely that the Company's financial condition and results of operations would
be materially adversely effected.
Based upon preliminary data currently in its possession, the Company does not
expect the costs of Year 2000 compliance to have a material adverse effect on
the Company or its results of operation, financial condition or future cash
flows. Nonetheless, employee hours that could otherwise be utilized for other
purposes will have to be spent resolving Year 2000 issues and making bundled
products, such as the Escape platform, Year 2000 compliant.
FORWARD LOOKING INFORMATION
The statements in this Annual Report on Form 10-KSB that are not statements
of historical fact constitute "forward-looking statements." Said forward-
looking statements involve risks and uncertainties which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performances or achievements, expressly predicted or
implied by such forward-looking statements. These forward-looking statements are
identified by their use of forms of such terms and phrases as "expects,"
"intends," "goals," "estimates," "projects," "plans," "anticipates," "should,"
"future," "believes," and "scheduled."
The important factors which may cause actual results to differ from the
forward-looking statements contained herein include, but are not limited to, the
following: general economic and business conditions; competition; success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence or absence of adverse publicity; changes in business strategy or
development plans; the ability to retain key management; availability, terms and
deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs;
availability and costs of raw materials and supplies; and changes in, or failure
to comply with, government regulations. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this filing will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and expectations of the Company will be achieved.
10
<PAGE> 11
EXHIBIT I
LINKON CORPORATION
CALCULATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
APRIL 30, 1999 APRIL 30, 1998
-------------- --------------
<S> <C> <C>
Loss for the Period $ (946,216) $ (574,219)
=============== ============
Weighted Number of Shares Outstanding 13,519,854 11,502,502
=============== ============
Loss Per Share: $ (.07) $ (.05)
=============== ============
</TABLE>
11
<PAGE> 12
LINKON CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
By complaint dated January 4, 1999, Syrinx Speech Systems Pty. Limited
commenced a civil action against Linkon in the Connecticut Superior Court,
Syrinx Speech Systems Pty. Ltd. v. Linkon Corp., CV-99-0358989-S, alleging
payment due and owing on invoices for services performed. In conjunction with
and based upon the complaint, Syrinx applied for a prejudgment attachment
against Linkon in the amount of $1 million. Following negotiations, including
with respect to the quality and nature of services performed and to be performed
by Syrinx, Linkon and Syrinx entered into a settlement agreement dated April 5,
1999. Under the terms of the settlement agreement, Linkon agreed to have
judgment entered against it in the amount of $802,500.00, and judgment in that
amount has been entered against Linkon. As part of the settlement agreement,
Syrinx agreed that it would not execute upon the judgment until June 1, 1999,
provided that Linkon remains in compliance with the conditions of the settlement
agreement, which include that Linkon make an installment payment of $30,000 by
May 1, 1999 (which was paid) and pay to Syrinx an adjustable percentage of new
equity investment toward satisfaction of the judgment. Because Linkon failed to
comply with the conditions of the settlement agreement, Syrinx is currently
entitled to execute immediately upon the judgment to recover from Linkon the
amount of the judgment (less any payments made by Linkon toward the judgment
pursuant to the settlement agreement), plus reasonable costs of execution,
including attorneys' fees. Until such time as the judgment amount of $802,500.00
is paid to Syrinx in accordance with the terms of the settlement agreement, the
restrictions set forth in the settlement agreement remain in effect, including
that Linkon will not incur or assume debt, encumbrances, liens, conditional
sales, lease commitments or a disposal of assets except as provided for in the
settlement agreement.
In a separate matter, Linkon has entered into a settlement agreement
with Devendra Bhagat ("Bhagat"). In response to a demand for payment on a
Convertible Subordinated Debenture previously issued to Bhagat by Linkon in the
amount of $100,000.00, Linkon agreed to make payment on the debenture. By
agreement dated December 22, 1998, Linkon agreed to pay Bhagat $106,335.62 in
principal and interest in four (4) installments, the last installment to be paid
no later than May 17, 1999. Linkon has paid the first three (3) installments in
the aggregate amount of $78,616.44, leaving a balance of $25,219.18. As part of
the consideration for the settlement agreement with Bhagat, Linkon signed an
affidavit of confession of judgment which would allow Bhagat, upon a default by
Linkon under the settlement agreement, to have judgment entered in New York
Supreme Court against Linkon for any remaining balance due under the December
22, 1998 settlement agreement. Linkon has defaulted on the last payment and
Bhagat has seized $11,000 thus far in Linkon's bank account to satisfy such
default.
Item 2. Changes in Securities and Use of Proceeds
On February 12, 1999, the Company issued 15,000 shares of common stock, and
warrants to purchase an additional 30,000 shares of common stock at a price of
$1.50 per share, to Morgen, Evan and Co., Inc., as additional consideration for
consulting services relating to the possibility of the Company entering into a
strategic alliance with a Japanese based company. The Company believes that the
issuance was exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), by virtue of the exemption set forth in
Section 4(2) thereof.
Item 3. Defaults Upon Senior Securities
Linkon is currently in default of the following:
- Promissory note to RG Capital Fund in the amount of $1,100,000
for interest payments due April 30, 1999.
- Promissory note to James Scibelli in the amount of $200,000, for
principal and interest payments due May 17, 1999.
- Promissory note to Woodland Partners in the amount of $300,000,
for principal and interest payments due June 9, 1999.
12
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description of Document
--- -----------------------
<S> <C>
27 Financial Data Schedule for the period ended April
30, 1999
(filed separately herewith)
b. Reports on Form 8-K
</TABLE>
There were no reports on Form 8-K filed for the three months ended April 30,
1999.
13
<PAGE> 14
LINKON CORPORATION
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LINKON CORPORATION
------------------
Registrant
DATED: June 21, 1999 /s/ Lee W. Hill
----------------
BY: LEE W. HILL
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATED: June 21, 1999 /s/ Thomas V. Cerabona
-----------------------
BY: THOMAS V. CERABONA
SENIOR VICE PRESIDENT
PRINCIPAL ACCOUNTING OFFICER
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description of Document
--- -----------------------
<S> <C>
27 Financial Data Schedule for the period ended
April 30, 1999(1)
</TABLE>
- ------------------
(1) Submitted separately, electronically.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET DATED AS OF APRIL 30, 1999 AND THE
COMPANY'S CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> APR-30-1999
<CASH> 83,736
<SECURITIES> 0
<RECEIVABLES> 72,721
<ALLOWANCES> 42,000
<INVENTORY> 614,352
<CURRENT-ASSETS> 737,328
<PP&E> 1,629,967
<DEPRECIATION> 1,278,467
<TOTAL-ASSETS> 2,012,925
<CURRENT-LIABILITIES> 2,513,514
<BONDS> 1,037,217
0
0
<COMMON> 13,667
<OTHER-SE> (1,524,139)
<TOTAL-LIABILITY-AND-EQUITY> 2,012,925
<SALES> 396,101
<TOTAL-REVENUES> 396,101
<CGS> 384,497
<TOTAL-COSTS> 384,497
<OTHER-EXPENSES> 882,575
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,524
<INCOME-PRETAX> (946,216)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (946,216)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
