UNITED STATES
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 period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT OF 1934
For the transition period from __ to __
Commission File No. 0-22744
VIKING CAPITAL GROUP, INC.
--------------------------
(Exact name of small business issuer as specified in its charter)
Utah 87-0442090
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Two Lincoln Centre, Suite 300, 5420 LBJ FWY, Dallas, Texas 75240
----------------------------------------------------------------
(Address of principal executive offices)
(972) 386-9996
---------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
As of June 30, 1999, approximately 29,649,073 shares of Common Stock of the
issuer were outstanding. As of June 30, 1999, 100,000 shares of Class B Common
Stock of the issuer were outstanding.
<PAGE>
VIKING CAPITAL GROUP, INC.
INDEX
Page
Number
----------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 3
Consolidated Statements of Operations - For the three months
ended June 30, 1999 and 1998, and for the period from inception
(November 12, 1986) to June 30, 1999 5
Consolidated Statements of Operations - For the six
months ended June 30, 1999 and 1998, and for the period from inception
(November 12, 1986) to June 30, 1999 6
Consolidated Statements of Cash Flows - For the six months
ended June 30, 1999 and 1998, and for the period from inception
(November 12, 1986) to June 30, 1999 7
Notes to Consolidated Condensed Financial Statements 9
Item 2. Management's Discussion and Analysis or Plan of Operations. 11
PART II - OTHER INFORMATION
Item 5. Other Information 12
Item 6. Exhibits 13
SIGNATURES 14
EXHIBITS 15
2
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
ASSETS
------
(Unaudited)
June 30, December 31,
1999 1998
CURRENT ASSETS ------------ ------------
<S> <C> <C>
Cash $ 5,946 $ 47,506
Accounts receivable -- 5,193
Notes and other accounts receivable and accrued interest 112,463 53,695
------------ ------------
Total current assets 118,409 106,394
------------ ------------
OFFICE FURNITURE, EQUIPMENT, SOFTWARE AND
CAPITALIZED SOFTWARE DEVELOPMENT COSTS 753,590 708,949
OTHER ASSETS 90,359 114,929
------------ ------------
TOTAL ASSETS $ 962,358 $ 930,272
============ ============
</TABLE>
-3-
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
(Unaudited)
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 227,923 $ 456,003
Accrued officer's payroll 776,462 649,793
Lease obligation, current portion 31,794 39,940
Note payable and accrued interest 157,261 314,249
----------- -----------
Total current liabilities 1,193,440 1,459,985
----------- -----------
LONG-TERM DEBT
Obligations under capital leases, less current portion 20,219 26,153
----------- -----------
Total liabilities 1,213,659 1,486,138
----------- -----------
STOCKHOLDERS' DEFICIT
Preferred stock $1.00 par value; 50,000,000 shares authorized;
no shares issued and outstanding -- --
Common stock $0.001 par value; 150,000,000 shares authorized;
30,174,698 and 26,357,431 issued and outstanding as of June
30, 1999 and December 31, 1998, respectively 30,174 26,357
Common stock Class B $0.001 par value; 100,000 shares
authorized and outstanding 100 100
Paid-in capital 8,570,693 7,170,190
Deficits accumulated in the development stage (8,058,028) (7,082,244)
----------- -----------
542,939 114,403
----------- -----------
Less treasury stock - 525,625 shares at cost (41,206) (41,206)
----------- -----------
Less stock issued for notes receivable (753,034) (629,063)
----------- -----------
Total stockholders' deficit (251,301) (555,866)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 962,358 $ 930,272
=========== ===========
</TABLE>
-4-
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, 1999 and 1998 and
Period from November 12, 1986 (inception) to June 30, 1999
Three months ended Period from
June 30, November 12, 1986
1999 1998 to June 30, 1999
------------ ------------ -----------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ 441,382
Cost of Revenue -- -- 68,119
------------ ------------ ------------
Gross Profit -- -- 373,263
------------ ------------ ------------
Cost and expenses
Depreciation and amortization 11,686 8,336 101,861
General and administrative expenses 487,205 327,344 8,096,325
------------ ------------ ------------
Total cost and expenses 498,891 335,680 8,198,186
------------ ------------ ------------
Loss from operations (498,891) (335,680) (7,824,923)
Other income(expenses)
Interest income 12,917 12,206 70,308
Interest and penalty expense (5,764) (5,367) (236,846)
Other 6,000 -- (35,346)
------------ ------------ ------------
Total other income(expense) 13,153 6,839 (201,884)
------------ ------------ ------------
Loss before income taxes (485,738) (328,841) (8,026,807)
Income tax provision -- -- (32)
------------ ------------ ------------
Net loss $ (485,738) $ (328,841) $ (8,026,839)
============ ============ ============
Loss per common share attributable to
common stockholders
Basic and Fully Diluted $ (.016) $ (.014)
Weighted average common shares outstanding 29,434,226 23,017,450
</TABLE>
-5-
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six months ended June 30, 1999 and 1998 and
Period from November 12, 1986 (inception) to June 30, 1999
Six months ended Period from
June 30, November 12, 1986
1999 1998 to June 30, 1999
------------ ------------ -----------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ 441,382
Cost of Revenue -- -- 68,119
------------ ------------ ------------
Gross Profit -- -- 373,263
------------ ------------ ------------
Cost and expenses
Depreciation and amortization 21,792 15,989 101,861
General and administrative expenses 964,359 675,039 8,096,325
------------ ------------ ------------
Total cost and expenses 986,152 691,028 8,198,186
------------ ------------ ------------
Loss from operations (986,152) (691,028) (7,824,923)
Other income(expenses)
Interest income 23,227 21,977 70,308
Interest and penalty expense (14,774) (16,941) (236,846)
Other 1,914 -- (35,346)
------------ ------------ ------------
Total other income(expense) 10,367 5,036 (201,884)
------------ ------------ ------------
Loss before income taxes (975,785) (685,992) (8,026,807)
Income tax provision -- -- (32)
------------ ------------ ------------
Net loss $ (975,785) $ (685,992) $ (8,026,839)
============ ============ ============
Loss per common share attributable to
common stockholders
Basic and Fully Diluted $ (.033) $ (.030)
Weighted average common shares outstanding 29,434,226 23,017,450
</TABLE>
-6-
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30, 1999 and 1998 and
Period from November 12, 1986 (inception) to June 30, 1999
Six months ended Period from
June 30, November 12, 1986
1999 1998 to June 30, 1999
------------ ------------ -----------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (975,785) $ (685,992) $ (8,026,839)
Non-cash charges included in operations
Allowance for doubtful accounts 56,000
Depreciation and amortization 21,792 15,989 101,861
Common stock issued for services and interest 231,169 232,048 2,243,856
Common B stock issued for services - -
Note payable issued for services - - 6,860
Common stock issued for services and
accrued expenses - - 30,434
Provision for doubtful notes receivable - - 52,754
Common stock issued for interest payable - - 127,064
Loss on assets - - 15,000
Advances to stockholder expensed to consulting - - 57,706
Changes in assets and liabilities
(Increase)Decrease in accounts receivable 193 57,074 (4,795)
Prepaid expenses - - -
Accrued interest receivable 16,537 (21,977) (19,896)
(Increase) in deposits - 3,477 (31,767)
(Increase) in other assets 15,417 - (67,160)
Accounts payable and accrued expenses (241,867) 169,097 264,939
Accrued payroll and payroll taxes 136,611 (2,974) 769,784
------------ ------------- -------------
Net cash used for operating activities (795,933) (233,258) (4,424,199)
Cash flows from investing activities
Capital expenditures (66,433) (238,707) (739,214)
Loans made (77,500) (5,000) (291,408)
Loan repayments 8,200 - 20,100
Other - - (15,050)
------------ ------------ --------------
Net cash used for investing activities (135,733) (243,707) (1,025,572)
Cash flows from financing activities
Stock sale expenses - - (11,716)
Proceeds from sale of common stock 897,862 276,699 3,784,106
Proceeds from notes payable 5,000 120,315 2,332,971
Principal repayments of notes payable (6,822) (16,650) (605,019)
Principal payments on capital lease obligations (5,934) (15,423) (47,472)
Proceeds from preferred stock sale - - 20,000
Repurchase of preferred stock - - (11,319)
Preferred dividends paid - - (5,834)
------------ ------------ --------------
Net cash provided by financing activities 890,106 364,941 5,455,717
Increase (decrease) in cash (41,560) (112,024) 5,946
</TABLE>
- continued -
-7-
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)
Six months ended June 30, 1999 and 1998
and Period from November 12, 1986 (inception) to June 30, 1999
Six months ended Period from
June 30, November 12, 1986
1999 1998 to June 30, 1999
----------- ----------- -----------------
<S> <C> <C> <C>
Cash at beginning of period 47,506 123,454 -
----------- ----------- -----------
Cash at end of period $ 5,946 $ 11,430 $ 5,946
=========== =========== ===========
Cash flow information:
Interest paid $ 14,774 $ - $ 107,839
Income taxes paid $ - $ - $ 32
Non-cash investing activities:
Repayment of note receivable - non cash method $ - $ - $ 21,000
Common stock issued for:
Acquisition of Triple A $ - $ - $ -
Acquisition of NIAI $ - $ - $ 10,000
Acquisition of VISI $ - $ - $ 434
Oil lease $ - $ - $ 40,000
Non-cash financing activities:
Preferred stock issued for:
Note payable-related party $ - $ - $ 60,000
Accrued interest-related party $ - $ - $ 4,500
Accrued expenses-related party $ - $ - $ 25,500
Common stock issued for:
Services and fees $ 219,595 $ 209,185 $ 2,093,968
Repayment of notes payable $ 151,318 $ 227,500 $ 1,390,735
Payment of interest $ 11,574 $ 22,864 $ 138,639
Payment of accounts payable and exp reimbursement $ - $ - $ 15,000
Conversion of preferred stock $ - $ - $ 100,000
Payment of preferred stock dividend $ - $ - $ 25,556
Notes Receivable $ 123,972 $ 74,134 $ 753,034
Equipment $ - $ 25,000 $ 25,000
Note payable issued for services $ - $ - $ 6,860
Assignment of oil lease in payment of note payable $ - $ - $ 40,000
Common stock acquired for conversion of
note receivable $ - $ - $ 6,406
Common stock canceled for conversion of
note receivable $ - $ - $ 5,600
Additions to equipment under capital leases $ - $ $ 107,631
</TABLE>
-8-
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIKING CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated interim financial statements include the accounts of Viking
Capital Group, Inc. and its wholly owned subsidiaries (collectively the
"Company").
The consolidated interim financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principals ("GAAP") have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Form 10-KSB as of and for the year ended December 31,
1998.
In the opinion of management, the unaudited interim consolidated financial
statements of the Company contains all adjustments, consisting only of those of
a normal recurring nature, necessary to present fairly the Company's financial
position and the results of its operations and cash flows for the periods
presented. The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions. Such estimates and
assumptions affect the reported amounts of assets and liabilities, as well as
the disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
2. SOFTWARE DEVELOPMENT COSTS
During January of 1998, the Company formed a strategic joint venture with
Transaction Information Systems, Inc. (TIS) for the building of a technical
robust architecture capable of supporting the Company's long term strategic
initiatives of creating an interactive enterprise insurance and retirement
services website. The Company has capitalized such costs as software development
costs. Total costs incurred to date with TIS is $666,767; of which, $600,000 is
paid.
Financial Accounting Standard No. 86, "Accounting for the Cost of Computer
Software to be Sold, Leased, or Otherwise Marketed", provides for the
capitalization of certain costs related to development of computer software
products. Capitalized computer software costs include direct labor,
labor-related overhead costs and interest. The software will be amortized over
its expected useful life of 3 years after it is placed in service. Management
periodically evaluates the recoverability, valuation and amortization of
capitalized software cost. As part of this review, management considers the
undiscounted projected future net earnings. If the undiscounted future net
earnings is less than the stated value, software costs will be written down to
fair value.
-9-
<PAGE>
VIKING CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
3. RELATED PARTY TRANSACTIONS
During the quarter, two promissory notes with a related party were repaid. The
notes originated on 4/28/98 and 9/28/98 and carried an interest rate of 12%. The
principal amounts were $3,000 and $1,322 respectively with accrued interest of
$388 and $104.
4. OPTIONS ISSUED
During the current quarter, the Company granted 230,388 options exercisable at
rates from $0.25 to $1.00 per share. This includes options for 230,388 shares
exercisable and expiring within one year at a weighted average exercise price of
$0.76 per share.
5. OTHER
The financial statements have been prepared on the assumption that the Company
will continue as a going concern. Its continued existence depends upon the
success of management's efforts to raise additional capital necessary to meet
the Company's obligations as they come due and to obtain sufficient capital to
execute its business plan.
There can be no degree of assurance given that the Company will be successful in
completing additional financing transactions. Should the Company be unsuccessful
in its efforts to obtain adequate financing, it's current financial condition
may be affected adversely, and such affects may be material.
6. EVENTS SUBSEQUENT TO JUNE 30, 1999
Subsequent to June 30, 1999, the Company issued a five million share option
exercisable at $0.75 per share for five years to William J. Fossen, its
chairman, president and CEO. The Company also issued a one hundred eighty
thousand share option under the 1996 Stock Option Plan to Tim Baumann, its VP
Mergers and Acquisitions exercisable at the rate of 25% per year for five years
at $1.00 per share.
-10-
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations.
Material Changes in Results of Operations
- -----------------------------------------
During the three and six month period ended June 30, 1999, the Company
continued in its efforts to secure capital and implement its proposed plan of
business. In the course of its efforts to fulfill its strategic plan of
operation it continued to expand upon its alliances and continued to improve
upon its systems. The purpose of these systems is to support the Company's long
term strategic initiative of creating an internet based financial portal with
systems capable of supporting the needs of full life insurance administration
and data processing(Universal IP), remote banking(IP Banker), facilitate
securities trading via the internet(IP Trader), and HR/Employee benefits data
processing(Benefits IP). A more complete description of each service is
available on the Company's website at www.vcgi.com. Additional resources are
also being put forth in a sales recruiting effort for the Company's remote
banking services. This service is called IP Banker and is provided on a service
bureau basis. The Company is actively seeking professional sales representatives
across the United States for IP Banker. The Company has thus far identified
candidates in Texas, Florida, Kentucky, New Jersey, New York, and Georgia. The
Company has also signed two agreements for products to be made available which
the Company believes will enhance customer satisfaction and use of its network.
These products will be made available through the Company's E-Commerce website
at www.eoutletdirect.com which was launched in July. The VidnetPC, a powerful
video conferencing PC, is currently available and featured. The technology
offers full-motion, 2-way video communications over IP based connections
(Internet, Extranet, Intranet) and is compliant with MPEG and streaming
video/DVD standards. The second agreement will provide for the sale and
distribution of a family of products called Webnote(TM) which is a sub-notebook
size device with touch screen, color display and keyboard. The complete unit
weighs about 2 lbs. The Webnote(TM) is also equipped with smart card technology
to provide additional security which acts as a "web access key" providing a
unique identifier. The Company anticipates using this technology to enhance
acceptance and use of its employee benefits administration services and other
services. The Company also continues to pursue insurance company acquisitions
and has added personnel to support such efforts. In connection with its
insurance company strategy, the Company has concluded that it will allow future
acquired insurance companies to buy the stock of Viking Capital Group, Inc. to
the extent allowed under state insurance laws. The Company's revenue generating
focus is on IP Banker while asset accumulation strategies continue to focus on
insurance company acquisitions. The Company continues to expand its web presence
and is initiating marketing efforts of its services, particularly IP Banker.
In connection with its efforts to attract capital and implement its
plan of business, the Company incurred general and administrative expenses of
$487,205 and reported net losses of $485,738 for the three month period ended
June 30, 1999. Included in the costs and losses is an accrued (unpaid) officer's
payroll charge for two quarters equaling $141,500.
Material Changes in Financial Condition, Liquidity and Capital Resources
- ------------------------------------------------------------------------
The Company had a cash balance of $5,946 at June 30, 1999. During the
second quarter of 1999, the Company raised $191,400 through private sale of
stock and exercise of options.
With the receipt of $191,400 from these sources and expected additional
funding , the Company believes it has sufficient funds to continue pursuing its
plan of operations for the next twelve months, exclusive of insurance company
acquisitions which constitutes the full plan of operations. The Company is
currently evaluating various options to raise additional capital, including
possible placements of debt and equity for the purpose of insurance company
acquisitions. There is no assurance, however, that the Company will be
successful in securing additional financing and, therefore, there is no
assurance that the Company can implement its full plan of operations. If the
Company is successful in implementing its plan of operations, the Company will
be required to lease, acquire or construct significant additional facilities and
equipment and hire substantial additional employees to carry out such
operations.
-11-
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
The Company's common stock trades on the OTC Electronic Bulletin Board.
Its symbol is "VGCP".
Company information can be found on the World Wide Web. The address is
www.vcgi.com.
Item 6. Exhibits and Reports
Exhibit 21.1 List of subsidiaries of the Registrant
Exhibit 27.1 Financial Data Schedule
-12-
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
-13-
<PAGE>
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.
VIKING CAPITAL GROUP, INC.
Dated: August 16, 1999 By: \s\ William J. Fossen
--------------------------------------
William J. Fossen, President
Dated: August 16, 1999 By: \s\ Matthew W. Fossen
--------------------------------------
Matthew W. Fossen
Chief Financial Officer
-14-
<PAGE>
EX-21
Subsidiaries of the Registrant
EXHIBIT 21.1
Viking Capital Group, Inc. and Subsidiaries
List of subsidiaries of the registrant
The following are current subsidiaries of Registrant.
Subsidiary and Name Under Which Business is Done Where Organized
- ------------------------------------------------ ---------------
Viking Capital Financial Services, Inc. Texas
Viking Insurance Services, Inc. Texas
Viking Systems, Inc. Texas
Viking Administrators, Inc. Texas
NIAI Insurance Administrators, Inc. California
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF THE COMPANY AS OF JUNE 30, 1999 INCLUDED IN THE 10QSB AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10QSB
</LEGEND>
<CIK> 0000886093
<NAME> VIKING CAPITAL GROUP, INC
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 5946
<SECURITIES> 0
<RECEIVABLES> 227623
<ALLOWANCES> 115160
<INVENTORY> 0
<CURRENT-ASSETS> 123741
<PP&E> 753560
<DEPRECIATION> 99861
<TOTAL-ASSETS> 962358
<CURRENT-LIABILITIES> 1193440
<BONDS> 20219
0
0
<COMMON> 30174
<OTHER-SE> (221127)
<TOTAL-LIABILITY-AND-EQUITY> 962358
<SALES> 0
<TOTAL-REVENUES> 30746
<CGS> 0
<TOTAL-COSTS> 986151
<OTHER-EXPENSES> 5605
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14774)
<INCOME-PRETAX> (975785)
<INCOME-TAX> 0
<INCOME-CONTINUING> (975785)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (975785)
<EPS-BASIC> (.033)
<EPS-DILUTED> (.033)
</TABLE>
