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 September 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 September 30, 1999, approximately 30,263,055 shares of Common Stock of the
issuer were outstanding. As of September 30, 1999, 100,000 shares of Class B
Common Stock of the issuer were outstanding.
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VIKING CAPITAL GROUP, INC.
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1999 and December 31, 1998 3
Consolidated Statements of Operations - For the three
months ended September 30, 1999 and 1998, and for the period from inception
(November 12, 1986) to September 30, 1999 5
Consolidated Statements of Operations - For the nine
months ended September 30, 1999 and 1998, and for the period from inception
(November 12, 1986) to September 30, 1999 6
Consolidated Statements of Cash Flows - For the nine months ended
September 30, 1999 and 1998, and for the period from inception
(November 12, 1986) to September 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
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<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
ASSETS
------
(Unaudited)
September 30, December 31,
1999 1998
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<S> <C> <C>
CURRENT ASSETS
Cash $ 34,890 $ 47,506
Accounts receivable -- 5,193
Notes and other accounts receivable and accrued interest 153,812 53,695
---------- ----------
Total current assets 188,702 106,394
---------- ----------
OFFICE FURNITURE, EQUIPMENT, SOFTWARE AND
CAPITALIZED SOFTWARE DEVELOPMENT COSTS 841,975 708,949
OTHER ASSETS 90,359 114,929
---------- ----------
TOTAL ASSETS $1,121,036 $ 930,272
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
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<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
(Unaudited)
September 30, December 31,
1999 1998
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 339,720 $ 456,003
Accrued officer's payroll 886,463 649,793
Lease obligation, current portion 27,288 39,940
Note payable and accrued interest 218,872 314,249
----------- -----------
Total current liabilities 1,472,343 1,459,985
----------- -----------
LONG-TERM DEBT
Obligations under capital leases, less current portion 17,263 26,153
----------- -----------
Total liabilities 1,489,606 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;
30,788,680 and 26,357,431 issued and outstanding as of September
30, 1999 and December 31, 1998, respectively 30,788 26,357
Common stock Class B $0.001 par value; 100,000 shares
authorized and outstanding 100 100
Paid-in capital 8,843,139 7,170,190
Deficits accumulated in the development stage (8,448,357) (7,082,244)
----------- -----------
425,670 114,403
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 (368,570) (555,866)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,121,036 $ 930,272
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended September 30, 1999 and 1998 and
Period from November 12, 1986 (inception) to September 30, 1999
Three months ended Period from
September 30, November 12, 1986
1999 1998 to September 30, 1999
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<S> <C> <C> <C>
Revenue $ -- $ -- $ 441,382
Cost of Revenue -- -- 68,119
------------ ------------ ------------
Gross Profit -- -- 373,263
------------ ------------ ------------
Cost and expenses
Depreciation and amortization 12,164 10,079 114,024
General and administrative expenses 383,034 192,928 8,477,651
------------ ------------ ------------
Total cost and expenses 395,198 203,007 8,591,675
------------ ------------ ------------
Loss from operations (395,198) (203,007) (8,218,412)
Other income(expenses)
Interest income 12,903 11,439 83,211
Interest and penalty expense (8,453) (17,632) (245,299)
Other (1,288) -- (36,635)
------------ ------------ ------------
Total other income(expense) 3,162 (6,193) (198,723)
------------ ------------ ------------
Loss before income taxes (392,036) (209,200) (8,417,135)
Income tax provision -- -- (32)
------------ ------------ ------------
Net loss $ (392,036) $ (209,200) $ (8,417,167)
============ ============ ============
Loss per common share attributable to
common stockholders
Basic and Fully Diluted $ (.013) $ (.009)
Weighted average common shares outstanding 30,068,565 23,213,781
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine months ended September 30, 1999 and 1998 and
Period from November 12, 1986 (inception) to September 30, 1999
Nine months ended Period from
September 30, November 12, 1986
1999 1998 to September 30, 1999
-------- --------- ---------------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ 441,382
Cost of Revenue -- -- 68,119
------------ ------------ ------------
Gross Profit -- -- 373,263
------------ ------------ ------------
Cost and expenses
Depreciation and amortization 33,955 26,067 114,024
General and administrative expenses 1,345,686 867,969 8,477,651
------------ ------------ ------------
Total cost and expenses 1,379,641 894,036 8,591,675
------------ ------------ ------------
Loss from operations (1,379,641) (894,036) (8,218,412)
Other income(expenses)
Interest income 36,130 33,416 83,211
Interest and penalty expense (23,227) (34,572) (245,299)
Other 625 -- (36,635)
------------ ------------ ------------
Total other income(expense) 13,528 (1,156) (198,723)
------------ ------------ ------------
Loss before income taxes (1,366,113) (895,192) (8,417,135)
Income tax provision -- -- (32)
------------ ------------ ------------
Net loss $ (1,366,113) $ (895,192) $ (8,417,167)
============ ============ ============
Loss per common share attributable to
common stockholders
Basic and Fully Diluted $ (.047) $ (.039)
Weighted average common shares outstanding 29,014,228 23,213,781
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30, 1999 and 1998 and
Period from November 12, 1986 (inception) to September 30, 1999
Nine months ended Period from
September 30, November 12, 1986
1999 1998 to September 30, 1999
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<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (1,366,113) $ (895,192) $ (8,417,167)
Non-cash charges included in operations
Allowance for doubtful accounts 56,000
Depreciation and amortization 33,955 26,067 114,024
Common stock issued for services and interest 274,839 266,493 2,287,526
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 5,193 59,772 205
Prepaid expenses - - -
Accrued interest receivable (23,811) (33,416) (60,244)
(Increase) in deposits - 4,601 (31,767)
(Increase) in other assets (14,686) - (97,263)
Accounts payable and accrued expenses (116,283) 498,816 390,523
Accrued payroll and payroll taxes 254,232 (3,549) 887,405
------------ ------------- -------------
Net cash used for operating activities (952,674) (76,408) (4,580,940)
Cash flows from investing activities
Capital expenditures (166,982) (551,012) (839,763)
Loans made (77,500) (5,000) (291,408)
Loan repayments 8,200 - 20,100
Other - - (15,050)
------------ ------------ --------------
Net cash used for investing activities (236,282) (556,012) (1,126,121)
Cash flows from financing activities
Stock sale expenses - - (11,716)
Proceeds from sale of common stock 1,119,751 296,699 4,005,995
Proceeds from notes payable 76,800 267467 2,404,771
Principal repayments of notes payable (11,322) (27,535) (609,519)
Principal payments on capital lease obligations (8,889) (23,495) (50,427)
Proceeds from preferred stock sale - - 20,000
Repurchase of preferred stock - - (11,319)
Preferred dividends paid - - (5,834)
------------ ------------ --------------
Net cash provided by financing activities 1,176,340 513,136 5,741,951
Increase (decrease) in cash (12,616) (119,284) 34,890
- continued -
The accompanying notes are an integral part of these financial statements.
-7-
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VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)
Nine months ended September 30,
1999 and 1998 and Period from November 12,
1986 (inception) to September 30, 1999
Nine months ended Period from
September 30, November 12, 1986
1999 1998 to September 30, 1999
-------- --------- ---------------------
Cash at beginning of period 47,506 123,454 -
------------ ------------ -------------
Cash at end of period $ 34,890 $ 4,170 $ 34,890
============= ============ =============
Cash flow information:
Interest paid $ 23,227 $ - $ 116,292
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 $ 259,365 $ 242,337 $ 2,133,738
Repayment of notes payable $ 158,818 $ 247,500 $ 1,398,235
Payment of interest $ 12,474 $ 24,156 $ 139,539
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>
The accompanying notes are an integral part of these financial statements.
-8-
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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
Beginning in January of 1998, the Company has been building 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 is $763,019; of which, $696,252 is paid. This includes
capitalized costs in the third quarter of $96,252.
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-
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VIKING CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
3. RELATED PARTY TRANSACTIONS
During the quarter, a promissory note for $1,300.00 was entered into with a
related party. The note originated on 8/16/99 and carries an interest rate of
12%.
4. OPTIONS ISSUED
During the current quarter, the Company granted 8,442,400 options exercisable at
rates from $0.50 to $1.00 per share with one to five year terms. One year
options for 8,400 shares were granted at $0.50 per share for conversion of
promissory notes. A five year employee stock option was granted for 180,000
shares, exercisable 25% per year at $1.00 per share, and was subsequently
canceled after resignation of the employee. Other five year employee options
were granted totaling 624,000 shares exercisable at 25% per year at $1.00 per
share. A five year, five million share option at $0.75 per share was granted to
William J. Fossen, Chairman, President and CEO of the Company. A five year, one
million share option at $1.00 was granted to Matthew W. Fossen, Secretary,
Treasurer, and CFO of the Company. Five year options at $1.00 per share were
also granted to members of the Board of Directors totaling 1,630,000 shares
including 500,000 share options to the President and 100,000 share options to
the CFO.
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 SEPTEMBER 30, 1999
Subsequent to September 30, 1999, 406,000 one year options at $0.30 per share
were granted and 200,000 one year options at $0.50 per share were granted. The
Company also issued 721,661 common shares for services, 61,600 common shares for
conversion of promissory note, and 182,000 common shares for cash.
-10-
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations.
Material Changes in Results of Operations
During the three and nine month period ended September 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), HR/Employee benefits data
processing(Benefits IP), and large marketing organizations data communications
(IP Marketer). 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 marketing and 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 and
enlisted sales representatives and as of the date of this report, are conducting
presentations to potential clients generated from earlier lead generating
activities. 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. 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
$395,198 and reported net losses of $392,037 for the three month period ended
September 30, 1999. Included in the costs and losses is an accrued (unpaid)
officer's payroll charge of $110,000.
Material Changes in Financial Condition, Liquidity and Capital Resources
The Company had a cash balance of $34,890 at September 30, 1999. During
the third quarter of 1999, the Company raised $293,690 through private sale of
stock, exercise of options, and promissory notes.
With the receipt of $293,690 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-
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EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
-13-
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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.
VIKING CAPITAL GROUP, INC.
Dated: November 15, 1999 By: /s/ William J. Fossen
----------------------------------
William J. Fossen, President
Dated: November 15, 1999 By: /s/ Matthew W. Fossen
-------------------------------
Matthew W. Fossen
Chief Financial Officer
-14-
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 SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 34890
<SECURITIES> 0
<RECEIVABLES> 263972
<ALLOWANCES> 115160
<INVENTORY> 0
<CURRENT-ASSETS> 188702
<PP&E> 953999
<DEPRECIATION> 112024
<TOTAL-ASSETS> 1121036
<CURRENT-LIABILITIES> 1472343
<BONDS> 17263
0
0
<COMMON> 30888
<OTHER-SE> (337682)
<TOTAL-LIABILITY-AND-EQUITY> 1121036
<SALES> 0
<TOTAL-REVENUES> 44199
<CGS> 0
<TOTAL-COSTS> 1379641
<OTHER-EXPENSES> 7444
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (23099)
<INCOME-PRETAX> (1366113)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1366113)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1366113)
<EPS-BASIC> (.047)
<EPS-DILUTED> (.047)
</TABLE>
