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 March 31, 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
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(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 March 31, 1999, approximately 29,032,009 shares of Common Stock of the
issuer were outstanding. As of March 31, 1999, 100,000 shares of Class B Common
Stock of the issuer were outstanding.
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<CAPTION>
VIKING CAPITAL GROUP, INC.
INDEX
Page
Number
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations - For the three months ended
March 31, 1999 and 1998, and for the period from inception (November
12, 1986) to March 31, 1999 5
Consolidated Statements of Cash Flows - For the three months ended
March 31, 1999 and 1998, and for the period from inception (November
12, 1986) to March 31, 1999 6
Notes to Consolidated Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of Operation. 10
PART II - OTHER INFORMATION
Item 5. Other Information 11
Item 6. Exhibits 12
SIGNATURES 13
EXHIBITS 14
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<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
ASSETS
------
(Unaudited)
March 31, December 31,
1999 1998
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<S> <C> <C>
CURRENT ASSETS
Cash $ 74,343 $ 47,506
Accounts receivable 5,000 5,193
Notes and other accounts receivable and accrued interest 116,778 53,695
---------- ----------
Total current assets 196,121 106,394
---------- ----------
OFFICE FURNITURE, EQUIPMENT, SOFTWARE AND CAPITALIZED SOFTWARE
DEVELOPMENT COSTS, NET 748,466 708,949
OTHER ASSETS 109,904 114,929
---------- ----------
TOTAL ASSETS $1,054,491 $ 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)
March 31, December 31,
1999 1998
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 198,128 $ 456,003
Accrued payroll and payroll taxes 638,132 649,793
Lease obligation, current portion 32,745 39,940
Note payable and accrued interest 206,612 314,249
----------- -----------
Total current liabilities 1,075,617 1,459,985
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LONG-TERM DEBT
Obligations under capital leases, less current portion 22,746 26,153
----------- -----------
Total liabilities 1,098,363 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;
29,557,634 and 26,357,431 issued and outstanding as of March
31, 1999 and December 31, 1998, respectively 29,557 26,357
Common stock Class B $0.001 par value; 100,000 shares
authorized and outstanding 100 100
Paid-in capital 8,277,543 7,170,190
Deficit accumulated in the development stage (7,570,582) (7,082,244)
----------- -----------
736,618 114,403
----------- -----------
Less treasury stock - 525,625 shares at cost (41,206) (41,206)
Less stock issued for notes receivable (739,284) (629,063)
----------- -----------
Total stockholders' deficit (43,872) (555,866)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,054,491 $ 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 March 31, 1999 and 1998 and
Period from November 12, 1986 (inception) to March 31, 1999
Three months ended Period from
March 31, November 12, 1986
1999 1998 to March 31, 1999
------------ ------------ -----------------
<S> <C> <C> <C>
Revenue $ -- $ -- $ 441,382
Cost of Revenue -- -- 68,119
------------ ------------ ------------
Gross Profit -- -- 373,263
------------ ------------ ------------
Cost and expenses
Depreciation and amortization 10,106 9,459 90,175
General and administrative expenses 475,547 345,889 7,607,512
------------ ------------ ------------
Total cost and expenses 485,653 355,348 7,697,687
------------ ------------ ------------
Loss from operations (485,653) (355,348) (7,324,424)
Other income(expenses)
Interest income 10,310 9,771 57,391
Interest and penalty expense (9,078) (11,574) (231,150)
Other (3,917) -- (41,177)
------------ ------------ ------------
Total other income(expense) (2,685) (1,803) (214,936)
------------ ------------ ------------
Loss before income taxes (488,338) (357,151) (7,539,360)
Income tax provision -- -- (32)
------------ ------------ ------------
Net loss $ (488,338) $ (357,151) $ (7,539,392)
============ ============ ============
Loss per common share attributable to
common stockholders
Basic $(.018) $(.016)
Weighted average common share outstanding
Basic 27,904,866 22,527,650
</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 CASH FLOWS
(Unaudited)
Three months ended March 31, 1999 and 1998 and
Period from November 12, 1986 (inception) to March 31, 1999
Three months ended Period from
March 31, November 12, 1986
1999 1998 to March 31, 1999
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<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (488,338) $ (357,151) $ (7,539,392)
Non-cash charges included in operations
Allowance for doubtful accounts - - 56,000
Depreciation and amortization 10,106 7,653 90,175
Common stock issued for services and interest 187,551 101,448 2,200,238
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
Changes in assets and liabilities
Accounts receivable 193 57,074 (4,795)
Prepaid expenses - - -
Accrued interest receivable (283) (9,771) (36,716)
(Increase) in deposits - (31,767)
(Increase) in other assets 5,024 1,044 (77,553)
Accounts payable and accrued expenses (255,156) (28,259) 251,650
Accrued payroll and payroll taxes (11,662) (3,275) 621,511
Advances to stockholder expensed to consulting - - 57,706
------------ ------------ -------------
Net cash used for operating activities (552,565) (231,237) (4,180,831)
Cash flows from investing activities
Capital expenditures (49,623) (102,788) (722,404)
Loans made (70,000) (5,000) (283,908)
Loan repayments - - 11,900
Other - - (15,050)
------------ ------------ --------------
Net cash used for investing activities (119,623) (107,788) (1,009,462)
Cash flows from financing activities
Stock sale expenses - - (11,716)
Proceeds from sale of common stock 706,463 179,729 3,592,707
Proceeds from notes payable - 53,500 2,327,971
Principal repayments of notes payable - (7,800) (598,197)
Principal payments on capital lease obligations (7,438) (7,530) (48,976)
Proceeds from preferred stock sale - - 20,000
Repurchase of preferred stock - - (11,319)
Preferred dividends paid - - (5,834)
------------ ------------ --------------
Net cash provided by financing activities 699,025 217,899 5,264,636
Increase (decrease) in cash 26,837 (121,126) 74,343
</TABLE>
- continued -
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 - Continued
(Unaudited)
Three months ended March 31, 1999 and 1998
and Period from November 12, 1986 (inception) to March 31, 1999
Three months ended Period from
March 31, November 12, 1986
1999 1998 to March 31, 1999
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<S> <C> <C> <C>
Cash at beginning of period 47,506 123,454 -
------------ ------------ -------------
Cash at end of period $ 74,343 $ 2,328 $ 74,343
============= ============ =============
Cash flow information:
Interest paid $ 9,010 $ - $ 102,075
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 $ 180,679 $ 81,184 $ 2,055,052
Repayment of notes payable $ 106,318 $ 207,500 1,345,735
Payment of interest $ 6,872 $ 20,264 133,937
Payment of accounts payable and exp reimbursement $ - $ - 15,000
Conversion of preferred stock $ - $ - 100,000
Payment of preferred stock dividend $ - $ - 25,556
Notes Receivable $ 110,222 $ 74,134 739,284
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.
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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. UNCONSOLIDATED SUBSIDIARY
Pursuant to a reorganization agreement dated September 4, 1997, the Company
acquired all of the outstanding stock of Triple A Annuity Marketing, Inc.
("Triple A"). Due to provisions in the agreement, the subsidiary was accounted
for as an unconsolidated subsidiary under the equity method. Under the terms of
the contingent provision, the Triple A acquisition agreement was rescinded
during 1998.
3. 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. During the periods ended March 31, 1999 and 1998, the company paid
$250,000 and $100,000, respectively, of costs associated with such initiatives.
Total costs incurred to date 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.
4. RELATED PARTY TRANSACTIONS
During the quarter a note receivable from a related party of $50,000 was
executed. The term of the note is one year and the interest rate is 8%.
-8-
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VIKING CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
5. OPTIONS ISSUED
During the current quarter, the Company granted 273,953 options exercisable at
rates from $0.20 to $1.00 per share. The weighted average exercise price of the
options granted was $0.61. All of these options are exercisable within one year
and expire within one year; except for 120,000 options which are vested 25% per
year and expire within five years.
6. 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.
7. EVENTS SUBSEQUENT TO MARCH 31, 1999
Subsequent to March 31, 1999, approximately 85,000 shares of common stock were
issued for services, 102,000 shares were issued for cash/notes receivable and
53,573 shares were issued for note conversion. Also subsequent to March 31,
1999, 146,788 options were issued with a weighted average exercise price of
$0.90 per share. All options expire within one year.
-9-
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Item 2. Management's Discussion and Analysis or Plan of Operations.
Material Changes in Results of Operations
During the three month period ended March 31, 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 concluded the negotiations of a Strategic Joint Venture with
Transaction Information Systems, Inc. (TIS). The agreement was signed in early
1998 with 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. During the
periods ended March 31, 1999 and 1998, the company paid $250,000 and $100,000,
respectively, of costs associated with such initiatives. Total costs incurred to
date is $666,767; of which, $600,000 is paid. In addition to its
telecommunications alliance previously announced with iXnet of New York which
provides the ATM backbone for Viking Capital Financial Network(VCFN), the
Company has signed additional alliances during the first quarter of 1999. The
Company signed a strategic alliance with Pearse EFT, Inc. of Malta, NY for their
Internet based remote banking software. The alliance allows Viking to provide
remote banking software as a service on the Company's private network for banks
wishing to provide their customers with remote or virtual banking services. This
service is called IP Banker. The agreement also lead the way to a service bureau
business model for remote banking which is named (Viking System) VS Banker's
Service Bureau. The Company also signed two agreements for products to be made
available which the Company believes will enhance customer satisfaction and use
of its network. The first agreement is with Netnote International, Ltd. which
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 second agreement is with
MaxPC Technologies, Inc. of Dallas, TX. The agreement gives Viking the right to
sell all MaxPC products via the Internet. The MaxPC product is a computer card
with a processor operating at 3.6 billion operations per second and takes the
burden of video processing away from the CPU. 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 card
is capable of transforming most PCs into video communication stations. The
Company anticipates using this technology in conjunction with its employee
benefits administration services and making this technology available to others
as a video conferencing tool.
In connection with its efforts to attract capital and implement its
plan of business, the Company incurred general and administrative expenses of
$475,547 and reported net losses of $488,338 for the three month period ended
March 31, 1999.
Material Changes in Financial Condition, Liquidity and Capital Resources
The Company had a cash balance of $74,343 at March 31, 1999. During the
first quarter of 1999, the Company raised $706,463 through private sale of stock
and exercise of options.
With the receipt of $706,463 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.
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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
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EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
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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: May 12, 1999 By: \s\ William J. Fossen
-----------------------------
William J. Fossen, President
Dated: May 12, 1999 By: \s\ Matthew W. Fossen
-----------------------------
Matthew W. Fossen
Chief Financial Officer
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<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
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF THE COMPANY AS OF MARCH 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 74343
<SECURITIES> 0
<RECEIVABLES> 236938
<ALLOWANCES> 115160
<INVENTORY> 0
<CURRENT-ASSETS> 196121
<PP&E> 836641
<DEPRECIATION> 88175
<TOTAL-ASSETS> 1054491
<CURRENT-LIABILITIES> 1075617
<BONDS> 22746
0
0
<COMMON> 29657
<OTHER-SE> (73529)
<TOTAL-LIABILITY-AND-EQUITY> 1054491
<SALES> 0
<TOTAL-REVENUES> 10310
<CGS> 0
<TOTAL-COSTS> 485653
<OTHER-EXPENSES> 3917
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (9078)
<INCOME-PRETAX> (488338)
<INCOME-TAX> 0
<INCOME-CONTINUING> (488338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (488338)
<EPS-PRIMARY> (0.018)
<EPS-DILUTED> (0.018)
</TABLE>
