SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the Fiscal Year Ended December 31, 1999
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from_______to_______.
Commission File Number 0-22744
VIKING CAPITAL GROUP, INC.
----------------------------------------------
(Name of small business issuer in its charter)
Utah 87-0442090
- ----------------------------- -----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
Two Lincoln Centre, Suite 300, 5420 LBJ Freeway, Dallas, Texas 75240
--------------------------------------------------------------------
(Address of Principal Executive Offices) ( Zip Code)
Registrant's Telephone Number, Include Area Code: (972) 386-9996
Securities Registered Pursuant to section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- ----------------------------------------
None None
Securities Registered Pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
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 twelve(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 ninety
(90) days. Yes X No
---
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year were zero.
The aggregate market value of the voting common stock held by
non-affiliates, computed using the average bid and asked price at March 15 ,
2000, was approximately $ 10,400,427.
As of March 15, 2000, there were 32,722,439 shares of Common Stock (Class
A) and 100,000 shares of Class B Common Stock of the issuer outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated herein by reference in Item 10 Part
III:
Adoption of an Employee Stock Option Plan as described and incorporated
into the Proxy Statement on the annual statement for fiscal year ended December
31, 1995.
1
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1. Description of Business.................................. 3
Item 2. Description of Properties................................ 11
Item 3. Legal Proceedings........................................ 11
Item 4. Submission of Matters to a Vote of Security Holders...... 11
PART II
Item 5. Market for Common Equity and Related Stockholder Matters. 11
Item 6. Management's Discussion and Analysis..................... 13
Item 7. Financial Statements..................................... 15
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................... 15
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons Compliance with Section 16(a)of the Exchange Act. 15
Item 10. Executive Compensation................................... 17
Item 11. Security Ownership of Certain Beneficial Owners
and Management...................................... 20
Item 12. Certain Relationships and Related Transactions........... 21
Item 13. Exhibits and Reports on Form 8-K......................... 21
Signatures.................................................................. 22
Exhibit Index............................................................... 23
2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Background. Viking Capital Group, Inc. (the "Company") is a Utah
corporation formed on November 12, 1986. The Company was originally formed under
the name Silver Harvest, Inc. for the purpose of obtaining capital to seek out,
investigate and acquire interests in new products, properties or businesses. In
June of 1988, the Company received from subscribers in a public offering
subscriptions for the purchase of 2,500,000 shares of its common stock for an
aggregate of $75,000. The Company's public offering was conducted pursuant to
the registration requirements set forth in Section 61-1-10 of the Utah Uniform
Securities Act and in reliance upon the exemption from federal registration
requirements set forth in Rule 504 of Regulation D as promulgated under the
Securities Act of 1933, as amended. Pursuant to Rule 11.1 of the Utah Securities
Division, the proceeds from the Company's public offering were placed in escrow
pending the specific allocation of such proceeds and subject to the subscribers'
right to rescind their subscriptions upon determination of the definitive use of
proceeds.
In 1989, the Company entered into an agreement with Louis Sylvester
pursuant to which the Company agreed to issue 1,000,000 shares of common stock
to Mr. Sylvester in exchange for all rights to certain financial education
seminar and business concepts developed by Mr. Sylvester. Pursuant to such
agreement, the Company agreed to change its name to The Institute for Financial
Fitness and to operate as a financial consulting and education firm utilizing
certain concepts developed by Mr. Sylvester. The Utah Securities Division then
approved the release of the funds held in escrow to the Company.
The Company subsequently abandoned its financial consulting and education
activities and pursued and abandoned various other opportunities and Mr.
Sylvester returned the shares of common stock received from the Company for
cancellation. In February of 1990, the Company changed its name to Viking
Capital Group, Inc. when the present management became involved. In November of
1991, the Company declared a 1 for 5 reverse stock split.
From 1990 through mid 1994 the Company concentrated only on laying the
ground work to become a insurance holding company and a fully reporting SEC
public holding company via the filing of the Form 10 with the SEC. In mid 1994
the Company became a fully reporting SEC Company and the effective first
reporting period was as of 12/31/93. The next major activity was to enlist a
market maker to establish trading in the Company's common stock via the over the
counter electronic bulletin board. This was achieved on January 20, 1995.
Subsequently, the common stock of the Company has attracted over ten (10) market
makers spread across the USA, therein trading the stock coast to coast.
As of December 31, 1999 the Company's activities include: (1) development
of private and institutional investors for various acquisitions, specifically,
the purchase of insurance companies, and funding of operations (2) solicitation
of various state and local governmental authorities for an economic incentive
package with value between $20M to $30M to locate our Insurance Administration
business in their state or local area, (3) implementation of the plan described
below to become a provider of specialized administration and data processing
services for insurance companies and banks. The Company, in pursuing these
plans, purchased NIAI Insurance Administrators, Inc. and Triple A Annuity
Marketing, Inc. in 1997. The Triple A Annuity Marketing, Inc. purchase was
rescinded in 1998 according to the terms of the agreement if certain conditions
were not met within one year. Relations with Triple A are favorable. During 1998
the Company concluded the negotiations of a Strategic Relationship with
Transaction Information Systems, Inc. (TIS) and IXNet both of New York. The
agreement with TIS was signed in early 1998 for the building of a technical
robust architecture capable of supporting the Company's long term strategic
initiatives of creating an interactive insurance, investment and retirement
services web site. The IXNet Joint Network Services Agreement was concluded in
June 1998 to create a high performance private ATM (asynchronous transfer mode)
network on which Viking will provide its services. This network has been named
the Viking Capital Financial Network.
3
<PAGE>
The Company also announced in January 1999 a strategic alliance with Pearse
EFT, Inc.. The agreement allows Viking to offer Pearse's remote banking software
application as a service on the Viking Capital Financial Network for banks
wishing to provide their customers with remote or virtual banking services.
An agreement announced in March of 1999 gives Viking the right to sell very
affordable video conferencing technology from MaxPC Technologies, Inc. of
Dallas, TX.
In November of 1999, the Company formed a Strategic Business Relationship
with VisualSoft, Inc. VisualSoft is a software solutions and consulting services
provider, offering solutions in client/server systems , ERP (Peoplesoft, SAP),
relational databases, custom software and product development, training and
education, Internet services and products , and reengineering and migration
services. VisualSoft has offices in New York and Chicago, as well as
state-of-the-art development facilities in Hyderabad, India. Training and
education are provided at the Dallas facility for both clients and VisualSoft
professionals. The agreement provides VSI with computer programming and systems
integration resources needed to connect banks to their customers via the
Internet using VSI's IP Banker service bureau and the Viking Capital Financial
Network (VCFN). It also provides Viking with computer and technology skill sets
at its disposal for other activities as Viking deems necessary.
Description of Business
Plan of Operation. The Company is a development stage company which has
developed a comprehensive multi-step plan to (1) become an application service
provider (ASP) for banks, insurance companies and brokerages and specialized
administration services for insurance companies and (2) acquire a base of
insurance managed assets under the Company's management. The Company's primary
objective is to provide quality fee based administration, data processing,
product development and management consulting services to businesses,
particularly banks and insurance companies, and to build its own insurance
managed assets via acquisitions and reinsurance purchases to a total of $1.5
billion of insurance managed assets. The Company's financial methodology is to
generate profits from its fee based services described above, equal to or in
excess of the cost of managing its own proposed to be purchased insurance
company assets and policy holders. This methodology is expected to allow the
Company to achieve a higher margin of profitability than its competitors and
allow shareholder equity to grow as the managed asset base grows. Management
expects the Company's proposed services will permit financial services
companies, particularly small to medium sized insurance companies, banks and
investment banks, to expand their sources of revenues while minimizing costs.
Such proposed services are described more fully below. Implementation of the
Company's plan of operations is expected to be carried out through one or more
strategic acquisitions of, or combinations with, operating companies. While the
Company has not purchased an insurance company yet, it has started operations in
corporate relations services, via Viking Capital Financial Services, Inc.,
insurance marketing services, via Viking Insurance Services, Inc., data
processing services, via Viking Systems, Inc., administration services, via
Viking Administrators, Inc. and the purchase of NIAI Insurance Administrators,
Inc. There is no assurance that the Company can successfully continue to fund
the start-up of Viking Capital Financial Services, Inc., Viking Insurance
Services, Inc., Viking Systems, Inc., Viking Administrators, Inc. and other
purchased operations or that such other operations can be integrated and carried
out on a profitable basis. Some of the risks that could cause actual results,
performance, or achievement, to differ materially from those described or
implied in forward-looking statements are general economic conditions,
competition, potential technology changes, changes in or the lack of anticipated
changes in the regulatory environment in various countries, the ability to
secure partnership, joint-venture, or strategic relationships with other
entities, the ability to raise additional capital to finance expansion, and the
risks inherent in new product and service introductions and the entry into new
geographic markets.
4
<PAGE>
While the Company presently has no known, specific source of funds to
implement its total plan of operations, the Company intends to pursue its plan
of operations through mergers, exchanges of stock for assets or stock, the
issuance of debt and/ or the private placement or public offering of stock for
cash. The Company believes that its status as a reporting company under the
Securities Exchange Act of 1934, the trading of its common stock on the over the
counter electronic bulletin board (symbol VGCP) and the stature and industry
contacts of Chairman, William J. Fossen, will make it more attractive to
potential merger or acquisition candidates and will enhance the Company's
ability to raise capital through the placement of its debt and/or equity
securities. No binding agreements, or agreements in principal, to raise capital
for the Company or invest in the Company for the purchase of insurance companies
existed as of December 31, 1999, and, therefore, there can be no assurance that
the Company will be successful in obtaining the financing necessary to implement
its full plan of operations.
Products and Services
The following services and proposed services described below are provided
through Viking Systems "Integrator" and distributed on the Viking Capital
Financial Network (VCFN) for the benefit of external customers, the wholly owned
subsidiaries of the Company, and the company's future acquired insurance
companies. The Company, via its subsidiaries, is structured to operate as a
business to business enterprise and intends to operate these businesses
worldwide.
IP Banker: Middleware that allows existing banks, S&L's and Credit Unions
to offer their depositors remote banking and remote bill pay. The service will
also provide a full service banking software package for those not yet in the
commercial banking business such as for Investment Banking firms. This Service
Product is called Virtual Banking. We propose that these systems will reside on
VCFN. Revenues will be generated from sales of the software, remote bill pay
package, APIs, training and their own Web Site. Viking Systems, Inc. charges a
fee for each depositor, per month to reside on our Network. The additional fee
for our network per depositor includes their network internet link and all it's
associated charges, installations costs and continuing maintenance, regardless
of bandwidth requirements. A minimum monthly fee and a minimum of three years
for this contract service will be required if hosted by Viking Systems(VS).
5
<PAGE>
IP Trader: This middleware allows existing Broker/Dealers to offer trading
to the VCFN users. VS offers the IP Trader as a link to such firms to the
company's depositors, policyholders, etc., of our Corporate Customers. We
receive a transaction fee on each order. We require a contract minimum of three
years for this service.
Benefits IP: This is a data processing system for Human Resources and
Employee Benefit Plans of all kinds. Once the Company acquires an insurance
company we will also offer these customers the ability to outsource part or all
of their employee benefit plan administration to Viking Administrators, Inc.
(VAI). Thirdly, we will ultimately offer customers the ability to purchase
specially designed insurance products manufactured at our own life company or
those of other carriers via Viking Insurance Services, Inc.(VISI). The Company
bids on these accounts and they vary in amounts depending on the size and
locations of all of their operations as well as the extent of their needs and
desires for the latest technology. We require a minimum of a three year contract
for this data processing link.
Universal IP: With this product the Company expects to be able to offer A
to Z life insurance company administration as well as just data processing
service bureau (application service provider). This is a key service for new
players in the insurance industry. We bid on each account same as for Benefits
IP. We require contracts for a minimum of seven to ten years depending upon the
extent of the customer's demands. Pricing is on a bid basis though the Company
does not seem to have any competitors as of this writing.
Viking Systems Banker's Service Bureau: This service offers those banks too
small to host their own systems, to outsource their remote banking services to
our Banker's Service Bureau. We handle all systems operations, security,
technology updates and compliance updates for this customer at one central
location which is at our Server Farm at 80 Pine NY, NY with two back-up
identical systems. iXnet, our fiber optic backbone, simply installs a line of
the customers choice (speed)which then runs to our servers and systems. We
require a minimum of seven to ten years on this contract depending on services
required. Contracts are on a bid basis.
Viking Systems Insurance Service Bureau: This service is identical in its
set up as above for banks. This allows smaller insurance companies or those
wishing to provide insurance products of their own but not wishing to perform
the back room administration functions of their own insurance company. This
bureau gives the new player to insurance (such as banks and investment bankers)
the ability to instantly be in the business without having to set up the entire
back room operations of an insurance company. Corporate customers, such as
banks, will be able to offer these products and services for their depositors
via what will be named Viking Capital Life Insurance Company (VCLIC) once Viking
has purchased its own insurance company. Some banks will want their own life
company now that the the 1933 Glass-Steagall law has been revised. We require a
minimum of seven to ten year contract. Pricing is on a bid basis.
The Company will charge a fee for each service which is determined by the
number of depositors, participants or policyholders. The Company will also
receive a transaction fee from vendors to whom the Company links to the
Company's Corporate Customers.
The Company has had a demand for certain other unrelated products (as
compared to electronic services) in technology and consumer products. Therein,
the Company will make available a video conferencing PC built around the
capabilities of the MAXpc video conferencing card. Customers are able to
purchase this technology on our e-commerce website at www.eoutletdirect.com. The
product was chosen because of our original research into the use of enabling
technology for enhancing our Corporate Customer Services listed above. The
Company needed an inexpensive video conferencing solution that would allow its
employee benefit plan customers the ability to link their worldwide employees
via video to their human resource service center, saving them personnel at all
of their locations. The Company chose this technology to fulfill that ability.
While our focus is on our corporate customers, the general public will be able
to purchase this item as well.
6
<PAGE>
Corporate Relations Services (Viking Capital Financial Services, Inc.):
This subsidiary of the Company provides capitalization, restructuring and
public offerings for the Company and for client companies that have significant
potential and/or assets. These services will be provided by the Company for a
consulting fee which limits the liability arising on behalf of the Company.
This division intends to provide services to the parent Company's
policyholders and corporate clients through various broker dealers, nationwide.
The Company intends to contract with broker dealers through Viking Capital
Financial Services, Inc. These broker/dealers will be large enough to provide
all types of securities products and trading services (stocks, bonds, etc.). The
Company presently does not intend to have ownership in any broker/dealerships
that it does business with, but may so choose to in the future, if management
deems it is necessary to properly serve its client companies. VCFSI is currently
focused on capitalization of the Company.
Insurance Marketing Services Company (Viking Insurance Services, Inc.):
Marketing insurance plans call for the "Viking Travel Plan" to be offered
worldwide via the Internet. The plan is an emergency travel medical and
evacuation plan developed by VISI for World Travelers Association, Inc. (WTA,
Inc.). Plans call for the marketing of the Viking Travel Plan via an exclusive
marketing contract with WTA, Inc. and the marketing of life, health, and annuity
products with several life insurance companies. Viking Insurance Services, Inc.
will serve as the Company's marketing center, and will also serve as a "profit
center", providing marketing services to other insurance carriers.
Data Processing Company (Viking Systems, Inc.):
VSI offers linkage to its data processing capabilities via the Viking
Capital Financial Network (VCFN) which will allow users to process employee
benefit plans (Benefits IP), Remote Banking (IP Bankers), process entire
insurance company operations (Universal IP) and link with existing securities
firms (IP Trader) via the Internet. Once VSI has successfully offered these
services in conjunction with the Company's other subsidiaries to all types of
Corporate employee benefit plans nationwide, other insurance companies, banks
and large direct marketing organizations, VSI will then offer these services to
existing corporate customers of iXnet.
In November of 1999, the Company formed a Strategic Business Relationship
with VisualSoft, Inc.. VisualSoft is a software solutions and consulting
services provider, offering solutions in client/server systems , ERP
(Peoplesoft, SAP), relational databases, custom software and product
development, training and education, Internet services and products , and
reengineering and migration services. VisualSoft has offices in New York and
Chicago, as well as state-of-the-art development facilities in Hyderabad, India.
Training and education are provided at the Dallas facility for both clients and
VisualSoft professionals.
7
<PAGE>
The Company will leverage these strategic relationships to service all of
its data processing, integration, and MIS needs for internal and external
customers. The robust, technical, architecture developed by Viking Systems can
drive relevant information to consumers about their coverage. VisualSoft will be
contracted for all the Company's integration of purchased insurance companies,
books of business purchased and unrelated customer insurance companies and
Employee Benefit Plans. VisualSoft will handle all installations, all MIS
personnel training, servicing of the systems and technology advances for Viking
customers. Viking Systems, Inc. is currently located at the same site as the
Company headquarters.
Savings and efficiencies are believed possible in numerous client
industries, particularly for holding companies in the insurance, banking and
financial services industries, where multiple entities, each having its own data
processing system, are brought together under a single data processing center
via outsourcing to the Company's subsidiary, Viking Systems, Inc.
In June of 1998 the Company also formed a Strategic Joint Venture with
IXNet of NY. IXNet will provide the Company with all the transportation of its
data systems between Viking and the corporate customer for data processing and
administration contracts. This world wide telecommunication network (The Viking
Capital Financial Network-VCFN) will also allow Viking Systems the ability to
push such data out via the Internet, so that individual account holders can
access their own accounts via the Internet for their personal employee benefit
plan, banking, insurance and securities accounts. Subsequent to 12/31/99, iXnet
and its parent IPC were purchased by Global Crossing.
Insurance Administration Services (Viking Administrators, Inc.)
Initially, Viking Administrators, Inc. is expected to offer its services
only to employee benefit plans and insurance companies, including those to be
acquired, and, ultimately, bank holding companies which wish to offer insurance
and securities products to their client base but do not wish to install their
own administration of such products. Contracts for administration on an
outsourcing basis are typically expected to be for periods of seven years or
more. The Company, through Viking Administrators, Inc., intends to offer a
comprehensive range of administrative services associated with the internal
operations of insurance companies, including accounting, billing, policy
issuance, policy servicing, compliance and financial reporting services. In
August of 1997, NIAI Insurance Administrators, Inc. was acquired by Viking
Capital Group, Inc. for stock. This administration company brings tested
administration software, an experienced administrator, and TPA licenses. NIAI
will concentrate its administration activities on group health insurance plans.
Purchase of the targeted life insurance company will facilitate licensing for
the administration companies in the state in which the insurance company is
licensed, therein, eliminating the need for any additional TPA licenses on a
state by state basis. Should the Company determine that its own purchased life
insurance company should serve as the licensed TPA, then VAI may be required to
become a holding subsidiary of such purchased life insurance company should the
regulators not allow VAI to accomplish such licensing via a contract with the
life company. The Company is currently making its final determination as to the
location of VAI. Several states are offering financial incentive packages to
locate VAI in their state.
8
<PAGE>
Proposed Acquisition of an Insurance Company (to be named Viking Capital Life
Insurance Company):
The Company is proposing to purchase four to six life insurance companies
initially to reach its immediate goal of $1.5 billion in managed insurance
assets. Two such companies have been targeted for purchase immediately upon
completion of the acquisition financing (phase III). Once purchased, each life
company will be merged into the life company with the most licenses. The
Company's own life insurance company, in addition to facilitating uniform
compliance with required administrator license requirements, will serve as a
warehouse or structure within which the Company intends to acquire insurance
policies, with a goal of accumulating a managed asset base of $1.5 billion. The
Company intends to acquire blocks of insurance utilizing three methods: (1)
reinsuring a portion of the Company's client insurance companies' insurance
sales for whom the Company is performing data processing and administration
services; (2) purchasing blocks of business (a block or book of business is
generally described as a number of insurance policies of the same type or plan),
including the required accumulated reserves, typically comprised of securities
and some mortgages and real estate, referred to as "managed assets"; and (3)
purchasing entire insurance companies so as to take over all of the desired
blocks of business in the targeted insurance company. All purchased blocks or
books of business will be integrated into the Company's data processing and
administration centers by Viking Systems, Inc. and Transaction Information
Systems, Inc., giving each purchase the immediate benefit of economy of size.
Further economy of size is achieved by the unrelated third party insurance
companies' outsourcing to the Company's subsidiaries.
Management presently has identified several targets that are available.
These targets may or may not be available upon the Company's completion of its
capitalization. However, management believes that appropriate companies are
readily available. The anticipated cost of acquiring and capitalizing an
insurance company operation is estimated at $6,600,000., for a shell insurance
company, and a minimum of $35,000,000., for existing operating insurance
companies, depending upon the assets accumulated in such a target insurance
company. Management looks for targets that have investment portfolios with poor
performance, but with high quality investments and high per policy general
administrative expenses, compared to the Company's ability to process data and
service the same policies.
The purchase of the targeted life insurance company will finalize the
licensing requirements for all activities planned. Thereafter, the Company will
make six insurance company acquisitions. Each acquisition will average
$250,000,000 of managed assets with approximately $45,000,000 of premium income.
Therein, achieving the Company's immediate goal of $1.5 billion in managed
assets.
9
<PAGE>
Proposed Additional Services:
The final phase of the Company's proposed plan of operations involves the
application of the Company's expected data processing, administration and
insurance expertise and capabilities to permit financial services companies,
particularly insurance related operations, to offer broad based financial
products on an efficient low cost basis. Such steps may involve the acquisition
and/or development of additional data processing and software development
companies and alliances with (and/or) the formation or acquisition of an
investment banking/securities broker/dealer firm(s). Management believes that
the implementation of the first two stages of its plan of operations and the
establishment of, or strategic alliances with a broker/dealer firm(s) will
permit the Company to offer insurance, securities and other financial products
from broker/dealer firms to or through its existing client base. Management
believes that the Company's ability to offer products from broker/dealer firms,
along with its proposed supporting data processing and its administrative
expertise, will be particularly attractive to small and medium sized banks which
are trying to retain payroll and other corporate accounts. As the banking
industry continues to expand into the sale of virtually all financial products,
the use of the Company's products and systems is expected to permit banks to
tailor financial products to their customers' needs. Thus, enabling smaller
banks to retain accounts without incurring the cost of developing the requisite
expertise and systems internally. The Company, upon the purchase of the targeted
life insurance company and with the completion of API's to a life system
connecting our robust technical architecture, called the VS Integrator, the IP
Banker and Benefits IP, now allows the company to implement the remainder of its
plan of operation. All of these products and services will reside at VSI's "NY
Server Farm" and are to be distributed on VCFN. Subject to the receipt of the
necessary funding to carry out its plan of operations, the Company intends to
issue a private placement of its common or preferred stock, carry out the
acquisition of four to six insurance companies and to carry out the balance of
its plan of operation. The above will be expedited upon completion of the
Company's capitalization.
Market and Competition. The Company is presently aware of no other company
providing or planning to provide services of the nature and scope proposed to be
offered by the Company in the medium to small bank and insurance company market.
Management expects that other companies will attempt to duplicate the Company's
proposed services.
Employees. At December 31, 1999, the Company had six employees and
approximately 1,400 employees available via its strategic partners, VisualSoft,
ixNet, TIS, and Pearse EFT. The Company's relations with its employees and
strategic partners are favorable.
10
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's executive offices are located in 15,189 square feet of office
space at Two Lincoln Centre, 5420 LBJ Freeway, Suite 300, Dallas, Texas 75240 at
the base rate of $21,518 per month for a period of sixty (60) months through
6/31/2001. Approximately 5,000 square feet are subleased to independent third
parties pursuant to written lease agreements providing for monthly lease
payments of $8,651 plus/minus adjustments. Either party may cancel the sublease
with 60 days notice to the other party. Neither party intends to give such
notice at the time of this report. The Company's present facilities are believed
to be adequate to support its present holding company operations for the
remainder of the lease. Upon purchase of its planned insurance company
acquisitions, the Company has determined that it will require approximately
300,000 additional square feet.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any significant threatened, pending or
ongoing litigation to the best knowledge of management.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
The Company's common stock began trading in the over the counter (OTC)
market January 20, 1995 and trades on the OTC market currently. The Company's
trading symbol is "VGCP". The volume in the trading averages approximately
48,434 shares a day during 1999. As of 12/31/99 the stock was quoted at $0.25
ask and $0.24 bid. There is a total of approximately 31,503,567 common shares
outstanding of which approximately 11,342,425 are free trading shares as of
12/31/99.
At December 31, 1999 the Company had 100,000 shares of Class B common stock
authorized and outstanding. All 100,000 shares were issued to William J. Fossen,
Chairman, President and CEO of the Company. The Class B common shares can elect
a majority of the board of directors.
11
<PAGE>
The following table sets forth the approximate low and high bid prices for
each quarter of the last two years for shares traded in the over the counter
market. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions. Source:
NASDAQ Trading and Market Services
Bid Bid Bid Bid
QTR Low High QTR Low High
- ---- ------- -------- ---- ------- -------
1Q98 $0.4375 $1.28125 1Q99 $0.45 $1.1563
2Q98 $0.375 $0.5 2Q99 $0.4375 $0.75
3Q98 $0.125 $0.5 3Q99 $0.42 $0.8875
4Q98 $0.11 $1.09375 4Q99 $0.21 $0.42
At December 31, 1999, the Company had outstanding options of approximately
12,925,826 shares of which approximately 10,528,008 are currently exercisable
for the purchase of common restricted stock.
Of the 31,503,567 shares of common stock outstanding at December 31, 1999,
approximately 20,161,142 shares are "restricted stock" as defined by Rule 144.
At December 31, 1999, approximately 15,281,689 shares of the restricted common
stock were eligible for resale pursuant to Rule 144.
Prior to December 31, 1999, the Company had outstanding certain note
agreements. All these note holders were offered a one time opportunity to
convert their notes and purchase a like amount of additional common shares by
October 1, 1995 for a conversion price of $1.10 per share. At 12/31/98 all these
note holders had converted or were repaid. Total conversion and purchase rights
were 230,182 common restricted shares. The shares are required to be registered
for resale (registration rights) when and if the Company ever filed for any
registration of any of its authorized but unissued common shares.
Note holders that converted to common stock received one A warrant and one
B warrant for each dollar that they convert. Each A warrant is exercisable at
$3.00 per share when the trading bid price of the common stock reaches a $4.00
average over five consecutive trading days. Each B warrant is exercisable at
$5.00 per share when the trading bid price of the common stock is a $6.00
average over five consecutive trading days. Each such warrant expires upon the
ninetieth day after the market trading bid price has reached the designated
price as outlined above.
As of December 31, 1999, the Company had $131,800 of convertible notes
outstanding that had the option to convert to 527,200 common restricted shares;
$5,000 convertible notes outstanding that had the option to convert to 16,667
common restricted shares; $5,000 convertible notes outstanding that had the
option to convert to 13,158 common restricted shares and $38,500 convertible
notes outstanding that had the option to convert to 77,000 common restricted
shares. If converted, $36,800 of these notes carry an additional option to
purchase the same number of common shares which the holder was originally
entitled to receive if the notes were converted to equity. An additional
$138,500 carry an option to purchase one-half of the number of common shares
which the holder was originally entitled to receive if the notes were converted
to equity. The option price is the same as the conversion rate except for
$116,800 convertible notes payable with a conversion rate of $0.25 per share and
an option rate of $0.50 per share. All options, if the notes are converted, are
exercisable for a period of one year from conversion.
12
<PAGE>
During and after the fourth quarter of 1999, the Company sold common
restricted shares (Class A Common) in a private placement under exemption from
registration under the Securities Act pursuant to Section 4(2) and Regulation D,
Rule 506. Sales have been made to accredited investors only. On November 2, 1999
the first sale of this private placement offering of up to $500,000 was
consummated. As of 3/28/00, $478,000 of this private placement have been sold
representing 1,593,333 common restricted shares and options to purchase an
additional 796,667 common restricted shares at 1.5 times the original price paid
for the common restricted shares.
Holders
At December 31, 1999, there were approximately 1,189 holders of record of
the common stock of the Company excluding share owners who hold stock in
brokerage houses nation wide in "street name".
Dividends
The Company has paid no cash dividends to any common equity holders to date
and does not expect to pay any dividends in the foreseeable future. Payment of
dividends on the Company's common stock is subject to the payment of all
accumulated dividends payable to holders of the Company's outstanding preferred
stock, if any. The Company had no preferred stock outstanding as of 12/31/99.
Other than the foregoing, there are no restrictions, nor are there likely to be
in the future, that limit the ability of the Company to pay dividends on its
common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company's plan of operations is also described more fully in Item 1.
Business, above. The Company has been engaged in preparing the necessary
business alliances and relationships to fulfill its full plan of operations
including both growth through acquisitions of insurance companies and growth
through building of technology based revenue streams through non-acquisition
methods. The company's plan for non-acquisition revenue growth has focused on
its business model of being an application service provider (ASP), formerly
referred to as a "service bureau environment", in fee and transaction fee
generating areas. These areas consist of internet based banking(IP Banker) ,
securities trading (IP Trader), human resource/benefit plan information
(Benefits IP), life insurance information relevant to policyholders and agents
(Universal IP) and direct marketing organizations (IP Marketer).
To this end, the Company has developed software capabilities encompassing
various aspects of each of these functions and is currently focused on pursuing
bank clients. Sales efforts are lead by a developing national sales force that
requires additional funding to compete effectively. The Company has also
developed strategic partners to handle secure communications and bandwidth
needs, implementation requirements, and ongoing maintenance, upgrade and
training needs. The Company's marketing niche is small to medium sized banks,
credit unions, S&L's etc. focusing on their desire to retain their current
customer base and enhance fee income in the face of sweeping regulatory changes
and increased services based competition primarily from larger institutions.
Each service provided by or proposed to be provided by the Company to a bank is
added to the basic on-line banking service and marketed through/with our bank
client. Our business model generates additional fee income for our clients by
sharing fee income generated through the bank depositors' use of different
services. The business model has been well received in the marketplace and the
Company intends to continue to pursue these customers.
13
<PAGE>
The company has, however, encountered difficulty in two areas both
centering on cash. The first area is that insurance company targets have almost
exclusively desired a cash purchase and the Company has not been able to move
fast enough before a competitor buys our target. The second area is that without
a larger cash balance, bank customers are not eager to sign contracts for
reasons of stability. While a lack of cash has hindered the company's progress,
management does not believe that it will ultimately prevent the Company from
moving forward as described below.
In the course of the past few months, management has reviewed several
options for the Company which includes acquisitions of revenue producing
technology companies that fit or compliment our business model. Management
believes, based upon discussions with potential targets, that a stock
acquisition of another company that is currently producing revenue is viable.
Technology companies are far more desirous of public company status and are
therefore more accepting of a non-cash transaction. This method of growth is
acceptable to Viking management. The Company is currently pursuing such
acquisitions.
The Company is and intends to continue to pursue its business plan in other
areas. On the insurance acquisition front, the Company continues to be
solicited, and continues to entertain such solicitations, by various state and
local government entities to place future acquired insurance company
administrative operations in their state or local area. The Company is seeking
economic incentive packages in the $20 to $30 million range in incentives and
grants from such entities. It is anticipated that this administrative business
will employ between 1,200 and 1,450 people. The Company has also been solicited
by various money managers to manage our future insurance company portfolios. The
Company has currently required that soliciting money managers must also be
willing to take an equity position in the Company. Such discussions are ongoing.
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.
For the fiscal year ended December 31, 1999 and 1998, net losses were
$1,980,074 and $1,540,614 respectively. The increased loss is due primarily to
increased personnel costs associated with Viking Systems relating to IP Banker
and Benefits IP.
At December 31, 1999, the Company had cash on hand of $8,434, current
assets of $99,075 including cash and $14,024 in accounts receivable, total
assets of $1,012,694 and liabilities totaling $718,510 excluding accrued
officer's salary of $921,422. After December 31, 1999 the Company received
additional cash in the amount of $362,250 via private sale of restricted common
stock. Also subsequent to December 31, 1999, $104,441 of current liabilities
were paid with common stock and a $20,000.00 promissory note payable was paid in
full with a $20,000 promissory note receivable. The Company anticipates that the
funds on hand will not sustain current operations beyond the first six months
and are not sufficient to implement any of the Company's full plan of
operations. Accordingly, in order to sustain operations past such period and to
implement the Company's full plan of operations, the Company must secure
additional funds.
14
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The "F series" pages follow page 22 and begin with "F-1"
Page
----
Report of Independent Certified Public Accountants..........................F-3
Consolidated Balance Sheets as of December 31, 1999, and 1998...............F-4
Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and for the period from inception (November 12, 1986) to
December 31, 1999..........................................................F-6
Consolidated Statements of Stockholders' Deficit for the years ended
December 31, 1999, and 1998 and for the period from inception
(November 12, 1986) to December 31,1999.....................................F-7
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998, and for the period from inception (November 12, 1986) to
December 31, 1999..........................................................F-11
Notes to Consolidated Financial Statements .................................F-14
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company's financial statements are audited by King Griffin & Adamson
P.C., Dallas, Texas. King Griffin & Adamson P.C. also audited the Company's
financial statements for the prior year.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Information Regarding Present Directors and Executive Officers
The following table sets forth certain information concerning the Company's
current directors and executive officers:
Age Title
--- -----
William J. Fossen 61 Chairman of the Board, President and CEO
Matthew W. Fossen 34 Director, CFO, Secretary, Treasurer
Mary M. Pohlmeier 51 Director
Robin M. Sandifer 62 Director
The terms for each director will expire at the next annual meeting of
shareholders or at such time as a successor is duly elected. Officers serve at
the discretion of the Board of Directors.
There is one family relationship among the Directors and Officers. Matthew
W. Fossen is the son of William J. Fossen.
15
<PAGE>
The following is a biographical summary of the business experience of the
directors and executive officers of the Company including dates of service as
directors:
William J. Fossen has served as Chairman, CEO & President of the parent
Company since 1989 has extensive executive experience in all facets of Life
Insurance Company operations, and public holding company operations and holds a
BS degree in Education from Valley City State University. Fossen founded his own
Financial Services Company in North Dakota which grew to seven offices and Sixty
Six full time brokers selling securities. After selling his own firm, Fossen
joined Life Investors Insurance Company where he served as a Vice President in
various executive roles for thirteen years. During this period Mr. Fossen was
responsible for opening the licensing of various states and their subsequent
sales operations. Fossen initiated the first open ended Real Estate Investment
Trust which was followed by a second Real Estate Investment Trust. These trusts
grew to over $425 million of managed trust real estate. For several years Mr.
Fossen was responsible for Iowa sales operations (the core sales operation)
where he doubled the premium in one year. Life Investors built its managed asset
base primarily by purchasing other insurance companies of which Mr. Fossen
played various active roles in their purchase and post acquisition structure and
operations. Life Investors grew to a $10.5 Billion of insurance in force company
with $1.2 Billion of managed assets and was then sold for $36 per share at which
time Mr. Fossen left the Company and sold his $2.75 per share holdings. Fossen
formed his own family company, National Investors Holding Corporation, in 1983
which has owned various operations including a small life insurance company. The
company is now inactive. Fossen took over Viking Capital in 1989 and began its
full management in 1994.
Matthew W. Fossen has served as a director, CFO, secretary and treasurer
since November 1997. Mr. Fossen has experience in the life and health insurance
industry and financial reporting systems. His insurance experience includes home
office operations such as new policy development, agent licensing and
contracting and premium accounting in addition to field sales experience. His
financial reporting systems experience was gained at Texas Instruments from 1991
to 1996. At Texas Instruments he developed specialized reporting systems for
special needs ranging from inventory analysis to multiple country sales while
living in TI locations around the world including Tokyo, Nice, Dallas, and
Austin. Fossen holds a BBA from The University of Texas, Austin and an MBA from
The University of North Texas where he was named outstanding MBA candidate in
finance, in addition to receiving the Financial Executive Institute award.
Mary M. Pohlmeier has served as a Director of the Company since October of
1991. Since June of 1987, Ms. Pohlmeier has been employed by Frito-lay, Inc. in
research and development and is presently a Technical Project Manager and
Principal Scientist where her responsibilities include the identification and
execution of strategies and designed testing for the introduction of new
products, coordination of functional support groups and supervision of
professional and technical staff on various projects.
Robin M. Sandifer has served as a director of the Company since 1997. Mr.
Sandifer holds a degree in Economics. Mr. Sandifer has had a successful career
in the food sales and distribution industry where he has been responsible for up
to $250 million in annual sales with operations in eleven processing plants. He
has been the successful owner and CEO of Tex American Food Marketing, Inc. since
1982.
Compliance With Section 16(a) Of The Exchange Act
Not Applicable
16
<PAGE>
<TABLE>
<CAPTION>
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning cash and non-cash
compensation paid or accrued by the Company and its subsidiaries to or on behalf
of the Company's Chief Executive Officer, William J. Fossen, and the named
officer during the three years ended December 31, 1999. No other executive
officer of the Company received, or had accrued on his or her behalf, total
compensation exceeding $100,000 during such periods.
Annual Compensation Long-term Compensation
------------------- ---------------------------------
Securities
Name and Principal Fiscal Underlying All Other
Position Year Salary Bonus Options Granted Compensation
- ----------------------- ----- ----------- ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
($) ($) (#) ($)
William J. Fossen (1)1999 $148,732(2) $ -0- 5,500,000(3) $ -0-
President and Chief (1)1998 $ 28,308(2) $ -0- -0- $ -0-
Executive Officer (1)1997 $ 29,536(2) $ -0- -0- $ 37,150(4)
Matthew W. Fossen (5)1999 $ 50,041(6) $ -0- 1,100,000(8) $ -0-
Secretary, Treasurer (5)1998 $ 35,863(6) $ -0- -0- $ -0-
Chief Financial Officer (5)1997 $ -0-(7) $ -0- 400,000(9) $ 30,000(10)
</TABLE>
(1) The aggregate cash remuneration to William Fossen, president, CEO &
chairman, during 1997, 1998, and 1999 was $29,536, $28,308 and $148,732
respectively
(2) The amounts above exclude accrued salaries at December 31, 1999 not paid of
approximately $718,463.
(3) These option shares consist of 5,000,000 shares granted in a five year
option exercisable at $0.75 per share expiring in July 2004 and a 500,000
share option granted in a five year option exercisable at $1.00 per share
expiring in September 2004. The 500,000 share option was granted to Mr.
Fossen in his capacity as a board member. All options listed are
exercisable and constitute Mr. Fossen's entire option holdings.
(4) A one-time non service related payment during 1997 consisting of 185,750
restricted shares valued at $37,150.
(5) The aggregate cash remuneration to Matthew Fossen, secretary, treasurer,
CFO and board member, during 1997, 1998, and 1999 consisted of $0, $35,863,
and $50,041 respectively.
(6) The amounts above exclude accrued salaries at December 31, 1999 not paid of
approximately $202,959.
(7) Prior to becoming an employee in November of 1997, Mr. Fossen performed
certain consulting functions from October 1996 through December 1996 for
which no fees were paid or accrued, and from January 1997 throughout the
year for which fees were paid. Such fees were $40,317 in cash and 150,000
common restricted shares valued at approximately $30,000. Also prior to
becoming an employee of the Company, a one-time non-compensatory fee of
47,460 common restricted shares valued at approximately $9,445 was received
by Mr. Fossen.
(8) These option shares consist of a 1,000,000 share option and a 100,000 share
option granted in five year options exercisable at $1.00 per share expiring
in September 2004. The 100,000 share option was granted to Mr. Fossen in
his capacity as a board member. All options listed are exercisable.
(9) These option shares are part of the 1996 Employee Stock Option Plan and are
vested at the rate of 25% per year in a five year option exercisable at
$1.00 per share expiring in November 2002.
(10) Upon joining the Company and the Board of Directors, Mr. Fossen was issued
150,000 common restricted shares valued at $30,000.
17
<PAGE>
Option/SAR Grants Table
The following table sets forth the options and/or stock appreciation rights
(SARs) made during the last completed fiscal year to each of the named executive
officers.
Option/SAR Grants in Last Fiscal Year
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Name Number of Percent of
Securities Options/
Underlying SARs
Options/SARs Granted to Exercise
Granted Employees or Base
(#) in Fiscal Price Expiration
Year ($/Sh) Date
- --------------------------------------------------------------------------------
William J. Fossen 5,000,000 52.7% $0.75 07/01/04
CEO 500,000 5.3% $1.00 09/16/04
Matthew W. Fossen 1,000,000 10.5% $1.00 09/16/04
CFO 100,000 1.1% $1.00 09/16/04
1) Percentages based upon 9,484,136 total compensatory options granted to
employees and contractors during 1999.
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
- --------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Name Shares acquired Value Number of
On exercise Realized securities Value of
(#) ($) underlying unexercised in-
unexercised the-money
options/SARs options/SARs at
at FY-end(#) FY-end ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable
- --------------------------------------------------------------------------------
William J. Fossen, CEO n/a n/a 5,500,000 (EX) n/a
Matthew W. Fossen n/a n/a 1,300,000 (EX) n/a
CFO n/a n/a 200,000 (UN) n/a
(EX) = Exercisable
(UN) = Un-exercisable
Compensation of Directors
The Directors of the Company are not paid any fee for their services in
such capacity on a regular plan. During 1999, the Company granted to Mary
Pohlmeier a one year option expiring on September 16, 2000 for 580,000 common
restricted stock options at the rate of $1.00 per share in recognition of Ms.
Pohlmeier's personal services, support, acts and deeds in support of the
Company. Ms. Pohlmeier has received for services or via purchase options in
prior years. Such options were taken into consideration by the board when
granting the above mentioned options. The Company also granted a five year stock
option for 50,000 shares per year of service, or portion thereof
18
<PAGE>
exceeding one half year, to each board member in recognition of their services
as a board member. Such options have an exercise price of $1.00 per share, are
immediately exercisable, and expire on September 16, 2004. Pursuant to this
rule, Matthew W. Fossen was granted an option for 100,000 common restricted
shares, William J. Fossen for 500,000 common restricted shares, Mary M.
Pohlmeier for 350,000 common restricted shares, and Robin M. Sandifer for
100,000 common restricted shares. On the date of grant of these options, the
closing price of the stock of the company was $0.4844 per share.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company has no employment contracts with any of its present executive
officers and has no plans or arrangements with respect to payments resulting
from the resignation, retirement or any other termination of a named executive
officer's employment or from a change-in-control of the Company. The Company
does have past due salaries accumulating to Mr. William J. Fossen and Matthew W.
Fossen of approximately $718,463 and $202,959 respectively.
Compensation Pursuant to Plans
The Company has adopted Viking Capital Group, Inc. 1996 Stock Option Plan
(Plan) which was approved by the shareholders at the 1995 annual meeting. Such
Plan is incorporated by reference as described at Item 13.
-- Intentionally left blank --
19
<PAGE>
<TABLE>
<CAPTION>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
----------------------
December 31, 1999
-----------------
The following table sets forth the names of the persons who own common
stock of the Company of 5% or more, of record or beneficially, and all officers
and directors of the Company and all officers and directors as a group.
Common Shares (Class A Common) and Percentages Owned
- --------------------------------------------------------------------------------
Shares Owned
Including Options
Shares Owned Exercisable Within
Name Excluding Options Percent(1) 60 Days Percent(2)
- ----------------------- ----------------- ------- ------------------ -------
<S> <C> <C> <C> <C>
National Investors
Holding Corp. 900,000 2.9% 900,000(3) 2.9%
William J. Fossen 2,085,750 6.6% 7,585,750(4) 20.5%
Mary M. Pohlmeier 956,353 3.0% 1,886,353(5) 5.8%
Matthew W. Fossen 850,127 2.7% 2,150,127(6) 6.6%
Robin M. Sandifer 441,987 1.4% 541,987(7) 1.7%
All Officers, Directors
and Beneficial owners
as a Group 5,234,217 16.6% 13,064,217 33.2%
</TABLE>
(1) Based on 31,503,567 shares outstanding at December 31, 1999.
(2) Based on 31,503,567 shares outstanding at December 31, 1999 plus 7,830,000
shares represented by options that are exercisable within 60 days of this
report as follows: William J. Fossen, 5,500,000 shares; Mary M. Pohlmeier,
930,000 shares, Matthew W. Fossen 1,300,000 shares and Robin M. Sandifer
100,000 shares.
(3) William J. Fossen is President and 56% owner of National Investors Holding
Corporation (NIHC). All NIHC shares have been pledged to First City Bank,
Farmers Branch, Texas.
(3) Includes 5,000,000 and 500,000 shares which may be acquired by Mr. Fossen
upon the exercising of options at $0.75 and $1.00 per share respectively.
Excludes 1,450,127 shares held by Mr. Fossen's adult children to which Mr.
Fossen disclaims beneficial ownership.
(4) Includes 930,000 shares which may be acquired by Ms. Pohlmeier upon the
exercising of options at $1.00 per share.
(5) Includes 1,300,000 shares which may be acquired by Mr. Fossen upon the
exercising of options at $1.00 per share.
(6) Includes 100,000 shares which may be acquired by Mr. Sandifer upon the
exercising of options at $1.00 per share.
(6) At 12/31/99 the Company had outstanding options for 12,925,826 shares of
which 10,528,008 were exercisable at 12/31/99. Fully diluted shares
outstanding at 12/31/99 are 44,429,393.
(7) All ownership is direct unless indicated otherwise.
Class B Common: William J. Fossen owns 100,000 shares of the Class B Common
Stock. This ownership represents 100% of all the authorized and issued Class B
Common shares. The Class B Common is entitled to elect a majority of the
directors. The creation and issuance of these shares to William J. Fossen was
approved by the shareholders at the Annual Meeting of the Shareholder held in
1995.
20
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998 and 1999, no transaction or series of similar transactions
involving persons named in Item 11 above or any of their immediate family
occurred which would have involved an amount in excess of $60,000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1 Stock for Stock agreement - Plan of Reorganization
Triple A Annuity Marketing, Inc.
3.1 Articles of Incorporation of Viking Capital Group, Inc. as amended *
3.2 Bylaws of Viking Capital Group, Inc. as amended *
4.1 Specimen Common Stock Certificate *
4.2 Specimen Preferred Stock Certificate *
10.1 1996 Stock Option Plan of the Registrant Filed on Form 14A in 1996 **
21.1 List of Subsidiaries
27.1 Financial Data Schedule
* Incorporated by reference pursuant to Exchange Act Rule 12b-23 to the
Registrant's Form 10-SB(File No. 0-22744) effective December 27, 1993.
** Incorporated by reference pursuant to Exchange Act Rule 12b-23 to the
Registrant's Form 14A (File No. 0-22744) for 1996.
*** Incorporated by reference pursuant to Exchange Act Rule 12b-23 to the
Registrant's Form 8K Exhibit 2.2 (File No. 0-22744) dated 9/4/97 and filed on
9/19/97 and Form 8K/A filed on November 18, 1997.
b) No reports on form 8K were filed during the fourth quarter of 1999.
21
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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.
By /s/ William J. Fossen
----------------------
William J. Fossen
President
Dated: March 28, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ William J. Fossen President, Chairman of the Board
- --------------------- and Chief Executive Officer March 28, 2000
William J. Fossen (Principal Executive Officer)
/s/ Matthew W. Fossen
- ---------------------
Matthew W. Fossen Director ,CFO, Secretary, Treasurer March 28, 2000
/s/ Mary M. Pohlmeier
- ---------------------
Mary M. Pohlmeier Director March 28, 2000
/s/ Robin M. Sandifer
- ---------------------
Robin M. Sandifer Director March 28, 2000
22
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
DECEMBER 31, 1999 AND 1998
F-1
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONTENTS
PAGE
----
Report of Independent Certified Public Accountants..........................F-3
Financial Statements
Consolidated Balance Sheets at December 31, 1999 and 1998.................F-4
Consolidated Statements of Operations for the years ended December 31,
1999 and 1998 and the period from November 12, 1986 (inception) to
December 31, 1999......................................................F-6
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1999 and 1998 and the period from November 12, 1986
(inception) to December 31, 1999........................................F-7
Consolidated Statements of Cash Flows for the years ended December 31,
1999 and 1998 and the period from November 12, 1986 (inception) to
December 31, 1999.....................................................F-11
Notes to Consolidated Financial Statements................................F-14
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors and Stockholders
of Viking Capital Group, Inc.
We have audited the accompanying consolidated balance sheets of Viking Capital
Group, Inc. and subsidiaries (a development stage enterprise), as of December
31, 1999 and 1998 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the consolidated
statements of operations, stockholders' equity (deficit) and accumulated
deficit, and cash flows of Viking Capital Group, Inc. and subsidiaries for the
period from November 12, 1986 (inception) to December 31, 1994. Those statements
were audited by other auditors whose reports have been furnished to us and our
opinion insofar as it relates to the cumulative amounts included for Viking
Capital Group, Inc. and subsidiaries is based solely on the reports of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Viking Capital
Group, Inc. and subsidiaries as of December 31, 1999 and 1998 and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
As described in Note C, the accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a going concern. The
Company has experienced recurring losses and has not generated any significant
revenue since its inception. Additionally, at December 31, 1999, the Company's
current liabilities exceeded its current assets by $1,526,468 and its total
liabilities exceeded its total assets by $627,238. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Unless the Company obtains additional financing, it will not be able to meet its
obligations as they come due and it will be unable to execute its long-term
business plan. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ King Griffin & Adamson P.C.
---------------------------------
KING GRIFFIN & ADAMSON P.C.
Dallas, Texas
March 7, 2000
F-3
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
1999 1998
----------- -----------
CURRENT ASSETS
Cash $ 8,434 $ 47,506
Accounts receivable 14,024 5,193
Notes receivable and accrued interest, net of
allowance of $124,222 and $115,160
in 1999 and 1998, respectively 76,617 53,695
----------- -----------
Total current assets 99,075 106,394
PROPERTY AND EQUIPMENT
Computer equipment 157,307 135,419
Furniture and office equipment 21,241 18,120
Accumulated depreciation and amortization (120,837) (78,069)
----------- -----------
Net property and equipment 57,711 75,470
CAPITALIZED SOFTWARE, net of accumulated amortization
of $8,080 and $0 in 1999 and 1998, respectively 765,549 633,479
OTHER ASSETS 90,359 114,929
----------- -----------
TOTAL ASSETS $ 1,012,694 $ 930,272
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
December 31,
1999 1998
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 200,300 $ 299,818
Notes payable - related party 11,300 4,322
Current obligations under capital leases 20,923 39,940
Accounts payable 363,843 452,003
Accrued payroll taxes 87,326 14,830
Accrued officer's salary 921,422 634,963
Other accrued expenses 12,828 4,000
Interest payable 5,569 7,607
Interest payable - related party 2,032 2,502
----------- -----------
Total current liabilities 1,625,543
1,459,985
LONG-TERM DEBT
Obligations under capital leases, less current portion 14,389 26,153
----------- -----------
Total liabilities 1,639,932 1,486,138
COMMITMENTS AND CONTINGENCIES (Notes C and F)
STOCKHOLDERS' DEFICIT
Preferred stock $1.00 par value; 50,000,000 shares authorized,
no shares issued and outstanding -- --
Series A Preferred Stock $1.00 par value; 2,500,000 shares
authorized, no shares issued and outstanding -- --
Series AA Preferred Stock $1.00 par value; 6,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock $0.001 par value, 150,000,000 shares authorized,
32,029,192 and 26,357,434 issued at December 31, 1999 and
1998, respectively 32,029 26,357
Common stock Class B $0.001 par value, 100,000 shares
authorized, issued and outstanding 100 100
Additional paid-in capital 9,197,191 7,170,190
Deficit accumulated in the development stage (9,062,318) (7,082,244)
----------- -----------
167,002 114,403
Less treasury stock, 525,625 shares at cost (41,206) (41,206)
Less common stock issued for notes receivable (753,034) (629,063)
----------- -----------
Total stockholders' deficit (627,238) (555,866)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,012,694 $ 930,272
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1999 and 1998 and period
from November 12, 1986 (inception) to December 31, 1999
Years Ended Period from
December 31, November 12, 1986 to
1999 1998 December 31, 1999
------------ ------------ --------------------
<S> <C> <C> <C>
REVENUE $ 18,012 $ -- $ 459,394
COST OF REVENUE 9,839 -- 77,958
------------ ------------ --------------------
GROSS PROFIT 8,173 -- 381,436
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,994,795 1,516,878 9,206,829
------------ ------------ --------------------
Loss from operations (1,986,622) (1,516,878) (8,825,393)
OTHER INCOME (EXPENSE)
Interest income 37,846 19,055 84,927
Interest expense (31,148) (40,574) (235,571)
Interest expense-related party (150) (2,217) (17,799)
Other -- -- (37,260)
------------ ------------ --------------------
Total other income (expense) 6,548 (23,736) (205,703)
------------ ------------ --------------------
Loss before income taxes (1,980,074) (1,540,614) (9,031,096)
Income tax provision -- -- (32)
------------ ------------ --------------------
NET LOSS $ (1,980,074) $ (1,540,614) $ (9,031,128)
============ ============ ====================
Loss per common share:
Basic and diluted loss per common share $ (0.07) $ (0.07)
============ ============
Weighted average common shares outstanding
(Basic and diluted) 29,328,537 23,507,668
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Period From November 12, 1986 (inception) to December 31, 1999
Class B
Preferred Stock Common Stock Common Stock
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 12, 1986
(date of inception) -- $ -- -- $ -- -- $ --
Issuance of 200,000 shares of
common stock at $.0375
per share -- -- 200,000 200 -- --
Expenses of stock issuance -- -- -- -- -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1986 -- -- 200,000 200 -- --
Net loss -- -- -- -- -- --
Balance at December 31, 1987 -- -- 200,000 200 -- --
Issuance of 500,000 shares of
common stock at $.15 per
share -- -- 500,000 500 -- --
Expenses of stock issuance -- -- -- -- -- --
Net income -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1988 -- -- 700,000 700 -- --
Issuance of 2,800,000 shares of
common stock at $.005 per
share for coal production
contract -- -- 2,800,000 2,800 -- --
Expenses of stock issuance -- -- -- -- -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1989 -- -- 3,500,000 3,500 -- --
Rescind issuance of common stock
for coal production contract -- -- (2,800,000) (2,800) -- --
Issuance of common stock:
60,000 shares for cash -- -- 60,000 60 -- --
265,000 shares for assets -- -- 265,000 265 -- --
40,000 shares for services -- -- 40,000 40 -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1990 -- -- 1,065,000 $ 1,065 -- --
Deficit
Accumulated Notes
Additional During the Receivable
Paid-in Development Treasury Issued for
Capital Stage Stock Stock Total
----------- ----------- ----------- ----------- -----------
Balance at November 12, 1986
(date of inception) $ -- $ -- $ -- $ -- $ --
Issuance of 200,000 shares of
common stock at $.0375
per share 7,300 -- -- -- 7,500
Expenses of stock issuance (200) -- -- -- (200)
Net loss -- (124) -- -- (124)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1986 7,100 (124) -- -- 7,176
Net loss -- (274) -- -- (274)
Balance at December 31, 1987 7,100 (398) -- -- 6,902
Issuance of 500,000 shares of
common stock at $.15 per
share 74,500 -- -- -- 75,000
Expenses of stock issuance (6,095) -- -- -- (6,095)
Net income -- 522 -- -- 522
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1988 75,505 124 -- -- 76,329
Issuance of 2,800,000 shares of
common stock at $.005 per
share for coal production
contract 11,200 -- -- -- 14,000
Expenses of stock issuance (5,421) -- -- -- (5,421)
Net loss -- (32,780) -- -- (32,780)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1989 81,284 (32,656) -- -- 52,128
Rescind issuance of common stock
for coal production contrat (11,200) -- -- -- (14,000)
Issuance of common stock:
60,000 shares for cash 14,940 -- -- -- 15,000
265,000 shares for assets 39,735 -- -- -- 40,000
40,000 shares for services 160 -- -- -- 200
Net loss -- (42,023) -- -- (42,023)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1990 $ 124,919 $ (74,679) -- -- $ 51,305
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Period From November 12, 1986 (inception) to December 31, 1999
Class B
Preferred Stock Common Stock Common Stock
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock:
For cash -- -- 400 -- -- --
For services -- -- 5,561,019 5,561 -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1991 -- -- 6,626,419 6,626 -- --
Issuance of common stock for
services -- -- 210,000 210 -- --
Issuance of preferred stock
at $1.00 110,000 110,000 -- -- -- --
Net loss -- -- -- -- -- --
Cumulative preferred stock
dividends -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1992 110,000 110,000 6,836,419 6,836 -- --
Issuance of common stock:
For services -- -- 2,192,506 2,193 -- --
For cash -- -- 202,500 202 -- --
To convert notes payable and
accrued interest payable -- -- 75,706 76 -- --
Net loss -- -- -- -- -- --
Cumulative preferred stock
dividends -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1993 110,000 110,000 9,307,131 9,307 -- --
Issuance of common stock:
For services -- -- 463,500 464 -- --
For cash -- -- 210,319 210 -- --
To convert preferred stock
and accrued dividends (90,000) (90,000) 57,561 58 -- --
Net loss -- -- -- -- -- --
Cumulative preferred stock
dividends -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1994 20,000 20,000 10,038,511 10,039 -- --
Deficit
Accumulated Notes
Additional During the Receivable
Paid-in Development Treasury Issued for
Capital Stage Stock Stock Total
----------- ----------- ----------- ----------- -----------
Issuance of common stock:
For cash $ 500 -- -- -- $ 500
For services 22,242 -- -- -- 27,803
Net loss -- (93,047) -- -- (93,047)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1991 147,661 (167,726) -- -- (13,439)
Issuance of common stock for
services -- -- -- -- 210
Issuance of preferred stock
at $1.00 -- -- -- -- 110,000
Net loss -- (137,754) -- -- (137,754)
Cumulative preferred stock
dividends -- (8,400) -- -- (8,400)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1992 147,661 (313,880) -- -- (49,383)
Issuance of common stock:
For services 217,058 -- -- -- 219,251
For cash 209,798 -- -- -- 210,000
To convert notes payable and
accrued interest payable 126,337 -- -- -- 126,413
Net loss -- (519,112) -- -- (519,112)
Cumulative preferred stock
dividends -- (13,200) -- -- (13,200)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1993 700,854 (846,192) -- -- (26,031)
Issuance of common stock:
For services 45,887 -- -- -- 46,351
For cash 215,640 -- -- -- 215,850
To convert preferred stock
and accrued dividends 115,063 -- -- -- 25,121
Net loss -- (508,473) -- -- (508,473)
Cumulative preferred stock
dividends -- (8,390) -- -- (8,390)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1994 1,077,444 (1,363,055) -- -- (255,572)
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Period From November 12, 1986 (inception) to December 31, 1999
Class B
Preferred Stock Common Stock Common Stock
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock:
For services -- -- 931,701 932 -- --
For cash -- -- 615,345 $ 615 -- --
Conversion of preferred stock
and accrued dividends (10,000) $ (10,000) 5,217 $ 5 -- --
Conversion of notes payable -- -- 150,000 150 -- --
Acquisition of VISI -- -- 454,545 454 -- --
Conversion of notes payable and
accrued interest -- -- 157,451 157 -- --
Issuance of Class B common stock
.001 par for services -- -- -- -- 100,000 100
Net loss -- -- -- -- -- --
Cumulative preferred stock
dividends -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 10,000 10,000 12,352,770 12,352 100,000 100
Issuance of common stock:
For services -- -- 659,500 660 -- --
For cash -- -- 833,300 833 -- --
Retirement of:
Preferred stock (10,000) (10,000) -- -- -- --
Common stock -- -- (2,500) (3) -- --
Conversion of notes payable
and accrued interest -- -- 128,650 129 -- --
Treasury stock acquired -- -- -- -- -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 -- -- 13,971,720 13,971 100,000 100
Issuance of common stock:
For services -- -- 1,743,773 1,745 -- --
For cash -- -- 1,182,137 1,182 -- --
For notes receivable -- -- 752,744 753 -- --
Fees other -- -- 725,339 725 -- --
Acquisitions -- -- 700,000 700 -- --
Expense reimbursement -- -- 60,274 60 -- --
Conversion of notes payable and
accrued interest -- -- 2,419,174 2,419 -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 -- -- 21,555,161 $ 21,555 100,000 $ 100
Deficit
Accumulated Notes
Additional During the Receivable
Paid-in Development Treasury Issued for
Capital Stage Stock Stock Total
----------- ----------- ----------- ----------- -----------
Issuance of common stock:
For services 639,429 -- -- -- 640,361
For cash $ 504,685 -- -- -- $ 505,300
Conversion of preferred stock
and accrued dividends $ 10,429 -- -- -- $ 434
Conversion of notes payable 74,850 -- -- -- 75,000
Acquisition of VISI -- -- -- -- 454
Conversion of notes payable and
accrued interest 173,033 -- -- -- 173,190
Issuance of Class B common stock
.001 par for services -- -- -- -- 100
Net loss -- (1,449,953) -- -- (1,449,953)
Cumulative preferred stock
dividends -- (1,200) -- -- (1,200)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 2,479,870 (2,814,208) -- -- (311,886)
Issuance of common stock:
For services 65,290 -- -- -- 65,950
For cash 690,810 -- -- -- 691,643
Retirement of:
Preferred stock (1,319) -- -- -- (11,319)
Common stock (5,597) -- -- -- (5,600)
Conversion of notes payable
and accrued interest 65,521 -- -- -- 65,650
Treasury stock acquired -- -- (6,406) -- (6,406)
Net loss -- (980,556) -- -- (980,556)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 3,294,575 (3,794,764) (6,406) -- (492,524)
Issuance of common stock:
For services 403,671 -- -- -- 405,416
For cash 523,445 -- -- -- 524,627
For notes receivable 301,169 -- -- (301,922) --
Fees other 137,089 -- -- -- 137,814
Acquisitions 44,100 -- -- -- 44,800
Expense reimbursement 11,995 -- -- -- 12,055
Conversion of notes payable and
accrued interest 731,307 -- -- -- 733,726
Net loss -- (1,746,866) -- -- (1,746,866)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 $ 5,447,351 $ (5,541,630) $ (6,406) $ (301,922) $ (380,952)
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Period From November 12, 1986 (inception) to December 31, 1999
Class B
Preferred Stock Common Stock Common Stock
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock:
For services -- -- 1,109,250 1,109 -- --
For cash -- -- 1,914,040 1,914 -- --
For notes receivable -- -- 797,480 798 -- --
Fees other -- -- 62,500 62 -- --
Expense reimbursement -- -- 18,280 19 -- --
Conversion of notes payable
and accrued interest -- -- 900,720 900 -- --
Triple A recision -- -- -- -- -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 -- -- 26,357,431 26,357 100,000 100
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock
For cash -- -- 3,532,412 3,532 -- --
For notes receivable -- -- 313,919 314 -- --
For services -- -- 1,216,046 1,216 -- --
For expense reimbursement -- -- 21,567 22 -- --
For equipment -- -- 5,870 6 -- --
Conversion of notes payable
and accrued interest -- -- 581,947 582 -- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 -- $ -- 32,029,192 $ 32,029 100,000 $ 100
=========== =========== =========== =========== =========== ===========
Deficit
Accumulated Notes
Additional During the Receivable
Paid-in Development Treasury Issued for
Capital Stage Stock Stock Total
----------- ----------- ----------- ----------- -----------
Issuance of common stock:
For services 426,493 -- -- 427,602
For cash 638,910 -- -- 640,824
For notes receivable 326,343 -- (327,141) --
Fees other 24,938 -- -- 25,000
Expense reimbursement 4,552 -- -- 4,571
Conversion of notes payable
and accrued interest 301,603 -- -- 302,503
Triple A recision -- (34,800) -- (34,800)
Net loss -- (1,540,614) -- -- (1,540,614)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 7,170,190 (7,082,244) (41,206) (629,063) (555,866)
----------- ----------- ----------- ----------- -----------
Issuance of common stock
For cash 1,279,863 -- -- 1,283,395
For notes receivable 123,657 -- (123,971) --
For services 421,816 -- -- 423,032
For expense reimbursement 6,449 -- -- 6,471
For equipment 1,755 -- -- 1,761
Conversion of notes payable
and accrued interest 193,461 -- -- -- 194,043
Net loss -- (1,980,074) -- -- (1,980,074)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 $ 9,197,191 $(9,062,318) $ (41,206) $ (753,034) $ (627,238)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999 and 1998
and period from November 12, 1986 (inception) to December 31, 1999
Period from
Years Ended November 12,
December 31, 1986 to
1999 1998 December 31,1999
------------ ------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,980,074) $ (1,540,614) $ (9,031,128)
Non cash charges included in operations
Allowance for doubtful accounts 9,062 56,000 65,062
Depreciation and amortization 50,848 36,145 130,917
Common stock issued for services 423,032 427,602 1,927,705
Common stock issued for services - related party - - 359,008
Common stock issued for fees and other costs - 25,000 162,814
Common stock issued for expense reimbursement 6,471 4,571 23,097
Common stock issued for purchase of equipment 1,761 - 1,761
Common stock issued for interest payable 14,232 25,203 141,296
Note payable issued for services - related party - - 3,200
Note payable issued for interest expense - - 3,660
Provision for doubtful notes receivable - - 52,754
Loss on assets - - 15,000
Advances to stockholder expensed to consulting - - 57,706
Changes in assets and liabilities
(Increase) decrease in accounts receivable (8,831) 60,384 (13,819)
(Increase) in interest receivable (12,744) (17,157) (49,117)
(Increase) in interest receivable - related party - - (60)
(Increase) decrease in other assets 24,570 (28,552) (58,007)
(Increase) in deposits - - (31,767)
Increase (decrease) in accounts payable (88,160) 330,048 356,942
Increase in accounts payable - related party - (6,700) 21,901
Increase (decrease) in interest payable (2,508) (2,111) (4,619)
Increase (decrease) in accrued payroll
and payroll taxes 286,459 218,596 919,632
Increase (decrease) in accrued expenses 81,324 14,425 118,367
Increase in accrued expenses - related party - - 4,871
------------ ------------- -------------
Net cash used for operating activities (1,194,558) (397,160) (4,822,824)
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs - - (50)
Purchase of fixed assets including payments
for software development (165,159) (651,367) (837,940)
Loans made (37,440) (3,600) (153,382)
Loans made to shareholder - - (17,000)
Loans made to related parties (50,000) - (145,366)
Loan repayments 18,200 10,800 34,000
Loan repayments-related parties 50,000 - 60,500
Deposit on coal production contract - - (15,000)
------------ ------------- -------------
Net cash used for investing activities (184,399) (644,167) (1,074,238)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
Years Ended December 31, 1999 and 1998
and period from November 12, 1986 (inception) to December 31, 1999
Period from
Years Ended November 12,
December 31, 1986 to
1999 1998 December 31, 1999
----------- ----------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Stock sale expenses $ - $ - $ (11,716)
Proceeds from notes payable 99,800 378,418 2,116,877
Proceeds from notes payable - related parties 26,300 13,667 337,194
Repayments of notes payable (19,500) (22,800) (402,990)
Repayments of notes payable - related parties (19,322) (25,365) (234,029)
Repayments of capital lease obligations (30,788) (19,365) (72,326)
Proceeds from preferred stock sale - - 20,000
Retirement of preferred stock - - (11,319)
Dividends converted to preferred stock - - (434)
Proceeds from sale of common stock 1,283,395 640,824 4,169,639
Preferred dividends paid - - (5,400)
----------- ----------- ------------
Net cash provided from financing activities 1,339,885 965,379 5,905,496
----------- ----------- ------------
Increase (decrease) in cash (39,072) (75,948) 8,434
Cash at beginning of period 47,506 123,454 -
----------- ----------- ------------
CASH AT END OF PERIOD $ 8,434 $ 47,506 $ 8,434
=========== =========== ============
SUPPLEMENTAL DISCLOSURES Cash flow information:
Interest paid $ 7,801 $ 36,829 $ 89,173
Interest paid - related party 3,888 927 14,135
Income taxes paid - - 32
Non-cash investing activities:
Repayment of note receivable - non cash method - 19,000 21,000
Common stock issued for:
Acquisition of VISI - - 434
Acquisition of NIAI - - 10,000
Acquisition (rescission) of Triple A - (34,800) -
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:
Repayment of notes payable 179,818 269,800 1,299,735
Repayment of notes payable-related party - 7,500 119,500
Payment of interest 14,232 25,203 138,200
Payment of interest - related party - - 3,097
</TABLE>
- Continued -
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
Years Ended December 31, 1999 and 1998
and period from November 12, 1986 (inception) to December 31, 1999
Period from
Years Ended November 12,
December 31, 1986 to
1999 1998 December 31, 1999
------------ ------------ -----------------
<S> <C> <C> <C>
Payment of accounts payable $ - $ - $ 15,000
Conversion of preferred stock - - 100,000
Payment of preferred stock dividend - - 25,556
Notes receivable 123,970 327,141 753,032
Note payable issued for:
Services - related party - - 3,200
Payment of interest - related party - - 3,660
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.
F-13
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Viking Capital Group, Inc. ("Company") is currently in the development stage as
it has generated no significant revenue. The Company is currently working to
secure capital necessary to execute its business plan to provide financial and
administrative services to banks and to acquire insurance companies. The Company
has completed and is now marketing a software product targeted at financial
institutions.
History
- -------
Viking Capital Group, Inc. was incorporated November 12, 1986, as a Utah
business corporation under the name of Silver Harvest, Inc. to transact any
business authorized under the general corporation law of Utah. On February 21,
1990 the Company amended its Articles of Incorporation to change its name to
Viking Capital Group, Inc. with all the same provisions of the original articles
to remain in full force. During June, 1994, the Company formed a wholly-owned
subsidiary, Viking Financial Services, Inc., a Texas corporation, to provide
corporate relations services. During 1995, the Company issued 454,545 common
shares in exchange for 100 percent of the common stock of Viking Insurance
Services, Inc. ("VISI") to provide insurance related services. During 1996, the
Company incorporated two additional wholly owned subsidiaries, Viking Systems,
Inc. and Viking Administrators, Inc. During 1997, the Company acquired Triple A
Annuity Marketing, Inc. ("Triple A") and NIAI Issuance Administrators, Inc.
("NIAI"). None of these companies have provided any significant level of
services to date other than Triple A which was accounted for under the equity
method during 1997, as discussed further in Note B. The Triple A acquisition
agreement was rescinded during 1998. The Company's portion of equity income or
loss related to its investment in Triple A during the year ended 1998 was
minimal. During 1999, the Company formed a wholly owned subsidiary, Viking
Capital Financial Services, Inc., a Texas corporation, to provide financial
services.
Consolidation
- -------------
The accompanying consolidated financial statements include the assets,
liabilities and operating activities of the Company's wholly-owned subsidiaries.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid debt instruments purchased with original
maturities of three months or less to be cash equivalents.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Equipment under capital leases is
stated at the present value of minimum lease payments at the inception of the
lease. The Company provides for depreciation of its office furniture and
equipment using the straight line method over the estimated useful life of the
depreciable assets ranging from five to seven years. Computer equipment held
under capital leases is amortized straight line over the shorter of the lease
term or the estimated useful life of the asset ranging from three to five years.
Amortization of assets held under capital leases is included with depreciation
expense. Maintenance and repairs are expensed as incurred. Replacements and
betterments are capitalized.
The gross amount and accumulated amortization for assets held under capital
leases amounted to $107,631 and $87,113, respectively at December 31, 1999, and
$107,631 and $59,267, respectively at December 31, 1998.
F-14
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1999 and 1998
NOTE A - BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Income Taxes
- ------------
Deferred income taxes are determined using the asset and liability method, under
which deferred tax assets and liabilities are calculated based on differences
between financial accounting and tax basis of assets and liabilities. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense or benefit is the payable or
refund for the period plus or minus the change during the period in deferred tax
assets and liabilities.
Loss per Common Share
- ---------------------
The Company has adopted SFAS No. 128, "Earnings Per Share", which requires the
disclosure of basic and diluted net loss per share. Basic net loss per share is
computed by dividing net loss plus preferred dividends paid and accrued during
the year (where applicable) by the weighted average number of common shares
outstanding for the period. Diluted net loss per share is computed by dividing
net loss plus preferred dividends paid and accrued during the year (where
applicable) by the weighted average number of common shares and common stock
equivalents. Common stock equivalents were excluded from the computation as such
inclusion would have an anti-dilutive effect.
Software Development
- --------------------
Software development costs have been capitalized in accordance with Statement of
Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed" ("SFAS 86"). Under SFAS 86,
capitalization of software development costs begins upon the establishment of
technological feasibility and ends when a product is available for general
release to customers. Software development costs will be amortized after the
product is placed in service over a period ranging from three to five years.
During 1999 the Company began to amortize software costs of $96,962 associated
with the development of an e-commerce web site, using an estimated useful life
of three years.
Stock Transactions
- ------------------
During 1999 and 1998, the Company entered into a number of stock transactions
for non-cash consideration. These include the issuance of stock for services, as
reimbursement for expenses incurred, for the purchase of equipment, and in
exchange for the issuance of notes receivable. The Company also converted
certain notes payable to common stock during 1999 and 1998. These transactions
were recorded at the market value of the services received, asset acquired or
the face value of the notes issued or converted.
Use of Estimates and Assumptions
- --------------------------------
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could vary from the estimates that were
used.
Recent Accounting Pronouncements
- --------------------------------
In June 1998, the Financial Accounting Standards Board issued Standard No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities".
SFAS 133 requires companies to record derivatives on the balance sheet as assets
or liabilities, measured at fair value. Gains or losses resulting from changes
in the values of those derivatives would be accounted for depending on the use
of the derivative and whether it qualifies for hedge accounting. SFAS 133 is
effective beginning in 2000. The adoption of SFAS 133 is not expected to have a
material impact on the financial position or results of operations of the
Company.
F-15
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1998 and 1997
NOTE A - BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position No. 98-5
("SOP 98-5"), "Reporting on the Costs of Start-up Activities". This statement
was required to be adopted for fiscal years beginning after December 15, 1998
and requires the expensing of all start-up costs, as defined, as they are
incurred. The Company has applied SOP 98-5 for the years ended December 31, 1999
and 1998, with no significant impact to its results of operations or financial
position.
NOTE B - BUSINESS COMBINATIONS
Pursuant to the Reorganization Agreement dated September 4, 1997, the Company
acquired all of the outstanding stock of Triple A in exchange for 500,000 shares
of its common stock. Due to certain contingent provisions in the agreement, the
transaction was accounted for as the purchase of an unconsolidated subsidiary
under the equity method as it was unclear whether or not control of the
subsidiary would be permanent. The investment was recorded at the net book value
which approximates fair market value of Triple A on the date of acquisition.
Under terms of the contingent provision, the Triple A acquisition agreement was
rescinded during 1998.
NOTE C - GOING CONCERN
The consolidated financial statements have been prepared on the assumption that
the Company will continue as a going concern. The Company sustained a net
operating loss of $1,980,074 during the year ended December 31, 1999 and has
accumulated losses of $9,031,124 since its inception, November 12, 1986. Cash
used by operating activities for the same periods aggregated $1,194,558 and
$4,822,824, respectively. Current liabilities at December 31, 1999 of $1,625,543
exceed current assets of $99,075. Total liabilities at December 31, 1999 of
$1,639,932 exceed total assets of $1,012,694. The Company's 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. The Company intends to obtain
capital primarily through issuances of common and preferred stock. There can be
no degree of assurance given that the Company will be successful in completing
additional financing transactions.
The consolidated financial statements do not include any adjustments to reflect
the possible effects on the recoverability and classification of assets or
classification of liabilities which may result from the inability of the Company
to continue as a going concern.
NOTE D - NOTES PAYABLE
The Company entered into new notes or renewed existing notes totaling $256,100
during 1999. All outstanding notes at December 31, 1999 mature during 2000, bear
interest ranging from 10% to 14% and are secured by the assets of the Company,
except for a $100,000 note which is secured by 200,000 free trading shares owned
by directors and shareholders of the Company. Interest payments are due
quarterly on this note. Interest payments on all of the other notes are due at
maturity. Included in the $256,100 balance is $26,300 from related parties.
During 1999 and 1998, notes payable totaling $179,811 and $277,300,
respectively, and related accrued interest of $14,232 and $25,203 were converted
to 581,947 and 900,720 common shares, respectively. As of December 31, 1999, the
Company had $131,800 of convertible notes outstanding that had the option to
convert to 527,200 common restricted shares; $5,000 convertible notes
outstanding that had the option to convert to 16,667 common restricted shares;
$5,000 convertible notes outstanding that had the option to convert to 13,158
common restricted shares and $38,500 convertible notes outstanding that had the
option to convert to 77,000 common restricted shares. If converted, $36,800 of
these notes carry an additional option to purchase the same number of common
F-16
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1998 and 1997
NOTE D - NOTES PAYABLE - Continued
shares which the holder was originally entitled to receive if the notes were
converted to equity. An additional $138,500 carry an option to purchase one-half
of the number of common shares which the holder was originally entitled to
receive if the notes were converted to equity. The option price is the same as
the conversion rate except for $116,800 convertible notes payable with a
conversion rate of $0.25 per share and an option rate of $0.50 per share. All
options, if the notes are converted, are exercisable for a period of one year
from conversion.
NOTE E - INCOME TAXES
Deferred tax assets and liabilities at December 31, 1999 and 1998 are as
follows:
1999 1998
---------- ----------
Current deferred tax asset 355,519 $ 255,042
Valuation allowance for current deferred tax asset (355,519) (255,042)
---------- ----------
Net current deferred tax asset - $ -
========== ==========
Non-current deferred tax asset 2,566,955 2,062,798
Valuation allowance for non-current deferred tax asset (2,566,955) (2,062,798)
---------- ----------
Net non-current deferred tax asset - $ -
========== ==========
The non-current deferred tax asset results from the tax benefit of the net
operating losses. The current deferred tax asset includes the accrual of
officers salary for financial reporting purposes not deducted for federal income
tax reporting purposes until paid and the allowance for doubtful accounts which
is not deducted for federal income tax reporting purposes until written-off.
The Company has operating loss carryforwards totaling approximately $8,598,000,
subject to limitations under Section 382 of the Internal Revenue Code, that are
available to offset its future income tax liability. The net operating loss
carryforwards expire as follows:
Year 2004 $ 21,000
Year 2005 0
Year 2006 168,000
Year 2007 206,000
Year 2008 450,000
Year 2009 504,000
Year 2010 1,443,000
Year 2011 981,000
Year 2012 1,572,000
Year 2013 1,273,000
Year 2014 1,980,000
------------
$ 8,598,000
As further described in Note C, realization of the benefit of these net
operating loss carryforwards and other deferred tax assets appear uncertain.
Accordingly, a valuation allowance of $2,922,474 has been recorded in 1999
against the deferred tax asset resulting from the recurring deferred tax
benefit. The valuation allowance increased by $604,634 and $405,234 during the
years ended December 31, 1999 and 1998, respectively.
F-17
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1999 and 1998
NOTE F - LEASE COMMITMENTS
During 1996, the Company entered into operating lease agreements for office
space and certain computer equipment. The office lease expires in 2001. The
Company leases computer equipment under capital leases and long-term
non-cancelable operating leases. Total rental expense was $183,222 and $169,593
in 1999 and 1998, net of $142,509 and $86,400 of rental income in 1999 and 1998
receivable under a sub-lease of part of the office space. Future minimum lease
payments under non-cancelable operating leases and capital leases at December
31, 1999 are as follows:
Operating Capital
Leases Leases
--------- --------
2000 258,216 25,083
2001 129,108 14,760
--------- --------
Total 387,324 39,843
Less lease income from sub-lease (16,176)
---------
$ 371,148
Less amount representing interest (4,531)
--------
Present value of net minimum lease payments
including current maturities of $20,923 $ 35,312
========
NOTE G - COMMON STOCK
In 1995, the Company amended its Articles of Incorporation to authorize the
issuance of 100,000 shares of Class B Common Stock with a par value of $.001.
All 100,000 shares were issued in 1995 to the President of the Company for
services provided. The Class B shares shall only hold the right to elect a
simple majority of the Company's Board of Directors, effectively functioning as
an "anti-takeover" provision against any unwelcome acquisition or merger
attempts for or with the Company.
NOTE H - PREFERRED STOCK
Authorized preferred stock at December 31, 1999 is 50,000,000 shares. The Board
of Directors has the discretion to attach any dividend rate and/or conversion
privilege at the time of issuance.
Effective October 14, 1996, the Board of Directors authorized the issuance of
2,500,000 shares of new Series A preferred stock, with a par value of $1.00 per
share. These shares are non-voting cumulative, callable preferred stock
convertible to common stock eighteen months after issuance at a rate equal to
one half the market value of the common stock. The Company will account for the
issuance of preferred stock with below market conversion features as deemed
dividends to the extent that the fair value of the common stock at the date of
issuance of the preferred stock exceeds the stated conversion price. The new
preferred stock will carry a coupon rate of 10%. As of December 31, 1999, no
Series A preferred stock had been issued.
Effective September 27, 1999, the Board of Directors authorized the issuance of
6,000,000 shares of new Series AA preferred stock, with a par value of $1.00 per
share. These shares are non-voting cumulative, callable preferred stock
convertible to common stock if, after issuance, the market price of the common
stock rose to $6.25 per share or higher, at a rate determined by the market
price of the common stock. The new preferred stock will carry a coupon rate of
8.1%. As of December 31, 1999, no Series AA preferred stock had been issued.
F-18
<PAGE>
<TABLE>
<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1999 and 1998
NOTE I - STOCK OPTIONS
Effective July, 1996, the Board of Directors approved a qualified employee stock
option plan for the Company (the "Plan"). Under the Plan, the Company may grant
options for up to five million shares of common stock. The exercise price of
each option may not be less than the fair market value of common stock at the
date of grant, without approval of the Board of Directors. Options are
exercisable according to the terms set out in the option agreement, not to
exceed ten years. At December 31, 1999 and 1998, there were a total of 1,919,000
and 2,590,045 options outstanding under the Plan, respectively. In addition, the
Company has issued stock options outside of the Plan to employees, directors and
others as compensation for services provided to the Company as well as options
which are non-compensatory in nature. At December 31, 1999 and 1998 there were a
total of 12,925,826 and 9,222,461 options (including compensatory and
non-compensatory) outstanding, respectively. All options granted by the Company
related to restricted stock under rules promulgated by the Securities and
Exchange Commission.
A summary of changes in the Company's compensatory options follows:
Employee Stock Plan Other Compensatory Combined Total
------------------- ------------------ --------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price Options
---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Outstanding at 12/31/97 3,637,685 - 4,598,076 - 8,235,761
Granted 780,000 $ 1.00 241,413 $ 0.87 1,021,413
Exercised - - - - -
Forfeited (1,827,640) $ 1.00 (1,100,000) $ 1.10 (2,927,640)
---------- ---------- ----------
Outstanding at 12/31/98 2,590,045 3,739,489 6,329,534
Granted 924,000 $ 1.00 8,560,136 $ 0.85 9,484,136
Exercised - - - - -
Forfeited (1,595,045) $ 1.00 (3,296,201) $ 1.03 (4,891,246)
---------- ----------- ----------
Outstanding at 12/31/99 1,919,000 9,003,424 10,922,424
========== =========== ==========
</TABLE>
The fair value of compensatory options issued during 1999 and 1998 was
$2,702,856 and $340,581, respectively.
<TABLE>
The following table summarizes information about options outstanding at December
31, 1999 under the Employee Stock Plan:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Avg.
Range of Number Remaining Weighted Avg. Number Weighted Avg.
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercisable Price
- --------------- ----------- ---------------- -------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$1.00 1,919,000 3.65 years $1.00 355,000 $1.00
The following table summarizes information about other compensatory stock
options outstanding at December 31, 1999:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Avg.
Range of Number Remaining Weighted Avg. Number Weighted Avg.
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercisable Price
- --------------- ----------- ---------------- -------------- ----------- -----------------
$0.75-$1.10 9,003,424 3.83 years $0.86 8,912,364 $0.86
</TABLE>
F-19
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1999 and 1998
NOTE I - STOCK OPTIONS - Continued
A summary of changes in the Company's non-compensatory options follows:
Non-Compensatory Weighted Average
Options Exercise Price
---------------- ----------------
Outstanding at 12/31/97 3,569,530 $ 1.31
Granted 2,451,024 0.49
Exercised (1,249,129) 0.41
Forfeited (1,878,498) 0.65
-----------
Outstanding at 12/31/98 2,892,927 0.74
Granted 1,160,644 0.38
Exercised (80,092) 0.50
Forfeited (1,970,077) 0.50
-----------
Outstanding at 12/31/99 2,003,402 $ 0.43
===========
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB25"), in accounting for its compensatory options. The options
granted in 1999 and 1998 have exercise prices which approximate fair value and
accordingly, no compensation cost has been recognized for its compensatory stock
options in the consolidated financial statements. Had compensation cost for the
Company's stock options been determined consistent with FASB statement No. 123,
"Accounting for Stock Based Compensation", the Company's net loss and net loss
per share would have been increased to the pro forma amounts indicated below:
Years ended December 31,
1999 1998
------------ ------------
Net Loss As reported $ 1,980,074 $ 1,540,614
Pro forma $ 4,860,598 $ 1,859,249
Loss per share As reported (basic
and diluted) $ 0.07 $ 0.07
Pro forma $ 0.17 $ 0.08
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The following assumptions were used for
grants in 1999; dividend yield at 0%, expected volatility at 104%, risk free
interest rate of 6.0% over a 1-3 year period, and an expected life of 1-3 years.
The following assumptions were used for grants in 1998; dividend yield of 0%,
expected volatility of 202%, risk free interest rates ranging from 5.3 % to 6.0%
over a 1-5 year period, and an expected life of 1-5 years.
F-20
<PAGE>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 1999 and 1998
NOTE J - RELATED PARTY TRANSACTIONS
Total consulting fees paid to related parties in the form of cash or stock
during 1999 and 1998 aggregated $0 and $15,000, respectively.
The Company loaned $50,000 to a related party during 1999. The loan, bearing
interest at 8% and due on March 25, 2000 was paid in full during 1999.
At December 31, 1999 and 1998, the Company had notes and interest receivable of
$2,158 and $53,695, respectively (net of allowance) from related parties.
NOTE K - CONCENTRATIONS OF CREDIT RISK
The Company's notes receivables and accounts receivable are subject to potential
credit risk. Some notes receivable are collaterized against shares held in the
Company; all other notes receivable are uncollatoralized. The Company has
provided an allowance for doubtful receivables which reflects its estimates of
uncollectible amounts. The maximum exposure assuming non performance by the
debtors is the amount shown on the balance sheet at the date of non-performance.
Included in other assets is a receivable of $50,000 which is collateralized by
the Company's common stock (see Note N).
NOTE L - EMPLOYEE BENEFIT PLAN
On April 18, 1995, the Company registered an Employee Benefit Plan ("Plan")
under regulation S-8 that reserved 1,000,000 shares of common stock for issuance
under the Plan. These shares can be issued by approval of an Employee Benefit
Committee appointed by the Board of Directors. During 1996, the Company
registered an additional 1,000,000 common shares through a Form S-8. On January
21, 1999, the Company registered a further 1,000,000 common shares through
another Form S-8. During years ended December 31, 1999 and 1998, 1,137,926 and
189,669 shares, respectively, have been issued under the terms of the Plan.
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments", requires disclosure about the fair value of all
financial assets and liabilities for which it is practicable to estimate. Cash,
accounts receivable, notes receivable, accounts payable, notes payable and other
liabilities are carried at amounts that reasonably approximate their fair
values.
NOTE N - SOFTWARE LICENSING AGREEMENT
On July 21, 1997, the Company entered into an agreement for the licensing of
certain proprietary software to a Company shareholder. Total consideration
received under the agreement totals $400,000, which is to be paid out over a
period of ten years plus interest at seven percent. The Company holds as
collateral 250,000 shares of Viking Capital Group, Inc. common stock. The
Company has recorded the sale and related receivable based upon the value of the
underlying collateral totaling $50,000. The receivable is included in other
assets in the accompanying balance sheets. All other payments will be recognized
as revenue when received.
NOTE O - SUBSEQUENT EVENTS
For the period from December 31, 1999 through the date of this report, the
Company issued 1,218,872 shares of common shares. Of this amount, 658,332 shares
were issued for $197,500 cash and 417,763 common shares were issued in payment
of $104,441 in services. During this period, the Company also issued 329,166 one
year options to acquire common stock.
F-21
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
21.1 List of Subsidiaries
27.1 Financial Data Schedule
22
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF THE COMPANY AS OF DECEMBER 31, 1999 INCLUDED IN THE 10KSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10KSB
</LEGEND>
<CIK> 0000886093
<NAME> VIKING CAPITAL GROUP, INC
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,434
<SECURITIES> 0
<RECEIVABLES> 14,024
<ALLOWANCES> 124,222
<INVENTORY> 0
<CURRENT-ASSETS> 99,075
<PP&E> 952,177
<DEPRECIATION> 128,917
<TOTAL-ASSETS> 1,012,694
<CURRENT-LIABILITIES> 1,625,543
<BONDS> 14,389
0
0
<COMMON> 32,129
<OTHER-SE> (659,367)
<TOTAL-LIABILITY-AND-EQUITY> 1,012,694
<SALES> 18,012
<TOTAL-REVENUES> 55,858
<CGS> 9,839
<TOTAL-COSTS> 1,994,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (31,298)
<INCOME-PRETAX> (1,980,074)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,980,074)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,980,074)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
