<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 1-12694
SOLIGEN TECHNOLOGIES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
WYOMING 95-4440838
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
19408 LONDELIUS STREET
NORTHRIDGE, CALIFORNIA 91324
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(818) 718-1221
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of issuer's Common Stock outstanding as of February 9, 2000:
35,459,423
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
SOLIGEN TECHNOLOGIES, INC.
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1999 (unaudited)
and March 31, 1999.................................................... 3
Consolidated Statements of Operations for the nine months ended
December 31, 1999 and 1998 (unaudited)................................ 4
Consolidated Statements of Cash flows for the nine months ended
December 31, 1999 and 1998 (unaudited)................................ 5
Notes to Consolidated Financial Statements............................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................... 10
PART II OTHER INFORMATION
Item 2. Changes in Securities ............................................... 14
Item 6. Exhibits and Reports on Form 8-K...................................... 17
Signatures............................................................ 18
</TABLE>
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PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 1999
------------ ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,287,000 $ 429,000
Accounts receivable 1,514,000 817,000
Inventories 73,000 121,000
Prepaid expenses 38,000 63,000
------------ ------------
Total current assets 2,912,000 1,430,000
Property, plant and equipment 2,504,000 2,369,000
Less: allowance for depreciation and amortization 2,053,000 1,817,000
------------ ------------
Net property, plant and equipment 451,000 552,000
Other assets 56,000 37,000
------------ ------------
TOTAL ASSETS $ 3,419,000 $ 2,019,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 954,000 $ 628,000
Trade accounts payable 337,000 309,000
Payroll and related expenses 359,000 170,000
Accrued expenses 206,000 345,000
Deferred revenue 96,000 33,000
------------ ------------
Total current liabilities 1,952,000 1,485,000
Notes payable, net of current portion 12,000 10,000
Series B redeemable preferred stock, no par value:
Authorized - 8,425,000 shares
Issued and outstanding 8,425,000 and 0
shares, respectively 1,538,000 --
Stockholders' equity:
Series A preferred stock, no par value:
Authorized -- 10,000,000 shares
Issued and outstanding -- 0 and 2,000
shares, respectively -- 1,000,000
Common stock, no par value:
Authorized -- 90,000,000 shares
Issued and outstanding 35,459,423 and
32,682,338 shares, respectively 11,632,000 10,500,000
Accumulated deficit (11,715,000) (10,976,000)
------------ ------------
Total stockholders' equity (83,000) 524,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,419,000 $ 2,019,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 1,862,000 $ 1,317,000 $ 5,230,000 $ 4,124,000
COST OF REVENUES 1,313,000 1,025,000 3,712,000 3,189,000
----------- ----------- ----------- -----------
Gross profit 549,000 292,000 1,518,000 935,000
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Research and development 309,000 251,000 904,000 758,000
Selling 140,000 179,000 513,000 551,000
General and administrative 254,000 233,000 657,000 739,000
Non-cash compensation 18,000 38,000 55,000 114,000
----------- ----------- ----------- -----------
Total operating expenses 721,000 701,000 2,129,000 2,162,000
----------- ----------- ----------- -----------
Loss from operations (172,000) (409,000) (611,000) (1,227,000)
OTHER INCOME (EXPENSE):
Interest income 6,000 5,000 24,000 10,000
Interest expense (50,000) (49,000) (153,000) (160,000)
Other income -- -- 3,000 8,000
----------- ----------- ----------- -----------
Total other income (expense) (44,000) 44,000 (126,000) (142,000)
----------- ----------- ----------- -----------
LOSS BEFORE PROVISION FOR
INCOME TAXES (216,000) (453,000) (737,000) (1,369,000)
Provision for state income taxes 2,000 2,000 2,000 4,000
----------- ----------- ----------- -----------
NET LOSS $ (218,000) $ (455,000) $ (739,000) $(1,373,000)
----------- ----------- ----------- -----------
BASIC AND DILUTED
NET LOSS PER SHARE $ (0.01) $ (0.01) $ (0.02) $ (0.04)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (739,000) $(1,373,000)
Depreciation and amortization 236,000 294,000
Non-cash interest expense 77,000 105,000
Non-cash compensation expense 55,000 114,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (697,000) 398,000
Decrease in inventories 48,000 19,000
Decrease in prepaid expenses 25,000 26,000
Increase (decrease) in trade accounts payable 28,000 (290,000)
Increase in payroll and related expenses 189,000 29,000
Increase (decrease) in accrued expenses (139,000) 180,000
Increase in deferred revenues 63,000 57,000
(Increase) decrease in other assets (19,000) 15,000
----------- -----------
Net cash used for operating activities (873,000) (426,000)
----------- -----------
Cash flows from investing activities:
Additions in property, plant and equipment (135,000) (82,000)
----------- -----------
Net cash used for investing activities (135,000) (82,000)
----------- -----------
Cash flows from financing activities:
Principal payments under capital lease obligations (29,000) (42,000)
Payments on notes payable (251,000) (187,000)
Proceeds from issuance of notes payable 127,000 30,000
Net borrowings under revolving line of credit 481,000 179,000
Preferred stock issuance, net of issuance costs 1,538,000 957,000
----------- -----------
Net cash provided by financing activities 1,866,000 937,000
----------- -----------
Net increase in cash 858,000 429,000
Cash - beginning of period 429,000 215,000
----------- -----------
Cash - end of period $ 1,287,000 $ 644,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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SOLIGEN TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The financial information included herein for the nine month period ended
December 31, 1999 and 1998 is unaudited; however, such information reflects all
adjustments consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods. The
financial information as of March 31, 1999, is derived from Soligen
Technologies, Inc.'s Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1999. The interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's 1999 Form 10-KSB.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
ACCOUNTING POLICIES
Reference is made to Note 1 of Notes to Financial Statements in the Company's
Annual Report on Form 10-KSB for the fiscal year ended March 31, 1999 for the
summary of significant accounting policies.
INVENTORIES
Inventories are stated at the lower of cost or market on a first-in, first-out
basis. Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------
<S> <C>
Raw materials and parts $ 28,000
Work in process 38,000
Finished goods 7,000
-------------
Total inventories $ 73,000
============
</TABLE>
DEFERRED REVENUE
Deferred revenue relates to the DSPC technology profit center. The deferred
revenue related to machine revenues resulting mainly from the Company's issuance
of licenses for the use of the machines, or to support the machines in the form
of maintenance, rather than the outright sale of machines.
6
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DEBT
NOTES PAYABLE AND CAPITAL LEASES
Notes payable and capital leases consists of the following at December 31, 1999:
<TABLE>
<S> <C>
Notes to insurance company, bearing interest at
9.84 percent, due in January 2000 2,000
Revolving line of credit, secured by certain assets
bearing interest at the bank's prime rate (81/4 percent
at December 31, 1999) plus 3 percent 876,000
Notes to four Company officers and its Controller, bearing
interest at 12 percent, due in January 2000 60,000
Note to finance companies, bearing interest ranging from
0.9 percent to 10.0 percent, due at various dates
through October 2003 28,000
---------
966,000
Less - current portion (954,000)
---------
$ 12,000
=========
</TABLE>
In December 1997, the Company's Board of Directors approved a short-term
subordinated promissory note and warrant financing. The offering was completed
in a private placement transaction to accredited investors only pursuant to
Regulation D and Rule 506 thereunder. A total of six investors loaned a total of
$220,000 to the Company in December 1997, and one investor loaned an additional
$40,000 to the Company in January 1998. Each investor received a promissory note
in the principal amount of the amount loaned, bearing interest at the rate of
12% per annum and due six months from the date of the promissory note. In
addition, for each dollar loaned to the Company the investors received a common
stock purchase warrant exercisable for two shares of the Company's common stock
(resulting in the issuance of warrants exercisable for a cumulative total of
520,000 shares of the Company's common stock). The warrants are exercisable for
a period of five years at $0.50 per share. A finder's fee in the amount of
$17,000 was paid to a non-employee member of the Company's Board of Directors in
consideration of services provided in connection with the financing. One of the
investors was a non-employee member of the Company's Board of Directors, one
investor was an employee member of the Company's Board of Directors, and the
remaining five investors were unaffiliated private investors. On June 12, 1998,
the Company extended $220,000 notes payable under the same terms and conditions
for an additional 45 days. In connection with this extension, warrants
exercisable for 110,000 shares of the Company's common stock were issued to the
investors. On July 27, 1998, the Company extended $210,000 notes payable under
the same terms and conditions for an additional 90 days. In connection with this
extension, warrants exercisable for 210,000 shares of the Company's common stock
were issued to the investors. On October 25, 1998, the Company extended $140,000
of the notes payable for an additional six months under the same terms and
conditions except for a change in the exercise price of the issued warrants. In
7
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connection with this extension, warrants exercisable for 330,000 shares of the
Company's common stock exercisable at $0.375 per share were issued to the
investors.
In December 1998, the Company's Board of Directors approved an additional
subordinated promissory note and warrant financing in the principal amount of up
to $500,000. The offering is for accredited investors only pursuant to
Regulation D and Rule 506 thereunder. Such notes are to bear interest at 12% per
annum and to be due April 25, 1999 and each such note purchaser to receive
warrants to purchase four shares of the Company's Common Stock exercisable at
$0.375 per share for each dollar of principal loaned to the Company per year of
the term of the note, pro-rated to the stated term of the note. Pursuant to this
financing, one investor loaned $30,000 to the Company in November 1998,
resulting in the issuance of warrants exercisable for a total of 50,000 shares
of the Company's common stock. The warrants are exercisable for a period of five
years. On April 25, 1999, the Company extended $170,000 notes payable for an
additional six months and to be due October 24, 1999 under the same terms and
conditions except for a change in the exercise price of the issued warrants. In
connection with this extension, warrants exercisable for 340,000 shares of the
Company's common stock exercisable at $0.1875 per share were issued to the
investors. On October 24, 1999, the Company extended $170,000 notes payable for
an additional 36 days under the same terms and conditions except for a change in
the exercise price of the issued warrants. In connection with this extension,
warrants exercisable for 68,000 shares of the Company's common stock exercisable
at $0.28125 were issued to the investors. The Company repaid the notes in
November 1999 from proceeds of the Series B Preferred stock financing.
Commencing in October 1998, the Company's officers and its Controller (a total
of five persons) elected to voluntarily defer a portion of their salaries. These
deferrals continued until October 1999, and the total amount deferred was
$108,039. In October 1999 the Company's Board of Directors determined that the
deferral should be discontinued and that the employees should be accorded the
same treatment as that given to the lenders under the debt financing described
in the preceding paragraph. Accordingly, in October 1999 the Company issued
promissory notes to each of the employees in the principal amount of the amount
deferred and bearing interest at the rate of 12% per annum. In addition, the
employees were issued warrants exercisable for the purchase of a cumulative
total of 108,039 shares of the Company's common stock. The warrants re
exercisable for a period of five years at an exercise price of $0.28125 per
share. In December 1999 a total of $48,328 was paid on these notes and the
entire remaining balance was repaid in January 2000.
PREFERRED STOCK
SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK
On November 24, 1999, the Company entered into a Series B Convertible Preferred
Stock Purchase Agreement providing for the private placement of 8,425,000 shares
of a newly authorized series of preferred stock ("Series B Preferred"). The
Company received gross proceeds of $1,685,000 from the sale of 8,425,000 shares
of Series B Preferred to thirty-three (33) private investors (all of whom were
accredited investors as defined in Regulation D) pursuant to the Stock Purchase
Agreement. The purchasers of Series B Preferred also received
8
<PAGE>
Common Stock purchase warrants exercisable for a cumulative total of 3,622,750
shares of the Company's Common Stock at an exercise price of $0.20 per share.
These warrants are exercisable for a period of one year, commencing November 24,
1999. The financing was completed in accordance with the exemption provided by
Rule 506 of Regulation D.
In connection with the Series B financing, the Company paid a cash finder's fee
in the approximate amount of $100,000. In addition, the finders received
warrants exercisable for 498,750 shares of common stock at a price of $0.20 per
share. These warrants are exercisable for a period of one year, commencing
November 24, 1999.
At a special stockholders meeting held on April 20, 1998, the Company's
stockholders approved an amendment to the Company's Articles of Incorporation
authorizing the issuance of up to 10,000,000 shares of preferred stock. This
amendment authorizes the Company's Board of Directors to issue preferred stock
in one or more series on terms approved by the Board of Directors without the
necessity of further action or approval by the stockholders. Pursuant to this
authority, the Company's Board of Directors has authorized the issuance of up to
8,425,000 shares of Series B Preferred Stock having rights and preferences as
set forth in a Statement of Rights and Preferences filed with the Secretary of
State of Wyoming on November 23, 1999. The following is a summary of certain
terms of the Series B Preferred, and reference is made to the Statement for a
complete description of the rights and preferences of the Series B Preferred.
The Series B Preferred is not entitled to any fixed or guaranteed dividend. Upon
a liquidation of the Company, the Series B Preferred is entitled to receive a
distribution of $0.20 per share in preference to any distribution to holders of
common stock or junior preferred stock. The approval of the holders of at least
two-thirds of the outstanding shares of Series B Preferred is required for
certain significant corporate actions, including mergers and sales of
substantially all of the Company's assets.
Each share of Series B Preferred is initially convertible into one share of the
Company's Common Stock, subject to adjustment for recapitalizations, stock
splits and similar events. Subject to certain exceptions, the Series B
conversion ratio is subject to adjustment in the event the Company issues shares
of Common Stock for no consideration or for a consideration less than the fair
market value of the Common Stock as of the date of such issuance. The Series B
Preferred automatically converts into common stock in the event the average
trading price of the Company's common stock over 60 consecutive trading days is
greater than $1.00 per share and the cumulative trading volume during such 60
day period is at least 1,000,000 shares, if traded on a national securities
exchange, or 1,500,000 shares if traded on NASDAQ or over-the-counter. The
Series B Preferred also automatically converts into common stock in the event
the Company completes an underwritten public offering in which the Company
receives gross proceeds of at least $10,000,000 and at a per share price of at
least $1.00 per share (subject to adjustment for stock splits,
recapitalizations, etc.).
The holders of Series B Preferred may tender their shares for redemption at a
per share price equal to 150% of the liquidation preference in the event of a
Change of Control (as defined in the Statement). In addition, the Company may,
at its option, redeem the Series B Preferred at a per share price equal to 150%
of the liquidation preference in the event that, from and after
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November 24, 2000, the common stock trades above $0.75 per share for sixty (60)
consecutive trading days.
Purchasers of Series B Preferred are also parties to an Investor Rights
Agreement which grants certain demand and "piggyback" registration rights. The
holders of Series B Preferred, voting as a separate class, are entitled to elect
one member of the Company's Board of Directors.
SERIES A CONVERTIBLE PREFERRED STOCK
In conjunction with a Series B Preferred financing completed on November 24,
1999, the Company entered into a Conversion Agreement with the holders of the
Company's Series A Convertible Preferred Stock ("Series A Preferred"). Pursuant
to this Agreement, all outstanding shares of Series A Preferred were converted
into 2,023,874 shares of the Company's Common Stock in accordance with the
Company's Articles of Incorporation. In consideration of the agreement of
holders of Series A Preferred to make such conversion, the Company issued a
cumulative total of 404,697 additional shares of Common Stock to the holders of
Series A Preferred. These additional shares are entitled to the same
registration rights granted to the holders of Series B Preferred.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED LARGELY ON THE COMPANY'S
CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES
INCLUDING, AMONG OTHERS (I) CUSTOMER ACCEPTANCE OF THE COMPANY'S "ONE STOP SHOP"
PARTS NOW PROGRAM; (II) THE POSSIBLE EMERGENCE OF COMPETING TECHNOLOGIES; AND
(III) THE UNCERTAINLY AS TO THE COMPANY ESTABLISHING PROFITABILITY. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS. IN VIEW
OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT THE
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-QSB
WILL IN FACT TRANSPIRE.
The following discussion should be read in conjunction with the accompanying
Financial Statements of Soligen Technologies, Inc ("STI") and its wholly-owned
subsidiary Soligen, Inc. ("Soligen") (collectively referred to herein as the
"Company") including the notes thereto, included elsewhere in this Quarterly
Report. On December 31, 1998, Altop, Inc., a wholly- owned subsidiary of Soligen
Technologies, Inc., was merged into Soligen, Inc. and will operate as Soligen -
Santa Ana Division.
OVERVIEW
The Company has developed a proprietary technology known as Direct Shell
Production Casting ("DSPC(R)"). This technology is embodied in the Company's
DSPC 300 System (the "DSPC System"), which produces ceramic casting molds
directly from Computer Aided Design
10
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("CAD") files. These ceramic molds are used to cast metal parts, which conform
to the CAD design. This unique capability distinguishes the DSPC System from
typical rapid prototyping technologies that are characterized by the ability to
produce non-functional, three-dimensional representations of parts from CAD
files.
The Company's DSPC System is based upon proprietary technology developed by the
Company and certain patent and other proprietary rights licensed to Soligen, a
wholly-owned subsidiary of the Company, by the Massachusetts Institute of
Technology ("MIT") pursuant to a license agreement (the "License") dated October
18, 1991, as amended. Pursuant to the License, MIT granted Soligen an exclusive,
world-wide license until October 1, 2006 to develop, manufacture, market and
sell products utilizing certain technology and processes for the production of
ceramic casting molds for casting metal parts. The license continues on a
non-exclusive basis thereafter until the expiration of the last patent relating
to the licensed technology. The exclusive period may be extended by mutual
agreement of both parties.
The Company believes that the rapid mold production capabilities of the DSPC
System provide a substantial competitive advantage over existing producers of
cast metal parts. Use of the DSPC System eliminates the need to produce tooling
(patterns and core boxes) for limited runs of metal parts, thereby reducing both
the time and the labor otherwise required to produce ceramic casting molds for
casting the metal parts. It provides for a paradigm shift by enabling engineers
to postpone the design or the fabrication of production casting tooling until
after the designed part has been functionally tested. This ability, in addition
to expediting the design verification and testing, enables manufacturers to save
time and money by designing production casting tools with very little chance for
error on the first attempt.
The DSPC System can also be used to produce the production tooling (usually made
of steel), required to cast the parts in larger production runs. To capitalize
on this advantage, the Company plans to form a network of rapid response
production facilities owned either by the Company or by licensed third parties.
This network will operate under the trade name Parts Now(R) service. These
facilities will include DSPC production facilities and foundries with in-house
machine shops. The Company intends to establish itself as a leading manufacturer
of cast metal parts by providing a seamless transition from CAD file to finished
part.
The Company operates the following four major revenue-generating production
centers:
1. PARTS NOW CENTER: Oversees the "one stop shop" production services from
receipt of the customer's CAD file through production. Parts Now is
responsible for any contract which requires a combination of the DSPC
production center and conventional casting and CNC machining expertise. The
Parts Now Center consists of program managers who oversee the transition
from CAD to first article, to tooling, to conventional casting and later to
mass production. The center acquires services from the DSPC Production
Center and the Production Parts Center.
2. DSPC PRODUCTION CENTER: Revenues result from using the DSPC process in the
production and sale of first article and short run quantities of cast metal
parts made directly from the
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customer's CAD file. This center also provides DSPC parts and tool making
services to the Parts Now Center
3. PRODUCTION PARTS CENTER: Revenues result from the production, and sale of
production quantities of cast and machined aluminum parts for industrial
customers. The Company generates revenues in this area through its aluminum
foundry and machine shop division in Santa Ana, CA. This center is limited
to conventional casting of aluminum parts that do not utilize DSPC made
tooling.
4. DSPC TECHNOLOGY CENTER: Revenues result from the sale, lease, license or
maintenance of DSPC machines and from participation in research and
development projects wherein the Company provides technological expertise.
RESULTS OF OPERATIONS
Revenues for the three months ended September 30, 1999 and the three and nine
months ended December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------- ------------------ ------------------
1999 1999 1998 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Parts Now(R) $1,160,000 $1,520,000 $ 601,000 $3,582,000 $1,783,000
DSPC(R)Production 336,000 173,000 482,000 932,000 1,501,000
Production Parts 239,000 169,000 204,000 665,000 723,000
DSPC(R)Technology 26,000 -- 30,000 51,000 117,000
---------- ---------- ---------- ---------- ----------
Total revenues $1,761,000 $1,862,000 $1,317,000 $5,230,000 $4,124,000
========== ========== ========== ========== ==========
</TABLE>
Revenues for the quarter ended December 31, 1999 were $1,862,000, an increase of
41% compared to $1,317,000 in the quarter ended December 31, 1998, and an
increase of 6% compared to $1,761,000 in the quarter ended September 30, 1999.
Compared to the comparable nine month period a year ago, combined revenues for
Parts Now and DSPC Production increased to $4,514,000 from $3,284,000 and
increased from $1,496,000 in the quarter ended September 30, 1999 to $1,703,000
in the quarter ended December 31, 1999. Production Parts decreased to $169,000
in the quarter ended December 31, 1999 from $204,000 in the similar quarter last
year and decreased from $239,000 in the quarter ended September 30, 1999. There
were no DSPC Technologies revenues for the quarter ended December 31, 1999
compared to $30,000 in the similar quarter last year and $26,000 in the quarter
ended September 30, 1999.
Gross profit increased to $549,000 for the quarter ended December 31, 1999 from
$292,000 in the similar quarter last year. For the nine months ended December
31, 1999, gross profit increased to $1,518,000 from $935,000 for the similar
period last year. Gross margin for the quarter ended December 31, 1999 increased
to 29% from 22% for the quarter ended December 31, 1998 and for the nine months
ended December 31, 1999 increased to 29% from 23% for the similar period last
year. The increase in gross margin was primarily the result of increased
revenues.
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Research and development expenses were $309,000 and $251,000 for the quarters
ended December 31, 1999 and 1998, respectively. For the nine months ended
December 31, 1999 and 1998, research and development expenses were $904,000 and
$758,000, respectively. The Company intends to continue the advancement of DSPC
technology and its applications in the market place.
Selling expenses decreased to $140,000 for the quarter ended December 31, 1999
from $179,000 in the similar quarter last year and decreased to $513,000 for the
nine months ended December 31, 1999 from $551,000 for the similar period last
year. The decrease in selling expenses for the quarter and nine months ended
December 31, 1999 compared to the similar periods last year was the result of
the recovery of a bad debt.
General and administrative expenses increased to $254,000 for the quarter ended
December 31, 1999 from $233,000 in the similar quarter last year and decreased
11% to $657,000 for the quarter ended December 31, 1999 from $739,000 for the
similar period last year. The increase for the quarter ended December 31, 1999
was the result of larger office expenses and adjustment for year-end payroll
taxes and decrease for year to date was the result of lower wages and
professional fees.
The Company issued stock options to non-employees in fiscal 1996 and, according
to SFAS No. 123 (Accounting for Stock-Based Compensation), non-cash compensation
expense is to be recognized over the expected period of benefit. As a result,
the Company recognized $18,000 and $55,000 non-cash compensation expense in the
quarter and nine months ended December 31, 1999 and $38,000 and $114,000 in
quarter and nine months ended for the similar period last year. Interest expense
increased to $50,000 in the quarter ended December 31, 1999 from $49,000 in the
similar quarter ended last year. For the nine months ended December 31, 1999 and
1998, interest expense decreased to $153,000 from $160,000. The Company issued
warrants to the short-term debt investors and, according to SFAS No. 123,
non-cash interest expense related to the warrants is to be recognized over the
expected period of the loan. As a result, the Company recognized $26,000 non
cash interest expense in the quarter ended December 31, 1999 and $35,000 in the
similar quarter ended last year and for the nine months ended December 31, 1999
and 1998, the Company recognized $77,000 and $105,000, respectively. The
increase in interest expense to $24,000 from $14,000 for the quarters ended
December 31, 1999 and 1998, respectively, and to $76,000 from $55,000 for the
nine months ended December 31, 1999 and 1998, respectively, was the result of
payments made for capital leases, other notes payable, short-term debt investors
and the commercial lender associated with the revolving line of credit.
CASH AND SOURCES OF LIQUIDITY
At December 31, 1999, working capital increased to $960,000 compared to working
capital of $161,000 at December 31, 1998, and $(55,000) at March 31, 1999. At
December 31, 1999, the Company had $2,801,000 in cash and accounts receivable,
compared to cash and accounts receivable of $1,504,000 at December 31, 1998 and
$1,246,000 at March 31, 1999.
13
<PAGE>
The Company's accounts receivable increased from $817,000 and 42 days of sales
at March 31, 1999 to $1,514,000 and 56 days of sales at December 31, 1999. The
increase in days of sales was the result of customers either by policy or
unofficial practice of delaying payments as well as the Company incurring most
of its revenues in the later part of the quarter ended December 31, 1999
compared to the quarter ended March 31, 1999.
In November 1999, the Company received net proceeds of $1,538,000 from the sale
of 8,425,000 shares of Series B Convertible Preferred Stock to thirty-three (33)
private investors
In August 1999, the Company entered into an agreement for one year with a new
commercial lender for up to $1 million revolving line of credit, collateralized
by accounts receivable, inventory and fixed assets. The credit facility provides
for an advance rate of 80% of eligible accounts receivable. At December 31,
1999, the Company had $130,000 available to borrow.
YEAR 2000 DISCLOSURE
The Company reviewed its hardware and related software used for operations and
financial management and made necessary changes to become Year 2000 compliant.
The incremental costs to become compliant did not have a material effect on the
Company's consolidated financial statements. The Company contacted major vendors
and other third parties that did business with the Company to check on the
status of their efforts to resolve any Year 2000 issues but was not aware of any
substantial issues.
To date, the Company has not encountered any Year 2000 problems with its
internal computer systems nor with its major vendors and other third parties.
The Company will continue to monitor its internal systems, major vendors and
third parties to insure the Company will promptly react should a Year 2000 issue
subsequently arise.
PART II: OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In December 1997, the Company's Board of Directors approved a short-term
subordinated promissory note and warrant financing. The offering was completed
in a private placement transaction to accredited investors only pursuant to
Regulation D and Rule 506 thereunder. A total of six investors loaned a total of
$220,000 to the Company in December 1997, and one investor loaned an additional
$40,000 to the Company in January 1998. Each investor received a promissory note
in the principal amount of the amount loaned, bearing interest at the rate of
12% per annum and due six months from the date of the promissory note. In
addition, for each dollar loaned to the Company the investors received a common
stock purchase warrant exercisable for two shares of the Company's common stock
(resulting in the issuance of warrants exercisable for a cumulative total of
520,000 shares of the Company's common stock). The warrants are exercisable for
a period of five years at $0.50 per share. A finder's fee in the amount of
$17,000 was paid to a non-employee member of the Company's Board of Directors in
consideration of
14
<PAGE>
services provided in connection with the financing. One of the investors was a
non-employee member of the Company's Board of Directors, one investor was an
employee member of the Company's Board of Directors, and the remaining five
investors were unaffiliated private investors. On June 12, 1998, the Company
extended $220,000 notes payable under the same terms and conditions for an
additional 45 days. In connection with this extension, warrants exercisable for
110,000 shares of the Company's common stock were issued to the investors. On
July 27, 1998, the Company extended $210,000 notes payable under the same terms
and conditions for an additional 90 days. In connection with this extension,
warrants exercisable for 210,000 shares of the Company's common stock were
issued to the investors. On October 25, 1998, the Company extended $140,000 of
the notes payable for an additional six months under the same terms and
conditions except for a change in the exercise price of the issued warrants. In
connection with this extension, warrants exercisable for 330,000 shares of the
Company's common stock exercisable at $0.375 per share were issued to the
investors.
In December 1998, the Company's Board of Directors approved an additional
subordinated promissory note and warrant financing in the principal amount of up
to $500,000. The offering is for accredited investors only pursuant to
Regulation D and Rule 506 thereunder. Such notes are to bear interest at 12% per
annum and to be due April 25, 1999 and each such note purchaser to receive
warrants to purchase four shares of the Company's Common Stock exercisable at
$0.375 per share for each dollar of principal loaned to the Company per year of
the term of the note, pro-rated to the stated term of the note. Pursuant to this
financing, one investor loaned $30,000 to the Company in November 1998,
resulting in the issuance of warrants exercisable for a total of 50,000 shares
of the Company's common stock. The warrants are exercisable for a period of five
years. On April 25, 1999, the Company extended $170,000 notes payable for an
additional six months and to be due October 24, 1999 under the same terms and
conditions except for a change in the exercise price of the issued warrants. In
connection with this extension, warrants exercisable for 340,000 shares of the
Company's common stock exercisable at $0.1875 per share were issued to the
investors. On October 24, 1999, the Company extended $170,000 notes payable for
an additional 36 days under the same terms and conditions except for a change in
the exercise price of the issued warrants. In connection with this extension,
warrants exercisable for 68,000 shares of the Company's common stock exercisable
at $0.28125 were issued to the investors. The Company repaid the notes in
November 1999 from proceeds of the Series B Preferred stock financing.
Commencing in October 1998, the Company's officers and its Controller (a total
of five persons) elected to voluntarily defer a portion of their salaries. These
deferrals continued until October 1999, and the total amount deferred was
$108,039. In October 1999 the Company's Board of Directors determined that the
deferral should be discontinued and that the employees should be accorded the
same treatment as that given to the lenders under the debt financing described
in the preceding paragraph. Accordingly, in October 1999 the Company issued
promissory notes to each of the employees in the principal amount of the amount
deferred and bearing interest at the rate of 12% per annum. In addition, the
employees were issued warrants exercisable for the purchase of a cumulative
total of 108,039 shares of the Company's common stock. The warrants re
exercisable for a period of five years at an exercise price of $0.28125 per
share. In December 1999 a total of $48,328 was paid on these notes and the
entire remaining balance was repaid in January 2000.
15
<PAGE>
SERIES B REDEEMABLE PREFERRED STOCK
On November 24, 1999, the Company entered into a Series B Convertible Preferred
Stock Purchase Agreement providing for the private placement of 8,425,000 shares
of a newly authorized series of preferred stock ("Series B Preferred"). The
Company received gross proceeds of $1,685,000 from the sale of 8,425,000 shares
of Series B Preferred to thirty-three (33) private investors (all of whom were
accredited investors as defined in Regulation D) pursuant to the Stock Purchase
Agreement. The purchasers of Series B Preferred also received Common Stock
purchase warrants exercisable for a cumulative total of 3,622,750 shares of the
Company's Common Stock at an exercise price of $0.20 per share. These warrants
are exercisable for a period of one year, commencing November 24, 1999. The
financing was completed in accordance with the exemption provided by Rule 506 of
Regulation D.
In connection with the Series B financing, the Company paid a cash finder's fee
in the approximate amount of $100,000. In addition, the finders received
warrants exercisable for 498,750 shares of common stock at a price of $0.20 per
share. These warrants are exercisable for a period of one year, commencing
November 24, 1999.
At a special stockholders meeting held on April 20, 1998, the Company's
stockholders approved an amendment to the Company's Articles of Incorporation
authorizing the issuance of up to 10,000,000 shares of preferred stock. This
amendment authorizes the Company's Board of Directors to issue preferred stock
in one or more series on terms approved by the Board of Directors without the
necessity of further action or approval by the stockholders. Pursuant to this
authority, the Company's Board of Directors has authorized the issuance of up to
8,425,000 shares of Series B Preferred Stock having rights and preferences as
set forth in a Statement of Rights and Preferences filed with the Secretary of
State of Wyoming on November 23, 1999. The following is a summary of certain
terms of the Series B Preferred, and reference is made to the Statement for a
complete description of the rights and preferences of the Series B Preferred.
The Series B Preferred is not entitled to any fixed or guaranteed dividend. Upon
a liquidation of the Company, the Series B Preferred is entitled to receive a
distribution of $0.20 per share in preference to any distribution to holders of
common stock or junior preferred stock. The approval of the holders of at least
two-thirds of the outstanding shares of Series B Preferred is required for
certain significant corporate actions, including mergers and sales of
substantially all of the Company's assets.
Each share of Series B Preferred is initially convertible into one share of the
Company's Common Stock, subject to adjustment for recapitalizations, stock
splits and similar events. Subject to certain exceptions, the Series B
conversion ratio is subject to adjustment in the event the Company issues shares
of Common Stock for no consideration or for a consideration less than the fair
market value of the Common Stock as of the date of such issuance. The Series B
Preferred automatically converts into common stock in the event the average
trading price of the Company's common stock over 60 consecutive trading days is
greater than $1.00 per share and the cumulative trading volume during such 60
day period is at least 1,000,000 shares, if traded on a national securities
exchange, or 1,500,000 shares if traded on NASDAQ or over-the-counter. The
Series B Preferred also automatically converts into common stock in the event
the Company
16
<PAGE>
completes an underwritten public offering in which the Company receives gross
proceeds of at least $10,000,000 and at a per share price of at least $1.00 per
share (subject to adjustment for stock splits, recapitalizations, etc.).
The holders of Series B Preferred may tender their shares for redemption at a
per share price equal to 150% of the liquidation preference in the event of a
Change of Control (as defined in the Statement). In addition, the Company may,
at its option, redeem the Series B Preferred at a per share price equal to 150%
of the liquidation preference in the event that, from and after November 24,
2000, the common stock trades above $0.75 per share for sixty (60) consecutive
trading days.
Purchasers of Series B Preferred are also parties to an Investor Rights
Agreement which grants certain demand and "piggyback" registration rights. The
holders of Series B Preferred, voting as a separate class, are entitled to elect
one member of the Company's Board of Directors.
SERIES A CONVERTIBLE PREFERRED STOCK
In conjunction with a Series B Preferred financing completed on November 24,
1999, the Company entered into a Conversion Agreement with the holders of the
Company's Series A Convertible Preferred Stock ("Series A Preferred"). Pursuant
to this Agreement, all outstanding shares of Series A Preferred were converted
into 2,023,874 shares of the Company's Common Stock in accordance with the
Company's Articles of Incorporation. In consideration of the agreement of
holders of Series A Preferred to make such conversion, the Company issued a
cumulative total of 404,697 additional shares of Common Stock to the holders of
Series A Preferred. These additional shares are entitled to the same
registration rights granted to the holders of Series B Preferred.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS: The following exhibits are filed as part of this report:
EXHIBIT
NUMBER DESCRIPTION
------- ---------------
11.1 Computation of Net Loss Per Share
27 Financial Data Schedule for the Quarter Ended December 31,
1999
(b) REPORTS ON FORM 8-K.
The Company filed a current report on Form 8-K on December 16, 1999
reporting that the Company completed a private placement on November
24, 1999 in the amount of $1,685,000 for 8,225,000 shares of a newly
authorized Series B Preferred Stock.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
SOLIGEN TECHNOLOGIES, INC.
Date: February 10, 2000 By: /s/ Yehoram Uziel
-------------------------
Yehoram Uziel
President, CEO and Chairman of the Board
(Principal executive officer)
Date: February 10, 2000 By: /s/ Robert Kassel
---------------------------
Robert Kassel
Chief Financial Officer
(Principal financial officer)
18
<PAGE>
EXHIBIT 11.1
SOLIGEN TECHNOLOGIES, INC.
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of shares
outstanding 33,984,000 32,682,000 33,205,000 32,682,000
Net loss $ (218,000) $ (455,000) $ (739,000) $ (1,373,000)
Net loss per share - basic and diluted $ (0.01) $ (0.01) $ (0.02) $ (0.04)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-QSB FOR THE QUARTER AND YEAR TO DATE AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,287
<SECURITIES> 0
<RECEIVABLES> 1,621
<ALLOWANCES> 107
<INVENTORY> 73
<CURRENT-ASSETS> 38
<PP&E> 2,504
<DEPRECIATION> 2,053
<TOTAL-ASSETS> 3,419
<CURRENT-LIABILITIES> 1,952
<BONDS> 0
1,538
0
<COMMON> 11,632
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,419
<SALES> 5,230
<TOTAL-REVENUES> 5,230
<CGS> 1,518
<TOTAL-COSTS> 1,518
<OTHER-EXPENSES> 2,129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153
<INCOME-PRETAX> (737)
<INCOME-TAX> 2
<INCOME-CONTINUING> (739)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (739)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
