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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:
September 30, 1996 Commission File No. 1-7939
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VICON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2160665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
525 Broad Hollow Road, Melville, New York 11747
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 293-2200
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, Par Value $.01
(Title of class)
American Stock Exchange
(Name of each exchange on which registered)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, 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-K or any amendment to this
Form 10-K.
The aggregate market value of Common Stock held by non-affiliates of the
registrant as of December 15, 1996 was approximately $5,500,000.
The number of shares outstanding of the registrant's Common Stock as of December
15, 1996 was 2,777,328.
PART I
ITEM 1 - BUSINESS
General
Vicon Industries, Inc. (the "Company"), incorporated in New York in October,
1967, designs, manufactures, assembles and markets a wide range of closed
circuit television ("CCTV") components and CCTV systems for security,
surveillance, safety, process and control applications by end users. The Company
sells CCTV components and systems directly to distributors, dealers and original
equipment manufacturers, principally within the security industry. The U.S.
security industry is a multi-billion dollar industry which includes guard
services, armored carrier, electronic alarms and sensing equipment, safes,
locking devices and access systems, as well as CCTV. The nature of the Company's
business and the general security market it serves has not changed materially in
the past five years.
Users of the Company's products typically utilize them as a visual crime
deterrent, for visual documentation, observing inaccessible or hazardous areas,
enhancing safety, obtaining cost savings (such as lower insurance premiums),
managing control systems, and improving the efficiency and effectiveness of
personnel. The Company's products are marketed under its own brand names and
registered trademarks. In fiscal 1996, no customer represented more than 10% of
consolidated revenues.
Products
The Company's product line consists of approximately 600 products, of which
about a third represent model variations. The Company's product line consists of
various elements of a video surveillance system, including video cameras,
display units (monitors), cassette recorders, switching equipment for video
distribution, digital video and signal processing units (which perform character
generation, multi screen display, video insertion, intrusion detection, source
identification and alarm processing), motorized zoom lenses, remote camera
positioning devices, manual and computer based system controls, environmental
camera enclosures and consoles for system assembly. The Company maintains a
large line of products due to the many varied climatic and operational
environments under which the products are expected to perform. In addition to
selling from a standard catalog line, for significant orders, the Company will
produce to specification or modify an existing product to meet a customer's
requirements. The Company's products range in price from $10 for a simple camera
mounting bracket to approximately one hundred thousand dollars (depending upon
configuration) for a large digital control and video switching system.
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Marketing
The Company's products are sold worldwide, principally to independent
distributors, dealers and integrators of various types of security-related
systems. Sales are made by in-house customer service representatives, field
sales engineers and by independent sales representatives in certain areas of the
United States. The sales effort is supported by several in-house application
engineers.
Although the Company does not sell directly to end users, much of its sales
promotion and advertising is directed at end user markets. The Company's
products are employed in video system installations by: (1) commercial and
industrial users, such as office buildings, manufacturing plants, warehouses,
apartment complexes, shopping malls and retail stores; (2) federal, state, and
local governments for national security purposes, municipal facilities, prisons,
and military installations; (3) financial institutions, such as banks, clearing
houses, brokerage firms and depositories, for security purposes; (4)
transportation departments for highway traffic control, bridge and tunnel
monitoring, and airport, subway, bus and seaport surveillance; (5) gaming
casinos, where video security is often mandated by local statute; and (6) health
care facilities, such as hospitals, particularly psychiatric wards and intensive
care units. The Company estimates that approximately 50 percent of its total
revenues are sales for commercial and industrial uses.
The Company's principal sales offices are located in Melville, New York;
Atlanta, Georgia and Segensworth, England.
International Sales
The Company sells internationally by direct export to dealers and distributors,
and, in Europe through the Company's United Kingdom (U.K.) subsidiary. In fiscal
1996, the operating profit and identifiable assets for the Company's U.K.
subsidiary amounted to approximately $421,000 and $4.8 million, respectively.
For more information regarding foreign operations, see Note 7 of Notes to
Consolidated Financial Statements included elsewhere herein. Direct export sales
and sales from the Company's U.K. subsidiary amounted to $16.2 million, $17.5
million, and $16.7 million or 38%, 40% and 35% of consolidated revenues in
fiscal years 1996, 1995, and 1994, respectively. Export sales are made through a
wholly-owned subsidiary, Vicon Industries Foreign Sales Corporation, a tax
advantaged foreign sales corporation. The Company's principal foreign markets
are Europe and the Far East, which together accounted for approximately 82
percent of international sales in fiscal 1996. Additional information is
contained in the discussion of foreign currency activity included in Item 7.
- 3 -
Competition
The Company competes in areas of price, service, product performance and
availability with several large and small public and privately-owned companies
in the manufacture and distribution of CCTV systems and components (excluding
cameras, monitors and video cassette recorders "Video Products") within the
security industry. The Company's Video Products compete with many large
companies whose financial resources and scope of operations are substantially
greater than the Company's. The Company is one of a few domestic market
suppliers that design, assemble, manufacture, market and support an extensive
line of products offering a comprehensive system capability in a wide range of
applications. Many competitors, including manufacturers of cameras, monitors and
recorders, typically produce a limited product line since components and
accessories are low volume items. The Company believes a broad product line is
desirable since many customers prefer to obtain a complete video system from one
supplier with the assurance of product compatibility and reliability. In recent
years, price competition has intensified limiting the amount of cost increases
the Company can pass on to customers and in some instances requiring price
reductions.
Research and Development
The Company is engaged in ongoing research and development activities in
connection with new or existing products. Changes in CCTV technology have
incorporated the use of advanced electronic components and new materials which
add to product life and performance. Nineteen professional employees devote full
time to the development of new products and to improving the qualities and
capabilities of existing products. Further, the Company engages the services of
others to assist in the development of new products. Expenditures for research
and development amounted to approximately $1,800,000 in 1996, $1,900,000 in
1995, and $1,600,000 in 1994 or approximately 4.2% of revenues in 1996, 4.2% of
revenues in 1995, and 3.4% of revenues in 1994.
Source and Availability of Raw Materials
The Company has not experienced shortages or significant difficulty in obtaining
its raw materials, components or purchased finished products. Raw materials are
principally aluminum, steel and plastics, while components are mainly motors,
video lenses and standard electronic parts. In 1996, the Company procured
directly and indirectly approximately 20% of its product purchases from Chun
Shin Electronics, Inc., its South Korean joint venture company (see Item 13 for
further discussion of this joint venture). The Company is not dependent upon any
other single source for a significant amount of its raw materials, components or
purchased finished products.
Patents and Trademarks
The Company owns a limited number of design and utility patents expiring at
various times and has several patent applications pending with respect to the
design and/or mechanical function of its products. The Company has certain
trademarks registered and several other trademark applications pending both in
the United States and in Europe. The Company has no licenses, franchises or
concessions with respect to any of its products or business dealings. The
Company does not deem its patents and trademarks, or the lack of licenses,
franchises and concessions, to be of substantial significance or to have a
material effect on its business.
- 4 -
Inventories
The Company maintains an inventory of finished products sufficient to
accommodate its customers' requirements, since most sales are to
dealer/contractors who do not carry large stock inventories. Parts and
components inventories are also carried in sufficient quantities to permit
prompt delivery of certain items. The Company would rather carry adequate
inventory quantities than experience shortages which detract from the production
process and sales effort. The Company's business is not seasonal.
Backlog
The backlog of orders believed to be firm as of September 30, 1996 and 1995 was
approximately $3.1 million and $2.7 million, respectively. All orders are
cancelable without penalty at the option of the customer. The Company prefers
that its backlog of orders not exceed its ability to fulfill such orders on a
timely basis, since experience shows that long delivery schedules only encourage
the Company's customers to look elsewhere for product availability.
Employees
At September 30, 1996, the Company employed 176 full-time employees, of whom
five are officers, 41 administrative personnel, 77 employed in sales capacities,
26 in engineering, and 27 production employees. At September 30, 1995, the
Company employed 175 persons categorized in similar proportions to those of
1996. There are no collective bargaining agreements with any of the Company's
employees and the Company considers its relations with its employees to be good.
ITEM 2 - PROPERTIES
In January 1988, the Company sold and subsequently leased back its 108,000
square foot headquarters facility in Melville, New York, which accommodates the
Company's sales, distribution, administration, product development and limited
assembly and manufacturing operations. Currently, the Company subleases 28,000
sq. ft. of its facility under an agreement which expires on January 30, 1998. In
November 1994, the Company entered into a sublease agreement dated as of January
1, 1993, which gives a company affiliated with its landlord the right to occupy
approximately 25,000 sq. ft. of its primary operating facility with two months
notice in exchange for specified rent payments through the expiration of the
primary lease in 1998. In connection with such agreement, the landlord and the
subtenant were each granted an option to ask the Company to vacate the entire
premises with six months notice and the landlord agreed to release the Company
from all future obligations under its lease in exchange for a lease termination
payment by the Company. (See Notes 3 and 10 of Notes to Consolidated Financial
Statements included elsewhere herein for further information).
In October 1996, the landlord exercised the aforementioned option which
obligates the Company to vacate the Melville facility in April 1997. In December
1996, the Company entered into a five year lease for a 56,000 square foot
facility which will accomodate all of the operations of the vacated facility.
The Company also operates, under lease, a regional sales office in Atlanta,
Georgia. In addition, the Company owns a 14,000 square foot sales, service and
warehouse facility in southern England which services the U.K. and European
Community markets.
ITEM 3 - LEGAL PROCEEDINGS
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's stock is traded on the American Stock Exchange under the symbol
(VII). The following table sets forth for the periods indicated, the range of
high and low prices for the Company's Common Stock on the American Stock
Exchange:
Quarter
Ended High Low
Fiscal 1996
December 2-3/8 1- 3/16
March 2 1- 1/4
June 2-3/4 1-11/16
September 5-7/16 2- 1/16
Fiscal 1995
December 2-1/16 1-1/2
March 2-15/16 1-1/2
June 2-1/2 1-3/8
September 2-1/8 1-9/16
The Company has not declared or paid cash dividends on its Common Stock for any
of the foregoing periods. Additionally, under the current loan agreement, the
Company may not declare dividends. The approximate number of holders of Common
Stock at December 15, 1996 was 1,500.
- 6 -
ITEM 6 - SELECTED FINANCIAL DATA
FISCAL YEAR 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands, except per share data)
Net sales $43,191 $ 43,847 $ 47,714 $ 45,923 $ 45,041
Gross profit 10,957 9,546 10,714 9,724 8,150*
Pretax income (loss) 385 (1,267) 74 (1,858) (3,317)
Net income (loss) 300 (1,347) 45 (1,875) (3,906)
Income (loss) per share:
Primary .11 (.49) .02 (.68) (1.42)
Fully diluted .10 (.49) .02 (.68) (1.42)
Total assets 28,085 26,423 28,857 26,069 26,701
Long-term debt 6,429 5,339 6,059 5,621 6,273
Working capital 12,064 10,721 13,359 13,420 15,741
Property, plant and
equipment (net) 3,034 3,262 3,180 3,245 3,913
Cash dividends - - - - -
* Includes a provision of $2.7 million for discontinuance of certain products
and product lines.
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fiscal Year 1996 Compared with 1995
Net sales for 1996 were $43.2 million, a decrease of 1.5%, compared with $43.8
million in 1995. The sales decline was principally the result of the termination
of low margin video product sales (cameras and VCR's) to a Far East distributor.
Lower sales in Europe due to delays in new product introduction were offset by
increased other export sales. Domestic revenue levels were essentially unchanged
from 1995. The backlog of orders was $3.1 million at September 30, 1996 compared
with $2.7 million at September 30, 1995.
Gross profit margins were 25.4% of net sales in 1996, compared with 21.8% in
1995. The margin improvement was due principally to a beneficial sales mix of
higher margin products, particularly new proprietary digital video products and
control systems. The Company also shifted sourcing of a major portion of its
video product line to lower cost suppliers outside of Japan. In addition, during
1996, the value of the dollar increased against the Japanese yen which increased
margins for those few products still sourced in Japan.
Operating expenses totaled $9.7 million in 1996 compared with $9.8 million in
1995. Operating expenses, as a percent of sales, amounted to 22.5% and 22.4% in
1996 and 1995, respectively. The decline in expenses was due primarily to
ongoing cost control measures.
During 1996, the Company recorded an unrealized foreign exchange gain of
$42,000. This gain resulted from the Company's revaluation of its yen
denominated mortgage obligation into U.S. dollars as the value of the British
pound sterling gained against the Japanese yen.
Interest expense declined $131,000 due principally to the lower cost of new bank
borrowings.
Income improved approximately $1.6 million principally as a result of the higher
gross margins discussed above.
- 8 -
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fiscal Year 1995 Compared with 1994
Net sales for 1995 were $43.8 million, a decrease of 8.1%, compared with $47.7
million in 1994. The sales decline was the result of lower domestic shipments,
while foreign sales increased $.8 million to $17.5 million. Domestic sales were
affected by several factors such as direct end user selling by competition; lack
of competitiveness of certain products whose cost is denominated in yen; and
shortened product life cycles which made certain of the Company's key control
systems less competitive. The backlog of orders was $2.7 million at September
30, 1995 compared with $3.0 million at September 30, 1994.
Gross profit margins were 21.8% of net sales in 1995, compared with 22.5% in
1994. The margin decline was due principally to the impact of lower sales in
relation to a substantially fixed overhead structure. In addition, the value of
the dollar declined significantly against the Japanese yen for most of the year
which lowered margins of those products sourced in Japan.
Operating expenses in 1995 totaled $9.8 million compared with $9.9 million in
1994. Operating expenses, as a percent of sales, amounted to 22.4% and 20.7% in
1995 and 1994, respectively. The increase in expenses as a percent of sales is
due in part to higher bad debt expense, severance pay, bank and professional
fees.
During 1994, the Company recorded an unrealized foreign exchange gain of
$45,000. This gain resulted from the Company's revaluation of its yen
denominated mortgage obligation into U.S. dollars as the value of the British
pound sterling gained against the Japanese yen.
Interest expense increased $230,000 as a result of higher interest rates.
The net loss of $1.3 million compared with a profit of $45,000 was the result of
lower sales and gross margins and higher interest expenses as discussed above.
- 9 -
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND FINANCIAL CONDITION
September 30, 1996 Compared with 1995
Total shareholders' equity increased approximately $335,000 to $9.0 million at
September 30, 1996, due primarily to the year's reported profit. Working capital
increased approximately $1.3 million to $12.1 million at September 30, 1996 due
principally to increased long term bank borrowings to finance higher inventory
levels.
Accounts receivable increased approximately $.3 million to $8.6 million at
September 30, 1996. The increase was principally the result of higher fourth
quarter sales compared with the prior year. Inventories increased $2.6 million
to $14.7 million at September 30, 1996. Finished products inventories increased
$2.3 million due principally to the introduction of new digital video products
and a general increase in stocking levels to meet anticipated customer demand.
Raw material and component inventories also increased principally to accomodate
production of a new camera dome system. Total accounts payable increased
approximately $1.0 million to $9.3 million at September 30, 1996 to support the
higher inventory levels.
The Company maintains an overdraft facility of 700,000 pounds sterling (approx.
$1.1 million) in the U.K. to support local working capital requirements. At
September 30, 1996, borrowings under this facility were approximately $960,000.
In December 1995, the Company repaid $2.8 million of bank debt with the proceeds
of a new U.S. bank loan. The new two year loan agreement provides for maximum
borrowings of $5,500,000 at September 30, 1996, subject to an availability
formula based on U.S. accounts receivable and inventories. Borrowings under such
agreement amounted to approximately $4.1 million at September 30, 1996.
Concurrent with the new loan agreement, the Company amended its $2,000,000
secured promissory note with Chugai Boyeki Co., Ltd., a related party, to defer
all scheduled principal installments to July 1998. The Company believes that the
new loan agreement and its other sources of credit provide adequate funding to
meet its near term cash requirements.
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Foreign Currency Activity
The Company's foreign exchange exposure is principally limited to the
relationship of the U.S. dollar to the Japanese yen and the British pound
sterling.
Japan sourced products denominated in Japanese yen accounted for approximately 7
percent of product purchases in fiscal 1996 compared with 19 percent in fiscal
1995. Although the dollar strengthened against the Japanese yen during fiscal
1996, in past years the dollar had weakened dramatically in relation to the yen,
resulting in increased costs for such products. When market conditions permit,
cost increases due to currency fluctuations are passed on to customers through
price increases. The Company also attempts to reduce the impact of an
unfavorable exchange rate condition through cost reductions from its suppliers,
lowering production cost through product redesign, and shifting product sourcing
to suppliers transacting in more stable and favorable currencies. The Company's
purchases from Japan are denominated in Japanese yen. At the Company's
direction, Chugai Boyeki Co., Ltd., its Japanese supplier, has entered into
foreign exchange contracts on behalf of the Company to hedge the currency risk
on these product purchases.
Sales to the Company's U.K. subsidiary, which approximated $3.7 million in
fiscal 1996, are made in pounds sterling and include products sourced from the
Far East. In the years when the pound weakened significantly against the U.S.
dollar and Japanese yen, the cost of U.S. and Japanese sourced product sold by
the Company's U.K. subsidiary increased. When market conditions permitted, such
cost increases were passed on to the customer through price increases. The
Company attempts to minimize its currency exposure on intercompany sales through
the purchase of forward exchange contracts.
The Company intends to increase prices and seek lower prices from suppliers to
mitigate exchange rate exposures, however, there can be no assurance that such
steps will be effective in limiting foreign currency exposure.
Inflation
The impact of inflation on the Company has lessened in recent years as the rate
of inflation remains low. However, inflation continues to increase costs to the
Company. As operating expenses and production costs increase, the Company seeks
price increases to its customers to the extent permitted by competition.
New Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation," which must be
adopted by the Company in fiscal 1997. The Company has elected not to implement
the fair value based accounting method for employee stock options, but has
elected to disclose, commencing in fiscal 1997, the pro-forma net income and
earnings per share as if such method had been used to account for stock-based
compensation cost as described in the Statement.
In March 1995, the FASB issued Statement No.121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which must
also be adopted by the Company in fiscal 1997. The effect of adopting the
standard will be insignificant.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 14, for an index to consolidated financial statements and
financial statement schedules.
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ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
- 12 -
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Directors and Executive Officers of the Company are as follows:
Directors and Executive Officers
Donald N. Horn, age 67 Chairman of the Board (since 1967);
term ends April 1999
Kenneth M. Darby, age 50 President, Chief Executive Officer,
Assistant Secretary, and Director
(since 1987); term ends April, 1997
Arthur D. Roche, age 58 Executive Vice President, Chief
Financial Officer, Secretary, Member
of the Office of the President and
Director (since 1992); term ends
April 1999
Peter F. Barry, age 67 Director since 1984; term ends April
1999
Milton F. Gidge, age 67 Director since 1987; term ends April
1998
Michael D. Katz, age 58 Director since 1993; term ends April
1998
Peter F. Neumann, age 62 Director since 1987; term ends April
1997
W. Gregory Robertson, age 52 Director since 1991; term ends April
1998
Kazuyoshi Sudo, age 54 Director since 1987; term ends April
1997
Arthur V. Wallace, age 71 Director since 1974; term ends April
1998
John L. Eckman, age 47 Vice President, U.S. Sales
Peter A. Horn, age 41 Vice President, Compliance and Quality
Assurance
Yacov A. Pshtissky, age 45 Vice President, Engineering
Gregory Stempkoski, age 36 Vice President, Export Sales
Mr. D. Horn founded the Company in 1967 and has served as Chairman of the Board
since its inception. He also served as Chief Executive Officer from the
Company's inception until April 1992 and as President to September, 1991.
Mr. Darby has served as Chief Executive Officer since April, 1992 and as
President since October, 1991. Mr. Darby also served as Chief Operating Officer
and as Executive Vice President, Vice President, Finance and Treasurer of the
Company. He first joined the Company in 1978 as Controller after more than nine
years at KPMG Peat Marwick, a major public accounting firm.
Mr. Roche joined the Company as Executive Vice President and co-participant in
the Office of the President in August 1993. For the six months earlier, Mr.
Roche provided consulting services to the Company. In October, 1991 Mr. Roche
retired as a partner of Arthur Andersen & Co., an international accounting firm
whom he joined in 1960.
Mr. Barry is a retired executive of Grumman Corp., an aerospace manufacturer,
for whom he served from August 1988 to March 1991 as Senior Vice President of
Washington D.C. operations. Previously, he served since 1974 as President of
Hartman Systems, Inc., a manufacturer of electronic controls and display devices
for military applications. Mr. Barry currently acts as a consultant to private
industry on government relations.
- 13 -
Mr. Gidge is a retired executive officer of Lincoln Savings Bank (1976-1994) and
served as its Chairman, Credit Policy. He has also served as a director since
1980 of Interboro Mutual Indemnity Insurance Co., a general insurance mutual
company and since 1988 as a director of Intervest Corporation of New York, a
mortgage banking company.
Mr. Katz is a physician practicing in New York. He is the President of Katz,
Rosenthal, Ganz, Snyder & PDC. He has served in that capacity since 1970.
Mr. Neumann has been President of Flynn-Neumann Agency, Inc. an insurance
brokerage firm, since 1971. He has also served since 1978 as a director of
Reliance Federal Savings Bank.
Mr. Robertson is President of TM Capital Corporation, a financial services
company, an organization he founded in 1989. From 1985 to 1989, he was employed
by Thomson McKinnon Securities, Inc. as head of investment banking and public
finance.
Mr. Sudo has been Treasurer of Chugai Boyeki (America) Corp., a distributor of
electronic, chemical and optical products, since 1985.
Mr. Wallace, who joined the Company in 1970, was Executive Vice President from
1979 until he retired in September, 1990.
Mr. Eckman joined the Company in August 1995 as Eastern Regional Manager. He
was promoted to Vice President, U.S. Sales in July, 1996. Prior to joining the
Company, he was Director of Field Operations for Cardkey Systems, Inc. with whom
he was employed for twelve years.
Mr. P. Horn joined the Company in January, 1974 and has been employed in various
technical capacities. In 1986 he was appointed as Vice President, Engineering;
in May, 1990 as Vice President, New Products and Technical Support Services; in
September 1993, he was appointed Vice President, Marketing; in 1994 as Vice
President, Product Management; and in 1995 as Vice President, Compliance and
Quality Assurance.
Mr. Pshtissky, who joined the Company in September 1979 as an Electrical Design
Engineer, was promoted to Director of Electrical Product Development in March,
1988 and to Vice President, Engineering in May, 1990.
Mr. Stempkoski joined the Company in June 1986 as an Inside Sales Administrator.
In October 1990, he was promoted to International Sales Manager and in October,
1996 he was promoted to Vice President, Export Sales.
There are no family relationships between any director, executive officer or
person nominated or chosen by the Company to become a director or officer except
for the relationship between Peter A. Horn, an officer of the Company, and
Donald N. Horn, Chairman of the Board. Peter A. Horn is the son of Donald N.
Horn.
- 14 -
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during the year ended September 30, 1996 and Form 5 and amendments
thereto furnished to the Company with respect to the year ended and certain
written representations, no person, who, at any time during the year ended
September 30, 1996 was a director, officer or beneficial owner of more than 10
percent of any class of equity securities of the Company registered pursuant to
Section 12 of the Exchange Act failed to file on a timely basis, as disclosed in
the above forms, reports required by Section 16 of the Exchange Act during the
year ended September 30, 1996.
ITEM 11 - EXECUTIVE COMPENSATION
The following information is set forth with respect to all compensation paid by
the Company to its Chief Executive Officer and its most highly compensated
executive officers other than the CEO whose annual compensation exceeded
$100,000, for each of the past three fiscal years.
Annual Long Term
Compensation Compensation
Fiscal
Name and Year Ended Options All Other
Principal Position September 30, Salary No. of Shares Compensation
Kenneth M. Darby 1996 $195,000 95,000 $34,750 (2)
Chief Executive Officer 1995 $195,000 - $ 3,000 (1)
1994 $195,000 59,194 $ 3,000 (1)
Arthur D. Roche 1996 $150,000 25,000 $15,875 (3)
Executive Vice President 1995 $150,000 - -
1994 $150,000 50,000 -
No listed officer received other non-cash compensation amounting to more than
10% of salary.
(1) Represents life insurance policy payment.
(2) Represents life insurance policy payment of $3,000 and bonus in the form
of 16,933 shares of common stock to be issued from Treasury.
(3) Bonus in the form of 8,467 shares of common stock to be issued
from Treasury.
- 15 -
Stock Options
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Individual Grants Value at Assumed
Annual Rates of Stock
% of Total Price Appreciation
No. of Granted to Exercise For Option Term
Options Employees In Price Expiration
Name Granted Fiscal Year Per Share Date 5% 10%
- ----------------- ---------- ------------- --------- ---------- ------- ------
Kenneth M. Darby 95,000 39% 1.6875 11/00 $44,300 $97,900
Arthur D. Roche 25,000 10% 1.6875 11/00 $11,700 $25,800
Options granted in the year ended September 30, 1996 were either issued under
the 1994 Incentive Stock Option Plan or reissued under the 1986 Incentive Stock
Option Plan. The options granted above are exercisable as follows: up to 30% of
the shares at the grant date, an additional 30% of the shares on the first
anniversary of the grant date, and the balance of the shares on the second
anniversary of the grant date, except that no option is exercisable after the
expiration of five years from the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised In-
Number of Unexercised Options the-Money Options at
As of September 30, 1996 September 30, 1996 (1)
----------------------------- ------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
Kenneth M. Darby 114,392 66,500 $66,800 $54,000
Arthur D. Roche 57,500 17,500 $37,300 $14,200
No options were exercised by any of the above-named officers during the year
ended September 30, 1996.
(1) Calculated based on $2.50 per share closing market value at September 30,
1996.
- 16 -
Mr. Darby has entered into an employment contract with the Company that entitles
him to receive an annual salary of $225,000 through fiscal year 2001. Mr. Roche
has an employment agreement with the Company that provides an annual salary of
$170,000 through September 30, 1999. Each of these agreements provide for
payment in an amount up to three times the average annual compensation for the
previous five years if there is a change in control without Board of Director
approval (as defined in the agreements).
Messrs. D. Horn and A. Wallace (current directors) each have insured deferred
compensation agreements with the Company which provide that upon reaching
retirement age total payments of $917,000 and $631,000, respectively, will be
made in monthly installments over a ten year period. The full deferred
compensation payment is subject to such individuals' adherence to certain
non-compete covenants. Mr. Wallace, who retired in September 1990, began
receiving payments under the agreement in October, 1990 and Mr. Horn began
receiving payments under the agreement in January, 1994.
Directors, except the Chairman of the Board and employee directors, are each
compensated at the rate of $600 per Board meeting and $300 per committee meeting
attended in person. The Chairman of the Board is compensated at the rate of
$1,000 per Board meeting and $300 per committee meeting attended in person.
Effective January 1, 1997, the directors and Chairman will be compensated at
annual rates of $6,000 and $10,000, respectively. Committee fees will be $500
per meeting attended in person.
- 17 -
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Neumann, Robertson and Wallace, none of whom are or ever have been officers of
the Company, except Mr. Wallace who retired in 1990 as Executive Vice President.
See the section entitled "Certain Relationships and Related Transactions"
included elsewhere herein, for a discussion of certain other relationships
maintained by Mr. Neumann and Mr. Robertson with the Company.
BOARD COMPENSATION COMMITTEE REPORT
The Compensation Committee's compensation policies applicable to the Company's
executive officers for the last completed fiscal year were to pay a competitive
market price for the services of such officers, taking into account the overall
performance and financial capabilities of the Company and the officer's
individual level of performance.
Mr. Darby makes recommendations to the Compensation Committee as to the base
salary and incentive compensation of all executive officers other than Mr.
Darby. The Committee reviews these recommendations with Mr. Darby, and after
such review, determines compensation. In the case of Mr. Darby, the Compensation
Committee makes its determination after direct negotiation with such officer.
For each executive officer, the Committee's determinations are based on the
committee's conclusions concerning each officer's performance and comparable
compensation levels in the CCTV Industry and the Long Island area for similarly
situated officers at other companies. The overall level of performance of the
Company is taken into account but is not specifically related to the base salary
of these executive officers. Also, the Company has established an incentive
compensation plan for all of its executive officers, which provides a specified
bonus to each officer upon the Company's achievement of certain annual
profitability targets.
The Compensation Committee grants options to executive officers to connect
compensation to the performance of the Company. Options are exercisable in the
future at the fair market value at the time of grant, so that an officer granted
an option is rewarded by the increase in the price of the Company's stock. The
Committee grants options based on significant contributions of an executive
officer to the performance of the Company.
In addition, in determining the salary compensation of Mr. Darby as CEO, the
Committee considered the responsibility assumed by him in formulating and
implementing a management and operating restructuring plan.
Compensation Committee
Peter F. Neumann, Chairman, W. Gregory Robertson
and Arthur V. Wallace
- 18 -
This graph compares the return of $100 invested in the Company's stock on
October 1, 1991, with the return on the same investment in the AMEX Market Value
Index and the AMEX High Technology Index.
(The following table was represented by a chart in the printed material)
AMEX High
Vicon AMEX Market Technology
Date Industries, Inc. Value Index Index
10/01/91 100 100 100
10/01/92 133 101 94
10/01/93 78 123 111
10/01/94 81 123 116
10/01/95 83 145 155
10/01/96 111 153 196
- 19 -
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth information as to each person, known to the Company to
be a "beneficial owner" (as defined in regulations of the Securities and
Exchange Commission) of more than five percent of the Company's Common Stock
outstanding as of December 15, 1996 and the shares beneficially owned by the
Company's Directors and by all Officers and Directors as a group.
Name and Address Amount of
of Beneficial Owner Beneficial Ownership (1) % of Class
------------------- ------------------------ ----------
Chugai Boyeki (America) Corp.
55 Mall Drive
Commack, NY 11725
and
Chugai Boyeki Company, Ltd.
2-15-13 Tsukishima
Chuo-ku
Tokyo, Japan 104 548,715 17.6%
Chu Chun
C/O I.I.I. Companies, Inc.
915 Hartford Turnpike
Shrewsbury, MA 01545 300,557 9.7%
Dongwon Securities Co., Ltd.
34-7, Yoido-Dong
Youngdungpo-Gu
Seoul 150-010, Korea 143,000 4.6%
*******************************************************************************
C/O Vicon Industries, Inc.
Michael D. Katz 271,400 (2) 8.7%
Kenneth M. Darby 225,239 (3) 7.2%
Donald N. Horn 124,300 (2) 4.0%
Arthur D. Roche 103,967 (4) 3.3%
Arthur V. Wallace 61,695 2.0%
Kazuyoshi Sudo 12,000 (2) .4%
Milton F. Gidge 6,500 (2) .2%
Peter F. Barry 5,600 (2) .2%
Peter F. Neumann 3,000 .1%
W. Gregory Robertson -- --
Total all officers and
directors as a group
(14 persons) 882,751 (5) 28.4%
(1) The nature of beneficial ownership of all shares is sole voting and
investment power.
(2) Includes currently exercisable options to purchase 5,000 shares.
(3) Includes currently exercisable options to purchase 136,032 shares and
16,933 shares issuable from Treasury.
- 20 -
(4) Includes currently exercisable options to purchase 65,000 shares and 8,467
shares issuable from Treasury.
(5) Includes currently exercisable options to purchase 293,832 shares and
25,400 shares issuable from Treasury.
- 21 -
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and Chugai Boyeki Company, Ltd. (Chugai), a Japanese corporation,
which owns 19.8% of the outstanding shares of the Company, have been conducting
business with each other for approximately seventeen years whereby the Company
imports certain video products and lenses through Chugai and also sells its
products to Chugai who resells the products in certain Asian and European
markets. In fiscal 1996, the Company purchased approximately $9.2 million of
products through Chugai and sold products to Chugai for resale totaling
approximately $2.1 million. Kazuyoshi Sudo, a director, is Treasurer of Chugai
Boyeki (America) Corp., a U.S. subsidiary of Chugai.
Chu S. Chun, who controls 10.8% of the outstanding shares of the Company, also
owns Chun Shin Industries, Inc. (CSI). CSI is a 50% partner with the Company in
Chun Shin Electronics, Inc. (CSE), a joint venture company which manufactures
and assembles certain Vicon products in South Korea. In fiscal 1996, CSE sold
approximately $5.8 million of product to the Company through I.I.I. Companies,
Inc. (I.I.I.), a U.S. based company controlled by Mr. Chun. I.I.I. arranges the
importation and provides short term financing on all the Company's product
purchases from CSE. CSE also sold approximately $1.7 million of product to CSI
which sells Vicon product exclusively in Korea. In addition, I.I.I. purchased
approximately $900,000 of products directly from the Company during fiscal 1996
for resale to CSI.
Peter F. Neumann, a director of the Company, is a principal in the insurance
brokerage firm of Bradley & Parker, Inc. which is the agent for a majority of
the Company's commercial insurance. The premium paid for such insurance amounted
to approximately $109,000 in fiscal 1996.
W. Gregory Robertson, a director of the Company, is President of TM Capital
Corporation, an investment banking firm which provides investment banking
services to the Company on a periodic basis. Services rendered to the Company
during fiscal 1996 amounted to approximately $40,000.
During 1996, the Company purchased approximately $72,000 of products from
Pro/Four Video Products, Inc., in which Donald N. Horn and Arthur V. Wallace,
directors of the Company, have an ownership interest.
- 22 -
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) (1) Financial Statements
Included in Part IV, Item 14:
Independent Auditors' Report
Financial Statements:
Consolidated Statements of Operations, fiscal years ended
September 30, 1996, 1995, and 1994
Consolidated Balance Sheets at September 30, 1996 and 1995
Consolidated Statements of Shareholders' Equity, fiscal years ended
September 30, 1996, 1995, and 1994
Consolidated Statements of Cash Flows, fiscal years ended
September 30, 1996, 1995, and 1994
Notes to Consolidated Financial Statements, fiscal years ended
September 30, 1996, 1995, and 1994
(a) (2) Financial Statement Schedule
Included in Part IV, Item 14:
Schedule I - Valuation and Qualifying Accounts for the years
ended September 30, 1996, 1995, and 1994
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and, therefore,
have been omitted.
- 23 -
14(a)(3) Exhibits
Exhibit Number or
Exhibit Incorporation by
Numbers Description Reference to
3 Articles of Incorporation and Incorporated by reference
By-Laws, as amended to the 1985 Annual Report
on Form 10-K; Form S-2
filed in Registration
Statement No. 33-10435 and
Exhibit A, B and C of the
1987 Proxy Statement
10 Material Contracts
(.1) Credit and Security Agreement Incorporated by reference
dated December 27, 1995 to the 1995 Annual Report
between the Registrant and on Form 10-K
IBJ Schroder Bank and Trust
Company
(.2) Credit and Security Agreement 10.2
between the Registrant and IBJ
Schroder Bank and Trust Company,
First Amendment dated August 19,
1996.
(.3) Promissory Note dated Incorporated by reference
October 5, 1993 as amended to the 1995 Annual Report
between Registrant and Chugai on Form 10-K
Boyeki Company, Ltd.
(.4) Mortgage Loan Agreement dated Incorporated by
June 2, 1989 between reference to the 1989
Registrant and Chugai Boyeki Annual Report on
Company, Ltd. Form 10-K
(.5) Employment Contract dated 10.5
October 1, 1996 between the
Registrant and Kenneth M. Darby
(.6) Employment Contract dated October 10.6
1, 1996 between Registrant
and Arthur D. Roche
(.7) Employment Agreement dated August 10.7
1, 1996 between Registrant and
John L. Eckman
(.8) Employment Agreement dated June 10.8
1, 1996 between Registrant and
Peter Horn
(.9) Employment Agreement dated June 10.9
1, 1996 between Registrant and
Yacov Pshtissky
- 24 -
(.10) Deferred Compensation Agreements Incorporated by
dated November 1, 1986 between the reference to the 1992
Registrant and Donald N. Horn and Annual Report on
Arthur V. Wallace Form 10K
(.11) Agreement of lease dated Incorporated by
January 18, 1988 between the reference to the 1988
Registrant and Allan V. Rose Annual Report on Form
10-K
(.12) Sublease Agreement dated Incorporated by reference
as of January 1, 1993 between to the 1994 Annual Report
the Registrant and AVR on Form 10-K
Mart Inc.
(.13) Consent of Overlandlord and Incorporated by reference
Release Agreement (undated) to the 1994 Annual Report
between the Registrant and on Form 10-K
Allan V. Rose
(.14) Sublease Agreement dated Incorporated by reference
as of September 1, 1995 between to the 1995 Annual Report
the Registrant and New York on Form 10-K
Blood Center
(.15) Amended and restated 1986 Incorporated by
Incentive Stock Option Plan reference to the 1990
Annual Report on Form
10-K
(.16) 1994 Incentive Stock Incorporated by reference
Option Plan to the 1994 Annual Report
on Form 10-K
(.17) 1994 Non-Qualified Stock Option Incorporated by reference
Plan for Outside Directors to the 1994 Annual Report
on Form 10-K
(.18) Lease agreement dated December 24, 10.10
1996 between the Registrant and
RREEF MIDAMERICA/EAST-V NINE, INC.
22 Subsidiaries of the Registrant Incorporated by
reference to the Notes
to the Consolidated
Financial Statements
24 Independent Auditors' Consent 24
No other exhibits are required to be filed.
14(b) - REPORTS ON FORM 8-K
No reports on Form 8-K were required to be filed during the last quarter of the
period covered by this report.
- 25 -
Other Matters - Form S-8 Undertaking
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statements on Form S-8 Nos. 33-7892
(filed June 30, 1986), 33-34349 (filed April 1, 1990) and 33-90038 (filed
February 24, 1995):
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
- 26 -
Independent Auditors' Report
The Board of Directors and Shareholders
Vicon Industries, Inc.:
We have audited the consolidated financial statements of Vicon Industries, Inc.
and subsidiaries as listed in Part IV, item 14(a)(1). In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in Part IV, item 14(a)(2). These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 Vicon Industries,
Inc. and subsidiaries at September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1996, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
Jericho, New York
November 12, 1996
- 27 -
VICON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended September 30, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Net sales $43,191,446 $43,846,571 $47,713,892
Cost of sales 32,234,192 34,300,638 37,000,055
------------ ---------- -----------
Gross profit 10,957,254 9,545,933 10,713,837
Operating expenses:
General and administrative expense 2,931,333 3,366,662 3,188,183
Selling expense 6,800,361 6,433,483 6,712,436
--------- --------- -----------
9,731,694 9,800,145 9,900,619
--------- --------- -----------
Operating profit (loss) 1,225,560 (254,212) 813,218
Unrealized foreign exchange gain (41,908) (550) (44,748)
Interest expense 882,290 1,013,383 783,731
---------- ----------- -----------
Income (loss) before income taxes 385,178 (1,267,045) 74,235
Income tax expense 85,000 80,000 29,000
---------- ----------- -----------
Net income (loss) $ 300,178 $(1,347,045) $ 45,235
========== =========== ===========
Income (loss) per share:
Primary $ .11 $(.49) $.02
===== ====== ====
Fully diluted $ .10 $(.49) $.02
===== ====== ====
See accompanying notes to consolidated financial statements.
- 28 -
VICON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1996 and 1995
ASSETS 1996 1995
- ------ ---- ----
Current Assets:
Cash $ 205,876 $1,151,850
Accounts receivable (less allowance
of $396,000 in 1996 and
$542,000 in 1995) 8,635,020 8,352,845
Other receivables 71,819 261,864
Inventories:
Parts, components, and materials 2,175,408 1,594,462
Work-in-process 1,391,552 1,686,287
Finished products 11,135,798 8,831,852
---------- ----------
14,702,758 12,112,601
Prepaid expenses 529,631 309,288
---------- ----------
Total current assets 24,145,104 22,188,448
Property, plant and equipment:
Land 290,448 292,298
Building and improvements 1,507,630 1,512,601
Machinery, equipment, and vehicles 11,842,120 11,417,598
---------- ----------
13,640,198 13,222,497
Less accumulated depreciation
and amortization 10,606,013 9,960,558
---------- ----------
3,034,185 3,261,939
Other assets 905,327 973,107
---------- ----------
$28,084,616 $26,423,494
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Borrowings under revolving credit agreement $ 959,583 $ 906,955
Current maturities of long-term debt 203,719 220,739
Accounts payable:
Related party 7,457,482 6,895,073
Other 1,811,730 1,335,935
Accrued wages and expenses 1,229,087 1,697,732
Income taxes payable 87,205 78,583
Deferred gain on sale and leaseback 332,100 332,100
----------- ----------
Total current liabilities 12,080,906 11,467,117
Long-term debt:
Related party 2,262,005 2,437,259
Other 4,166,881 2,901,490
Deferred gain on sale and leaseback 101,893 433,993
Other long-term liabilities 504,776 550,609
Commitments and contingencies - Note 10
Shareholders' equity
Common Stock, par value $.01 per share
Authorized - 10,000,000 shares
Issued 2,802,728 and 2,788,228 shares 28,027 27,882
Capital in excess of par value 9,423,089 9,396,890
Accumulated deficit (283,611) (583,789)
---------- ----------
9,167,505 8,840,983
Less treasury stock at cost, 25,400 shares (82,901) (82,901)
Foreign currency translation adjustment (116,449) (125,056)
---------- ----------
Total shareholders' equity 8,968,155 8,633,026
---------- ----------
$28,084,616 $26,423,494
See accompanying notes to consolidated financial statements.
- 29 -
VICON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Fiscal Years Ended September 30, 1996, 1995, and 1994
Foreign Total
Capital in Retained currency share-
Common excess of earnings Treasury translation holders'
Shares Stock par value (deficit) Stock adjustment equity
Balance September 30, 1993 2,788,228 $27,882 $9,396,890 $ 718,021 $(82,901) $ (179,622) $ 9,880,270
Foreign currency translation
adjustment - - - - - 117,027 117,027
Net income - - - 45,235 - - 45,235
--------- ------- ---------- --------- -------- ---------- -----------
Balance September 30, 1994 2,788,228 $27,882 $9,396,890 $ 763,256 $(82,901) $ (62,595) $10,042,532
Foreign currency translation
adjustment - - - - - (62,461) (62,461)
Net loss - - - (1,347,045) - - (1,347,045)
--------- ------ ---------- ---------- --------- ---------- -----------
Balance September 30, 1995 2,788,228 $27,882 $9,396,890 $ (583,789) $(82,901) $ (125,056) $ 8,633,026
Foreign currency translation
adjustment - - - - - 8,607 8,607
Exercise of stock options 14,500 145 26,199 - - - 26,344
Net income - - - 300,178 - - 300,178
--------- ------ ---------- ---------- -------- ---------- -----------
Balance September 30, 1996 2,802,728 $28,027 $9,423,089 $ (283,611) $(82,901) $ (116,449) $ 8,968,155
========= ======= ========== ========== ======== ========== ===========
See accompanying notes to consolidated financial statements.
- 30 -
VICON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended September 30, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 300,178 $ (1,347,045) $ 45,235
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 699,211 704,900 722,488
Amortization of deferred gain
on sale and leaseback (332,100) (332,100) (332,100)
Unrealized foreign exchange
gain (41,908) (550) (44,748)
Change in assets and liabilities:
Accounts receivable (312,207) 1,377,405 (422,815)
Other receivables 190,045 39,684 230,259
Inventories (2,593,382) 1,358,533 (2,201,508)
Prepaid expenses (218,762) 13,513 (17,618)
Other assets 67,780 (30,000) (359,547)
Accounts payable 1,045,453 708,591 572,724
Accrued wages and expenses (460,350) 409,285 (22,020)
Income taxes payable 7,517 48,077 8,220
Other liabilities (45,833) (63,878) (35,277)
----------- ----------- ----------
Net cash (used in) provided
by operating activities (1,694,358) 2,886,415 (1,856,707)
----------- ---------- -----------
Cash flows from investing activities:
Capital expenditures, net of
minor disposals (482,111) (608,808) (573,100)
----------- ----------- ----------
Net cash used in
investing activities (482,111) (608,808) (573,100)
----------- ----------- ----------
Cash flows from financing activities: Borrowings under U.S.
credit and security agreement 4,142,898 - -
Repayments of U.S. revolving
credit agreement (2,800,000) (1,700,000) (396,000)
Proceeds from exercise of stock
options 26,344 - -
Increase (decrease) in borrowings
under U.K. revolving credit
agreement 57,251 (29,511) 941,365
Issuance of promissory note
to related party - - 2,000,000
Repayments of other debt (220,625) (237,723) (229,506)
---------- ---------- ----------
Net cash provided by (used
in) financing activities 1,205,868 (1,967,234) 2,315,859
---------- ---------- ----------
Effect of exchange rate changes on cash 24,627 (68,923) (14,765)
---------- ---------- ----------
Net (decrease) increase in cash (945,974) 241,450 (128,713)
Cash at beginning of year 1,151,850 910,400 1,039,113
---------- ---------- ----------
Cash at end of year $ 205,876 $1,151,850 $ 910,400
========== ========== ==========
Non-cash investing and financing activities:
Capital lease obligations - $ 178,151 -
Cash paid during the fiscal year for:
Income taxes $ 78,121 $ 32,097 $ 17,431
Interest $ 888,061 $ 974,640 $ 707,357
See accompanying notes to consolidated financial statements.
- 31 -
VICON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Years ended September 30, 1996, 1995, and 1994
NOTE 1. Summary of Significant Accounting Policies
Nature of Operations
The Company designs, manufactures, assembles and markets closed circuit
television components and systems for use in security, surveillance, safety,
process and control applications by end users. The Company markets its products
worldwide directly to distributors, dealers and original equipment
manufacturers, principally within the security industry.
Principles of Consolidation
The consolidated financial statements include the accounts of Vicon Industries,
Inc. (the Company) and its wholly owned subsidiaries, Vicon Industries Foreign
Sales Corp., a Foreign Sales Corporation (FCC) and Vicon Industries (U.K.), Ltd.
after elimination of intercompany accounts and transactions.
Revenue Recognition
Revenues are recognized when products are sold and title is passed to a third
party, generally at the time of shipment.
Inventories
Inventories are valued at the lower of cost (on a moving average basis which
approximates a first-in, first-out method) or market. When it is determined that
a product or product line will be sold below carrying cost, affected on hand
inventories are written down to their estimated net realizable values.
Property, Plant and Equipment
Property, plant, and equipment are recorded at cost and include expenditures for
replacements or major improvements. Depreciation, which includes amortization of
assets under capital leases, is computed by the straight-line method over the
estimated useful lives of the related assets for financial reporting purposes
and on an accelerated basis for income tax purposes. Machinery, equipment and
vehicles are being depreciated over periods ranging from 2 to 10 years. The
Company's building is being depreciated over a period of 40 years and leasehold
improvements are amortized over the lesser of their estimated useful lives or
the remaining lease term.
Research and Development
Product research and development costs are charged to cost of sales as incurred,
and amounted to approximately $1,800,000, $1,900,000 and $1,600,000 in fiscal
1996, 1995, and 1994, respectively.
Earnings Per Share
Earnings per share are computed based on the weighted average number of shares
outstanding and equivalent shares from dilutive stock options. The numbers of
shares used to compute primary earnings/(loss) per share were 2,841,000 in 1996
and 2,763,000 in 1995 and 1994, respectively.
Fully diluted earnings per share reflect the maximum dilution that would have
resulted from the exercise of stock options. The number of shares used to
compute fully diluted earnings per share were 2,874,000 in 1996 and 2,763,000 in
1995 and 1994, respectively.
Foreign Currency Translation
Foreign currency translation is performed utilizing the current rate method
under which assets and liabilities are translated at the exchange rate on the
balance sheet date, while revenues, costs, and expenses are translated at the
average exchange rate for the
- 32 -
reporting period. The resulting translation adjustment of $(116,449) and
$(125,056) at September 30, 1996 and 1995, respectively, is recorded as a
component of shareholders' equity. Intercompany balances not deemed long-term in
nature at the balance sheet date resulted in a translation gain of $14,399,
$46,893 and $46,216 in 1996, 1995, and 1994, respectively, which is reflected in
cost of sales. Gains and losses on contracts which hedge specific foreign
currency denominated commitments, primarly inventory purchases, are included in
cost of sales.
Income Taxes
The Company accounts for income taxes under the provisions of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to be recovered or settled (see
Note 5).
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure of the fair value of
certain financial instruments. The carrying amounts for accounts and other
receivables, accounts payable and accrued expenses approximate fair value
because of the short-term maturity of these instruments. The carrying amounts of
the Company's long-term debt and extended term related party accounts payable
approximates fair value since the interest rates are prime-based and,
accordingly, are adjusted for market rate fluctuations. The fair value of
forward exchange contracts is estimated by obtaining quoted market prices. The
exchange rates on committed forward exchange contracts at September 30, 1996
approximated market rates for similar term contracts.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassification
Certain prior year amounts have been reclassified to conform with current year
presentation.
NOTE 2. Investment in Affiliate
The Company's 50 percent ownership interest in Chun Shin Electronics, Inc., a
joint venture company which assembles certain Vicon products in South Korea, is
accounted for using the equity method of accounting which reflects the cost of
the Company's investment adjusted for the Company's proportionate share of
earnings or losses. Such earnings or losses have been insignificant during each
of the three years ended September 30, 1996. Assets and sales of the joint
venture were approximately $3.1 million and $8.1 million, respectively, for the
fiscal year ended September 30, 1996. A significant portion of joint venture
product sales were to related parties including approximately $5.8 million
indirectly to the Company and approximately $1.7 million to a company owned by
the other joint venture partner (see Note 11).
NOTE 3. Deferred Gain on Sale and Leaseback
In fiscal 1988, under a sale and leaseback agreement, the Company sold its
principal operating facility in Melville, New York for approximately $11 million
and leased it back under a ten-year lease agreement. The transaction resulted in
a net gain of $3,321,000 which was deferred and is being amortized over the
ten-year lease period (see Note 10).
- 33 -
NOTE 4. Short-Term Borrowings
Borrowings under the revolving credit agreement represent short term borrowings
by the Company's U.K. subsidiary. Maximum borrowings during 1996, 1995 and 1994
amounted to approximately $1,045,000, $1,083,000 and $1,123,000, respectively.
The weighted-average interest rate on borrowings during these years was 8.00% in
1996, 8.50% in 1995 and 7.25% in 1994.
At September 30, 1996 and 1995, Accounts Payable - related party included
approximately $4.4 million and $4.5 million, respectively, of extended accounts
payable balances due Chugai Boyeki Company, Ltd., a shareholder of the Company.
The extended accounts payable balance at September 30, 1996 and 1995, includes
approximately $4.1 million and $.5 million, respectively, of purchases
denominated in U.S. dollars which bear interest at the prime rate of the related
party's U.S. bank (8.25% and 8.75% at September 30, 1996 and 1995,
respectively). The remaining balances are denominated in Japanese yen and bear
interest at the related party's internal lending rate (4.0% and 4.25% at
September 30, 1996 and 1995, respectively).
NOTE 5. Income Taxes
The components of income tax expense (recovery) for the fiscal years indicated
are as follows:
Current Deferred Total
1996
Federal $ - $ - $ -
State - - -
Foreign 85,000 - 85,000
------------- ------------ -------------
$ 85,000 $ - $ 85,000
============= ============ =============
1995
Federal $ - $ - $ -
State - - -
Foreign 80,000 - 80,000
------------- ------------ -------------
$ 80,000 $ - $ 80,000
============= ============ =============
1994
Federal $ - $ - $ -
State - - -
Foreign 29,000 - 29,000
------------- ------------ -------------
$ 29,000 $ - $ 29,000
============= ============ =============
A reconciliation of the U.S. statutory tax rate to the Company's effective tax
rate follows:
1996 1995 1994
---- ---- ----
Amount Percent Amount Percent Amount Percent
U.S. statutory tax $131,000 34.0% $(431,000) 34.0 % $ 25,000 34.0%
U.S. net operating
loss carryforward (56,000) (14.5) 532,000 42.0 (21,000) (28.3)
Foreign subsidiary
operations - - (42,000) (3.3) 6,000 8.0
Officers' life insurance 5,000 1.3 17,000 1.3 17,000 22.8
Other 5,000 1.3 4,000 0.3 $ 2,000 2.6
-------- ------ -------- ----- --------- -----
Effective Tax Rate $ 85,000 22.1% $ 80,000 6.3% $ 29,000 39.1%
======== ====== ======== ===== ========== =====
- 34 -
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at September 30, 1996 and 1995 are
presented below:
1996 1995
---- ----
Deferred tax assets:
Deferred gain on sale and leaseback $ 146,000 $ 259,000
Inventory obsolescence and
disposition reserves 418,000 328,000
Deferred compensation accruals 206,000 221,000
Allowance for doubtful
accounts receivable 123,000 177,000
Net operating loss carryforwards 1,987,000 1,926,000
General business credit carryforwards 186,000 186,000
Other 8,000 18,000
---------- ----------
Total deferred tax assets 3,074,000 3,115,000
Less valuation allowance (2,998,000) (3,054,000)
---------- ----------
Net deferred tax assets 76,000 61,000
---------- ----------
Deferred tax liabilities:
Cash surrender value of officers'
life insurance 61,000 61,000
Other 15,000 -
---------- ----------
Total deferred tax liabilities 76,000 61,000
---------- ----------
Net deferred tax assets and liabilities $ -0- $ -0-
---------- ----------
The Company has provided a valuation allowance of $2,998,000 for deferred tax
assets since realization of these assets was not assured due to the Company's
recent history of operating losses. At September 30, 1996, the Company had net
operating loss carryforwards for federal income tax purposes of approximately
$5,800,000 which are available to offset future federal taxable income, if any,
through 2011. The Company also had general business tax credit carryforwards for
federal income tax purposes of approximately $186,000 which are available to
reduce future federal income taxes, if any, through 2003. Pretax domestic income
(loss) amounted to approximately $136,000, ($1,626,000), and $6,000 in fiscal
years 1996, 1995 and 1994, respectively. Pretax foreign income amounted to
approximately $311,000, $291,000 and $83,000 in fiscal years 1996, 1995 and
1994, respectively.
- 35 -
NOTE 6. Long-Term Debt
Long-term debt is comprised of the following at September 30, 1996 and 1995:
1996 1995
---- ----
Related party:
Mortgage loan denominated in Japanese
yen at a formula interest rate
(6.3% and 6.1% at September 30, 1996
and 1995) with annual installments of
14,400,000 yen to December 1998 $ 393,008 $ 583,010
Term loan with interest rate of 1%
above the prevailing prime rate
(9.25% and 10.0% at September 30, 1996
and 1995) due July 1998 2,000,000 2,000,000
---------- ----------
2,393,008 2,583,010
Less installments due within one year 131,003 145,751
---------- ----------
$2,262,005 $2,437,259
========== ==========
Banks and other:
Revolving credit loan (see below) $4,142,898 $2,800,000
Capital lease obligations 86,520 146,048
Other 10,179 30,430
---------- ----------
4,239,597 2,976,478
Less installments due within one year 72,716 74,988
---------- ----------
$4,166,881 $2,901,490
In October 1993, the Company issued a $2,000,000 secured promissory note to
Chugai Boyeki Co., Ltd., a related party. The note is subordinated to senior
bank debt with regard to liens and interest under certain conditions and is due
in July 1998.
At September 30, 1995, the Company was a party to a secured Revolving Credit
Agreement with two banks which provided for aggregate maximum borrowings of
$2,800,000 subject to an availability formula based on accounts receivable.
Borrowings under the Credit Agreement were due in October, 1995, with interest
at 3% above the banks' prime rate (11.75% at September 30, 1995), and required
no compensating balances. At September 30, 1995, the Company was in default of
certain financial covenants under this agreement. Such debt was repaid on
December 28, 1995 with the proceeds received under a new two year Credit and
Security Agreement with another bank which provides for maximum borrowings of
$5,500,000, subject to an availability formula based on accounts receivable and
inventory balances. Borrowings under the agreement bear interest at the bank's
prime rate plus 1.25% (9.50% at September 30, 1996).
The Credit and Security Agreement contains restrictive covenants which, among
other things, require the Company to maintain certain levels of net worth,
earnings and ratios of interest coverage and debt to net worth. Borrowings under
this agreement are secured by substantially all assets of the Company.
Long-term debt maturing in each of the three fiscal years subsequent to
September 30, 1996 approximates $204,000 in 1997, $6,298,000 in 1998 and
$131,000 in 1999, respectively.
- 36 -
At September 30, 1996, future minimum annual rental commitments under the
non-cancellable capital lease obligations were as follows: $68,556 in 1997 and
$24,585 in 1998, which includes imputed interest of $6,019 in 1997 and $602 in
1998.
NOTE 7. Foreign Operations
The Company operates one foreign entity, Vicon Industries (U.K.), Ltd., a wholly
owned subsidiary which markets and distributes the Company's products
principally within the United Kingdom and Europe.
The following summarizes certain information concerning the Company's operations
in the U.S. and U.K. for fiscal years 1996, 1995, and 1994:
1996 1995 1994
---- ---- ----
Net sales
U.S. $35,468,000 $34,294,000 $39,342,000
U.K. 7,723,000 9,553,000 8,372,000
----------- ----------- -----------
Total $43,191,000 $43,847,000 $47,714,000
Operating profit (loss)
U.S. $ 805,000 $ (827,000) $ 542,000
U.K. 421,000 573,000 271,000
----------- ----------- -----------
Total $ 1,226,000 $ (254,000) $ 813,000
Identifiable assets
U.S. $23,260,000 $21,213,000 $23,388,000
U.K. 4,825,000 5,210,000 5,469,000
----------- ----------- -----------
Total $28,085,000 $26,423,000 $28,857,000
Net assets-- U.K. $ 935,000 $ 711,000 $ 499,000
U.S. sales include $8,531,000, $7,987,000 and $8,358,000 for export in
fiscal years 1996, 1995, and 1994, respectively. Operating profit (loss)
excludes unrealized foreign exchange gain/loss, interest expense and income
taxes. U.S. assets include $117,000, $1,127,000, and $888,000 in fiscal years
1996, 1995, and 1994, respectively, of cash for general corporate use.
NOTE 8. Stock Options and Stock Purchase Rights
The Company maintains stock option plans which include both incentive and
non-qualified options covering a total of 477,584 shares of common stock
reserved for issuance to key employees, including officers and directors. Such
amount includes a total of 200,000 options reserved for issuance in 1994 under
an Incentive Stock Option Plan, as well as a total of 50,000 options reserved
for issuance in 1994 under a Non-Qualified Stock Option Plan for Outside
Directors. All options are issued at fair market value at the grant date and are
exercisable in varying installments according to the plans. There were 32,935
and 227,923 shares available for grant at September 30, 1996 and 1995,
respectively. As of September 30, 1996, 1995, and 1994, options exercisable
pursuant to the plans amounted to 289,471, 198,783, and 268,054, respectively.
- 37 -
Changes in outstanding stock options for the three years ended September 30,
1996, are presented below:
Shares Price Range Per Share
Balance-September 30, 1993 313,174 $ 2.12 -- 4.88
Granted 221,694 $ 1.88 -- --
Cancelled (103,694) $ 2.12 -- 4.88
-------
Balance-September 30, 1994 431,174 $ 1.88 -- 2.38
-------
Granted 25,000 $ 1.94 -- --
Cancelled (156,513) $ 1.88 -- 2.25
-------
Balance-September 30, 1995 299,661 $ 1.88 -- 2.38
-------
Granted 245,397 $ 1.69 -- 2.25
Exercised (14,500) $ 1.69 -- 1.88
Cancelled (85,909) $ 1.69 -- 2.38
-------
Balance-September 30, 1996 444,649 $ 1.69 -- 2.25
=======
In November 1986, the Board of Directors declared a dividend of one Stock
Purchase Right for each share of common stock outstanding on December 1, 1986.
In addition, 385,715 Rights were distributed with certain new shares
subsequently issued by the Company. The Rights entitle the holder to purchase
for $15 one share of common stock subject to adjustment under certain
conditions. The Rights are redeemable by the Company until the occurrence of
certain events at $.05 per Right. The Rights expire on November 30, 1996.
NOTE 9. Industry Segment and Major Customer
The Company operates in one industry which encompasses the design, manufacture,
assembly, and marketing of closed-circuit television (CCTV) equipment and
systems for the CCTV segment of the security products industry. The Company's
products include all components of a video surveillance system such as remote
positioning devices, cameras, monitors, video switchers, housings, mounting
accessories, recording devices, manual and motorized lenses, controls, video
signal equipment, and consoles for system assembly. No customer represented
sales in excess of ten percent of consolidated revenues during any of the three
fiscal years presented.
NOTE 10. Commitments
In January 1988, the Company entered into a sale and leaseback agreement
involving its principal operating facility (see Note 3). The ten-year lease
provides for rent of $1,128,000 in the first year, increasing 4 percent annually
through 1998.
In November 1994, the Company entered into a sublease agreement, dated January
1, 1993, with an affiliated company of the landlord which provides for minimum
sublease payments to the Company of $120,000 in calendar year 1993; $180,000 in
1994; $240,000 in 1995 and $300,000 per year from January 1, 1996 through
January 19, 1998, in exchange for the right to occupy a total of approximately
25,000 sq. ft. of office and warehouse space in the Company's primary operating
facility. At the same time, the Company entered into an agreement with its
landlord and subtenant whereby the Company has agreed to vacate its principal
operating facility at anytime after January 1995, at the landlord's or
subtenant's option, and the landlord has agreed to release the Company from its
future lease obligations in consideration of a lease termination payment by the
Company to the landlord of $1,000,000. Such option, if exercised, would also
require the landlord to provide the Company with at least six months notice
prior to the required vacate date. The lease termination payment will be reduced
by $27,778 for each month after January 31, 1995 that the Company remains
obligated under the primary lease. In October 1996, the landlord exercised its
option that the Company vacate within six months. The lease termination
obligation will be approximately $260,000. Such expense will be substantially
offset by the remaining unamortized balance of the deferred sale and leaseback
gain. In the event the Company is unable to vacate by the required date, it will
be required to refund all sublease payments received through the actual vacate
date as specified above in the November 1994 sublease agreement.
- 38 -
Additionally, the Company occupies certain other facilities, or is contingently
liable, under long-term operating leases which expire at various dates through
1998. The leases, which cover periods from one to four years, generally provide
for renewal options at specified rental amounts. The aggregate operating lease
commitment (net of sublease rental) at September 30, 1996 was $1,180,000 with
minimum rentals for the fiscal years shown as follows: 1997--$907,000;
1998--$273,000. Subsequent to year end, the Company entered into a five year
lease agreement for a new principal operating facility. The aggregate commitment
under such agreement amounted to $1,803,000 with minimum rentals for the fiscal
years shown as follows: 1997 -- $182,000; 1998 -- $369,000; 1999 -- $377,000;
2000 -- $384,000; 2001 and thereafter -- $491,000.
The Company is a party to employment agreements with five executives which
provide for, among other things, the payment of compensation if there is a
change in control without Board of Director approval (as defined in the
agreements). The contingent liability under these change in control provisions
at September 30, 1996 was approximately $1,635,000. The total compensation
payable under these agreements aggregated $1,264,000 at September 30, 1996. The
Company is also a party to insured deferred compensation agreements with two
retired officers. The aggregate remaining compensation payments of approximately
$966,000 as of September 30, 1996 are subject to the individuals adherence to
certain non-compete covenants, and are payable over a ten year period commencing
upon retirement.
Sales to the Company's U.K. subsidiary are denominated in British pounds
sterling. The Company attempts to minimize its currency exposure on these
intercompany sales through the purchase of forward exchange contracts to cover
unpaid receivables. These contracts generally involve the exchange of one
currency for another at a future date and specified exchange rate. At September
30, 1996, the Company had approximately $2,000,000 of outstanding forward
exchange contracts to sell British pounds. Such contracts expire at varying
dates and exchange rates through April 25, 1997.
The Company's purchases of Japanese sourced products through Chugai Boyeki Co.,
Ltd., a related party, are denominated in Japanese yen. At September 30, 1996,
Chugai had purchased, on the Company's behalf, forward exchange contracts to
purchase approximately 100 million Japanese yen to hedge the currency risk on
accounts payables denominated in Japanese yen. Such contracts expire at varying
dates and exchange rates through December 1996.
- 39 -
NOTE 11: Related Party Transactions
As of September 30, 1996 and 1995, Chugai Boyeki Company, Ltd. ("Chugai") owned
548,715 shares of the Company's common stock (19.8% of the total outstanding
shares). The Company, which has been conducting business with Chugai for
approximately 17 years, imports certain finished products and components through
Chugai and also sells its products to Chugai who resells the products in certain
Asian and European markets. The Company purchased approximately $9.2, $11.6 and
$14.1 million of products and components from Chugai in fiscal years 1996, 1995,
and 1994, respectively, and the Company sold $2.1, $3.4, and $3.5 million of
product to Chugai for distribution in fiscal years 1996, 1995, and 1994,
respectively. At September 30, 1996 and 1995, the Company owed $7.5 million and
$6.9 million, respectively, to Chugai and Chugai owed $148,000 and $92,000,
respectively, to the Company resulting from purchases of products. The amounts
owed to Chugai are secured by a subordinated lien on substantially all the
Company's assets. During fiscal 1989, Chugai made a mortgage loan to the Company
in the amount of $1,026,000 to partially finance the construction of a new
sales/distribution facility in the U.K. In October 1993, the Company borrowed $2
million from Chugai under a promissory note agreement. See Note 6 for a further
discussion of this transaction.
As of September 30, 1996, Mr. Chu S. Chun controlled 300,557 shares of the
Company's common stock (10.8% of the total outstanding shares). Mr. Chun owns
Chun Shin Industries, Inc., the Company's 50% South Korean joint venture
partner, and Chun Shin Electronics. (CSE) which purchases product from the joint
venture (see Note 2). Mr. Chun also controls I.I.I. Companies, Inc. (I.I.I.), a
U.S. based company, which arranges the importation and provides short term
financing on all the Company's product purchases from Chun Shin Electronics,
Inc. During fiscal years 1996 and 1995, the Company purchased approximately $5.8
million and $5.1 million of products from I.I.I. under this agreement. Further,
the Company sold approximately $900,000 of its products to I.I.I. during each of
fiscal years 1996 and 1995. At September 30, 1996 and 1995, I.I.I. owed the
Company approximately $368,000 and $422,000, respectively.
- 40 -
VICON INDUSTRIES, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(Unaudited)
Net Earnings (loss)
per share
Quarter Net Gross Net
Ended Sales Profit Profit (Loss) Primary Fully Diluted
Fiscal 1996
December $10,512,000 $2,706,000 $ 102,000 $ .04 $ .04
March 10,856,000 2,748,000 125,000 .05 .05
June 10,902,000 2,735,000 41,000 .01 .01
September 10,921,000 2,768,000 32,000 .01 .01
----------- ----------- ----------- ----- -----
Total $43,191,000 $10,957,000 $ 300,000 $ .11 $ .10
=========== =========== =========== ===== =====
Fiscal 1995
December $11,828,000 $2,698,000 $ 16,000 $ .01 $ .01
March 10,952,000 2,351,000 (467,000) (.17) (.17)
June 10,287,000 2,247,000 (540,000) (.20) (.20)
September 10,780,000 2,250,000 (356,000) (.13) (.13)
----------- ---------- ----------- ----- ----
Total $43,847,000 $9,546,000 $(1,347,000) $(.49) $(.49)
=========== ========== =========== ===== =====
The Company has not declared or paid cash dividends on its common stock for any
of the foregoing periods. Additionally, certain loan agreements restrict the
payment of any cash dividends in future periods.
Because of changes in the number of common shares outstanding and market price
fluctuations affecting outstanding stock options, the sum of quarterly earnings
per share may not equal the earnings per share for the full year.
- 41 -
SCHEDULE I
VICON INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended September 30, 1996, 1995, and 1994
Balance at Charged to Balance
beginning costs and at end
Description of period expenses Deductions of period
Reserves and allowances
deducted from asset
accounts:
Allowance for uncollectible
accounts:
September 30, 1996 $542,000 $186,000 $332,000 $396,000
======== ======== ======== ========
September 30, 1995 $309,000 $381,000 $148,000 $542,000
======== ======== ======== ========
September 30, 1994 $295,000 $180,000 $166,000 $309,000
======== ======== ======== ========
- 42 -
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VICON INDUSTRIES, INC.
By Kenneth M. Darby By Arthur D. Roche By John M. Badke
Kenneth M. Darby Arthur D. Roche John M. Badke
President Executive Vice President Controller
(Chief Executive Officer) (Chief Financial Officer) (Chief Acctg. Officer)
December 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated:
VICON INDUSTRIES, INC.
Donald N. Horn December 26, 1996
- --------------------- -----------------
Donald N. Horn Chairman of the Board Date
Kenneth M. Darby Director December 26, 1996
- --------------------- -----------------
Kenneth M. Darby Date
Arthur D. Roche Director December 26, 1996
- --------------------- -----------------
Arthur D. Roche Date
Arthur V. Wallace Director December 26, 1996
- --------------------- -----------------
Arthur V. Wallace Date
Peter F. Barry December 26, 1996
- --------------------- -----------------
Peter F. Barry Director Date
Milton F. Gidge December 26, 1996
- --------------------- -----------------
Milton F. Gidge Director Date
Michael D. Katz December 26, 1996
- --------------------- -----------------
Michael D. Katz Director Date
Peter F. Neumann December 26, 1996
- --------------------- -----------------
Peter F. Neumann Director Date
W. Gregory Robertson December 26, 1996
W. Gregory Robertson Director Date
Kazuyoshi Sudo December 26, 1996
Kazuyoshi Sudo Director Date
- 43 -
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VICON INDUSTRIES, INC.
By By By
Kenneth M. Darby Arthur D. Roche John M. Badke
President Executive Vice President Controller
(Chief Executive Officer) (Chief Financial Officer) (Chief Acctg. Officer)
December , 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated:
VICON INDUSTRIES, INC.
December , 1996
Donald N. Horn Chairman of the Board Date
Director December , 1996
Kenneth M. Darby Date
Director December , 1996
Arthur D. Roche Date
Director December , 1996
Arthur V. Wallace Date
December , 1996
Peter F. Barry Director Date
December , 1996
Milton F. Gidge Director Date
December , 1996
Michael D. Katz Director Date
December , 1996
Peter F. Neumann Director Date
December , 1996
W. Gregory Robertson Director Date
December , 1996
Kazuyoshi Sudo Director Date
- 43 -