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 SEPTEMBER 30, 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 November 9, 1999:
33,030,852
Transitional Small Business Disclosure Format: Yes [ ] No [X]
SOLIGEN TECHNOLOGIES, INC.
FORM 10-QSB
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at September 30, 1999 (unaudited)
and March 31, 1999 .................................................... 3
Consolidated Statements of Operations for the six months ended
September 30, 1999 and 1998 (unaudited) ............................... 4
Consolidated Statements of Cash flows for the six months ended
September 30, 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 ................................................. 8
PART II OTHER INFORMATION
Item 2. Changes in Securities ................................................. 13
Item 4. Submission of Matters to a Vote of Security Holders ................... 14
Item 5. Other Information ..................................................... 14
Item 6. Exhibits and Reports on Form 8-K ...................................... 15
Signatures ............................................................ 16
2
PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, MARCH 31,
1999 1999
------------- ----------
(UNAUDITED)
ASSETS
Current assets:
Cash $ 197,000 $ 429,000
Accounts receivable 948,000 817,000
Inventories 102,000 121,000
Prepaid expenses 84,000 63,000
---------- ----------
Total current assets 1,331,000 1,430,000
Property, plant and equipment 2,461,000 2,369,000
Less: allowance for depreciation and amortization 1,975,000 1,817,000
---------- ----------
Net property, plant and equipment 486,000 552,000
Other assets 42,000 37,000
---------- ----------
TOTAL ASSETS $1,859,000 $2,019,000
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 702,000 $ 628,000
Trade accounts payable 411,000 309,000
Payroll and related expenses 300,000 170,000
Accrued expenses 267,000 345,000
Deferred revenue 80,000 33,000
---------- ----------
Total current liabilities 1,760,000 1,485,000
Notes payable, net of current portion 8,000 10,000
Stockholders' equity:
Preferred stock, no par value:
Authorized - 10,000,000 shares
Issued and outstanding - 1,800 and 2,000
shares, respectively 900,000 1,000,000
Common stock, no par value:
Authorized - 90,000,000 shares
Issued and outstanding - 32,911,641 and
32,682,338 shares, respectively 10,688,000 10,500,000
Accumulated deficit (11,497,000) (10,976,000)
----------- -----------
Total stockholders' equity 91,000 524,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,859,000 $ 2,019,000
----------- -----------
----------- -----------
The accompanying notes are an integral part of these financial statements.
3
SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------- -------------
REVENUES $1,761,000 $1,167,000 $3,368,000 $2,807,000
COST OF REVENUES 1,369,000 1,068,000 2,399,000 2,164,000
---------- ---------- ---------- ----------
Gross profit 392,000 99,000 969,000 643,000
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Research and development 315,000 263,000 595,000 507,000
Selling 196,000 192,000 373,000 372,000
General and administrative 220,000 270,000 403,000 506,000
Non-cash compensation 16,000 38,000 37,000 76,000
---------- ---------- ---------- ----------
Total operating expenses 747,000 763,000 1,408,000 1,461,000
---------- ---------- ---------- ----------
Loss from operations (355,000) (664,000) (439,000) (818,000)
OTHER INCOME (EXPENSE):
Interest income 16,000 4,000 18,000 5,000
Interest expense (62,000) (55,000) (103,000) (111,000)
Other income -- -- 3,000 8,000
---------- ---------- ---------- ----------
Total other income (expense) (46,000) (51,000) (82,000) (98,000)
---------- ---------- ---------- ----------
LOSS BEFORE PROVISION FOR INCOME TAXES (401,000) (715,000) (521,000) (916,000)
Provision for state income taxes -- -- -- 2,000
---------- ---------- ---------- ----------
NET LOSS $ (401,000) $ (715,000) $ (521,000) $ (918,000)
---------- ---------- ---------- ----------
BASIC AND DILUTED
NET LOSS PER SHARE $ (0.01) $ (0.02) $ (0.02) $ (0.03)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The accompanying notes are an integral part of these financial statements.
4
SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1999 1998
------------ ------------
Cash flows from operating activities:
Net loss $(521,000) $(918,000)
Depreciation and amortization 158,000 203,000
Non-cash interest expense 51,000 70,000
Non-cash compensation expense 37,000 76,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (131,000) 510,000
(Increase) decrease in inventories 19,000 (1,000)
(Increase) in prepaid expenses (21,000) (21,000)
Increase (decrease) in trade accounts payable 102,000 (278,000)
Increase (decrease) in payroll and related expenses 130,000 (24,000)
Increase (decrease) in accrued expenses (78,000) 147,000
Increase (decrease) in deferred revenues 47,000 (26,000)
(Increase) decease in other assets (5,000) 4,000
---------- ----------
Net cash used for operating activities (212,000) (258,000)
---------- ----------
Cash flows from investing activities:
Additions in property, plant and equipment (92,000) (106,000)
---------- ----------
Net cash used for investing activities (92,000) (106,000)
---------- ----------
Cash flows from financing activities:
Principal payments under capital lease obligations (17,000) (31,000)
Payments on notes payable (21,000) (89,000)
Net borrowings (payments) under revolving line of credit 110,000 (6,000)
Preferred stock issuance, net of issuance costs -- 957,000
---------- ----------
Net cash provided by financing activities 72,000 831,000
---------- ----------
Net increase (decrease) in cash (232,000) 467,000
Cash - beginning of period 429,000 215,000
---------- ----------
Cash - end of period $ 197,000 $ 682,000
---------- ----------
---------- ----------
The accompanying notes are an integral part of these financial statements.
5
SOLIGEN TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The financial information included herein for the six month period ended
September 30, 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:
SEPTEMBER 30, 1999
------------------
Raw materials and parts $ 83,000
Work in process 9,000
Finished goods 10,000
--------
Total inventories $102,000
--------
--------
DEFERRED REVENUE
Deferred revenue relates to the DSPC technology profit center. The deferred
revenue related to machine revenues results 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
DEBT
NOTES PAYABLE AND CAPITAL LEASES
Notes payable and capital leases consists of the following at September 30,
1999:
Notes to various investors and related parties, bearing
interest at 12 percent, due in October 1999 $ 170,000
Notes to insurance company, bearing interest at
9.84 percent, due in December 1999 9,000
Revolving line of credit, secured by certain assets
bearing interest at the bank's prime rate (8 1/4 percent
at September 30, 1999) plus 3 percent 505,000
Note to finance company, bearing interest at
0.9 percent, due in August 2001 14,000
Capital leases 12,000
-----------
710,000
Less - current portion (702,000)
-----------
$ 8,000
-----------
-----------
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
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 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 25, 1999, $170,000 notes payable
became due. The Company intends to repay the notes from the financing
currently being negotiated.
PREFERRED STOCK
On April 24, 1998, the Company entered into a Series A Convertible Preferred
Stock Purchase Agreement providing for the private placement of up to 3,000
shares of a newly authorized series of preferred stock. The Company received
gross proceeds of $800,000 in April 1998, $100,000 in July 1998 and $100,000
in September 1998 from the sale of 1,600, 200 and 200 shares, respectively,
of Series A Preferred Stock to three private investors pursuant to the Series
A Convertible Preferred Stock Purchase Agreement. In June 1999, two private
investors converted 200 shares of Series A Preferred Stock into 229,303
shares of the Company's common stock and in November 1999, one private
investor converted 100 shares of Series A Preferred Stock into 119,211 shares
of the Company's common stock.
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 COMPANY'S ABILITY TO OBTAIN ADDITIONAL
FINANCING REQUIRED TO SUPPORT ITS CONTINUING OPERATIONS AND PROJECTED REVENUE
GROWTH. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING
STATEMENTS. IN VIEW OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO
8
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-Registered Trademark-"). This technology is
embodied in the Company's DSPC 300 System (the "DSPC System"), which produces
ceramic casting molds directly from Computer Aided Design ("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-Registered Trademark- service. These facilities will include DSPC
production facilities and foundries with in-house machine
9
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 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 June 30, 1999 and the three and six
months ended September 30, 1999 and 1998 were as follows:
THREE MONTHS
ENDED THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
----------- -------------------------- --------------------------
1999 1999 1998 1999 1998
----------- ------------ ----------- ------------ ------------
Parts Now $ 902,000 $ 1,160,000 $ 467,000 $ 2,062,000 $ 1,182,000
-Registered
Trademark-
DSPC-Registered
Trademark-
Production 423,000 336,000 419,000 759,000 1,019,000
Production Parts 257,000 239,000 231,000 496,000 519,000
DSPC-Registered
Trademark-
Technology 25,000 26,000 50,000 51,000 87,000
----------- ------------ ----------- ------------ ------------
Total revenues $ 1,607,000 $ 1,761,000 $ 1,167,000 $ 3,368,000 $ 2,807,000
----------- ------------ ----------- ------------ ------------
----------- ------------ ----------- ------------ ------------
Revenues for the quarter ended September 30, 1999 were $1,761,000, an
increase of 51% compared to $1,167,000 in the quarter ended September 30,
1998, and an increase of 10%
10
compared to $1,607,000 in the quarter ended June 30, 1999. Compared to the
comparable period a year ago, combined revenues for Parts Now and DSPC
Production increased to $1,496,000 from $886,000 and increased from
$1,325,000 in the quarter ended June 30, 1999. Production Parts increased to
$239,000 in the quarter ended September 30, 1999 from $231,000 in the similar
quarter last year and decreased from $257,000 in the quarter ended June 30,
1999. DSPC Technologies revenues decreased to $26,000 for the quarter ended
September 30, 1999 from $50,000 in the similar quarter last year and
increased from $25,000 in the quarter ended June 30, 1999.
Gross profit increased to $392,000 for the quarter ended September 30, 1999
from $99,000 in the similar quarter last year. For the six months ended
September 30, 1999, gross profit increased to $969,000 from $643,000 for the
similar period last year. Gross margin for the quarter ended September 30,
1999 increased to 22% from 8% for the quarter ended September 30, 1998 and
for the six months ended September 30, 1999 increased to 29% from 23% for the
similar period last year. The increase in gross margin was primarily the
result of increased revenues.
Research and development expenses were $315,000 and $263,000 for the quarters
ended September 30, 1999 and 1998, respectively. For the six months ended
September 30, 1999 and 1998, research and development expenses were $595,000
and $507,000, respectively. The Company intends to continue the advancement
of DSPC technology and its applications in the market place.
Selling expenses were relatively flat increasing to $196,000 for the quarter
ended September 30, 1999 from $192,000 in the similar quarter last year and
increased to $373,000 for the six months ended September 30, 1999 from
$372,000 for the similar period last year.
General and administrative expenses decreased 19% to $220,000 for the quarter
ended September 30, 1999 from $270,000 in the similar quarter last year and
decreased 20% to $403,000 for the quarter ended September 30, 1999 from
$506,000 for the similar period last year. The decrease for the quarter and
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 $16,000 and $37,000 non-cash compensation
expense in the quarter and six months ended September 30, 1999 and $38,000
and $76,000 in quarter and six months ended for the similar period last year.
Interest expense increased to $62,000 in the quarter ended September 30, 1999
from $55,000 in the similar quarter ended last year. For the six months
ended September 30, 1999 and 1998, interest expense decreased to $103,000
from $111,000. 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 $25,000 non cash interest expense in the
quarter ended September 30, 1999 and $35,000 in the similar quarter ended
last year and for the six months ended September 30, 1999 and 1998, the
Company recognized $51,000 and $70,000, respectively. The additional
interest expense in the amount of $37,000 and $20,000 for the quarters ended
September 30, 1999 and
11
1998, receptively, and $52,000 and $41,000 for the six months ended September
30, 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 September 30, 1999, working capital decreased to $(429,000) compared to
working capital of $438,000 at September 30, 1998, and $(55,000) at March 31,
1999. At September 30, 1999, the Company had $1,145,000 in cash and accounts
receivable, compared to cash and accounts receivable of $1,430,000 at
September 30, 1998 and $1,246,000 at March 31, 1999.
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 September 30, 1999, the Company had $150,000 available to
borrow.
The Company is in final discussion with investors for a Convertible Preferred
Stock private placement with closing anticipated in November 1999. Terms of
the financing as currently proposed provide for the offer and sale of up to
5,000,000 shares of Series B Convertible Preferred Stock ("Series B
Preferred") at a price of $0.20 per share. Each share of Series B Preferred
will be initially convertible into one share of common stock, subject to
adjustment in certain events. For each 100 shares of Series B Preferred
purchased, the investors will receive common stock purchase warrants
exercisable for the purchase of 43 shares of common stock at a price of $0.20
per share. These warrants will be exercisable for a period of one year. The
investors will have demand and "piggyback" registration rights as to the
common stock issuable upon conversion of the Series B Preferred and exercise
of the warrants. In addition, the holders of Series B Preferred will have
the right to elect one director to the Company's Board of Directors. Closing
of the financing is contingent upon a minimum aggregate investment of
$800,000, completion of investor due diligence, and negotiation and execution
of definitive agreements. As of the date of filing of this Report on Form
10-QSB, subscriptions for $900,000 have been received, due diligence is in
process and draft agreements are being negotiated between the Company and the
investors.
The Company continues to require significant funds to expand and continue
operations. The Company believes its current cash, revolving line of credit
and funds anticipated from the private placement will allow the Company to
increase its engineering and manufacturing capacity and to adequately fund
operations through March 2000.
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 has
and continues to contact major vendors and other third parties that do
business with the Company to check on the status of their efforts to resolve
any
12
Year 2000 issues. The Company prepared a contingency plan based on the Year
2000 readiness of major vendors and customers. In order to provide for an
uninterrupted production flow at year-end, the Company plans to increase the
inventory of critical production items. The Company is presently unable to
assess the likelihood that it will experience significant operational
problems due to unresolved third party issues; there can be no assurance that
these entities will achieve timely Year 2000 compliance and therefore could
have a material impact on the Company's operations.
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 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 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
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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 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 27, 1999, the Company held its 1999 Annual Meeting of Shareholders,
at which the following actions were taken:
1. The Shareholders elected the five nominees for Director to the Board of
Directors of the Company. The five Directors elected were Yehoram Uziel,
Mark W. Dowley, Kenneth T. Friedman, Patrick J. Lavelle and William Spier
(27,688,212, 27,689,412, 27,689,112, 27,689,412 and 27,449,112 shares
were voted affirmatively and 71,581, 70,381, 70,681, 70,381 and 310,681
shares abstained from voting for each of the nominees named,
respectively).
2. The Shareholders ratified the selection of Arthur Andersen, LLP as
independent public accountants of the Company for the fiscal year ended
March 31, 2000 (27,348,725 shares were voted affirmatively, 1,000 shares
voted negatively and 36,416 shares abstained from voting on this
proposal).
ITEM 5. OTHER INFORMATION
On August 31, 1999, the American Stock Exchange formally notified the Company
that its Common Stock listed on the Emerging Marketplace was to be delisted.
The Company did not meet the Exchange guidelines with the Company's
shareholders' equity less than $2.0 million and the per share market price of
its Common Stock below $1.00.
As a result of the action taken by Amex, the last day of trading of the
Company's Common Stock on the American Stock Exchange under the symbol SGT
was on September 3, 1999. The Company's Common Stock began trading on the
Over-The-Counter Bulletin Board on September 15, 1999, under the symbol SGTN.
The Company will continue to maintain its listing on the Vancouver Stock
Exchange under the symbol SGT.
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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 September 30, 1999
(b) REPORTS ON FORM 8-K.
The Company filed current report on Form 8-K on September 9, 1999
reporting that the Company's Common Stock Listed on the American Stock
Exchange Emerging Company Marketplace was delisted and began trading
on the Over-The-Counter Bulletin Board.
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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: November 10, 1999 By: /s/ Yehoram Uziel
----------------------------------------
Yehoram Uziel
President, CEO and Chairman of the Board
(Principal executive officer)
Date: November 10, 1999 By: /s/ Robert Kassel
----------------------------------------
Robert Kassel
Chief Financial Officer
(Principal financial officer)
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