-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HLf/W6KfAyJmFEJo+f9lYRF52GR3eMZMvDWC7WOpBEffjYEcdi7z3sEaBFEo9vR0 iEmfHtHzBv1mMvl5qNXDQA== 0000890163-97-000115.txt : 19970822 0000890163-97-000115.hdr.sgml : 19970822 ACCESSION NUMBER: 0000890163-97-000115 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970821 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINGERMATRIX INC CENTRAL INDEX KEY: 0000316618 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 132854686 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09940 FILM NUMBER: 97667389 BUSINESS ADDRESS: STREET 1: 145 PALISADE ST CITY: DOBBSFERRY STATE: NY ZIP: 10522-1617 BUSINESS PHONE: 9146931050 MAIL ADDRESS: STREET 1: 145 PALISADE ST CITY: DOBBSFERRY STATE: NY ZIP: 10522 10-Q 1 FINGERMATRIX FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 -------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from to ------------------- -------------------------- Commission File Number 0-9940 FINGERMATRIX, INC. - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) New York 13-2854686 - ------------------------------------------------------------------------------ (State of other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 145 Palisade Street, Dobbs Ferry, New York 10522-1617 - ------------------------------------------------------------------------------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (914) 693-1050 None - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changes since last report) 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 and Exchange Act of 1934 during the preceding twelve 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at June 30, 1997 - --------------------------- ----------------------------- Common stock $.01 par value 9,428,393 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements The accompanying financial statements and information are submitted as required by Form 10-Q. The financial information does not include all disclosures that are required by generally accepted accounting principles. In the opinion of management, all adjustments that are necessary to present fairly, the financial position of Fingermatrix, Inc. ("the Company") for the period included, have been made. PART I - FINANCIAL STATEMENTS FINGERMATRIX, INC. (A Development Stage Company) BALANCE SHEETS ASSETS ------
June 30, September 30, ---------- ------------- 1997 1996 ---------- ------------- Current assets: Cash and cash equivalents $105,059 $404,986 Inventories 147,458 78,870 Prepaid expenses and other current assets 36,327 156,842 -------- -------- Total current assets 288,844 640,698 -------- -------- Property and equipment, net of accumulated depreciation of $80,086; $64,600 at September 30, 1996 132,536 174,308 -------- -------- Patents, net of accumulated amortization of $118,836; $108,180 at September 30, 1996 122,697 133,353 Deferred charges 16,841 - Deposits 12,805 13,605 -------- -------- 152,343 146,958 -------- -------- Total assets $573,723 $961,964 ======== ========
See notes to financial statements. 1 PART I - FINANCIAL STATEMENTS FINGERMATRIX, INC. (A Development Stage Company) BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------
June 30, September 30, ----------- ------------- 1997 1996 ----------- ------------- Liabilities: Accounts payable - trade $ 134,483 $ 1,291 Accrued expenses 65,057 126,459 Shareholder loan payable 100,000 -- Current portion of long-term debt 117,000 504,839 ----------- ----------- Total current liabilities 416,540 632,589 ----------- ----------- Shareholders' equity: Common stock - $.01 par value: 20,000,000 shares authorized; 9,428,393 and 8,206,150 shares issued and outstanding 94,285 82,062 Additional paid in capital 61,990,844 60,452,875 Deficit accumulated during the development stage (61,927,946) (60,205,562) ----------- ----------- Stockholders' equity 157,183 329,375 ----------- ----------- Total liabilities and stockholders' equity $ 573,723 $ 961,964 =========== ===========
See notes to financial statements. 2 PART I - FINANCIAL STATEMENTS FINGERMATRIX, INC. CONDENSED STATEMENTS OF OPERATIONS
Three months ended Nine months ended June 30, June 30, --------------------------------- ------------------------------- 1997 1996 1997 1996 --------- --------- ---------- ---------- Revenues: Net sales $ 8,845 $ - $ 12,320 $ - Interest income 940 8,282 4,140 20,333 --------- --------- ---------- ---------- 9,785 8,282 16,460 20,333 --------- --------- ---------- ---------- Expenses: Operating costs 282,357 329,894 833,078 795,923 General and administrative 302,103 287,958 893,253 840,562 Interest 3,247 8,896 12,513 53,141 --------- --------- ---------- ---------- 587,707 626,748 1,738,844 1,689,626 --------- --------- ---------- ---------- Net loss $(577,922) $ (618,466) $(1,722,384) $(1,669,293) ========= ========== =========== =========== Net loss per common share $ (.06) $ (.09) $ (.19) $ (.30) ========= ========== =========== ============ Weighted average number of shares outstanding 9,295,903 6,701,770 8,957,574 5,607,922 ========= ========== =========== ===========
See notes to financial statements. 3 PART I - FINANCIAL STATEMENTS FINGERMATRIX, INC. (A Development Stage Company) CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED JUNE 30, 1997
Common Stock Additional Development ---------------------------- Paid-In Stage Share Amount Capital Deficit Total --------- -------- ----------- ------------ ----------- Balance, September 30, 1996 8,206,150 $ 82,062 $60,452,875 $(60,205,562) $ 329,375 Warrants exercised 175,486 1,755 347,716 - 349,471 Shares issued pursuant to private placement 500,000 5,000 495,000 - 500,000 Shares issued pursuant to Regulation S offering 361,275 3,613 465,587 - 469,200 Shares issued pursuant to Regulation D offering 185,482 1,855 229,666 - 231,521 Net loss for the nine months ended June 30, 1997 - - - (1,722,384) (1,722,384) --------- -------- ----------- ------------ ----------- Balance, June 30, 1997 9,428,393 $ 94,285 $61,990,844 $(61,927,946) $ 157,183 ========= ======== =========== ============ =========
See notes to financial statements. 4 PART I - FINANCIAL STATEMENTS FINGERMATRIX, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996 ---------- ---------- Cash flows from operating activities: Net loss $(1,722,384) $(1,669,293) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 45,266 24,976 Amortization 10,656 9,900 Increase (decrease) in cash flows from changes in operating assets and liabilities: Prepaid expenses 120,515 (15,474) Inventories (68,588) (95,000) Deposits 800 - Accounts payable 133,192 44,832 Accrued expenses (149,239) (648,156) Deferred charges (16,841) - Other current assets - (15,275) ---------- ---------- Net cash used in operating activities (1,646,623) (2,363,940) ---------- ---------- Cash flows from investing activities: Acquisition of property and equipment (3,496) (163,412) ---------- ---------- Cash flows from financing activities: Proceeds from issuance of common stock 1,318,671 2,724,700 Repayment of notes payable (300,000) (400,000) Proceeds from shareholder loan 100,000 - Proceeds from Regulation D offering 231,521 - Payment of current portion of long-term debt - (263,878) --------- ---------- Net cash provided by financing activities 1,350,192 2,060,822 --------- --------- Net decrease in cash (299,927) (466,530) Cash, beginning of period 404,986 1,099,402 --------- ---------- Cash, end of period $ 105,059 $ 632,872 ========= ==========
See notes to financial statements. 5 PART I - FINANCIAL STATEMENTS FINGERMATRIX, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996 (Continued)
1997 1996 ---------- ---------- Supplemental disclosures: Increase in stockholders' equity: Issuance of stock in lieu of bonuses $ - $ 302,625 Conversion of note payable - 250,000 --------- --------- $ - $ 552,625 ========= =========
See notes to financial statements. 6 FINGERMATRIX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED JUNE 30, 1997 1. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in conformity with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and the applicable rules of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending September 30, 1997. For further information, refer to the financial statements and footnotes for the years ended September 30, 1996, 1995, and 1994. BUSINESS OPERATIONS The Company has been in the development stage and, accordingly, has directed its efforts and resources to product and prototype development and production planning of its electronic fingerprint identification systems. The Company operated as a debtor in possession pursuant to Chapter 11 of the Federal Bankruptcy Code until September, 1994, at which date a Trustee was appointed. On March 31, 1995, a Plan of Reorganization was confirmed and, accordingly, the Company exited from protection of the Bankruptcy Court and the Company's Management was transferred to a Board of Directors. 2. STOCK WARRANTS In addition to the common shares issued pursuant to the terms of the reorganization plan, the Company issued three classes of common stock warrants, Series A, B and C. The number of warrants issued for the preceding nine months is detailed in the chart below. 7 FINGERMATRIX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED JUNE 30, 1997 2. STOCK WARRANTS (continued) Summary of warrants exercised and outstanding:
Number of Number of Warrants Warrants Outstanding Outstanding Total at at Exercise Potential September 30, Warrants June 30, Price Conversion Class 1996 Exercised 1997 Per Share Amounts ----- ------------- --------- ------------ --------- ---------- B Warrants 1,245,681 175,486 - - - C Warrants 100,000 - 100,000 $ .01 $ 1,000 Special A Warrants 285,000 - 285,000 $1.00 $285,000 Special B Warrants 205,000 - 205,000 $2.00 $410,000
Class B warrants entitle the holder thereof to purchase for $2.00 one share of common stock in exchange for one warrant. These warrants expired January 15, 1997. Class C and additional Warrants entitle the holder thereof to purchase for $.01 one share of common stock in exchange for one warrant. Special Class A warrants entitle the holder thereof to purchase for $1.00 one share of common stock in exchange for one warrant. These warrants will expire July, 2000. Special Class B warrants entitle the holder thereof to purchase for $2.00 one share of common stock in exchange for one warrant. These warrants will expire July, 2001. Between October 1, 1996 and June 30, 1997, 175,486 warrants were exercised generating $349,471 and resulting in the issuance of 175,486 common shares. Class A Warrants expired January 15, 1996. 8 FINGERMATRIX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED JUNE 30, 1997 3. STOCK OPTIONS In addition to the warrants, there are 2 stock option plans. Details are listed below: A) 296,500 shares are reserved for the issuance upon the exercise of options granted under the Company's Employee Incentive Stock Option Plan with varying exercise prices from $1.75 to $2.375 expiring July 21, 2005. B) 300,000 shares reserved for the issuance upon the exercise of options granted under the Company's Directors' Stock Option Plan at an exercise price of $2.375 expiring July 21, 2005. 4. FINANCING TRANSACTIONS During the quarter ended June 30, 1997 the Company completed a Regulation D offering that raised a net of $231,521, through the sale of 185,482 common shares. Additionally, a 10% subordinated convertible note in the amount of $100,000 was executed by the Company with a stockholder. Said note is due in full on May 31, 1998, with interest compounded quarterly. The holder of the note has the right to convert the principal, or any portion thereof, into common shares of the Company at any time on or before May 31, 1998 at the rate of $.70 per share, for a total of 147,875.14 shares. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the condensed Financial Statements of the Company and notes thereto annexed hereto. LIQUIDITY AND CAPITAL RESOURCES Although the Company has started to receive small but firm orders for its products, and has indications that it will be receiving significant orders within the next several months, the Company, after twenty years of operation and a bankruptcy reorganization, is still a development stage company and it still has not yet achieved a sufficient volume of sales to cover the large expenditures required for product development, production engineering, tooling, equipment, and promotion and sale of its products. As a consequence, the Company has continuously operated at a loss from its inception to the present. It has been and is currently dependent on the sale of its securities to fund its operations. As of date hereof, the Company has nearly exhausted its working capital, and, as indicated below, if additional capital is not raised by the end of August, 1997, the Company may not be able to continue its day-to-day operations. The following capital investments and loans aggregating $1,690,971, less $40,800 in commissions, and less $300,000 in repayment of bankruptcy mandated loan obligations, were made to the Company during the nine months ended June 30, 1997 which has enabled the Company to sustain itself: 1. In the nine months ended June 30, 1997, an aggregate of $175,486 shares of the Company's common stock were issued pursuant to the exercise of like number of warrants having exercise prices of $2.00 per share for an aggregate price to the Company of $349,471. 2. In the months of October, 1996 and through December, 1996, pursuant to a subscription agreement made in August, 1995, the Company sold 500,000 shares of its common stock under Regulation S at a price of $1.00 per share for an aggregate price of $500,000. 3. In the months of January and February, 1997, the Company sold a total of 361,255 shares of its common stock under Regulation S for an aggregate gross price of $510,000; of the total of 361,255 shares of common stock, 313,720 shares were sold at a price of $1.434 per share, and the balance of 47,555 shares were sold at a price of $1.2617 per share; a commission of 8%, amounting to $40,800 was paid by the Company on these sales. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (continued) 4. In June, 1997, the Company sold 185,482 shares in an offering to "accredited investors" pursuant to Regulation D at varying prices which averaged to $1.50 per share with Company receiving $231,500. 5. The Sum of $100,000 was loaned to the Company by one of the Company's largest investors in the last days of May, 1997, and is evidenced by a convertible subordinated note bearing interest at 10% per annum dated June 1, 1997 and payable May 31, 1998; at the option of the holder of the June 1, 1997 and payable May 31, 1998; at the option of the holder of the note, each $.70 of principal owed on the note is convertible into one share of the Company's common stock. In July, 1997, the same lender loaned the Company an additional $100,000 evidenced by a convertible subordinated note dated July 1, 1997 having the same terms as the first note and due June 30, 1998. The Company had as of June 30, 1997 cash in the sum of $105,000 and working capital deficiency of $127,000. The monthly costs of the Company for the nine months ended June 30, 1997 averaged $190,000. Based upon continuation of such monthly operating costs, the Company has sufficient working capital to continue until the end of August, 1997, assuming the Company has no revenues from sales of its products and services and that it does not raise additional capital through the sale of its securities and through loans, it may have to cease operations until it can raise further capital. The monthly operating costs do not take into account the remaining payment which the Company has to make on the bankruptcy obligation. The remaining payment owed on the bankruptcy obligation to SIS is $117,000. The Company has paid on the bankruptcy obligations through June 30, 1997 a total of $2,204,000, all of it financed from funds raised from the equity lenders and the private placement, payment of which is now in default. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS At date hereof (August 15, 1997), the Company has current indebtedness of approximately $160,000, including approximately $13,000 payable to the landlord of the Company's place of business for two months rent, who is threatening eviction. In order to finance funding for operations of the Company as well as to pay for the bankruptcy obligations, the Company has had to seek and shall seek such funding through sales of its securities in private placements exempt from registration under the Securities Act. No assurance or representation is made by the Company it will be able to secure such funding. RESULTS OF OPERATIONS During the nine months ended June 30, 1997 and 1996, the Company had revenues from sales of $12,000 and $ -0-, respectively. During the same period, operating costs increased $40,000 or 5%, as compared to the corresponding prior year period. This is primarily attributable to an increase in consulting expenses. The main components of operating expenses are payroll and related employment costs, outside consulting development costs, and research and development costs. Said costs aggregated $811,000 for the 1997 period, as compared with $760,000 for 1996. General and administrative expenses increased $55,000 for the nine months ended June 30, 1997, as compared to an increase of $20,000 in 1996. The 1997 period included higher professional and accounting fees, higher payroll and related taxes, higher depreciation expense resulting from the acquisition of fixed assets needed for anticipated sales, and higher telephone and traveling expenses incurred in the solicitation of business. The other components of general and administrative expenses remained relatively constant, as compared with the prior year. Interest expense decreased from $8,900 in 1996 to $3,200, or 60%, in 1997. This is the result of the debt repayments made during the year as a result of the bankruptcy plan. 12 SIGNATURES Pursuant to the requirements 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. FINGERMATRIX, INC. (Registrant) Dated August 15, 1996 By -------------------------------- Thomas T. Harding, President 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K (a) No exhibits. (b) Form 8K, February 7, 1997, reporting sale of 313,720 shares of common stock under Regulation S exemption aggregating in gross $450,000. Form 8K, February 28, 1997 reporting sale of 47,555 shares of common stock under Regulation S exemption aggregating in gross $60,000. Said form 8K's are incorporated here in reference. SIGNATURES Pursuant to the requirements 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. FINGERMATRIX, INC. (Registrant) Dated August 15, 1997 By -------------------------------- Thomas T. Harding, President 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS 9-MOS JUN-30-1997 JUN-30-1996 JUN-30-1997 JUN-30-1996 105,059 404,986 0 0 0 0 0 0 147,458 78,870 288,844 640,698 212,622 238,908 80,086 64,600 573,723 961,964 416,540 632,589 0 0 0 0 0 0 94,285 82,062 62,898 247,313 573,723 961,964 12,320 0 16,460 20,333 0 0 0 0 1,726,331 1,636,485 0 0 12,513 53,141 (1,722,384) (1,669,293) 0 0 (1,722,384) (1,669,293) 0 0 0 0 0 0 (1,722,384) (1,669,293) (.19) (.30) 0 0
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