-----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, JFks9rM7oAMZ2/ya/WsVVaExGc9udgBdCoOCMKmjAvZuKtwxklF/MPeQXapuJCnE sGSGN+8FKcrAM9IV5zqS9A== 0000897101-97-000756.txt : 19970714 0000897101-97-000756.hdr.sgml : 19970714 ACCESSION NUMBER: 0000897101-97-000756 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970711 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL BIOMETRICS INC CENTRAL INDEX KEY: 0000868373 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 411545069 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-18856 FILM NUMBER: 97639699 BUSINESS ADDRESS: STREET 1: 5600 ROWLAND RD CITY: MINNETONKA STATE: MN ZIP: 55343 BUSINESS PHONE: 6129320888 MAIL ADDRESS: STREET 2: 5600 ROWLAND RD CITY: MINNETONKA STATE: MN ZIP: 55343 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to _________________________ Commission File Number: 0-18856 DIGITAL BIOMETRICS, INC. (Exact name of registrant as specified in its charter) Delaware 41-1545069 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5600 Rowland Road, Minnetonka, Minnesota 55343 (Address of principal executive offices) (Zip Code) (612) 932-0888 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed 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 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 filing requirements for the past 90 days. [x] Yes [ ] No Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value April 30, 1997 - 12,324,038 shares (Class) (Outstanding) DIGITAL BIOMETRICS, INC. THREE MONTHS ENDED MARCH 31, 1997 INDEX PART I - FINANCIAL INFORMATION: PAGE ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) BALANCE SHEETS 3 STATEMENTS OF OPERATIONS 4 STATEMENTS OF CASH FLOWS 5 NOTES TO FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND 16 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART II - OTHER INFORMATION: ITEM 1. LEGAL PROCEEDINGS 25 ITEM 2. CHANGES IN SECURITIES 25 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 26 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 26 ITEM 6. (a) EXHIBITS 27 (b) REPORTS ON FORM 8-K 27 SIGNATURES 28 EXHIBIT 11 STATEMENT RE: COMPUTATION OF LOSS PER SHARE 29 EXHIBIT 27 FINANCIAL DATA SCHEDULE 30 EXHIBIT 99.1 1990 STOCK OPTION PLAN AS AMENDED 31 TENPRINTER(R) and the Company's mechanical hand logo have been registered as trademarks with the U.S. Patent and Trademark Office. The Company has applied for registration of the SQUID(TM) trademark. In addition, FC-5(TM), FC-6(TM), FC-7(TM), FC-11(TM), FC-21(TM) and FC-22(TM) are trademarks of the Company.
DIGITAL BIOMETRICS, INC. BALANCE SHEETS (UNAUDITED) March 31, September 30, 1997 1996 ------------ ------------ Current assets: Cash and cash equivalents (note 2) $ 394,762 $ 466,990 Accounts receivable, less allowance for doubtful accounts of $557,274 and $692,534, respectively 5,932,065 5,676,849 Inventory (note 4) 3,181,792 3,633,659 Prepaid expenses and other costs 263,521 208,349 ------------ ------------ Total current assets 9,772,140 9,985,847 ------------ ------------ Property and equipment 2,450,633 2,471,754 Less accumulated depreciation and amortization (1,206,033) (1,089,026) ------------ ------------ 1,244,600 1,382,728 ------------ ------------ Marketable securities (notes 2 and 3) 4,937,479 5,690,371 Patents, trademarks, copyrights and licenses, net of accumulated amortization of $222,077 and $192,899, respectively 113,867 123,017 Deferred issuance costs on convertible debentures, net of accumulated amortization of $195,197 and $172,476, respectively (note 7) 13,433 127,408 ------------ ------------ $ 16,081,519 $ 17,309,371 ============ ============ Current liabilities: Accounts payable $ 782,615 $ 1,103,174 Line of credit advances (note 5) 2,432,598 1,255,000 Deferred revenue 947,232 649,178 Accrued expenses (note 6) 884,205 1,471,908 ------------ ------------ Total current liabilities 5,046,650 4,479,260 Convertible debentures (note 7) 343,555 2,374,739 ------------ ------------ Total liabilities 5,390,205 6,853,999 ------------ ------------ Stockholders' equity (note 8): Common stock, $.01 par value. Authorized, 20,000,000 shares; issued and outstanding 12,060,122 and 10,777,288 shares, respectively 120,601 107,773 Additional paid-in capital 42,011,547 39,743,380 Unrealized losses on marketable securities (notes 2 and 3) (108,787) (134,753) Deferred compensation (100,500) (96,000) Notes receivable from sale of common stock (117,623) (117,623) Accumulated deficit (31,113,924) (29,047,405) ------------ ------------ Total stockholders' equity 10,691,314 10,455,372 Commitments and contingencies (notes 8, 9 and 10) ------------ ------------ $ 16,081,519 $ 17,309,371 ============ ============ See accompanying notes to financial statements.
DIGITAL BIOMETRICS, INC. STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended March 31, March 31, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Sales: Identification systems $ 3,356,443 $ 884,834 $ 4,972,757 $ 3,053,705 Maintenance and other services 392,071 374,117 791,230 724,340 ------------ ------------ ------------ ------------ Total sales 3,748,514 1,258,951 5,763,987 3,778,045 ------------ ------------ ------------ ------------ Cost of sales: Identification systems 2,486,646 600,008 3,335,343 1,650,862 Maintenance and other services 434,936 423,636 991,880 784,960 ------------ ------------ ------------ ------------ Total cost of sales 2,921,582 1,023,644 4,327,223 2,435,822 ------------ ------------ ------------ ------------ Gross margin 826,932 235,307 1,436,764 1,342,223 ------------ ------------ ------------ ------------ Selling, general and administrative expenses: Sales and marketing 706,459 491,469 1,232,428 1,121,146 Engineering and development 584,108 1,185,123 1,272,337 2,124,998 Depreciation and amortization 81,604 154,583 164,028 293,242 General and administrative 398,974 492,843 785,132 975,626 ------------ ------------ ------------ ------------ Total expenses 1,771,145 2,324,018 3,453,925 4,515,012 ------------ ------------ ------------ ------------ Loss from operations (944,213) (2,088,711) (2,017,161) (3,172,789) Interest income 82,320 168,730 169,254 371,130 Interest expense (note 11) (104,579) (244,230) (211,195) (2,475,888) Loss on disposal of fixed assets (7,417) -- (7,417) -- ------------ ------------ ------------ ------------ Net loss $ (973,889) $ (2,164,211) $ (2,066,519) $ (5,277,547) ============ ============ ============ ============ Loss per common share $ (0.08) $ (0.26) $ (0.18) $ (0.65) ============ ============ ============ ============ Weighted average common shares outstanding 11,571,802 8,435,781 11,213,297 8,162,324 ============ ============ ============ ============ See accompanying notes to financial statements.
DIGITAL BIOMETRICS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended March 31, ------------------------------ 1997 1996 ------------ ------------ Cash flows from operating activities: Net loss $ (2,066,519) $ (5,277,547) Adjustments to reconcile net loss to net cash used in operating activities: Provision for doubtful accounts receivable 5,000 37,420 Deferred compensation amortization 13,500 96,342 Depreciation and amortization 302,021 467,039 Loss on disposal of fixed assets 7,417 7,773 Interest expense amortization for the intrinsic value of the beneficial conversion feature of convertible debentures -- 1,923,529 Interest expense on debentures converted into common stock 212,701 152,139 Changes in operating assets and liabilities: Accounts receivable (260,215) (699,869) Inventories 451,867 (1,107,273) Prepaid expenses (55,172) (58,666) Accounts payable (320,559) 516,586 Deferred revenue 298,054 231,541 Accrued expenses (470,981) 29,927 ------------ ------------ Net cash used in operating activities (1,882,886) (3,681,059) ------------ ------------ Cash flows from investing activities: Purchase of property and equipment (99,804) (722,829) Proceeds from marketable securities 752,892 -- Patents, trademarks, copyrights and licenses (20,028) (22,695) ------------ ------------ Net cash provided by (used in) investing activities 633,060 (745,524) ------------ ------------ Cash flows from financing activities: Exercise of warrants -- 315,000 Issuance of convertible debentures -- 10,109,750 Net line of credit advances (repayments) 1,177,598 (1,450,000) ------------ ------------ Net cash provided by financing activities 1,177,598 8,974,750 ------------ ------------ Increase (decrease) in cash and cash equivalents (72,228) 4,548,167 Cash and cash equivalents at beginning of period 466,990 367,866 ------------ ------------ Cash and cash equivalents at end of period $ 394,762 $ 4,916,033 ============ ============ See accompanying notes to financial statements.
DIGITAL BIOMETRICS, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) (1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Digital Biometrics, Inc., (the Company) was incorporated in Minnesota in May, 1985 and reincorporated in Delaware in December, 1986. The Company is a developer, manufacturer and marketer of identification products based on electro-optical imaging technologies. The Company's principal product, the TENPRINTER(R) system is a computer-based, inkless "live-scan" fingerprint system that electronically reads a fingerprint and creates a digital image, which can then either be printed on an attached printer or transmitted electronically to a central printing or storage site. The TENPRINTER system is designed for use by, and is being actively marketed to, law enforcement agencies and other organizations requiring a high resolution fingerprint image for identification cards or similar applications. The Company's performance in any one quarter is not necessarily indicative of sales trends or future performance. The nature of the law enforcement market and the government procurement process are expected to continue to produce an irregular and unpredictable revenue cycle for the Company. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the 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. For further information, refer to financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 1996. The presentation of fiscal year 1996 operating results includes reclassifications between "identification systems" cost of sales and "maintenance and other services" cost of sales to reflect comparability to fiscal year 1997 classification. (2) ACCOUNTING POLICIES SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK The Company extends credit to state and local governments in connection with sales of products to law enforcement agencies. Approximately 86% of customer accounts receivable at March 31, 1997 were from government agencies. At March 31, 1997, approximate 28% of customer accounts receivable was from a single governmental customer. For the three-month period ended March 31, 1997, sales to three customers accounted for 47%, 22% and 11% of sales. Sales to two customers during the three-month period ended March 31, 1996 accounted for 21% and 10% of period sales. For the six-month period ended March 31, 1997, sales to two customers accounted for 30% and 20% of sales. Sales to two customers during the six-month period ended March 31, 1996. accounted for 33% and 10% of period sales. Export sales for the three-month period ended March 31, 1997 were 11% of period sales as compared to 18% for the same period in 1996. Export sales for the six-month period ended March 31, 1997 were 7% of period sales as compared to 32% for the same period in 1996. MARKETABLE SECURITIES Marketable securities consist primarily of collateralized mortgage backed securities (see note 3). The Company has adopted Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115). Under SFAS 115, the Company classifies its marketable debt securities as available for sale and records these securities at fair market value. Net realized and unrealized gains and losses are determined on the specific identification cost basis. WARRANTY COSTS Estimated product warranty costs are accrued at date of shipment. Accrued warranty costs at March 31, 1997 were $120,000 compared with $129,000 at September 30, 1996. REVENUE AND REVENUE RECOGNITION Revenues from product sales are generally recognized on the date of shipment. The Company's standard terms of sale are payment due net in thirty days, f.o.b. Digital Biometrics, Inc. Terms of sale and shipment for certain procurements by municipal or other government agencies may, however, be subject to negotiation. In cases where the Company is required to purchase a performance bond or to deposit collateral in accordance with the terms of a contract, the Company's policy is to defer revenues under such contracts until the amount shipped exceeds the amount of the performance collateral or until the security is released by the bonding company. Maintenance revenues are recognized over the life of the contract on a straight-line basis. For contracts where a performance bond, collateral or customer acceptance is required, revenue is not recognized until collateral requirements have been satisfied and customer acceptance has occurred. The Company's performance for any period is not necessarily indicative of sales trends or future performance. The nature of the law enforcement market and the government procurement process are expected to result in an irregular and unpredictable revenue cycle for the Company. ENGINEERING AND DEVELOPMENT ARRANGEMENTS Engineering and development costs are expensed as incurred. Engineering and development expenses for the six-month period ended March 31, 1996 are net of reimbursements of $462,000 from a company with which there was a teaming agreement on an international development project. STATEMENT OF CASH FLOWS For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments and certificates of deposit purchased with an original maturity date of three months or less to be cash equivalents. Cash equivalents include primarily U.S. Government money market funds and A-1, P-1 rated commercial paper. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Six Months Ended March 31, 1997 1996 ------------ ---------- Cash paid during the period for interest $104,937 $9,866 ============ ========== For supplemental disclosure of non-cash investing and financing activities see notes 7 and 8. NET LOSS PER COMMON SHARE Net loss per common share is determined by dividing the net loss by the weighted average number of shares of common stock and dilutive common share equivalents outstanding. Common share equivalents have been excluded from the computation of net loss per share as their effect is anti-dilutive. INCOME TAXES The Company has adopted the asset and liability method of accounting for income taxes of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). Under the asset and liability method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amount and tax basis of assets and liabilities. The Company provides for deferred taxes at the enacted tax rate that is expected to apply when the temporary differences reverse. ACCOUNTING 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. (3) MARKETABLE SECURITIES Investments in marketable securities have maturities ranging from 2005 to 2016. The unrealized loss for available-for-sale marketable securities is as follows. March 31, September 30, 1997 1996 -------------- -------------- Fair market value $4,937,479 $5,690,371 Amortized cost 5,046,266 5,825,124 -------------- -------------- Unrealized loss $ (108,787) $ (134,753) ============== ============== Unrealized gains and losses are reflected as a separate component of stockholders' equity. A decline in the market value of any available-for-sale or held-to-maturity security below cost that is deemed other than temporary results in a charge to operations resulting in the establishment of a new cost basis for the security. Realized losses on sales of marketable securities are reported as a reduction in interest income. There were no realized losses on sales of marketable securities for the three and six-month periods ended March 31, 1997 or 1996. (4) INVENTORY Inventory is valued at standard which approximates the lower of first-in, first-out (FIFO) cost or market. Inventory consists of the following: March 31, September 30, 1997 1996 -------------- -------------- Raw materials $1,922,452 $1,934,371 Work in process 852,592 717,696 Finished goods 406,748 981,592 -------------- -------------- $3,181,792 $3,633,659 ============== ============== (5) LINES OF CREDIT The Company has a $4,000,000 line of credit with Norwest Bank Minnesota N.A. Borrowings under this line of credit are secured by marketable securities and are limited to 80% of the market value of the marketable securities held as collateral by the bank. Borrowings under the line were $2,125,000 on March 31, 1997 and bear interest at rates from 7.67% to 8.5%. Depending on the timing of accounts receivable collection, the line may reach the maximum borrowings allowed during fiscal 1997. The line is payable upon demand and expires in May 1997. The Company anticipates the line will be renewed upon expiration. The Company entered into a receivables financing line of credit effective October 1, 1996 for the lesser of eligible receivables or $3,500,000 with Norwest Business Credit. Borrowings under this line of credit are secured by all assets of the Company. Borrowings under the line were $308,000 at March 31, 1997 and bear interest at 1.5% above the prime rate (8.5% at March 31, 1997), are payable upon demand and expires in September 1997. The Company has a $200,000 line of credit with First Bank Minneapolis, secured by cash deposits. Borrowings under the line bear interest at the prime rate (8.5% on March 31, 1997), are payable upon demand and expires in March 1998. There were no amounts borrowed under the line at March 31, 1997. (6) ACCRUED EXPENSES March 31, September 30, 1997 1996 ------------ -------------- Accrued expenses consist of: Accrued salaries $350,125 $ 442,701 Accrued vacation 97,564 112,665 Accrued interest payable 54,225 205,529 Payroll taxes payable 76,345 55,561 Sales taxes payable 2,128 22,953 Accrued warranty 120,100 128,500 Other accrued expenses 183,718 503,999 ------------ -------------- $884,205 $1,471,908 ============ ============== Accrued salaries at March 31, 1997 and September 30, 1996 include $107,000 and $330,000, respectively, for severance costs related to the retirement of the Company's former president and chief executive officer. (7) CONVERTIBLE DEBENTURES On September 29, 1995, the Company completed a private placement to offshore accredited investors of $10,900,000 of 8% Convertible Debentures due September 29, 1998 (the "Debentures"). Net proceeds to the Company after placement fees but before legal and other expenses were $10,109,750. The Debentures are convertible one third after 45 days, one third after 75 days and one third after 105 days at the option of the Debenture holder. The Company has the right to redeem the debentures prior to conversion. The conversion price is equal to the lesser of $7.00 per common share or 85% of the average trading price for any five consecutive trading days before conversion. This beneficial conversion feature has an intrinsic value of $1,924,000 which has been recorded as a charge to interest expense. The intrinsic value of the beneficial conversion features is to be allocated to additional paid-in capital with the resulting discount on the debt resulting in a non-cash interest expense charge to earnings (loss) over the vesting period of the conversion feature. Interest accrued on the Debentures is payable in common stock at the time of conversion at the conversion price as described above. In addition to the cash placement fee, a warrant to purchase 112,893 shares of the Company's common stock at $8.40 per share was granted to the placement agent for this offering. The warrant was valued at $112,893, which is reflected as a discount on the Debentures and is being amortized as interest expense over the term of the Debentures. Net proceeds to the Company is being used for working capital, product development and other general corporate purposes. As of March 31, 1997, the Company has issued 3,973,832 shares of common stock for the conversion of principal aggregating $10,500,000 of the 8% Convertible Debentures plus $509,000 of accrued interest at an average conversion price of $2.77 per share. For the six-month period ended March 31, 1997, the Company has issued 1,221,964 shares of common stock for the conversion of principal aggregating $2,050,000 of the 8% Convertible Debentures plus $215,000 of accrued interest at an average conversion price of $1.85 per share. In the three-month period ended March 31, 1997, the Company issued 1,124,565 shares of common stock upon the conversion of principal aggregating $1,800,000 of the 8% Convertible Debentures plus $192,000 of accrued interest at an average conversion price of $1.77 per share. The remaining $400,000 of convertible debentures and related accrued interest of $49,000 were converted to 263,916 shares of common stock during April, 1997. (8) STOCKHOLDERS' EQUITY During the three-month period ended December 31, 1996, the Company granted 119,500 discretionary stock option awards to certain of its executive officers and employees. These options are exercisable at prices ranging from $2.56 to $3.125 per share and expire in 2006. Effective December 31, 1996, the Company issued 41,798 shares of common stock to satisfy the Company's discretionary matching to employees electing participation in the Company's 401(k) retirement plan. This issuance increased common stock and additional paid-in capital by $88,821 and reduced accrued compensation by the same amount. Effective January 1, 1997, stock option awards of 250,000 shares exercisable at $2.125 per share were issued pursuant to an offer of employment to the Company's new President and Chief Executive Officer. Effective January 27, 1997, the Company issued two warrants in payment for services rendered in securing employment of certain executive officers of the Company. Each warrant entitles the holder to purchase 10,000 shares of the Company's common stock, exercisable at the price of $2.3125 per share, subject to antidilution provisions of the warrants. Effective March 17, 1997, a stock option award of 75,000 shares exercisable at $2.31 per share was issued to an executive officer pursuant to an offer of employment. Effective with the acceptance of the resignation of a director, 6,341 shares of restricted common stock which were not yet vested were forfeited. Effective with their election at the annual stockholders' meeting held on March 18, 1997, the Company granted 25,413 shares of restricted common stock to certain of its non-employee directors. The grant resulted in $54,000 in additional common stock issued and an equal amount of deferred compensation expense which is being amortized on a straight-line basis over the three-year restricted period. Effective March 18, 1997, the Company authorized a warrant to C. McKenzie Lewis III pursuant to his re-election to the Board of Directors of the Company. This warrant was authorized in lieu of restricted common shares. The warrant entitles Mr. Lewis to purchase 8,000 shares of the Company's common stock, exercisable at the price of $2.125 per share. The warrant vests over a three-year period. (9) LEASE COMMITMENTS The Company leases its primary office and production facility under an operating lease that expires in April, 2001. Annual base rent under the lease agreement is approximately $237,000 and the Company is obligated to pay a pro rata share for property taxes, maintenance and other operating expenses. The Company leases a separate sales and service office in Los Angeles, California under an operating lease that expires in December, 1997 and a sales office in Washington, D.C. on a month-to-month lease arrangement. Rent expense, property taxes, maintenance and other lease operating expenses for the six months ended March 31, 1997 and 1996 was $205,000 and $165,000, respectively. (10) LITIGATION On June 1, 1995, the Company filed a complaint for patent infringement against Identix, Inc., of Sunnyvale, California, in the United States District Court for the Northern District of California. The complaint alleged that Identix has willfully and deliberately infringed a Company patent through the manufacture, use and/or sale of competing products. The complaint sought, among other things, an injunction prohibiting further infringement as well as unspecified monetary damages. Identix responded to the complaint alleging, among other purported defenses, non-infringement and patent invalidity. On August 27, 1996, the judge assigned to the case granted a partial summary judgment in favor of Identix dismissing the Company's claims of patent infringement with respect to Identix's Touchprint 600 product line. A predecessor product, the Touchprint 900, received a similar ruling in favor of Identix on December 20, 1996. During January 1997, the Company filed an appeal of the court's decision of non-infringement. The interpretation of patents will ultimately be decided by the special patent Court of Appeals in Washington D.C. However, a prediction of the final outcome of the appeal is not possible. In the event the Company does not prevail in this litigation, its competitive position could be adversely affected. There are no other material claims pending or, to the Company's knowledge, threatened against the Company. (11) RESTATEMENT On March 28, 1997, the Securities and Exchange Commission (SEC) staff announced its position on the accounting treatment for the issuance of convertible debt securities with beneficial conversion features such as that contained in the Company's convertible debentures issued in September 1995. The SEC staff's announcement requires retroactive determination using the intrinsic-value method of the beneficial conversion feature. The intrinsic value of the beneficial conversion features is to be allocated to additional paid-in capital with the resulting discount on the debt resulting in a non-cash interest expense charge to earnings (loss) over the vesting period of the conversion feature. As a result of this SEC announcement, the Company is restating its fiscal 1996, results to reflect the in-the-money beneficial conversion feature of the convertible debentures which were issued by the Company in September 1995. An additional charge of $1,923,529 has been recorded in fiscal 1996, for the in-the-money beneficial conversion feature which vested the first quarter of fiscal 1996. As a result, interest expense, net loss and net loss per share for the six-month period ended March 31, 1996 were restated from $552,359, $3,354,018 and $0.41 to $2,475,888, $5,277,547 and $0.65, respectively. This restatement had no effect on cash flows or total stockholders' equity. FACTORS THAT MAY AFFECT OPERATING RESULTS The statements contained in this Report on Form 10-Q/A that are not purely historical are forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company's expectations, hopes, intentions or strategies regarding the future. All forward looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward looking statements, It is important to note that the Company's actual results could differ materially from those in such forward looking statements. Some of the factors that could cause actual results to differ materially are set forth below under the caption "Forward Looking Comments and Matters That May Affect Operating Results." DIGITAL BIOMETRICS, INC. THREE MONTHS ENDED MARCH 31, 1997 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company develops, manufactures, assembles and markets identification products based on electro-optical imaging technologies. Most of the Company's sales have been to state and local law enforcement agencies and, to date, have consisted primarily of TENPRINTER systems and related peripheral equipment and software. The nature of the law enforcement market and the government procurement process is subject to budgetary, economic and political considerations which may vary significantly from state to state and among different agencies. These market characteristics, along with the recent and continuing development of the live-scan electronic fingerprint industry, have resulted in and are expected to continue to result in an irregular revenue cycle for the Company and any prediction of future trends is inherently difficult. The Company believes, however, that its principal product line, which is designed to be sold to law enforcement agencies, is a leader in its marketplace. To the extent that funds become available to such customers for procurement purposes, the Company should benefit from the continuing development of this market. The Company generally recognizes product sales on the date of shipment. The Company's standard terms of sale are payment due net in 30 days, f.o.b. the Company. Terms of sale and shipment for certain procurements by municipal or other government agencies may, however, be subject to negotiation. In cases where the Company is required to purchase a performance bond or to deposit collateral in accordance with the terms of a contract, the Company's policy is to defer recognition of revenues from such contracts until the amount shipped exceeds the amount of the performance collateral or until the security is released by the bonding company. Maintenance revenues are recognized over the life of the contract on a straight-line basis. Maintenance costs are expensed as incurred. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 Total sales were $3,749,000 for the three months ended March 31, 1997 compared with $1,259,000 for the same prior-year period. Identification system product sales were $3,356,000 compared with $885,000 in 1996. The increase is due primarily to an increase in the number of TENPRINTER systems sold during the three months ended March 31, 1997, offset by volume discounts offered to two customers. Limited sales of peripheral and networking equipment occurred during the current year three-month period as compared to the prior year period. For the three-month period ended March 31, 1997, sales to three customers accounted for approximately 47%, 22% and 11% of total sales. Sales to two customers during the three months ended March 31, 1996 accounted for approximately 21% and 10% of total sales. Export sales for the three-month period ended March 31, 1997 were 11% of period sales as compared to 18% for the same period in 1996. Product maintenance and service revenues were $392,000 for the three months ended March 31, 1997 compared with $374,000 for the same prior-year period. This increase is due primarily to a larger installed base of TENPRINTER systems. Overall gross margins for the three months ended March 31, 1997 were 22% as compared with 19% of sales for the same prior-year period. Gross margins on identification system sales were 26% for the three months ended March 31, 1997 compared with 32% in 1996. Gross margins on identification system sales were negatively impacted by 18% due to volume discounts during the current-year period, offset in part by a higher volume of sales as compared to the prior year. Product maintenance and service margins for the three months ended March 31, 1997 and 1996 were (11%) and (13%), respectively, of maintenance and support revenues. Sales and marketing expenses for the three-month period ended March 31, 1997 were 19% of total sales compared to 39% for the same three-month prior-year period. This decrease is due primarily to higher volume of sales offset by higher promotional costs during the current-year three-month period. Engineering and development expenses were 16% of total sales for the three-month period ended March 31, 1997 compared to 94% for the same period a year ago. This decrease is due primarily to higher volume of sales, reduced new product development costs and cost containment measures during the current three-month period. General and administrative expenses for the three-month periods ended March 31, 1997 and 1996 were 11% and 39%, respectively, of total sales. This decrease is due primarily to higher volume of sales and reduced legal expenses related to a patent infringement suit during the current three-month period. Depreciation and amortization costs decreased to $82,000 for the three months ended March 31, 1997 from $155,000 for the same prior-year period, primarily due to reduced software amortization costs of information systems products that was written off during the fourth quarter of fiscal year 1996. Interest income decreased to $82,000 for the three months ended March 31, 1997 from $169,000 for the same period in 1996, primarily due to lower balances of cash and marketable securities. Interest expense decreased to $105,000 for the three months ended March 31, 1997 from $244,000 for the same prior-year period, primarily due to the reduced balance of 8% convertible debentures outstanding. The Company incurred a net loss for the three-month period ended March 31, 1997 of $974,000 ($0.08 per share) as compared with $2,164,000 ($0.26 per share) for the same prior-year period. SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO SIX MONTHS ENDED MARCH 31, 1996 Total sales were $5,764,000 for the six months ended March 31, 1997 compared with $3,778,000 for the same prior-year period. Identification system product sales were $4,973,000 compared with $3,054,000 in 1996. The increase is due primarily to an increase in the number of TENPRINTER systems sold during the six months ended March 31, 1997, offset by volume discounts offered to two customers. Limited sales of peripheral and networking equipment occurred during the current-year six-month period as compared to the same prior-year period. For the six-month period ended March 31, 1997, sales to two customers accounted for approximately 30% and 20% of total sales. Sales to two customers during the six months ended March 31, 1996 accounted for approximately 33% and 10% of total sales. Export sales for the six-month period ended March 31, 1997 were 7% of period sales as compared to 32% for the same period in 1996. Product maintenance and service revenues were $791,000 for the six months ended March 31, 1997 compared with $724,000 for the same prior-year period. This increase is due primarily to a larger installed base of TENPRINTER systems. Overall gross margins for the six months ended March 31, 1997 were 25% as compared with 36% of sales for the same prior-year period. Gross margins on identification system sales were 33% for the six months ended March 31, 1997 compared with 46% in 1996. Gross margins on identification system sales were negatively impacted by 11% due to volume discounts during the current-year period. Product maintenance and service margins for the six months ended March 31, 1997 and 1996 were (25%) and (8%), respectively, of maintenance and support revenues. The decrease in product maintenance and service margins during the current-year period is due primarily to an increase in maintenance and service cost compared to the prior year due primarily to a larger installed base. Sales and marketing expenses for the six-month period ended March 31, 1997 were 21% of total sales compared to 30% for the same six-month prior-year period. This decrease is due primarily to higher volume of sales offset by higher promotional costs during the current-year six-month period. Engineering and development expenses were 22% of total sales for the six-month period ended March 31, 1997 compared to 56% for the same period a year ago. This decrease is due primarily to higher volume of sales and reduced new product development costs during the current six-month period. Engineering and development expenses for the six-month period ending March 31, 1996 are net of reimbursements of $462,000 related to an international development project. General and administrative expenses for the six-month periods ended March 31, 1997 and 1996 were 14% and 26%, respectively, of total sales. This decrease is due primarily to higher volume of sales and reduced legal expenses related to a patent infringement suit during the current six-month period. Depreciation and amortization costs decreased to $164,000 for the six months ended March 31, 1997 from $293,000 for the same prior-year period, primarily due to reduced software amortization costs of information systems products that was written off during the fourth quarter of fiscal year 1996. Interest income decreased to $169,000 for the six months ended March 31, 1997 from $371,000 for the same period in 1996, primarily due to lower balances of cash and marketable securities. Interest expense decreased to $211,000 for the six months ended March 31, 1997 from $2,476,000 for the same prior-year period, primarily due to a non-cash charge of $1,924,000 during the six-month period ended March 31, 1996 for the intrinsic value of the beneficial conversion feature of the convertible debentures, and to a lesser extent, the reduced balance of 8% convertible debentures outstanding. The Company incurred a net loss for the six-month period ended March 31, 1997 of $2,067,000 ($0.18 per share) as compared with $5,278,000 ($0.65 per share) for the same prior-year period. The net loss for the six-month period ended March 31, 1996 includes a non-cash interest expense charge of $1,924,000 ($0.24 per share) for the intrinsic value of the beneficial conversion feature of the Company's convertible debentures. INFLATION The Company does not believe inflation has significantly impacted revenues or expenses. NET OPERATING LOSS CARRYFORWARDS At March 31, 1997, the Company had carryforwards of net operating losses of approximately $26,500,000 that may allow the Company to reduce future income taxes that would otherwise be payable. Of this amount approximately $2,200,000 relates to compensation associated with the exercise of non-qualified stock options which, when realized, would result in approximately $880,000 credited to additional paid-in capital. The carryforwards expire annually beginning in 1999. The annual limitation on use of net operating losses is calculated by multiplying the value of the corporation immediately prior to the change in ownership by the long-term federal tax exempt rate. A total of $3,700,000 of the net operating loss carryforwards at March 31, 1997 is subject to an annual net operating loss limitation, estimated at $350,000, resulting from the change in control of the Company which occurred, for income tax purposes, on December 14, 1990, the date of the Company's initial public offering. If the limited carryforward amount for any tax year exceeds the regular taxable income for such year, then the unused portion may generally be carried forward to increase the annual limitation for the following year. Utilization of net operating losses aggregating $22,800,000 which were incurred subsequent to the change of ownership are not limited. However, any future ownership change could create a limitation with respect to these loss carryforwards. LIQUIDITY AND CAPITAL RESOURCES BACKGROUND For the period from the Company's inception in 1985 through March 31, 1997, limited revenues have resulted from product sales and at March 31, 1997, the Company's cumulative deficit was $31,114,000. Losses are expected to continue until the market development and acceptance of the technology incorporated into the Company's products provides product sales sufficient to cover the Company's operating expenses. CURRENT AND FUTURE OPERATIONS The Company's business has included large contract awards from international, state and local law enforcement agencies and it is expected that this trend will continue. Collection of receivables related to billings of these contract amounts is often protracted. As of March 31, 1997, approximately $4,220,000 was due from such customers. The Company's performance in any one reporting period is not necessarily indicative of sales trends or future performance. The nature of the law enforcement market and the government procurement process are expected to continue to result in an irregular and unpredictable revenue cycle for the Company. Net cash used in operating activities was $1,883,000 for the six months ended March 31, 1997 compared with $3,681,000 for the same prior-year period. The decrease in cash used in operating activities was primarily a result of a smaller net loss during the six-month period in 1997 adjusted for changes in operating assets and liabilities. Cash flows from changes in operating assets and liabilities changed from cash used of $1,088,000 during the prior-year six-month period to $357,000 of cash used during the same current-year period. This $731,000 change in cash flow from operating assets and liabilities resulted primarily from lower inventory and accounts payable balances on March 31, 1997. Net cash provided by investing activities was $633,000 for the six months ended March 31, 1997 as compared with $746,000 net cash used in investing activities for the same prior-year period. Net cash provided by investing activities during the current six-month period includes $753,000 from the proceeds from marketable securities. Capital expenditures for the six-months ended March 31, 1996 were primarily for engineering and manufacturing test fixtures. The Company's business does not require significant amounts of cash for capital expenditures because substantial amounts of the manufacturing and assembly processes utilized in the production of current products are performed by outside vendors, as directed by the Company. Specifically, the Company purchases electronics modules and standard mechanical assemblies from manufacturers of such goods. In addition, sheet metal components, optical components and specialized electronics modules are designed by the Company and manufactured to the Company's specifications by outside sources. Net cash provided by financing activities was $1,178,000 for the six months ended March 31, 1997 due to borrowings on lines of credit. Net cash provided by financing activities was $8,975,000 for the six months ended March 31, 1996, due to cash received from the issuance of 8% convertible debentures and repayments of outstanding borrowings on lines of credit. Borrowings under lines of credit were $2,433,000 at March 31, 1997. There were no borrowings under lines of credit on March 31, 1996. On September 29, 1995, the Company completed a private placement to offshore accredited investors of $10,900,000 of 8% Convertible Debentures due September 29, 1998 (the "Debentures"), of which $10,500,000 were converted to 3,973,832 shares of common stock as of March 31, 1997. The average conversion price was $2.77 per share. Net proceeds to the Company during fiscal 1996 after placement fees but before legal and other expenses were $10,109,750. Interest accrued on the Debentures is also payable in common stock at the time of conversion at the conversion price as described above. In addition to the cash placement fee, a warrant to purchase 112,893 shares of the Company's common stock at $8.40 per share was granted to the placement agent for this offering. The warrant was valued at $112,893, which is reflected as a discount on the Debentures and is being amortized as interest expense over the term of the Debentures. The Debentures include a beneficial conversion feature with an intrinsic value of $1,924,000 which has been recorded as a charge to interest expense during the three-month period ended December 31, 1995. The intrinsic value of the beneficial conversion features is to be allocated to additional paid-in capital with the resulting discount on the debt resulting in a non-cash interest expense charge to earnings (loss) over the vesting period of the conversion feature. Net proceeds to the Company were used for working capital, product development and other corporate purposes. The remaining $400,000 of convertible debentures and related accrued interest of $49,000 were converted to 263,916 shares of common stock during April, 1997. At March 31, 1997, the Company had $395,000 in cash and cash equivalents and $4,937,000 in marketable securities, which are classified as available for sale. The unrealized loss on marketable securities at March 31, 1997 was $109,000. These marketable securities are collateral for borrowings under a line of credit. The Company has a $4,000,000 line of credit with Norwest Bank Minnesota N.A. Borrowings under this line of credit are secured by marketable securities and are limited to 80% of the market value of marketable securities held as collateral by the bank. Borrowings under the line were $2,125,000 on March 31, 1997 and bear interest at rates from 7.67% to 8.5%. Depending on the timing of accounts receivable collection, the line may reach the maximum borrowings allowed during fiscal 1997. The line is payable upon demand and expires in May 1997. The Company anticipates the line will be renewed upon expiration. The Company entered into a receivables financing line of credit effective October 1, 1996 for the lesser of eligible receivables or $3,500,000 with Norwest Business Credit. Borrowings under this line of credit are secured by all assets of the Company. Borrowings under the line were $308,000 at March 31, 1997 and bear interest at 1.5% above the prime rate (8.5% at March 31, 1997), is payable upon demand and expires in September 1997. The Company has a $200,000 line of credit with First Bank Minneapolis, secured by cash deposits. Borrowings under the line bear interest at the prime rate (8.5% on March 31, 1997), are payable upon demand and expires in March 1998. There were no amounts borrowed under the line at March 31, 1997. FORWARD LOOKING COMMENTS AND MATTERS THAT MAY AFFECT OPERATING RESULTS Except for the historical information contained in this Form 10-Q/A, the matters discussed herein are forward looking statements made within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and involve risks and uncertainties, including development and market acceptance of the Company's products and the availability of new employees experienced in the present and contemplated markets. Other factors that may affect future performance of the Company include successful expansion of distribution channels for products through OEM's and others; changes in general economic conditions; availability of funding where customer procurements are dependent on state or federal government grants and general tax funding; concentrations of accounts receivable and other credit risk in single large customers; or cost and availability of components. In addition, markets for the Company's products are characterized by significant and increasing competition, and the Company's financial results may be adversely affected by the actions of existing and future competitors, including the development of new technologies, the introduction of new products, and price reductions by such competitors to gain or retain market share. It is important to note that the Company's actual results could differ materially from those in such forward looking statements and the Company assumes no obligation to update such forward looking statements. Due primarily to continuing operating losses, the Company has not yet achieved positive cash flow. Management believes that cash and cash equivalents, investments, accounts receivable and working capital provided from operations, together with available financing sources, are sufficient to meet current and foreseeable operating requirements, however additional financing may be required. There can be no assurance that additional financing, should it be required, will be available at terms acceptable to the Company. LAW ENFORCEMENT AND REGULATORY AGENCY MARKET The Company's performance in any one reporting period is not necessarily indicative of sales trends or future performance. Law enforcement agencies are subject to political and budgetary constraints and the nature of the law enforcement market and the government procurement process are expected to continue to result in an irregular and unpredictable revenue cycle for the Company. The Company extends credit to state and local governments in connection with sales of products to law enforcement agencies. Approximately 86% of customer accounts receivable at March 31, 1997 were from government agencies. At March 31, 1997, approximate 28% of customer accounts receivable was from a single governmental customer. Sales to this and other customers requiring large and sophisticated networks of TENPRINTER systems and peripheral equipment often include technical requirements which are not fully known at the time requirements are specified by the customer. In addition, contracts may specify performance criteria which is required to be satisfied before the customer accepts the products and services. The Company does not record revenue for these products and services until acceptance criteria have been satisfied. It is often not known until installation is in process if older and often obsolete communication lines and local area networks will accommodate the large amount of computer data transmitted by the TENPRINTER systems and related peripherals. Generally, it is only upon completion of customer requirements, which time periods are unpredictable and which may involve investment of additional Company resources, that accounts receivable are collected. These investments of additional resources are accrued when amounts can be estimated but however, may be uncompensated and, other than increased customer loyalty, negatively impact profit margins and the Company's liquidity. GAMING AND OTHER COMMERCIAL MARKETS The Company has only recently began marketing products to the gaming industry and has not yet completed production level systems of TRAK-21. Although prototype models of TRAK-21 have been successfully demonstrated in laboratory conditions, there can be no assurance that scheduled beta tests in live casino environments will be successful. In addition, it has not been determined whether or not the TRAK-21 system will be able to compete, on the basis of price and performance, with player tracking systems of competitors whose systems have been marketed for longer periods of time and whose financial and other resources are far greater than that of the Company. DIGITAL BIOMETRICS, INC. THREE MONTHS ENDED MARCH 31, 1997 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 1, 1995, the Company filed a complaint for patent infringement against Identix, Inc., of Sunnyvale, California, in the United States District Court for the Northern District of California. The complaint alleged that Identix has willfully and deliberately infringed a Company patent through the manufacture, use and/or sale of competing products. The complaint sought, among other things, an injunction prohibiting further infringement as well as unspecified monetary damages. Identix responded to the complaint alleging, among other purported defenses, non-infringement and patent invalidity. On August 27, 1996, the judge assigned to the case granted a partial summary judgment in favor of Identix dismissing the Company's claims of patent infringement with respect to Identix's Touchprint 600 product line. A predecessor product, the Touchprint 900, received a similar ruling in favor of Identix on December 20, 1996. During January 1997, the Company filed an appeal of the court's decision of non-infringement. The interpretation of patents will ultimately be decided by the special patent Court of Appeals in Washington D.C. However, a prediction of the final outcome of the appeal is not possible. In the event the Company does not prevail in this litigation, its competitive position could be adversely affected. There are no other material claims pending or, to the Company's knowledge, threatened against the Company. ITEM 2 CHANGES IN SECURITIES (a) Not applicable. (b) Not applicable. (c) Effective January 27, 1997, the Company issued two warrants in payment for services rendered in securing employment of certain executive officers of the Company. No underwriter or broker-dealer was involved in connection with such issuance, nor was any commission or discount paid or allowed in connection therewith. The registrant claims that the issuance of the warrant was exempt from registration under Securities Act of 1933, as amended pursuant to Section 4(2) thereof as a transaction not involving a public offering. Each warrant entitles the holder to purchase 10,000 shares of the Company's common stock, exercisable at the price of $2.3125 per share, subject to customary antidilution provisions of the warrants. Effective March 18, 1997, the Company authorized a warrant to C. McKenzie Lewis III pursuant to re-election to the Board of Directors for the Company. No underwriter or broker-dealer was involved in connection with such issuance, nor was any commission or discount paid or allowed in connection therewith. The registrant claims that the issuance of the warrant was exempt from registration under Securities Act of 1933, as amended pursuant to Section 4(2) thereof as a transaction not involving a public offering. The warrant entitles Mr. Lewis to purchase 8,000 shares of the Company's common stock, exercisable at the price of $2.125 per share, subject to customary antidilution provisions of the warrant. The warrant vests over a three-year period. ITEM 3 DEFAULTS UPON SENIOR SECURITIES (a) Not applicable. (b) Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Stockholders on March 18, 1997. Proxies for such meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934 as amended. At the meeting, sufficient favorable votes were cast to approve each of the following of management's proposals: * Adopt an amendment to the Company's 1990 Stock Option Plan to, among other things, increase the number of shares for which options may be granted under such plan from 1,500,000 to 2,000,000. The amendment received 8,240,509 shares voted for approval; 1,951,302 shares voted against; 100,262 shares abstaining and 42,000 broker non-votes. * Ratify KPMG Peat Marwick LLP, independent certified public accountants, as auditors of the Company for its fiscal year ending September 30, 1997. KPMG Peat Marwick LLP received 10,109,532 shares voted for approval; 189,880 shares voted against; 34,661 shares abstaining and no broker non-votes. The proposal to adopt an Amended and Restated Certificate of Incorporation of the Company to provide, among other things, for an increase in the number of shares of Common Stock authorized from 20,000,000 to 50,000,000 and to authorize the issuance of up to 5,000,000 shares of preferred stock was not passed. The results of the vote on this proposal were 4,464,588 shares voted for; 1,929,556 shares voted against; 95,829 shares abstaining and 3,869,100 broker non-votes. ITEM 6. (a) EXHIBITS Exhibit 11 Statement re: Computation of loss per share Exhibit 27 Financial Data Schedule Exhibit 99.1 1990 Stock Option Plan as amended (b) REPORTS ON FORM 8-K On February 11, 1997, the Company filed a report on Form 8-K related to the conversion of $750,000 of 8% Convertible Debentures and $76,482 of accrued interest into 428,504 shares of the Company's common stock. On February 18, 1997, the Company filed a report on Form 8-K related to the conversion of $100,000 of 8% Convertible Debentures and $10,893 of accrued interest into 62,144 shares of the Company's common stock. On February 25, 1997, the Company filed a report on Form 8-K related to the conversion of $100,000 of 8% Convertible Debentures and $11,123 of accrued interest into 68,140 shares of the Company's common stock. On March 5, 1997, the Company filed a report on Form 8-K related to the conversion of $800,000 of 8% Convertible Debentures and $89,775 of accrued interest into 548,750 shares of the Company's common stock. DIGITAL BIOMETRICS, INC. THREE MONTHS ENDED MARCH 31, 1997 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. DIGITAL BIOMETRICS, INC. (Registrant) July 11, 1997 s/ John J. Metil -------------------------------- John J. Metil Chief Financial Officer EX-11.0 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11.0 DIGITAL BIOMETRICS, INC. STATEMENT RE: COMPUTATION OF LOSS PER SHARE The per share computations are based on the weighted average number of common shares outstanding during the periods.
Three Months Ended Six Months Ended March 31, March 31, ----------------------------- ----------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Shares outstanding at beginning of period 10,916,485 8,221,445 10,777,288 7,833,633 Shares issued under retirement plan -- -- 41,798 16,831 Restricted stock awards, net of forfeitures 19,072 17,456 19,072 17,456 Exercise of options and warrants -- -- -- 157,500 Shares issued from debenture and related interest conversion 1,124,565 1,135,288 1,221,964 1,348,769 ------------ ------------ ------------ ------------ Shares outstanding at end of period 12,060,122 9,374,189 12,060,122 9,374,189 ============ ============ ============ ============ Weighted average shares outstanding (A) 11,571,802 8,435,781 11,213,297 8,162,324 ============ ============ ============ ============ Net loss $ (973,889) $ (2,164,211) $ (2,066,519) $ (5,277,547) ============ ============ ============ ============ Loss per common share $ (0.08) $ (0.26) $ (0.18) $ (0.65) ============ ============ ============ ============ (A) Stock options and other common share equivalents are not included in the calculation of the net loss per common share for the three- and six-month periods ended March 31, 1997 and 1996 as their effect is antidilutive.
EX-27 3 FINANCIAL DATA SCHEDULE
5 0000868373 DIGITAL BIOMETRICS INC 6-MOS SEP-30-1997 OCT-01-1996 MAR-31-1997 394,762 4,937,479 5,932,065 557,274 3,181,792 9,772,140 2,450,633 1,206,033 16,081,519 5,046,650 343,555 0 0 120,601 10,570,713 16,081,519 4,972,757 5,763,987 3,335,343 4,327,223 3,453,925 0 211,195 (2,066,519) 0 (2,066,519) 0 0 0 (2,066,519) (0.18) (0.18)
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