SCHEDULE B: SUPPLEMENTARY INFORMATION
1. For the six months ended June 30, 2000:
a) Purchases of materials
Hardware 35,751
Services 296
Supplies 1,840
Freight 671
Customs and duty 984
Translation 2,841
Consulting 12,216
------
Total 54,599
======
b) Administration expense
Bank charges and interest, net 6,501
Consulting fees 34,590
Foreign exchange (3,447)
Office and rent 160,042
Management fees 25,800
Salaries and benefits 75,932
Professional fees 85,963
Shareholder relations and regulatory filings 86,323
Travel and entertainment 50,865
-------
Total 522,569
=======
c) Non-arm's Length Expenses
Wages and benefits for two officers 118,271
(President & CEO and Chief Technology
Officer)
Management fees for three directors and 62,800
officer -------
Total 181,071
=======
2. Summary of Securities Issued During the Quarter Ended June 30, 2000:
a) Summary of securities issued during the quarter:
Date Type Type Number
of of of or Total
Issue Security Issue Amount Price Proceeds
03/29/00 Common Option exercise 5,000 $1.00 $ 5,000
04/06/00 Common Warrant exercise 200,000 $0.64 $128,000
05/19/00 Common Option exercise 6,000 $1.00 $ 6,000
05/31/00 Common Option exercise 30,000 $1.00 $ 30,000
06/05/00 Common Option exercise 10,000 $1.00 $ 10,000
06/06/00 Common Option exercise 5,000 $1.00 $ 5,000
06/12/00 Common Option exercise 40,001 $1.00 $ 40,001
b) Options/warrants granted during the quarter:
Nil
3. Share Capital as at June 30, 2000:
a) Authorized Capital
100,000,000 common shares without par value:
<PAGE>
Issued and outstanding No. of shares Amount
-------------------------------------------------------------------
Balance, June 30, 2000 11,909,796 $5,368,986
b) Summary of options and warrants outstanding as at June 30, 2000:
Options
Number of common shares Exercise Price Date of Expiry
Issuable
230,000 $0.30 July 6, 2003
140,000 $1.00 February 25, 2004
45,000 $1.00 March 25, 2004
45,000 $1.00 April 13, 2004
60,000 $1.00 July 19, 2004
418,998 $1.00 January 19, 2005
---------------------------------------------------------------------
938,998
=====================================================================
Warrants
Number of common shares Exercise Price Date of Expiry
Issuable
133,333 $1.25 February 23, 2001
875,000 $0.80 March 17, 2001
133,333 $1.25 February 23, 2002
133,333 $1.25 February 23, 2003
--------------------------------------------------------------------
1,275,000
====================================================================
800,000 shares are being held in escrow, subject to release provisions
as follows: one-third (1/3) of the securities are to be released on
each of the first, second and third anniversaries of the completion of
the reverse take-over of Imagis Cascade.
c) List of Directors as at June 30, 2000:
Iain Drummond
Sandra Buschau
Fred Clarke
Rory Godinho
Robert Gordon
Altaf Nazerali
Oliver "Buck" Revell
<PAGE>
SCHEDULE C: MANAGEMENT DISCUSSION
Note: The following management discussion has been prepared as a summary of
activities for the six-month period ending June 30, 2000 and significant
events subsequent to that period.
NATURE OF BUSINESS
IMAGIS is a developer and marketer of biometric-based software applications
for the law enforcement, security and gaming industries. IMAGIS premier
product is CABS (Computerized Arrest and Booking System), an integrated
software system used by police departments, the Royal Canadian Mounted Police,
and other law enforcement agencies for collecting and storing all information
associated with booking an offender, including capturing facial images of the
person and images of identifying marks.
Imagis' recently-introduced ID-2000 facial recognition capabilities that
enable an individual to be matched against the records of offenders in the
CABS database, using only their image as the basis of the search.
HIGHLIGHTS
- Sales for the six-month period were $460,000, or 60% of 1999 full-year
revenues.
- Our Computerized Arrest & Booking System (CABS) was chosen as the software
solution by both the Amherst, NS and Summerside, PEI police departments in
Eastern Canada.
- We announced a $1.8 million order from Alameda County in California.
- BCIT selected our Envisage product for their OneCard ID Project at all of
their campus locations in British Columbia.
- We received two orders from the Service Group West Covina Police Department.
- The Guildford Police Department in Guildford, Connecticut purchased our
Computerized Arrest & Booking System (CABS) product.
- New business partners have been signed.
SIGNIFICANT EVENTS AND TRANSACTIONS
ORDERS RECEIVED FROM RCMP DETACHMENTS IN TWO NEW PROVINCES
On April 19, 2000, Imagis announced that our CABS Computerized Arrest and
Booking System had been chosen by both the Amherst, Nova Scotia and
Summerside, Prince Edward Island police departments in eastern Canada.
Once implemented, one of the project objectives is to expand CABS usage to
include data input and access to the CABS Regional Database, which is being
set-up in the "J" Division, Codiac Detachment of the RCMP in New Brunswick.
This implementation will provide for quick and easy sharing of offender and
occurrence based images and data with all participating police and law
enforcement agencies. The immediate access to offender records from
contributing agencies will allow for positive identification of repeat
offenders and the ability to solve crimes faster.
IMAGIS AWARDED US$1.2 MILLION CONTRACT FROM ALAMEDA COUNTY SHERIFF'S OFFICE
On May 15, 2000, Imagis announced that, together with its business partner,
Orion Scientific Systems, we have been chosen to provide an integrated
imaging-based law enforcement solution for the Alameda County Sheriff's Office
in California. The total contract award is $2.65 million U.S., our portion,
as key technology provider, will be $1.2 million U.S.
Imagis will provide a completely integrated law enforcement solution,
including the CABS Computerized Arrest and Booking System, ID-2000 Facial
Recognition Software, Regional Data-Sharing, Property-ID for evidence control
and tracking in the field, and CABS Mobile for wireless transmission of record
and image information to patrol cars. Imagis will integrate its software with
the County's CORPUS mainframe application.
The county-wide booking implementation at Alameda will be the largest digital
imaging system in law enforcement on the West Coast. The system will bring
officers, beat-cops, detectives and sheriffs the most recent arrest
information and photographs, available anytime and anywhere using laptops,
internet protocols and secure wireless communications. The products and
services being provided by Orion and Imagis are a combination of
state-of-the-art facial recognition and image and database management allowing
law enforcement agencies to be more efficient and effective in their jobs.
The Alameda project is planned to be installed this year and be fully
operational during the 1st quarter of 2001.
<PAGE>
IMAGIS SOFTWARE CHOSEN BY BCIT FOR CAMPUS ONECARD SOLUTION
On June 8, 2000, Imagis announced that the British Columbia Institute of
Technology, ("BCIT") has chosen Imagis' Envisage electronic identification
system for BCIT's new OneCard ID Project for all their campus locations in
B.C. The BCIT OneCard is a student and staff photo-identification card that
will offer multiple functions and services for BCIT students and staff
beginning in the fall term. These include library borrowing, door entry,
access to campus student services and on-campus debit card usage.
IMAGIS ANNOUNCES THREE NEW ORDERS IN CALIFORNIA
On June 14, 2000, Imagis announced that we have received three new orders for
our ID-2000 facial recognition software in California. The West Covina Police
Department, just east of Los Angeles, has installed Imagis' ID-2000 facial
recognition software to operate with the already installed CABS Arrest &
Booking System. In addition, through the Service Group of the West Covina
Police Department, the El Segundo and La Habra Police departments have
separately purchased Imagis' CABS Arrest & Booking software together with
ID-2000. This installation will include a fully integrated computer-aided
dispatch system, records management, and mobile use for police cruisers.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview:
In February, 1999, we completed the acquisition of Imagis-Cascade Technologies
Inc. (Imagis-Cascade) and in the second quarter, completed a financing raising
approximately Cdn$2.9 million before financing costs. The acquisition was
accounted for as a reverse take-over whereby the company acquired, in our case
Imagis-Cascade, is deemed the parent for reporting purposes and the acquirer,
in our case Imagis Technologies Inc., is considered the target or acquired
entity. This treatment conforms with generally accepted accounting principles
in Canada which are essentially identical to those applicable in the United
States for such transactions.
Results of Operations for the three month periods ended June 30, 2000 and June
30,1999:
Revenues:
Our Revenues for the three months ended June 30, 2000 rose to $258,646 from
$118,581 generated in the comparable period in 1999, more than double the 1999
level. The gain was mostly attributable to higher sales revenues for our CABS
product rising from $48,663 in 1999 to $161,271 in the current quarter. A
small improvement in support fees earned and higher revenues of approximately
$51,000 from hardware sales in the quarter, up from $27,000 in the second
quarter of 1999 also contributed to our overall gain.
As previously indicated in prior periods, we purchase and resell hardware
components to facilitate the overall sale of our software products and period
to period hardware sales levels reflect only our customers' needs where we
have made a direct sale to an end-user. Our current marketing strategy
involves developing strategic alliances with partners which can fill this
hardware need as well as provide support services to customers. This will
allow us to focus in the future essentially on the development and sale of our
software products through these partners. At present we have established
relationships with a large number of partners. Consequently, we expect
revenues from hardware sales to be lower in the future.
Operating Costs:
Operating costs for the quarter totaled $1,087,811, significantly higher than
comparable period in 1999 of $741,225. This higher amount is consistent with our
plans both to expand our marketing efforts and to develop new biometric
capabilities in our products. Operating costs include materials purchases,
primarily hardware for resale, sales and marketing, technology development,
administration and amortization.
Purchases of materials:
Our costs of hardware and other materials purchased for the quarter were
$27,574. This is significantly lower than the costs for the comparable
period in 1999 of $64,276. As stated in previous reports, our hardware purchases
reflect the needs of direct sales to customers, and in 1999 we relied
predominantly on direct sales which is reflected in the significantly higher
hardware cost in 1999. We expect our costs of hardware purchases to be lower in
future periods as a result of our altered marketing approach involving
partners.
Sales and marketing:
Our sales and marketing costs for the quarter ended June 30, 2000 were
$386,295. This is 85 per cent higher than the 1999 comparable period of
$208,508 and reflects our increased sales staff level and their marketing
activities which have resulted in higher travel, trade show attendance and
marketing material costs. Further additions to staff are not planned at this
time.
Technology Development:
The technology development costs for the quarter ended June 30, 2000 were
$361,443. The 1999 comparable period costs were at $148,099. Our
technology development costs include primarily salaries for our development
team together with other functional costs for travel and facilities. Our
development staff has grown continuously since we completed our acquisition of
Imagis Cascade in order to complete code programming of several of our new
products including ID-2000, Property ID and Casino ID. We are committed to
expanding our biometric capabilities and expect to augment our staff to
accelerate development in this area. As a result, we expect our current level
of expenditure will increase as we bring on new development staff.
<PAGE>
Administration:
Our administration costs of $299,814 were down slightly from those of the
comparable 1999 period of $311,169. As is the case for our technology
development function, administration costs include primarily salaries with
additional costs incurred for office facilities, travel and requisite
shareholder and regulatory reporting.
Other Costs and Expenses:
Other costs for the quarter include only amortization, amounting to $12,685,
up from $9,173 in the second quarter of 1999 due to additions to our office
equipment over the year.
Net Loss for the Period:
We experienced a net loss amounting to $829,165 or $.07 per share for the
quarter ended June 30, 2000, higher than for the comparable period in 1999 of
$622,644 or $.08 per share. This higher amount reflects our higher
expenditure levels in both the sales and marketing and technology development
functions, only partially offset by our gains in sales revenues over those of
the prior year.
Results of Operations for the six month periods ended June 30, 2000 and June
30,1999:
Revenues:
For the six months ended June 30, 2000, our revenues were $453,781, up 25 per
cent from the prior year to date level of $364,238. Sales of our software
products rose 78 per cent from $146,715 in 1999 to $261,762 in 2000, and
support and service revenues rose from the 1999 level of $99,951 to $124,527
in 2000, while hardware sales revenues fell from $117,191 in 1999 to $67,170
this year. The gain in software sales revenues includes both higher sales
volumes of our CABS product and sales of our new products, primarily ID-2000,
a facial recognition capability. The lower hardware revenues reflect our
efforts to withdraw from sales of hardware equipment coupled to our software
products.
Operating Costs:
As was the case in the quarterly comments above, our operating costs for the
six months ended June 30, 2000 rose significantly in 2000 to $1,908,855 over the
1999 level of $1,180,666. The increase is due to much higher cost levels for
both the sales and marketing and technical development functions consistent with
our commitment to increase our sales efforts to improve revenues and to
significantly expand the technical capabilites of our biometric applications.
While costs overall are higher than in the prior year, all categories,
individually and in total, are within budget for the year 2000.
Purchases of materials:
As indicated above, sales revenues for hardware components to customers for the
six months ended June 30, 2000 fell to approximately half the level in the 1999
comparable period. Similarly, purchase costs were much lower at $54,599 in 2000,
only 38 per cent of the 1999 first half costs of $144,802.
Sales and marketing:
Our sales and marketing costs for the six months ended June 30, 2000 rose 80
per cent to $610,189 from $338,590 in the 1999 comparable period, consistent
with the increase reported for the most recent quarter. The costs include staff
salaries, travel, marketing materials and facilities including communications.
The higher level reflects the impact of several additions to staff over the
intervening period and the consequent higher level of expenditure arising from
their activities.
Technology development:
The increase in costs for our technology development function was even greater
than in sales and marketing, rising from the 1999 year to date level of
$225,534 to the current year to date amount of $686,609, an increase of over
200 per cent above the prior amount. The significant increase is due to the
additions to staff of several developers needed to complete all of the
projects which were in their initial stages at the time of acquisition
last year and which have led to several of our new product introductions, and
to the expansion of programming in biometrics. Other costs include those for
facilities and some staff travel.
Administration:
Our administration costs for the six months ended June 30, 2000 were $522,569,
only slightly higher than those for the comparable period in 1999 of $506,677.
Administration
<PAGE>
costs include staff salaries and travel, professional fees, shareholder and
regulatory costs, and facility and other related costs. No staff additions
have been made from year to year and all other costs have been held constant
to keep the overall expenditure in line with the prior year.
Other Costs and Expenses:
Other costs for the six months ended June 30, 2000 include amortization of
$34,889, compared with $14,432 for the comparable period in 1999. In 1999,
there was a loss resulting from the write-off of inventory items of $111,836 and
a gain on the settlement of accounts payable of $161,205.
Net Loss for the Period:
We experienced a net loss amounting to $1,455,074 or $.13 per share for
the six months ended June 30, 2000, higher than for the comparable period in
1999 of $816,428 or $.14 per share. The higher amount reflects our higher
expenditure levels in both the Sales and marketing and Technology development
functions which are only partially offset by our gains in sales revenues over
1999.
Liquidity and Capital Resources:
At year end, our cash position had declined to only $9,682 and anticipating
this we had taken a number of steps late in 1999 to raise funds to support our
ongoing activities. Consequently during the first quarter, we raised over $1.9
million by means of (i) a private placement of our common stock which yielded
$700,000, (ii) from the exercise of outstanding warrants and options yielding
approximately $880,000 and (iii) from the conversion of debentures for common
stock issued in 1999 which provided approximately $210,000. This past quarter,
we added to our cash position through the further exercise of warrants
providing $128,000 and of options yielding $96,001. Year to date cash inflows
from such capital transactions aggregate $2,075,699. We expect our cash
position as of June 30, 2000 to be adequate to fund our on-going operations
through September 30, 2000. Thereafter, depending on the development of our
business, we may need to raise additional cash for working capital or other
expenses. If we need to raise additional capital, we plan to do so through
the sale of equity securities. We may not be able to raise sufficient capital
when needed or on terms commercially favorable to us.
We have used these funds to sustain our operations during the six month
period, to repay notes payable of $130,000 and to acquire equipment costing
$29,679. After these disbursements and the costs associated with our operating
loss net of working capital changes other than cash of $1,546,613, we closed
the period with cash on hand of $197,914 remaining for future operations.
As indicated in the discussion of our technology development expenditures, we
anticipate hiring additional technical staff and increasing the development of
biometric capabilities in our software, and anticipate the need to raise
additional funds through the issue of our common stock. We are currently
seeking financing of approximately $5 million and are discussing our needs
with few potential investors.
INVESTOR RELATIONS
During 1999 and for the period ending June 30, 2000, the Company did not
engage outside parties for investor relations. Investor relations functions
were accomplished through personnel whose duties include: the dissemination
of news releases, investor communications and general day-to-day operations of
this department. The costs of these personnel and activities are identified
in the Financial Statements as "Shareholder Relations and Regulatory Filings".
SIGNIFICANT SUBSEQUENT EVENTS
- On July 19, 2000, Imagis announced the official launch and installation of
CASINO-ID and its biometric Facial Recognition Software at Gateway Casinos
Inc. in Canada. Gateway Casinos will install software licenses in all three
of its locations in the greater Vancouver area of British Columbia. Upon
installation, CASINO-ID will allow integration between all Gateway locations
with the ability to connect, share database information and photography. By
year-end, Gateway Casinos anticipates adding their Edmonton, Alberta facility
to the list of connect CASINO-ID users. CASINO-ID was designed to allow any
casino or gaming establishment to utilize biometric technology to capture
images using existing surveillance cameras, and then create suspect databases
and compare images based on facial features only.
- On July 31, 2000, Imagis announced that we have retained Somerset Financial
Group ("Somerset") of New York as our non-exclusive U .S. financial advisor.
Somerset will assist us in pursuing our business plan, which will include
banking advisory services and review of any potential business combinations,
joint ventures, financing or other capital market needs. We have paid
Somerset a fee of $10,000 U.S. and have agreed to issued to Somerset 50,000
warrants exercisable ad $4.00 Cdn. The warrants will be exercisable for a
<PAGE>
period of two years from the date of issue and will contain standard
anti-dilution provision.
