UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2000.
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from __________ to __________.
Commission File Number: 0-30090
IMAGIS TECHNOLOGIES INC.
--------------------------------------------------------------
(Exact name of Small Business Issuer as Specified in its Charter)
BRITISH COLUMBIA, CANADA NOT APPLICABLE
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Idenditifacion No.)
incorporation or organization)
1300 - 1075 West Georgia Street, Vancouver, BC V6E 3C9
--------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code:
(604) 684-2449
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
12,242,297 as of August 11, 2000
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
<PAGE>
IMAGIS TECHNOLOGIES INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 2000
(unaudited) and December 31, 1999 3
Consolidated Statements of Operations (unaudited) for
the three and six months ended June 30, 2000 and 1999 5
Consolidated Statements of Cash Flows (unaudited) for
the three and six months ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Shareholders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Exhibit Index 18
Financial Data Schedule 19
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited financial statements for the period ended June 30,
2000 are included in response to Item 1 and have been compiled by management.
The financial statements should be read in conjunction with the Management's
Discussion and Analysis and other financial information included elsewhere in
this Form 10-QSB.
IMAGIS TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(expressed in Canadian dollars)
(Unaudited - Prepared by Management)
Jun 30, Dec 31,
2000 1999
$ $
ASSETS
CURRENT ASSETS
Cash 197,914 9,682
Accounts receivable 390,994 251,073
Inventory 44,212 45,834
---------- ----------
633,120 306,589
CAPITAL ASSETS 78,966 84,176
---------- ----------
712,086 390,765
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
IMAGIS TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(expressed in Canadian dollars)
(Unaudited - Prepared by Management)
Jun 30, Dec 31,
2000 1999
$ $
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities 309,462 299,920
Notes payable - 130,000
Deferred revenue 70,354 68,025
Current portion of obligation under
capital lease 6,164 6,678
---------- ----------
385,980 504,623
OBLIGATION UNDER CAPITAL LEASE -- 2,226
ADVANCES PAYABLE -- 356,480
PAYABLE TO PACIFIC CASCADE
CONSULTANTS LTD. 444,095 463,342
---------- ----------
830,075 1,326,671
---------- ----------
SHAREHOLDERS' EQUITY
Share capital 5,368,986 3,223,995
Convertible debenture 128,000 --
Retained earnings (5,614,975) (4,159,901)
---------- ----------
(117,989) (935,906)
---------- ----------
712,086 390,765
========== ==========
See accompanying notes to consolidated financial statements.
/s/ Iain Drummond
---------------------
Iain Drummond
President & Director
/s/ Sandra Buschau
---------------------
Director
<PAGE>
IMAGIS TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
(expressed in Canadian dollars)
(Unaudited - Prepared by Management)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
$ $ $ $
Revenues 258,646 118,581 453,781 364,238
---------- ---------- ---------- ----------
Operating costs:
Purchases of materials 27,574 64,276 54,599 144,802
Sales and marketing 386,295 208,508 610,189 338,590
Technology development 361,443 148,099 686,609 225,534
Administration 299,814 311,169 522,569 506,677
Write-off of inventory -- -- -- 111,836
Amortization 12,685 9,173 34,889 14,432
Gain on settlement of
accounts payable -- -- -- (161,205)
---------- ---------- ---------- ----------
1,087,811 741,225 1,908,855 1,180,666
---------- ---------- ---------- ----------
Net loss (829,165) (622,644) (1,455,074) (816,428)
========== ==========
Deficit, beginning of period (4,159,901) (1,320,439)
Adjustment to deficit due to
application of accounting
principles for reverse
take-over accounting -- (728,676)
---------- ----------
Deficit, end of period (5,614,975) (2,865,543)
========== ==========
Earnings per common share:
- basic (Canadian GAAP) $ (0.07) $ (0.08) $ (0.13) $ (0.14)
========== ========== ========== ==========
- weighted average
number of common
shares outstanding 11,835,641 8,087,884 10,797,236 6,038,421
========== ========== ========== ==========
- basic (U.S. GAAP) $ (0.07) $ (0.08) $ (0.13) $ (0.14)
========== ========== ========== ==========
- weighted average
number of common
shares outstanding 11,835,641 8,087,884 10,797,236 6,038,421
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
IMAGIS TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
(expressed in Canadian dollars)
(Unaudited - Prepared by Management)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
$ $ $ $
Cash provided by (used in):
Cash flows from operating
activities:
Net loss (829,165) (622,644) (1,455,074) (816,428)
Items not involving the use
of cash:
Amortization 12,685 9,173 34,889 14,432
Changes in non-cash working
capital items:
Accounts receivable(62,382) 160,219 (139,921) (15,011)
Inventories (12,273) -- 1,622 111,836
Deferred revenue 10,836 -- 2,329 --
Accounts payable
and accrued
liabilities 181,885 (216,325) 9,542 (421,270)
---------- ---------- ---------- ----------
Cash flows from operations (698,414) (669,577) (1,546,613) (1,126,441)
---------- ---------- ---------- ----------
Cash flows from investing
activities:
Cash consideration on business
combination -- (760,517) -- (669,153)
Deferred acquisition costs -- 90,091 -- --
Purchase of capital assets (13,313) (35,049) (29,679) (35,049)
---------- ---------- ---------- ----------
Cash flows from investing (13,313) (705,475) (29,679) (704,202)
---------- ---------- ---------- ----------
Cash flows from financing
activities:
Issuance of common shares for
private placement -- 2,717,484 700,000 3,017,484
Issuance of common shares for
warrant exercise 128,000 -- 625,200 --
Issuance of common shares for
option exercise 96,001 -- 381,001 --
Issuance of convertible
debentures -- -- 238,720 --
Cost of financing -- -- (28,410) --
Repayment of obligation under
capital lease (1,070) -- (2,740) --
Repayment of notes payable -- (310,000) (130,000) (310,000)
Loan from Pacific Cascade
Consultants Ltd. (16,904) (233,997) (19,247) (70,884)
---------- ---------- ---------- ----------
Cash flows from financing 206,027 2,173,487 1,764,524 2,636,600
---------- ---------- ---------- ----------
Increase in cash for the period(505,700) 798,435 188,232 805,957
Cash, beginning of period 703,614 46,326 9,682 38,804
---------- ---------- ---------- ----------
Cash, end of period 197,914 844,761 197,914 844,761
========== ========== ========== ==========
<PAGE>
Supplementary information and
disclosure of non-cash financing
and investing activities:
Interest paid 96 7,725 2,890 10,151
Non-cash transactions not
reported above:
Issuance of common shares
for services rendered -- -- 7,296 87,875
Issuance of common shares
on conversion of
debentures -- -- 467,200 --
Advances payable eliminated
on business combination -- -- -- (180,000)
See accompanying notes to consolidated financial statements.
<PAGE>
IMAGIS TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in Canadian dollars)
(Unaudited - Prepared by Management)
1. Operations:
Imagis Technologies Inc. (formerly Colloquium Capital Corp.) ("Imagis" or,
subsequent to the transaction described below, the "Company") was incorporated
under the Company Act (British Columbia) on March 23, 1998. The common shares
of the Company were listed on the Vancouver Stock Exchange, now the Canadian
Venture Exchange (the "exchange"), on September 9, 1998 as a venture capital
pool corporation ("VCP") as defined by the policies of the exchange. Under
the terms of the exchange's policies, Imagis had 19 months from the date
of listing to complete a Qualifying Transaction.
On October 6, 1998, Imagis, Imagis Cascade Technologies ("Imagis Cascade"), a
private Canadian company which develops and markets law enforcement software
products, and the Imagis Cascade shareholders entered into a Confidentiality
and Standstill Agreement pursuant to which Imagis was able to complete due
diligence respecting the business and affairs of Imagis Cascade. On October
16, 1998, Imagis gave notice to the Imagis Cascade shareholders of its
intention to acquire all of the issued and outstanding shares of Imagis
Cascade.
Effective February 23, 1999, Imagis acquired 100% of the outstanding shares of
Imagis Cascade.
As set out in the Share Purchase Agreement, consideration for the acquisition
of all of the shares of Imagis Cascade was $2,632,000, plus contingent
additional consideration of up to $400,000, paid as follows:
(a) as to $100,000 by application of an existing deposit on the closing date;
(b) as to $1,632,000 by allotment and issue to Imagis Cascade's shareholders
of 3,400,000 common shares of Imagis at a deemed value of $0.48 per share;
(c) as to $900,000 in cash on or before April 30, 1999; and
(d) up to $400,000 payable to a shareholder if, as and when, the warrants
comprised in the Offering described below are exercised to raise up to
$400,000 net to the Company's treasury.
In consideration for renouncing his right to acquire up to a 6% equity
interest in Imagis Cascade, on closing Imagis issued to the president of
Imagis Cascade, a warrant to purchase 400,000 common shares of the Company at
a price of $1.25 per share exercisable for a two year period subsequent to
vesting which will occur equally on an annual basis over a three year period.
In addition, Imagis issued a warrant to purchase 24,000 common shares at a
price of $1.25 per share for a one year period to an unrelated party for
services provided.
In addition, the Company paid a finders fee with the issuance of 100,000
shares at a deemed value of $0.48 per share.
As the shares issued in this transaction resulted in the recipients gaining
voting control over Imagis, the acquisition is accounted for as a reverse
take-over in accordance with accounting principles generally accepted in
Canada. The net assets deemed to have been acquired comprised cash of
$239,522 less accounts payable of $33,012 resulting in a value assigned to the
shares issued of $206,510. During the period from January 1, 1999 to
completion of the acquisition, Imagis incurred operating costs of
approximately $30,000. Application of reverse take-over accounting results in
the consolidated financial statements of the combined entity being issued
under the name of the legal parent but being considered to be a continuation
of the financial statements of the legal subsidiary.
<PAGE>
IMAGIS TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in Canadian dollars)
(Unaudited - Prepared by Management)
These financial statements have been prepared on a going concern basis which
includes the assumption that the Company will be able to realize its assets
and settle its liabilities in the normal course of business. At June 30,
2000, the Company has a deficiency in net assets of $117,989 and has working
capital of $247,140. Failure to obtain ongoing support of its shareholders
and creditors may make this basis of accounting inappropriate in which
case the Company's assets and liabilities would need to be recognized at their
liquidation values. These financial statements do not include any adjustment
due to this going concern uncertainty.
2. Significant accounting policies:
The Company prepares its financial statements in accordance with generally
accepted accounting principles in Canada and reflect the following significant
accounting policies:
(a) Basis of presentation:
These financial statements include the accounts of the Company and its
wholly owned subsidiary, Imagis Cascade Technologies, Inc. All material
intercompany balances and transactions have been eliminated.
(b) Inventories:
Inventories are recorded at the lower of cost, calculated on a weighted
average basis, and estimated net realizable value.
(c) Capital assets:
Capital assets are recorded at cost and are amortized over their estimated
useful lives on a straight-line basis at the following annual rates:
Asset Rate
Computer hardware 30%
Computer software 100%
Furniture and fixtures 20%
(d) Revenue recognition:
(i) Software sales revenue:
Revenue is recognized on the later of title passing to the customer
and customer acceptance of the product. The Company provides for
estimated return and warranty costs on recognition of revenue.
(ii)Support revenue:
Revenue from the sales of contract support services have been
deferred and are amortized to revenue over the period that the
support services will be provided.
(e) Use of estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported or disclosed in the financial
statements. Actual amounts may differ from these estimates.
<PAGE>
IMAGIS TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in Canadian dollars)
(Unaudited - Prepared by Management)
2. Significant accounting policies (cont'd):
(f) Foreign currency:
Monetary items denominated in foreign currencies are translated to
Canadian dollars at exchange rates in effect at the balance sheet date.
Revenues and expenses are translated to using rates in effect at the time
of the transactions. Foreign exchange gains and losses are included in
income.
(g) Income taxes:
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, future tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Future tax assets
and liabilities are measured using enacted or substantively enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on future tax assets and liabilities of a change in tax rates is
recognized to income in the period that includes the date of enactment or
substantive enactment.
(h) Stock option plan:
The Company has a stock option plan. No compensation expense is recognized
when stock options are issued. Any consideration paid on exercise of
stock options is credited to share capital.
(i) Loss per share:
Loss per share is calculated using the weighted average number of shares
outstanding during the fiscal period. This average includes outstanding
common shares issued in a reporting period from their date of issuance.
Fully diluted per share amounts are not presented as the effect of
outstanding options and warrants is anti-dilutive.
(j) Unaudited interim financial information:
The information as at June 30, 2000 and for the three and six month
periods ended June 30, 2000 and 1999 is unaudited. However, such
financial information reflects all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the
results for the periods presented.
3. Convertible debentures:
During the year ended December 31, 1999, the Company agreed to sell 595.2
convertible note units, each note unit consisting of one $1,000 convertible
debenture and 1,562.5 share purchase warrants. The convertible debenture has
a one-year term and bears interest at a rate of 8% per annum.
A holder of the convertible debenture has the option to convert it into common
shares of the Company at a rate of $0.64 per share up until one year from the
closing of this placement. After the first anniversary, the Company may
convert outstanding convertible debentures to common shares of the Company at
a rate not lower than $0.15 per share.
Each share purchase warrant provides for the acquisition of one common share
of the Company at a rate of $0.64 up until the first anniversary, and at a
rate of $0.74 until the second anniversary of the closing of this placement.
<PAGE>
IMAGIS TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in Canadian dollars)
(Unaudited - Prepared by Management)
As of December 31, 1999, the Company had received $356,480 of the $595,200
convertible note units. On January 10, 2000, the Company received the
remaining $238,720. On February 4, 2000, warrants relating to the convertible
debentures were exercised, providing proceeds of $238,080. On February 22,
2000, convertible debenture warrants were exercised, providing the Company
with an additional $229,120. Subsequent to the end of the first quarter, the
final convertible debenture warrants were exercised, providing proceeds of
$128,000 (note 6).
On February 29, March 15 and March 20, 2000, 97.28, 229.12 and 140.8
convertible note units, respectively, were converted into common shares. As
of June 30, 2000, 128.0 of the convertible note units had not been converted.
4. Payable to Pacific Cascade Consultants Ltd.:
The payable to Pacific Cascade Consultants Ltd. ("Pacific Cascade"), a
significant shareholder of the Company, is non-interest bearing, unsecured and
has no specific terms of repayment. Pacific Cascade has confirmed in writing
that it does not intend to demand repayment in the next twelve months.
5. Related party transactions:
Related party transactions not disclosed elsewhere are as follows:
(a) included in accounts payable and accrued liabilities is $94,396 (December
31, 1999 - $74,134) which is due to companies with a director in common.
(b) included in administration expense is $62,800 (December 31, 1999 -
$104,002) for payments made to a company with a director in common for
services rendered to the Company.
6. Subsequent events:
Subsequent to June 30, 2000:
(a) A total of 312,500 share purchase warrants have been exercised at a price
of $0.80 for total proceeds to the Company of $250,000.
(b) A total of 20,001 share purchase options have been exercised at a price of
$1.00 for total proceeds to the Company of $20,001.
(c) On July 3, 2000, the Company granted an additional 25,000 stock options
under its Incentive Stock Option Plan to an employee of the Company. The
options were issued with an exercise price of $3.75, vesting over three
years and an expiry date of July 3, 2005.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements:
Statements in this Quarterly Report on Form 10-QSB, including those concerning
our expectations of future sales, gross profits, sales and marketing,
technology development, and administrative expenses, product introductions and
cash requirements include certain forward-looking statements. As such, our
actual results may vary materially from expectations. Factors which could
cause our actual results to differ from expectations include variations in the
level of orders which can be affected by general economic conditions and in
the markets served by our customers, international economic and political
climates, difficulties or delays in the functionality or performance of our
products, our timing of future product releases, our failure to respond
adequately to either changes in technology or customer preferences,
changes in our pricing or that of our competitors, our ability to manage
growth, risk of nonpayment of accounts receivable, changes in budgeted costs,
all of which constitute significant risks for us. There can be no assurance
that our results of operations will not be adversely affected by one or more
of these factors.
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
the 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.
<PAGE>
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.
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.
<PAGE>
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 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.
<PAGE>
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) 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 net of costs. 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.
<PAGE>
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
a) None
b) None
c) During the three months ended June 30, 2000, the Registrant sold
55,001 common shares pursuant to the exercise of stock options
issued under its Incentive Stock Option Plan for aggregate
proceeds of Cdn.$55,001. The Registrant relied on the exemption
from registration provided by Rule 701 under the U.S. Securities
Act of 1933.
d) None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. An Annual General Meeting of the shareholders was held on June 23, 2000.
B. The following were voted by the shareholders to continue as Directors of
the Company:
Iain Drummond (3,172,812 votes for, 0 votes against, 0 abstained)
Sandra E. Buschau (3,172,812 votes for, 0 votes against, 0 abstained)
Altaf Nazerali (3,172,812 votes for, 0 votes against, 0 abstained)
Rory Godinho (3,172,812 votes for, 0 votes against, 0 abstained)
Frederick Clarke (3,172,812 votes for, 0 votes against, 0 abstained)
Oliver "Buck" Revell (3,172,812 votes for, 0 votes against, 0 abstained)
Robert Gordon (3,172,812 votes for, 0 votes against, 0 abstained)
C. The following matters were considered at the meeting:
1. To receive and consider the Report of the Directors (3,172,812 votes
for, 0 votes against, 0 abstained)
2. To receive and consider the audited financial statements of the
Company for the year ended December 31, 1999 together with the
auditors' report thereon (3,172,812 votes for, 0 votes against, 0
abstained)
3. To appoint auditors for the ensuing year and to authorize the
directors to fix the remuneration to be paid to the auditors
(3,172,812 votes for, 0 votes against, 0 abstained)
4. To fix the number of directors for the ensuing year at seven
(3,172,812 votes for, 0 votes against, 0 abstained)
5. To elect directors for the ensuing year (3,172,812 votes for, 0 votes
against, 0 abstained)
6. To consider and, if deemed advisable, pass an ordinary resolution
of disinterested shareholders to approve the Company's 2000
stock option plan (the "2000 Plan"), subject to regulatory
approval, and as more particularly described in the Information
Circular (3,172,812 votes for, 0 votes against, 0 abstained)
7. To transact such other business as may properly come before the
meeting.
ITEM 5. OTHER INFORMATION
None
<PAGE>
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
99.1 Form-61 as required by the British Columbia Securities
Commission
(b) Reports on Form 8-K
On June 6, 2000, we filed a report on Form 8-K including a notice
of our Annual General Meeting to be held on June 23, 2000 along
with the Information Circular, Proxy and Return Card. In addition,
on the same Form 8-K, the Company filed a News Release dated May
15, 2000 announcing the details of the awarding of a US$1.2 million
contract from the Alameda County Sheriff's Office in California.
<PAGE>
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.
Dated: August 11, 2000
Imagis Technologies Inc.
(Registrant)
By: /s/ IAIN DRUMMOND
----------------------
Iain Drummond
President & CEO
By: /s/ ROSS WILMOT
----------------------
Ross Wilmot
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedule
<PAGE>
