<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: Commission file number
June 30, 1995 0-8951
COMPARATOR SYSTEMS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Colorado 95-3151060
- ------------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
4350 Von Karman Ave., Ste. 180
Newport Beach, California 92660
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (714) 851-4300 Securities
registered pursuant to Section 12(b) of the Act: None Securities registered
pursuant to Section 12(g) of the Act: None
Common Stock, $0.01 par value
-----------------------------
(title of class)
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 the
filing requirements for at least the past 90 days.
Yes X No
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The number of shares of Registrant's common stock outstanding as of
June 30, 1995, was 564,344,703. The approximate aggregate market value of
voting stock held by non-affiliates of Registrant at September 1, 1995, based on
the average bid and asked prices of such stock on such date($0.046875) was
$26,453,657.31.
Documents incorporated by reference: None.
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Table of Contents
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Page
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Item 1: Business................................................... 1
*Overview.......................................................... 1
*Company History................................................... 1
*The Company's Products............................................ 3
*The Market for Biometric Identification........................... 3
*Competition....................................................... 5
*Marketing......................................................... 6
*Manufacturing and Supply.......................................... 6
*Industry Segment.................................................. 6
*Employees......................................................... 7
Item 2: Property................................................... 7
Item 3: Legal Proceedings.......................................... 7
Item 4: Submission of Matters to a Vote of
Security Holders........................................... 7
Part II.
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Item 5: Market for the Company's Common Stock and
Related Stockholder Matters................................ 7
Item 6: Selected Financial Data.................................... 8
Item 7: Management's Discussion and Analysis of
Financial Condition and Results of
Operation.................................................. 9
* Liquidity, Capital Resources and Results
of Operation................................................. 9
* Private Placement............................................ 9
* Other Commitments to Issue Stock............................. 9
Item 8: Financial Statements and Supplementary Data................ 10
Item 9: Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................ 10
Part III.
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Item 10: Directors and Executive Officers of the Company............ 10
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Table of Contents
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(Continued)
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Item 11: Executive Compensation ................................... 11
Item 12: Security Ownership of Certain
Beneficial Owners and Management
and Potential Change in Control........................... 12
* Security Ownership of Certain
Beneficial Owners .......................................... 12
* Security Ownership of Management............................ 12
Item 13: Certain Relationships and Related Transactions ........... 13
Part IV.
- --------
Item 14: Exhibits, Financial Statement
Schedules, and Reports on Form 8-K........................ 14
Signatures ......................................................... 15
Index to Financial Statements....................................... 16
</TABLE>
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PART I
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ITEM 1: BUSINESS
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Overview
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Comparator Systems Corporation started life as a manufacturer of
biometric identity verification systems utilizing the fingerprint to confirm
people's identities. The Company is one of the pioneers in the Biometrics
Industry. It has been engaged in the development, manufacture and marketing of
fingerprint-based identity verification systems since its initial public
offering in 1979.
In the 1980s the Company introduced and marketed its first-generation
fingerprint comparison system, the Comparator Model ID-1, to the law enforcement
market. That device was designed primarily for use in jails and prisons, to
verify that the right prisoner was being released. Model ID-1 systems have been
in continuous use across the country for many years, and have had the backing
and endorsement of police and prison officials. ID-1's have the unique
distinction that, in what is now estimated to be over 1,000,000 cumulative
prisoner identity verifications, not one error by an ID-1 has ever been reported
by a law enforcement customer. The ID-1, however, was a relatively high-cost
electro-optical-mechanical system that required an operator, and the use of
hard-copy inked fingerprints.
The Company therefore initiated further research to develop a
computerized identity verification system that would retain the reliability and
the ruthless accuracy of the Model ID-1, but that would incorporate
instantaneous "live-scan" fingerprint comparison and networking capability. This
program led to the development of successive generations of engineering
prototypes, culminating in the development of an entirely new software-driven
technology for an identity verification system that now meets all of Comparator
Systems Corporation's technical and price criteria.
Meanwhile, Comparator Systems Corporation's view of itself has been
evolving as it has become clear that the Company's core products - identity
verification devices - are, in effect, "yes" or "no" switches that authorize a
transaction to proceed, or not. In this context, a transaction may be any one
of innumerable interactions between or among people, ranging from the release of
a prisoner, to withdrawing cash from an ATM, gaining access to a nuclear plant,
logging-on to a computer network, crossing a border, verifying the identity of
an unconscious surgical patient, making a credit card purchase, boarding an
aircraft, entering a hotel room, applying for welfare benefits, or cashing a
check. The Company is actually now in the transactions processing business,
only one aspect of which is transaction authentication.
Company History
- ---------------
The Company was formed in California July 12, 1976 and reincorporated
in Colorado October 12, 1978. Prior to the summer of 1979, the Company had
engaged only in limited engineering and development of a fingerprint comparison
system. In July, 1979 the Company obtained the net proceeds of approximately
$799,000 of an initial public offering of 10,000,000 shares of its one cent par
value common stock at 10 cents per share. By 1981 the proceeds of the IPO had
been fully disbursed and the Company's founding president was forced to withdraw
from
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active participation due to health problems. During the following years the
Company had continuous and increasing difficulty in raising working capital and
sustaining operations under a succession of three presidents.
In 1983 a new Chairman and President was recruited, and through
personal investments of his, and loans to the Company guaranteed by him, limited
working capital was obtained from time to time. In 1984 the Company was able to
complete production engineering of the prototypes of its Model ID-1 Comparator.
It established a production facility, and initiated manufacturing and limited
sales of its first-generation system, although it was financially unable to
mount a full-scale marketing program.
In 1987 the Company obtained additional working capital and in 1987
and 1988 was able to initiate its first significant marketing program of the
Model ID-1 to law enforcement customers. The Company obtained excellent
acceptance of the product from police throughout the country, but due to chronic
insufficiency of capital experienced by law enforcement customers, and to the
long lead-time in completing sales to them resulting from their annual budgeting
procedures, the Company was not financially able to sustain its marketing effort
long enough to achieve a positive cash flow.
During this period, the Company also determined that commercial
customers required a faster and more automated product than the ID-1, and it
therefore chose to redirect its limited capital from marketing the ID-1 into
development of a successor system. Due to continued intermittent working capital
shortages, operational progress moved more slowly than would have otherwise been
possible.
In 1992, at the invitation of Dr. Mahathir, the Prime Minister, the
Company established operations in Malaysia, and temporarily relocated its senior
management and key scientists to Kuala Lumpur, the capital. There, with
financial backing from Malaysian investors, development moved ahead quickly of
the Company's new fingerprint comparison technology. In 1993 a manufacturing
plant was established in Petaling Jaya, a suburb of Kuala Lumpur, Malaysia by a
joint venture company owned by Comparator Systems Corporation and the Malaysian
investors.
In October 1993 it was discovered that the Company's vice president
administration/corporate secretary, an employee of ten years standing who had
been acting general manager during the president's absence in Malaysia, had
misappropriated an estimated $830,000 in stock and cash. Her services were
terminated, a criminal complaint was lodged with the Irvine, California Police
Department, and, in light of these developments, the Company reorganized its
internal operations and initiated new administrative controls in an effort to
preclude the possibility of similar problems occurring in the future. As an
apparent consequence of the misappropriation, together with a crash of the Kuala
Lumpur stock market in 1994, the Malaysian investment was halted, and the
Company was forced to close-down operations there and return to the United
States.
Subsequently the Company has been negotiating with major funding
sources to replace the lost Malaysian financing, while product engineering
efforts have been progressing at a reduced rate, commensurate with the funds
available to the Company.
On June 1, 1995 the Company retained Richard E. Floegel as its new
President and Chief Operating Officer. Robert Reed Rogers, who joined the
Company in 1983, remains as Chairman and CEO.
Subsequent to the end of fiscal year 1995, the Company acquired,
through a purchase of assets for cash and stock, International Financial
Systems, Inc. (IFSI), which is operated as a wholly-
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owned subsidiary. IFSI markets integrated operating systems to the banking
industry in the United States and in Central America. IFSI's operating systems
include proprietary software of its own design integrated with computers and
peripheral equipment of other manufacturers. The Company believes that its own
fingerprint comparison software can readily be incorporated into IFSI's
operating software to provide biometric identification capability to new banking
industry customers, as well as to IFSI's existing customers on a retrofit basis.
The Company's Products
- ----------------------
Products produced by or for the Company at this point include its
original core product line of proprietary automated fingerprint identity
verification systems, as well as identification cards, electronic time and
attendance systems, and accounting software and integrated operating systems for
the banking industry.
The Company's biometric identification products include:
. Comparator 4000 electro-optical single fingerprint scanner, capable of
capturing in less than one second a high-resolution fingerprint image, and
transmitting it to a PC or to a remote site, for full finger viewing or
subsequent processing.
. Comparator 5000 transaction processing terminal, employed either as a
peripheral for PCS or as a fingerprint acquisition terminal on a local or
wide area network, utilizing external processing.
. Comparator 5500 fully-integrated transaction terminal capable of acquiring a
"live" fingerprint image, processing and storing the image data either
internally or in a remote data base, and comparing the stored image data with
that of a subsequent live finger presented for identity verification, and
with a fingerprint stored on an identification card by an ID-1 has ever been
reported.
Additionally, in 1995 Comparator Systems Corporation secured
distribution rights for a recently-developed multi-tasking, software-driven time
and attendance system (the 1990's version of what used to be known as a time
clock) and is in the process of incorporating its fingerprint identification
technology into the system.
Also, International Financial Systems markets fully-integrated
operating systems and accounting software for the banking industry, including
credit unions and savings and loans across the United States and in Central
America. IFSI provides an open door into the banking industry for Comparator
Systems Corporation, whose fingerprint comparison software can readily be
integrated with IFSI's installed operating systems software to provide financial
institutions with transaction authentication capability.
The Market For Biometric Identification
- ---------------------------------------
Growing worldwide concern with issues such as military security,
terrorism, industrial security, narcotics trade, computer fraud, border control,
alien movement control, forgery, credit card fraud, inmate control, mis-
identification of medical and psychiatric patients, tax evasion and internal
fraud in financial institutions is creating a rapidly growing demand for
positive personal
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identification products and methods.
Biometrics methods presently used or being developed include visual
recognition by guards; photographs; personal identification numbers ("PINs") or
other secret codes; identification cards; fingerprints; retina prints; hand
geometry; voice prints; gait analysis; handwriting analysis; brainwave analysis;
and qualitative analysis of body tissues and fluids. Generally speaking, the
less exotic the technology used, the less certain is the identification, but the
more exotic the technology used, the greater is the cost, the complexity, the
inconvenience, the risk of injury and the resistance of users to the
identification procedure. Among the identification procedures available or
being developed, however, fingerprint verification stands alone in several
respects:
. The fingerprint is absolutely unique to each individual, yet it is relatively
convenient, easy, noninvasive and quick to obtain.
. Properly utilized, the fingerprint is virtually impossible to forge, and its
use is not affected by the memories of individuals, or changes with age.
. Fingerprinting does not involve physical discomfort or a real or perceived
danger to the subject, and it is the only positive identification method
which has been in use extensively enough to be a broadly-accepted procedure.
The major drawback of fingerprinting as a generally-useful
identification procedure has until recently been the necessity that highly-
trained experts be employed to visually compare fingerprints, in the absence of
practical technologies to perform the task.
There are two basic uses of the fingerprint as an identification
method:
. Criminal Justice/Forensic Systems for the comparison of the fingerprint of an
---------------------------------
unknown person (e.g. a latent print found at the scene of a crime) with the
recorded fingerprints of many known persons, in order to identify the unknown
person. This has been the traditional use of fingerprinting by law
enforcement agencies, employing experts trained in such comparisons. Such
systems are generally multi-million dollar, skilled labor intensive,
dedicated mainframes.
. Identity Verification Systems for the authentication of the identity of a
-----------------------------
"known" person by comparing his or her freshly-taken fingerprint with one
previously taken and stored for future reference. This use of fingerprinting
was not practical for commercial applications in the past due to the limited
availability of fingerprint technicians and to the high cost of employing
them in this manner if they had been available. Even so, the INS has required
a fingerprint on the resident alien identification card, and some banks have
required fingerprints on the backs of checks, as a psychological deterrent.
Identity Verification applications exist wherever one or another of
multiple parties are required to prove or verify their identity. Typical
applications include:
. Welfare benefits
. Social Security/Provident Fund benefits
. National identification cards
. Passports, resident alien identification cards
. Drivers licenses
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. Aircraft boarding control
. Credit and debit cards
. Restricted area access
. Electronic or data access
. Patient ID, drug access control
. Insurance benefits identification
. Employee time and attendance verification
Comparator Systems Corporation has specialized since its founding in
identity verification systems. These are access control/transaction control
systems used to verify whether an entry matches a designated record. A finger is
scanned and the collected data is compared with data stored in system memory or
on a card. No search is normally performed, since the task of these systems is
to perform only a one-to-one comparison, allowing an individual access to an
area or to an electronic system (e.g. computer or network) if a scanned finger
matches the individual's stored finger data.
Competition
- -----------
The three largest of the known fingerprint systems producers serve the
Criminal Justice/Forensic System market, producing specialized dedicated "AFIS"
(Automated Fingerprint Identification System) computers, costing from $1,000,000
to over $30,000,000, designed to accelerate the processing by law enforcement
agencies of fingerprint comparisons of unknown persons with computerized
fingerprint files. This is not a market in which the Company participates, and
these manufacturers represent potential, but not immediate competition.
The market for Identity Verification Systems was until recently mainly
a potential market, with limited actual industry sales. In the Company's
opinion, this was due in part to the fact that reliable, accurate and cost
effective biometric identification systems were not available to prospective
users, and in part to perceived public resistance to the use of fingerprint
identification. In the past several years this market has begun to expand
rapidly, and a growing, but still small number of firms worldwide is believed to
be in the business of developing or marketing fingerprint identification
systems. The largest of these firms, however, are systems integrators that do
not themselves possess biometric identification systems, and must subcontract
with firms such as Comparator Systems Corporation for this technology.
Several firms other than the Company have pursued the development of
Identity Verification Systems, typically employing "minutiae" technology to
digitize and store fingerprint details for later retrieval and comparison with
real-time fingerprints. The Company, in contrast to its competitors, does not
employ minutiae comparison, but rather employs proprietary image processing
comparison technology for comparing entire prints with each other. Based on
such information as it has, the Company believes that certain features of the
its own products, including durability, simplicity, and, above all, high
accuracy, constitute significant competitive advantages.
Some of the companies referred to above are believed to have
substantially larger financial resources than does the Company. There are also
several firms producing identification devices based on other biometric methods
such as signature dynamics, hand geometry, retinal vasculature or voice
characteristics of the person to be identified. The Company does not know
whether such devices may ultimately be competitive with its products, but
believes that the most significant competitive factors in the field are and will
be accuracy, price, ease of operation, reliability and non-
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invasiveness. The Company believes it is in a position to compete effectively
with respect to these factors. Name recognition may also be significant, and
although the names of the Company's competitors have been better known than that
of the Company, the reputation of the Comparator product has credibility,
particularly in the law enforcement community, whose endorsement the Company
feels will be valuable as it enters other markets.
Marketing
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In the past, the Company's primary customers have been law enforcement
agencies, and the nature of marketing new, pioneering products required that the
Company employ a direct sales force rather than relying on dealers and
distributors.
The Company's new commercially-oriented products are useful in such a
wide variety of applications that it is necessary to use a variety of
distribution methods to reach prospective customers. Major government and
commercial accounts are handled either directly by Company sales executives, or
through strategic alliances with larger companies, or through subcontractor
relationships with systems integration companies. Other markets, such as
industrial security and time and attendance are reached through distributors and
dealers. Markets such as the ATM market are reached through OEM relationships.
In preparation for completion of production engineering of its new
product line, the Company has begun reconfirming prior distribution
relationships and establishing new ones, and has several such agreements in the
United States and overseas in place. It is believed that substantial investment
in marketing and sales, beyond what has been financially possible in the past,
and completion of production engineering of its new products, will be required
for the Company to achieve sustained profitability. There can be no assurance
that the Company will be able to achieve this result.
Manufacturing and Supply
- ------------------------
In the late 1980's the Company closed the manufacturing facility it
had established and operated in Costa Mesa, California for production of its
Model ID-1, and in 1994, with the cessation of its funding in Malaysia, the
Company vacated the manufacturing plant it had established there to manufacture
its new products. The passage of NAFTA has opened up attractive new
possibilities for manufacturing in Mexico. Negotiations are currently in
progress, although no decision has been made and no manufacturing agreements
have yet been formally executed.
The Company's production involves the assembly and testing of the
various components and sub-components used in its products. These include
electronic circuit boards, switches, transformers, optical assemblies, and other
components purchased from independent suppliers. Certain key items are
manufactured in-house or are fabricated by independent contractors to the
Company's specifications. There are presently qualified suppliers for all
required parts and services.
Industry Segment
- ----------------
The Company is not presenting revenue and operating profit or loss by
industry segment since it has not yet produced significant sales and earnings in
any segment.
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Employees
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The Company had thirteen employees and or part-time consultants in the
United States as of June 30, 1995. As of the date hereof, the Company has
twenty-two employees and/or part-time consultants. See Items 7 and 11 below, for
information regarding the discharge of the Company's obligations to employees
for unpaid past compensation.
ITEM 2: PROPERTY
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The Company leases office and engineering space in Newport Beach,
California. The present space of approximately 5,900 square feet is leased by
the Company under a five year lease, with a average annual rental of $71,004,
beginning October 1993.
ITEM 3: LEGAL PROCEEDINGS
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On June 30, 1995, the Company was a judgment debtor in approximately
27 cases in which judgments against the Company had become final, with an
aggregate unsatisfied judgment debt of approximately $323,526 and accrued
interest of $155,028.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
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ITEM 5: MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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a. The Company's common stock is traded over the counter on NASDAQ.
For the period beginning June 30, 1993 and ending August 30, 1994, the
approximate high and low inter-dealer bid quotations were as set forth below.
The source of such quotation data is the National Quotation Bureau, Inc. Such
prices are without retail markup, markdown or commission and may not necessarily
represent actual transactions.
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Quarter Ended High Bid Low Bid
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June 30, 1994 0.03125 0.03125
September 30, 1994 0.03125 0.03125
December 31, 1994 0.03125 0.03125
March 31, 1995 0.03125 0.03125
June 30, 1995 0.03125 0.03125
Period Ended 0.03125 0.03125
August 30, 1995
</TABLE>
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b. The approximate number of record holders of the Company's common
stock at August 1, 1995 was 8,245.
c. The Company has never paid any cash dividends on its common stock
and intends to retain earnings, if any, to finance the development and expansion
of its business. The future dividend policy is subject to the discretion of the
Board of Directors and will depend upon a number of factors, including future
earnings, capital requirements and the financial condition of the Company.
ITEM 6: SELECTED FINANCIAL DATA
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Fiscal Years Ended June 30
(Dollars Except Per Share Data)
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<CAPTION>
1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
Revenue $ 90,161 $ 258,376 $ 420,938 $ 62,332 $ 23,274
Expenses 1,936,890 2,310,223 1,342,356 2,074,485 43,854
Net Income (Loss) (1,846,729) (2,051,847) (921,418) (2,012,154) (2,121,380)
Earnings(Loss) Per (.0035) (.0045) (.0025) (.007) (.015)
Common Share(1)
Cash Dividends Per -0- -0- -0- -0- -0-
Common Share
Weighted Average(1) 525,395,100 457,877,388 363,499,021 286,089,077 145,132,807
Number of Shares
Balance Sheet Data
- ------------------
Working Capital $ (636,000) $ (547,479) $ (1,999,551) $ (1,828,410) $ (1,679,584)
Current Assets 911,648 881,906 103,131 123,247 112,005
Total Assets 5,678,574 5,987,888 4,682,547 4,550,510 4,895,675
Long Term Debt -0- -0- -0- -0- -0-
Shareholders Equity 3,661,261 4,086,008 2,081,812 2,265,297 2,728,822
</TABLE>
See "Financial Statements" below. The Company will incur a substantial loss for
the Fiscal Year ended June 30, 1994.
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATION
------------
Liquidity, Capital Resources and Results of Operation
- -----------------------------------------------------
The Company has since its inception been essentially engaged in
research and development and in the limited sale of its biometric identification
products. It was not in the past able to generate from operations sufficient
income to meet the Company's need for cash, and material losses have been
generated in each period since inception. The net proceeds of the Company's
$1,000,000 initial public offering in 1979 were employed primarily for the
development of engineering prototypes of the Company's first-generation product,
the Comparator Model ID-1, and were essentially expended by 1981. From 1981
until September 1987, at which time the Company closed a $2,550,000 private
placement, the Company had no capital resources excepting only erratic and
occasional funds generated by private sales of common stock and loans from
officers and other persons interested in the Company. Subsequent to 1987,
liquidity remained a problem as the Company attempted to stretch its working
capital in order to fund its market research, new product development, product
field testing, in preparation for initiation of operations that could generate
sales sufficient to cover operating expenses. Some vendors of the Company were
not paid, and the Company was for the most part not able to pay its officers,
employees and consultants, except by issuance of stock as consideration for
products and services.
In 1992 and 1993 the Company entered into agreements with investors in
Malaysia to establish a jointly-owned company to manufacture the Company's
products for worldwide sale. Subsequently, the Company's top management and key
scientists, relocated to Malaysia, were successful in developing new technology
supporting a new software-driven generation of Comparator products. The
Malaysian investors also subscribed to purchase a substantial block of the
Company's common stock. They paid-in ten percent of the agreed-upon investments,
before discontinuing their financial participation in 1994, as described above.
Subsequent to that time the Company has been preserving its financial
resources, while negotiating with others for funding to replace the Malaysian
financing.
Private Placements
- ------------------
The proceeds from funds received as a result of its past private
placements have been used to defray costs of US operations, including product
research and development, market testing and preparation for initiating full-
scale marketing efforts upon availability of marketable product. Proceeds from
the latest For its private placements, the Company has relied on various
exemptions from registration under applicable securities laws, including the
private placement exemption under Regulation D and Section 4(4) of the
Securities Act.
Other Commitments to Issue Stock
- --------------------------------
During the fiscal year ended June 30, 1993, no stock was issued for
employee salaries; 49,199,817 shares were issued for services of $511,002; and
5,128,666 shares were issued for debt reduction of $84,896.
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During the fiscal year ended June 30, 1994, 37,002,828 shares were
issued in consideration of accrued salaries of $615,570; 12,779,683 shares of
stock were issued in consideration of services of $582,437; and debtors accepted
19,393,157 shares in consideration of $317,886.
During the fiscal year ended June 30, 1995, 24,596,273 were issued to
pay accrued salaries of $721,323; 5,595,749 shares were issued to pay debt of
$138,296; and 797,097 shares were issued for services of $14,501.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The Financial Statements included herein are attached following the
signature page of this report.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
--------
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------------------------------
At June 30, 1995, the following were the directors and executive
officers of the Company. Directors serve until the next annual meeting of
shareholders and until their successors have been elected and qualified. The
officers are serving pursuant to employment agreements described under Item 11
below.
<TABLE>
<CAPTION>
Name Position Age Director Since Officer Since
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amb. Maxwell Rabb Honorary Chairman 83 April, 1991 N/A
of the Board
Robert Reed Rogers CEO, Treasurer, 66 August, 1983 August, 1983
Director
Richard E. Floegel President 51 August, 1995 June, 1995
Gregory Armijo Vice President, 32 July, 1994 July, 1992
Director
</TABLE>
In addition to the foregoing executive officers, the following key
employees are expected to make significant contributions to the business of the
Company. Such employees serve pursuant to employment agreements described under
Item 11 below.
10
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<TABLE>
<CAPTION>
Name Position Age Served as such since
- ------------------------------------------------------------------
<S> <C> <C> <C>
Fred Bezold Vice President, 66 January, 1986
Marketing
- ------------------------------------------------------------------
</TABLE>
Ambassador Maxwell M. Rabb joined the Company as Honorary Chairman of
the Board in April, 1991. Among his positions with the US Government, he served
for nine years as US Ambassador to Italy, for presidents Reagan and Bush. He is
a graduate of Harvard University and Harvard Law School.
Robert Reed Rogers has been President of the Company since August,
1983. Previously he was variously President of The Protcus Group, Inc; President
of Kensington Associates, Inc.; Group Vice President, American Electric, Inc.;
President, North American subsidiaries, Muirhead & Co., Ltd.; Manager of
Planning, Industrial Group, Litton Industries, Inc.; Consultant, McKinsey & Co.,
Inc., Faculty Member, Department of Business and Economics, Illinois Institute
of Technology; and C.O., Training Aids Department, U.S. Ninth Naval District.
Fred Bezold has been employed by the Company since January 1986.
Prior to that time he was variously President of Technical Development
Industries; President, Westel, Inc.; VP Marketing, Data Memory, Inc.; VP and
General Mgr., Ralph M. Parsons Electronics, XVP, Eicor, Inc.
Gregory Armijo has been employed by the Company since September, 1987.
Before joining the Company he had seven years experience in management with
retail, service industry, and telecommunications industries.
Richard E. Floegel has been employed by the Company since June, 1995.
For the previous six years he was Vice President Operations of Adaptive
Information Systems, a Hitachi Group company. Before that he was Director of
Product Sales for Laser Magnetic Storage International, and Director of product
Marketing for Control Data Corporation.
ITEM 11: EXECUTIVE COMPENSATION
- --------------------------------
During the Company's fiscal years ended June 30, 1993, 1994 and 1995,
respectively, none of the executive officers of the Company had cash
compensation equal to or which exceeded $60,000 per year.
Since January 1, 1995, the compensation of the Company's current
executive officers and key employees is as follows, subject to the agreements
described below:
<TABLE>
<CAPTION>
Name Base Salary Additional Compensation
- -------------------------------------------------------------
<S> <C> <C>
Robert Reed Rogers $125,000 none
Richard E. Floegel $110,000 none
Fred L. Bezold $ 70,000 none
Gregory Armijo $ 70,000 none
R. Wayne Marple $ 60,500 none
Donald R. Levering $ 62,500 none
</TABLE>
11
<PAGE>
During the fiscal year ended June 30, 1995, 24,596,273 shares were
issued to reduce accrued salaries of employees by $721,323.
During the fiscal year ended June 30, 1994, 37,002,828 shares were
issued to reduce total salaries accrued and common stock payable of $615,570.
During the fiscal year ended June 30, 1993, no shares were issued to
reduce salaries of employees.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
- ----------------------------------------------------------------------------
POTENTIAL CHANGE IN CONTROL
---------------------------
Security Ownership Of Certain Beneficial Owners.
- ------------------------------------------------
The following table shows the ownership of common stock by persons
other than members of management owning more than 5% of the 564,344,703
outstanding shares as of June 30, 1995. Unless otherwise indicated, all persons
have voting and investment power over the shares listed as beneficially owned by
them in the table.
<TABLE>
<CAPTION>
Number Percentage
Name of of Shares of
Beneficial Owner Owned Class Owned
- ------------------- --------- -----------
<S> <C> <C>
None. n/a n/a
</TABLE>
Security Ownership of Management.
- --------------------------------
The following table shows the ownership of common stock by directors, and all
directors and executive officers as a group, as of June 30, 1995. The
percentages given under "Percentage of Class Owned" are based on a total of
564,344,703 shares outstanding. Unless otherwise indicated, all persons have
voting and investment power over the shares listed as beneficially owned by them
in the table.
<TABLE>
<CAPTION>
Name of Beneficial Owner Number of Shares Owned Percentage of Class Owned
- --------------------------------------------------------------------------------
<S> <C> <C>
Robert Reed Rogers 72,621,414 12.87%
Gregory Armijo 28,003,461 4.96%
Fred Bezold 30,023,575 5.32%
----------- -----
All directors and 130,648,450 23.15%
officers as a group
</TABLE>
12
<PAGE>
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
During the fiscal year ended June 30, 1993, the Company issued to its
officers shares of its common stock based on performance and not in cancellation
of accrued or unpaid salaries. The dollar balance represents unpaid salary
accounts at June 30, 1993.
<TABLE>
<S> <C> <C>
Robert Reed Rogers 10,000,000 $131,415
Scott Hitt 10,000,000 -0-
Karen Kay Churchill 10,000,000 -0-
Gregory Armijo 10,000,000 $ 40,774
Fred Bezold -0- $116,799
Murray C. Stone -0- $ 14,500
</TABLE>
During the fiscal year ended June 30, 1994, the Company issued to its
officers shares of its common stock in cancellation of accrued or unpaid
salaries. The dollar balance represents unpaid salary accounts at June 30, 1994.
<TABLE>
<S> <C> <C>
Robert Reed Rogers 21,579,219 $9,600
Gregory Armijo 1,681,545 -0-
Fred Bezold 10,255,647 -0-
</TABLE>
During the fiscal year ended June 30, 1995, the Company issued to its
officers shares of its common stock in cancellation of accrued and unpaid
salaries. The dollar balance represents unpaid salary accounts at June 30,
1995.
<TABLE>
<S> <C> <C>
Robert Reed Rogers 13,339,847 -0-
Gregory Armijo 3,257,404 $7,357
</TABLE>
13
<PAGE>
PART IV
-------
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) The following financial information for the Registrant for the
fiscal years ended June 30, 1995, 1994 and 1993 is filed as part of this report.
(1) Financial Statements Index
<TABLE>
<S> <C>
Report of Independent Certified Public Accountant on
Financial Statements............................................ F-1
Balance Sheets at June 30, 1995 and 1994.......................... F-2
For the years ended June 30, 1995, 1994, and 1993
Statement of Operations................................. F-4
Statement of Changes in Shareholders' Equity............ F-5
Statement of Cash Flows................................. F-6
Notes to Financial Statements..................................... F-7
(2) Schedules
Report of Independent Certified Public Accountant on
Financial Statement Schedules................................... F-15
Statement of Supplementary Information for the years
ended June 30, 1995, 1994 and 1993.............................. F-16
Report of Independent Certified Public Accountant on
Financial Statement Schedules................................... F-17
Schedules:
V Properties, Equipment and Improvements.............. F-18
VI Accumulated Depreciation, Properties,
Equipment and Improvements.......................... F-19
</TABLE>
All other schedules are omitted since the required information is not present in
amounts sufficient to require submission of the schedule, or because the
information required is included in the Financial Statements and noted thereto.
14
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company had duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMPARATOR SYSTEMS CORPORATION
By: /s/ ROBERT REED ROGERS
----------------------------------
Robert Reed Rogers, CEO and Treasurer
Date: September 20, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
By: /s/ ROBERT REED ROGERS Date: September 20, 1995
------------------------------
Robert Reed Rogers, Director,
Chairman of the Board,
CEO and Treasurer
By: /s/ GREGORY ARMIJO Date: September 20, 1995
------------------------------
Gregory Armijo, Vice President
and Corporate Secretary
15
<PAGE>
COMPARATOR SYSTEMS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountant on
Financial Statements............................................ F-1
Balance Sheets at June 30, 1995 and 1994.......................... F-2
For the years ended June 30, 1995, 1994, and 1992
Statement of Operations................................. F-4
Statement of Changes in Shareholders' Equity............ F-5
Statement of Cash Flows................................. F-6
Notes to Financial Statements..................................... F-7
Report of Independent Certified Public Accountant on
Financial Statement Schedules................................... F-15
Schedules for the years ended June 30, 1995, 1994, and 1993:
V Properties, Equipment and Improvements.............. F-18
VI Accumulated Depreciation, Properties,
Equipment and Improvements.......................... F-19
</TABLE>
All other Schedules are omitted since the required information
is not present in amounts sufficient to require submission
of the Schedule, or because the information required is included in the
financial statements and noted thereto
16
<PAGE>
ELI BUCHALTER ACCOUNTANCY CORPORATION
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Comparator Systems Corporation
Irvine, California
I have examined the balance sheets of Comparator Systems Corporation as of June
30, 1995 and 1994 and the related statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended June 30, 1995. These Financial Statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
Financial Statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the Financial Statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Financial Statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall Financial Statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion the aforementioned Financial Statements present fairly in all
material respects the financial position of Comparator Systems Corporation as of
June 30, 1995 and 1994, and the results of their operations and their cash flows
for each of the years in the three-year period ended June 30th, 1995, in
conformity with generally accepted accounting principles.
The accompanying Financial Statements have been prepared on a going-concern
basis which contemplates continuity of operations and realization of assets and
liquidation of liabilities in the ordinary course of business. Because of
significant operating losses, the Company's ability to continue in existence is
dependent upon the attainment of future profitable operations and obtaining
adequate financing. The Financial Statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should
the Company be unable to continue in existence.
/s/ Eli Buchalter
-----------------------
Eli Buchalter
Accountancy Corporation
September 20, 1995
Los Angeles, California
F-1
<PAGE>
COMPARATOR SYSTEMS CORPORATION
BALANCE SHEETS
JUNE 30
ASSETS
<TABLE>
<CAPTION>
Notes 1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 34,871 $ 2,682
16 Accounts Receivable 797,723 800,170
1 Inventory 79,054 79,054
---------- ----------
Total Current Assets 911,648 881,906
---------- ----------
1 & 5 PROPERTY & EQUIPMENT NET 363,799 361,932
---------- ----------
1 & 4 PATENTS & LICENSES NET 2,433,529 2,665,281
---------- ----------
OTHER ASSETS
Deposits & Prepaid expenses 146,645 156,211
11 Prepaid Fees 507,693 616,000
9 Investments 1,216,626 1,216,626
12 Notes Receivable 72,526 72,526
Accrued Interest Receivable - Notes 26,109 17,406
---------- ----------
Total Other Assets 1,969,598 2,078,769
---------- ----------
TOTAL ASSETS $5,678,574 $5,987,888
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
F-2
<PAGE>
COMPARATOR SYSTEMS CORPORATION
BALANCE SHEETS
JUNE 30
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Notes LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
15 Accounts Payable $ 241,171 $ 248,286
15 Accrued Expenses 127,698 121,940
Sales Tax Payable 0 1,476
Accrued Payroll Taxes 7,790 8,773
3 Accrued Royalty Payable 42,000 42,000
Accrued Salary 68,291 6,698
Accrued Professional Services Payable 9,800 9,800
2 & 10 Judgments & Claims 323,536 328,905
Accrued Interest payable-Judgments & Claims 155,028 125,288
14 Notes Payable 338,125 338,125
Accrued Interest Payable on Notes 202,776 164,413
13 Investment Notes Payable 31,431 33,681
------------ ------------
Total Current Liabilities 1,547,648 1,429,385
------------ ------------
LIABILITIES, OFFICERS & DIRECTORS
Accounts Payable 40,317 71,440
Accrued Salaries Payable 23,158 27,101
Notes Payable 322,374 322,374
Accrued Interest Payable on Notes 83,817 51,580
------------ ------------
Total Liabilities - Officers & Directors 469,666 472,495
------------ ------------
TOTAL LIABILITIES 2,017,313 1,901,880
------------ ------------
SHAREHOLDERS' EQUITY
4 & 8 Common stock, $0.01 par value,
750,000,000 shares authorized,
shares issued, issuable and outstanding
564,344,703 at June 30, 1995
and 513,113,471 at June 30th, 1994 5,643,198 5,131,136
Treasury Shares 0 0
Preferred Stock, $5.00 par value,
50,000,000 authorized, no shares issued 0 0
Additional Paid In Capital 17,653,826 16,743,908
Retained Earnings (Deficit) (19,635,764) (17,789,036)
------------ ------------
SHAREHOLDERS' EQUITY 3,661,260 4,086,008
------------ ------------
$ 5,678,574 $ 5,987,888
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
F-3
<PAGE>
COMPARATOR SYSTEMS CORPORATION
STATEMENT OF OPERATIONS
YEARS ENDED JUNE, 30
<TABLE>
<CAPTION>
1995 1994 1993
---- ----- ----
<S> <C> <C> <C>
REVENUES $ 90,161 $ 258,376 $ 420,938
----------- ------------ ------------
COST & EXPENSES
Cost of sales 0 0 267
Selling expenses 121,855 126,416 147,399
Administrative expenses 1,439,763 1,828,988 817,153
Depreciation 34,490 18,407 27,796
Amortization 231,752 231,752 232,888
Interest expenses 109,030 104,660 116,853
----------- ------------ ------------
TOTAL COST & EXPENSES 1,936,890 2,310,223 1,342,356
----------- ------------ ------------
LOSS BEFORE INCOME TAXES (1,846,729) (2,051,847) (921,418)
PROVISION FOR INCOME TAXES 0 0 0
----------- ------------ ------------
NET LOSS $(1,846,729) $ (2,051,847) $ (921,418)
----------- ------------ ------------
NET LOSS PER SHARE $ (0.0035) $ (0.0045) $ (0.0025)
----------- ------------ ------------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 525,395,100 457,877,388 363,499,021
=========== ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
F-4
<PAGE>
COMPARATOR SYSTEMS CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
-----------------------------
Additional Total
Number of $0.01 Paid-in Shareholders'
shares Par Value Capital Deficit Equity
----------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance @ June 30, 1992 349,946,924 $3,499,469 $13,581,598 $(14,815,770) $ 2,265,297
Issuance of shares for:
Services 36,695,454 366,955 19,004 0 385,959
Cash 4,938,045 49,380 92,654 0 142,034
Debt 5,128,666 51,287 33,609 0 84,896
Improper Issue 12,504,363 125,044 0 0 125,044
Net Loss for Period 0 0 0 (921,418) (921,418)
----------- ---------- ----------- ------------ -----------
Balance @ June 30, 1993 409,213,452 4,092,135 13,726,865 (15,737,188) 2,081,812
Issuance of shares for:
Salaries 37,002,828 370,028 245,542 0 615,570
Services 12,779,683 127,797 454,640 0 582,437
Cash 23,422,368 234,224 1,718,868 0 1,953,092
Debt 19,393,157 193,932 123,954 0 317,886
Investment 5,000,000 50,000 450,000 0 500,000
Improper Issue 6,301,983 63,020 24,039 0 87,059
Net Loss for Period 0 0 0 (2,051,848) (2,051,848)
----------- ---------- ----------- ------------ -----------
Balance @ June 30, 1994 513,113,471 $5,131,136 $16,743,908 $(17,789,036) 4,086,008
Issuance of shares for:
Salaries 24,596,273 245,963 475,360 721,323
Services 5,595,749 55,957 82,339 138,296
Cash 22,971,097 229,711 369,772 599,483
Debt 797,097 7,971 6,530 14,501
Investment - - -
Stock Cancellation (2,728,984) (27,290) (24,331) (51,621)
Net Loss for Period (1,846,729) (1,846,729)
----------- ---------- ----------- ------------ -----------
Balance @ June 30, 1995 564,344,703 $5,643,448 $17,653,578 $(19,635,765) $ 3,661,261
=========== ========== =========== ============ ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
F-5
<PAGE>
COMPARATOR SYSTEMS CORPORATION
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(1,846,729) $(2,051,847) $(921,418)
----------- ----------- ---------
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Depreciation & Amortization 390,242 374,159 300,184
Issuance of common stock for services 115,835 582,437 182,921
Issuance of common stock for salaries 721,323 615,570 0
Issuance of common stock for debt 14,501 84,896
Improper issue of stock 0 647,778
Cancellation of common stock (51,621) 0 0
Write off for Bad Debts 16,000 0 0
Accrued Interest on notes receivable (17,934) (8,703) (8,703)
Liabilities, officers & directors (2,829) (344,595) 26,619
CHANGES IN CYCLICLE ACCOUNTS:
Accounts receivable 2,447 (783,170) 8,635
Accounts payable (7,115) (181,102) 5,311
Accrued expenses 5,758 (77,714) (62,882)
Sales Tax payable (1,476) 0 0
Accrued Payroll Taxes (983) (86,950) 15,975
Accrued Salary 61,593 (182,573) 274,239
Judgements & Claims & accrued interest thereon 24,372 (28,342) 21,456
Notes Payable & accrued interest thereon 36,113 (114,516) 38,768
----------- ----------- ---------
NET CASH USED IN OPERATING ACTIVITIES (540,503) (1,639,568) (33,999)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for equipment (36,357) (337,492) (5,000)
Cash received/(paid) from/(to) deposits 9,566 19,573
----------- ----------- ---------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (26,791) (317,919) (5,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short term debt (114,250)
Proceeds from issuing common stock for cash 599,483 1,953,092 142,035
----------- ----------- ---------
Increase/(decrease) in Cash 32,189 (4,395) (11,214)
Cash at beginning of period 2,682 7,077 18,291
Cash at end of period $ 34,871 $ 2,682 $ 7,077
=========== =========== =========
Cash paid during the year for Income Taxes 800 800 800
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
F-6
<PAGE>
COMPARATOR SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
DESCRIPTION OF BUSINESS - The Company was organized to exploit, through
-----------------------
licensing and manufacturing rights, patented technology for a fingerprint
comparison device.
Although the Company has had limited sales activity, with the passage of time
to develop this technology, the Company is no longer considered a development
stage enterprise.
BASIS OF FINANCIAL STATEMENTS - The accompanying financial statements have
-----------------------------
been prepared on a going-concern basis which contemplates the realization of
assets and satisfaction of liabilities and commitments in the normal course of
business. The Company has an operating history of losses.
Management is of the opinion that with the infusion of additional capital, the
Company can achieve profitable operations. However, no assurance can be given
that the Company will be able to fully develop, establish and market the
technology so as to generate profitable operations. Continuation of the Company
as a going concern is dependent upon future funding.
PROPERTY AND EQUIPMENT - Property and equipment are carried at cost.
----------------------
Depreciation is computed using the straight line method over a five to seven-
year life. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is recognized in income for the period. The cost of
maintenance and repairs is charged to income as incurred; significant renewals
and betterments are capitalized. Deduction is made for retirements resulting
from renewals or betterments.
PATENTS AND LICENSES - Patents and licenses are being amortized over a 17
--------------------
year period using the straight-line method and are carried at cost, less
accumulated amortization.
INVENTORY VALUATION - Inventories are valued at the lower of cost or market
-------------------
on a first-in, first-out basis.
INCOME TAX - The Company has not provided for income taxes as, in the
----------
opinion of management, no taxes are due except for minimal amounts applicable to
certain states. Investment tax credits are recognized when the related tax
benefits are realized.
REVENUE RECOGNITION - The Company recognizes revenue when a machine is sold
-------------------
and approved by its customer.
NET LOSS PER SHARE - Net loss per share is calculated using the weighted
------------------
average number of shares outstanding and authorized to be issued during the
applicable period.
2. JUDGEMENT AND CLAIMS PAYABLE AND SETTLEMENT
-------------------------------------------
The Company during the past fiscal years incurred obligations which it failed
to liquidate under the terms of the related agreements or open account. Various
creditors have filed lawsuits in an attempt to perfect their claims. In most
instances they received judgements for the amounts claimed plus interest and
certain costs related to the litigation. The Company during the current period
was attempting to negotiate settlements at reduced amounts with these creditors.
In certain instances the Company has been successful. The amount reflected in
the financial statements reflect the total amounts claimed plus costs or the
settled amounts which remained unpaid as of the applicable date.
During the fiscal year 1995, the Company negotiated settlements of certain
debt aggregating reductions of $5,369; during 1994, the amount was $78,644:
during 1993, the amount was $127,704.
F-7
<PAGE>
COMPARATOR SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS
3. INVENTORIES
-----------
Inventories comprised the following:
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Raw Materials $30,780 $30,780 $30,780
Work in Progress 36,179 36,179 36,179
Finished Goods 12,095 12,095 12,095
------- ------- -------
Total Inventories $79,054 $79,054 $79,054
======= ======= =======
</TABLE>
4. PATENTS
-------
On March 30, 1977 the Company's predecessor, Comparator Systems Corporation (a
California Corporation) entered into an agreement with Harold Green,
(hereinafter referred to as "Green") then a major shareholder, officer and
director, to be the exclusive licensee of the U.S. Patents on the Comparator
Systems, in consideration of shares of its common stock.
On January 4 1983, August 30, 1983 and May 30, 1985, the license agreement was
modified and extended and a new exclusive license agreement was reached
replacing all previous agreements and granting the Company the sole and
exclusive right to manufacture, distribute, sell and otherwise exploit the
devices described in the licensed patents and any other devices invented by
licenser, which are used or useful for the purposes described above.
The license was to terminate on the expiration of the term of the last of the
U.S. Patents to expire, which occurred on September 27, 1993. Minimum royalties
were $50,000 per year against five percent (5%) of defined gross revenues
derived by the Company from sales or other dispositions of the licensed devices
and related services and accessories.
During each of the three years ended June 30th, 1990, the Company charged the
minimum annual royalty of $50,000 to expense. No royalty was accrued during
fiscal year 1993, 1994 or 1995, as none was due. $42,000 has been accrued as
royalty payable, since 1990.
The Company was informed in April 1987, that a third party, Strategic Asset
Recovery Group, Inc., (a Nevada Corporation), (hereinafter referred to as
"SARG") had purchased the two patents licensed to the Company. "SARG" claimed
that the Company had breached the license agreement and sought to terminate the
license agreement. On April 24 1987, the Company filed an action against "SARG"
and various individuals and corporations affiliated with "SARG". The Company
sought and was granted injunctive relief and requested damages for wrongful
interference with the Company's prospective advantages and business relations.
On May 26, 1987, the defendants filed a cross-complaint against the Company and
certain officers for breach of the license agreement, seeking declaratory
relief, termination of the license agreement and an accounting. On June 11,
1987, the court preliminary enjoined "SARG" and other defendants, among other
things, to attempt to terminated the license agreement.
By letter of intent dated April 20, 1989, and agreement dated July 13, 1989,
and closed October 4, 1989, Strategic Asset Recovery Group, Inc., Ronald
Froelich and Harold Green entered into a settlement with the Company of the
above law suits and negotiated terms upon which the Company acquired all the
right, title and interest in the two United States Patents (No. 3,928,842 dated
December 23, 1975 and No. 3,982,836 dated September 28, 1976 and certain foreign
patents) all pertaining to the optical comparison of patterns such as
fingerprints. In addition,
F-8
<PAGE>
COMPARATOR SYSTEMS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
4. PATENTS (CONTINUED)
-------------------
the Company acquired exclusive sub license agreements from TRI-G Associates,
Ltd. (a California Limited Partnership) concerning the development, manufacture,
use and sale of products described in United States Patent No. 4,829,166 dated
May 9, 1989, for a computerized data bearing card and reader/writer therefore;
and in United States Patent Application No. 286214 filed December 19, 1989,
regarding major security through a digitized fingerprint, known as the
"Intelligent Card". In addition, Ronald Froelich assigned all of his right,
title and interest in and to that certain United States Patent No. 4,690,554
dated September 1, 1987, and foreign patents regarding the development and
manufacture of stand alone fingerprint comparison device using advanced
technology to compare two fingerprints.
As a result of these agreements, the Company paid Ronald Froelich the sum of
$10,125 plus accrued interest at June 30, 1989 of $4,299. In addition, Ronald
Froelich was to be retained to render research and development services to be
compensated at the rate of $3,000 per month and $90 per hour for services in
excess of 33 hours during any calendar month in connection with the development
and manufacturing of The Enhanced Comparator Fingerprint Device. The Company
also reimbursed Ronald Froelich $23,502 as reimbursement for costs and expenses
advanced by Ronald Froelich in the development of the Intelligent Card. No
payments were made to Ronald Froelich during the fiscal year 1993, 1994 or 1995.
Previously, Ronald Froelich had granted Tri-G Associates, Ltd. (a California
Limited Partnership) an exclusive license agreement to manufacture, distribute,
use, lease, sell and otherwise exploit the technology concerning Froelich's
"Enhanced Version of the Comparator ID-1 Device" and the "Intelligent Card".
Subject to earned royalties and a minimum royalty payment of $12,500 per
quarter. By agreements dated July 13, 1989, these rights were sub licensed to
the Company, in consideration of a payment of $25,000 and subject to the royalty
payments, the Company has authorized issuance to Tri-G of 46,109,903 shares
(being 9,221,981 shares as a result of the one for five reverse stock split in
August 1990) of common stock as consideration for all the exclusive agreement
rights valued at $1,613,847.
The consideration, other than the cash payments which had been accrued for
financial reporting at June 30, 1989, were paid through issuance of stock as
follows:
<TABLE>
<S> <C> <C>
SARG 35,690,000 shares $1,249,150
FROELICH 20,000,000 shares 700,000
GREEN 2,750,000 shares 96,250
----------
$2,045,400
==========
</TABLE>
The original license agreement was capitalized at $225,586. During the Fiscal
Year Ended June 30, 1989 the Company acquired all of Mr. Green's rights
outstanding for an additional capitalization of $55,000.
During December 1989 TRI-G Associate, Ltd were authorized to receive
46,109,903 shares of Common Stock for the exclusive license agreement (now being
9,221,981 shares).
Legal counsel for TRI-G Associates, Ltd., a California Limited Partnership
amended the terms of the July 13, 1989, agreement and which has been extended by
TRI-G and COMPARATOR, and accordingly, the exclusive of the partnership has been
extended and the shares issuable under the agreement is 9,221,981, to reflect
the one for five reverse stock split. These shares had been issued in May 1994.
F-9
<PAGE>
COMPARATOR SYSTEMS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
4. PATENTS (CONTINUED)
-------------------
Capitalized Costs and accumulated amortization for the past three years was as
follows.
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------------
Capitalized Costs: 1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Original License Rights $ 225,586 $ 225,586 $ 225,586
Patents 1989 (Green) 55,000 55,000 55,000
Patents 1989 (Froelich) 2,045,400 2,045,400 2,045,400
License 1989 (Tri-G) 1,613,847 1,613,847 1,613,847
----------- ----------- -----------
TOTAL 3,939,833 3,939,833 3,939,833
Less: Accum. Amortization (1,506,304) (1,274,552) (1,042,800)
----------- ----------- -----------
Total Patents & Licenses $ 2,433,529 $ 2,665,281 $ 2,897,033
=========== =========== ===========
</TABLE>
5. PROPERTY AND EQUIPMENT
----------------------
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Vehicle $ 3,500 $ 3,500 0
Accumulated Depreciation (1,225) (525) 0
Equipment & Machinery 121,996 121,996 84,733
Accumulated Depreciation (96,240) (88,634) (80,645)
Furniture & Fixtures 38,976 38,976 38,152
Accumulated Depreciation (38,329) (38,211) (38,152)
Tooling & Molds 484,175 447,818 147,429
Accumulated Depreciation (149,054) (122,988) (113,154)
--------- --------- ---------
Total Assets 648,647 612,290 270,314
Total Accumulated Depreciation (284,848) (250,358) (231,951)
--------- --------- ---------
Property and Equipment Net $ 363,799 $ 361,932 $ 38,363
========= ========= =========
</TABLE>
6. INCOME TAXES
------------
As of June 30, 1995, the Company has net operating loss carry forwards of
approximately $15,700,000 available to reduce future federal taxable income
which expire in the years 1995 through 2009. During the next three years;
$245,409 will expire in 1995, and $576,586 will expire in 1996 and $434,889 will
expire in 1997.
7. COMMITMENTS AND CONTINGENCIES
-----------------------------
LEASE - In October, 1993, the Company moved to new quarters under a 5-year
-----
lease providing for an annual rental of $77,965. At June 30, 1995 the Company
owed $47,162 for the lease at 18552 MacArthur Blvd., Irvine, California; and,
owed $38,010 for the office space at 2862 McGaw Avenue, Irvine, California; and,
$35,168 for the office space at 16591 Millikan Avenue, Irvine, California.
F-10
<PAGE>
COMPARATOR SYSTEMS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
-----------------------------------------
AGREEMENTS WITH EMPLOYEES - Employees have agreed to accept stock for accrued
-------------------------
salaries payable; during fiscal year 1993, no stock was issued for employee
salaries. During fiscal year 1994, 37,002,828 shares were issued in
consideration of $615,570. During fiscal year 1995, 24,596,273 shares were
issued in consideration of $721,323.
AGREEMENTS WITH CONSULTANTS AND DEBTORS - During fiscal year 1993, consultants
---------------------------------------
agreed to accept stock for accrued and current services; 41,824,120 shares of
stock in consideration of services of $470,855. During fiscal year 1994,
consultants accepted 12,779,683 shares of stock in consideration of services of
$582,437; During fiscal year 1994 debtors accepted 19,393,157 shares of stock
in consideration of $317,886. During fiscal year 1995, consultants accepted
5,595,749 shares of stock in consideration of services of $138,296. During
fiscal year 1995, debtors accepted 797,097 shares in consideration of $14,501.
EMPLOYMENT AGREEMENTS - On December 31, 1993, the Company extended the existing
---------------------
Employment Agreements, which have various completion dates. Each contract
contains the following Common conditions:
a. Provide a Stock Option Program
b. The Company shall provide a reasonable automobile allowance.
c. The Company shall reimburse the employee for reasonable entertainment,
travel, and similar items, subject to review and approval of the Board of
Directors.
d. The Company will provide dental and health insurance for the employee and
his or her immediate family, and to include term life insurance.
The following compensation was effective 1995:
<TABLE>
<CAPTION>
Employee Annual Base Compensation Additional Compensation
- ------------------ ------------------------ -----------------------
<S> <C> <C>
Robert Rogers $125,000 None
Fred Bezold $ 70,000 2% of sales
Gregory Armijo $ 70,000 None
Donald Levering $ 62,500 None
R. Wayne Marple $ 60,000 None
</TABLE>
8. COMMON STOCK, STOCK OPTIONS, WARRANT AND OTHER COMMITMENTS TO ISSUE STOCK
-------------------------------------------------------------------------
In March, 1989, a majority of shareholders of the Company voted to increase
the authorized common stock from 250,000,000 shares to 500,000,000 shares, and
authorized 50,000,000 shares of a $5.00 par value Preferred Stock. In December
1989, a majority of shareholders voted to increase the authorized common stock
from 500,000,000 shares to 750,000,000 shares.
9. INVESTMENT IN VALCORP, INC.
---------------------------
The Company acquired a 49.76% investment interest in a New Jersey based
company engaged in the nationwide sale of x-ray film and supplies. Their sales
for the fiscal year ended December 31, 1988 (Audited) reflected sales $6,954,786
with a net loss of $539,298 for the year. The carrying value was based on 49.76%
of shareholders equity at December 31, 1987, as adjusted to the fiscal year
audit for the period ended December 31, 1988. Valcorp markets its product
through dealers who may provide a ready-made distribution system for planned
medical identification systems to be made by the Company.
F-11
<PAGE>
COMPARATOR SYSTEMS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
INVESTMENT IN VALCORP, INC.(CONTINUED)
--------------------------------------
The Company issued 328,006 shares of its five dollar par non-voting, non-
dividend paying convertible preferred stock. The preferred stock issued was
converted at a price of fifteen cents ($0.15) per share of common stock. This
preferred stock was converted by negotiation to 7,993,533 shares of pre-split
common stock, being 1,598,707 post-split shares by letter agreement dated April
16, 1990. The carrying value of this asset held for investment is $407,950.
Since the inception of the investment in Valcorp, the Company has never had
any influence in managerial or financial activities in Valcorp. Therefore, the
Company elects to carry Valcorp investment at cost method rather than the equity
method.
INVESTMENT IN TRUST DEEDS
-------------------------
The Company acquired three first trust deeds on acreage in Spotsylvania,
Virginia, in consideration of the issuance of 9,833,333 shares of one cent par
value common stock valued at three cents ($0.03) per share, for a purchase cost
of $295,000. The trust deeds carried an interest rate of 12%. Two of the trust
deeds required the owner to make quarterly payments of princeipal and interest
of $3,000 until payment of the principal sum of $112,500,000. Two notes covers
25 lots, with release clauses of $5,000 per lot. The payments were current. In
May, 1993 the trust deeds were converted into 250,000 shares of a preferred
stock of the debtor. The trust deeds were cancelled. The preferred stock
carries a six percent dividend and rights of conversion.
INVESTMENT IN WIRA ASSETS
-------------------------
In November, 1993 the Company acquired Wira Assets Sdn Bhd in consideration
for the issuance of 5,000,000 shares of one cent par value common stock valued
at ten cents ($0.10) per share, for a purchase cost of $500,000. The acquisition
of Wira Assets Sdn Bhd gave the Company an 25% of Carini Sdn Bhd which, in turn,
owned 60% of Comparator Systems Malaysia. Effectively giving the Company a
controlling interest (55%) in Comparator Systems Malaysia.
10. LEGAL PROCEEDINGS
-----------------
At June 30, 1995, the Company was a debtor in approximately 27 cases in which
judgements against the Company had become final, with an aggregate unsatisfied
judgement debt of $323,526 principal and accrued interest of $155,028. All of
these cases has been finalized. Eight(8) other cases for a total of
approximately $300,000 are in dispute and have not been finalized.
11. PREPAID FEES
------------
Under a compensation agreement, an independent contractor was retained to
perform consulting services on Russian sales and marketing for the Company, for
a term of ten years, with a right to extend. The initial payment of $400,000
was in the form of ten million shares of restricted one cent par value common
stock. This retainer will be amortized over the life of the contract. In
addition, the contractor will receive a commission of fourteen percent (14%) on
each one million dollars of sales, not to exceed a payment of three million five
hundred thousand dollars during the initial ten year term. During fiscal year
1993, the Board of Directors authorized management and key employees to be
issued forty two million shares as a bonus contingent on the closing of the
joint venture manufacturing and financing agreements in Malaysia. The value of
the restricted one cent par value was capitalized at $420,000. This value will
be amortized over five years.
12. NOTES RECEIVABLE
----------------
During fiscal year 1989, the Company advanced funds to a non-affiliate
to be prepaid within one year, at twelve percent interest. The note was
carried as a current asset in the financials for fiscal year 1990. The note was
not paid timely,
F-12
<PAGE>
COMPARATOR SYSTEMS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
however management extended the due date. The note has been reclassified in the
balance sheet to "Other Assets." It is management's opinion that the note will
be paid in full, with accrued interest.
13. INVESTMENT NOTES PAYABLE
------------------------
During the period from March 26 through June 30, 1991, the Company borrowed
funds from individuals on an individual basis which provided the investor with a
share of the Company's restricted common stock based on three cents ($0.03) per
share and a note due in one year for the principal amount plus thirty three and
one-third percent (33 1/3%) interest payable in a lump sum on the due date. The
principal amount recorded was recorded as a prepaid interest, accrued as an
expense on a quarterly amortization basis to interest expense. At June 30, 1995
the outstanding notes were in default.
At June 30, 1991, the total notes amounted to $47,500 principal (received by
the Company) and the stipulated interest to be paid was $15,829. The total
accrual, being $63,329, was amortized at June 30, 1991 as $7,811 interest
expense. The prepaid interest of $55,518 was recorded in the deposits and
prepaid expenses, to be amortized quarterly. The total of the principal and
stipulated interest is recorded in the liabilities as investment notes payable.
Prepaid interest has been expensed in Fiscal Year 1992. The total amount past
due at June 30, 1995 was $31,431.
14. NOTES PAYABLE-OTHERS
--------------------
The Company has executed promissory notes to twelve (12) individuals for funds
to be used in operations in fiscal year 1990 and before. All of these notes are
past due along with accrued interest at 10% per annum.
15. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
-------------------------------------
These two accounts represents accruals at the end of the fiscal year for costs
of operations and administration that remain unpaid.
16. OFFICER EMBEZZLEMENT/IMPROPER ISSUANCE OF STOCK
-----------------------------------------------
The Company has terminated the services of it's Corporate Secretary/Vice
President Administration, due to misconduct on her part. In October, 1993, the
Company became aware of several unusual and suspicious financial transactions
involving this Officer and placed her on administrative leave pending an
internal investigation. The Company retained independent outside legal counsel
to conduct this investigation and also instituted an internal audit of its
banking activities and stock issuances. Although this investigation is still
continuing, the Company has reluctantly concluded that this Officer has
improperly issued Comparator stock to herself, her family, and her friends,
without knowledge of the Company's President or Board of Directors. In addition
to these unauthorized issuances, the Company's investigation suggests that this
Officer has misapplied Company funds to satisfy personal obligations. The
Company currently estimates the value of the misappropriated stock to be
$747,778 and the cash to be $97,201. The Company was able to recover $100,000
of these stock issuances.
A complaint against the Officer has been filed with the Irvine Police
Department. The Company has also recently been successful in obstructing the
proposed transfer of some of the misappropriated shares from the Officer to a
third party. The Company is currently weighing all available options to recoup
any and all damages suffered on account of the Officer's activities, including
the filing of a civil action against her and other possible defendants.
F-13
<PAGE>
COMPARATOR SYSTEMS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
17. CURRENT EVENTS
--------------
Subsequent to the end of the fiscal year 1995, the Company acquired, through a
purchase of assets, International Financial Systems, Inc., a supplier of
integrated hardware/software operating systems to the banking industry. IFSI
has an existing customer base of credit union and cooperative customers in the
United States and in Central America. The Company's fingerprint comparison
software can readily be integrated with IFSI's operating system software, to
provide new banking industry customers with fingerprint identity verification
capability as well as to provide IFSI's existing customer base with biometric
identification on a retrofit basis. IFSI is operated as a wholly-owned
subsidiary of the Company.
END OF NOTES TO THE FINANCIAL STATEMENTS
F-14
<PAGE>
ELI BUCHALTER
ACCOUNTANCY CORPORATION
To the Board of Directors
Comparator Systems Corporation
Irvine, California
My examinations were made for the purpose of forming an opinion on the basic
Financial Statements taken as a whole. The supplementary information for the
years ended June 30, 1995, 1994, 1993, is presented for purposes of additional
analysis and is not a required part of the basic Financial Statements. My
opinion covering the basic Financial Statements (page F-1) describes an
uncertainty regarding the realizability of the assets and the carrying value in
the Financial Statements. The supplementary information has been subjected to
the auditing procedures applied in the examination of the basic Financial
Statements and, in my opinion, subject to the effects of the information
presented or any adjustments, if any, as might have been required had the
resolution of such matters discussed above been known, is fairly stated in all
material respects in relation to the basic Financial Statements taken as a
whole.
/s/ ELI BUCHALTER
-----------------------
Eli Buchalter
Accountancy Corporation
September 20, 1995
Los Angeles, California
F-15
<PAGE>
COMPARATOR SYSTEMS CORPORATION
STATEMENT OF SUPPLEMENTARY INFORMATION
FOR THE YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
COST OF SALES
Inventory reduction $ 0 $ 0 $ 267
Rent Expenses 0 0 0
Supplies 0 0 0
Outside services 0 0 0
---------- ---------- --------
Total Cost of sales $ 0 $ 0 $ 267
---------- ---------- --------
SELLING EXPENSES
Salaries $ 70,000 $ 77,250 $ 84,500
Advertising 0 0 0
Seminars & Promotion 0 0 2,147
Auto expenses 11,841 7,919 13,358
Sales expense 40,014 41,247 47,394
---------- ---------- --------
Total selling expenses $ 121,855 $ 126,416 $147,399
---------- ---------- --------
ADMINISTRATIVE EXPENSES
Salaries - employees 318,599 $ 194,856 $139,536
Salaries - officers & directors 524,445 325,867 210,000
Auto expenses 55,654 53,556 18,446
Advertising 245 0 700
Bad Debts 16,000 0 0
Bank charges 1,842 2,292 1,962
Insurance 1,359 1,566 5,865
Legal & Accounting 51,786 78,163 47,282
Consulting services 255,317 663,073 72,858
Office expenses 21,932 53,384 47,305
Permits & Fees 2,174 3,245 8,943
Rent 84,905 64,135 43,560
Repairs & Maintenance 2,897 866 2,953
Stock transfer & shareholder expense 20,929 36,509 7,936
Payroll expenses 5,479 63,542 69,122
Telephone 21,023 25,938 18,009
Travel 11,097 149,897 101,880
Commissions 41,390 103,938 16,066
Utilities 0 2,619 1,410
Courier & freight 2,690 5,542 3,320
---------- ---------- --------
Total Administrative expenses $1,439,763 $1,828,988 $817,153
========== ========== ========
</TABLE>
F-16
<PAGE>
ELI BUCHALTER
ACCOUNTANCY CORPORATION
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The report on the financial statements of Comparator Systems Corporation
for the year ended June 30, 1995 is included in this Form 10-K. In connection
with my examination of such Financial Statements, I have also examined the
related Financial Statement Schedules V, VI, and X for the three years ended
June 30, 1994 and 1993.
In my opinion, the Financial Statement Schedules referred to above, when
considered in relation to the basic Financial Statements taken as a whole,
present fairly the information required to be included therein, in conformity
with generally accepted accounting principles applies on a consistent basis.
/s/ Eli Buchalter
-------------------------------------
Eli Buchalter Accountancy Corporation
September 20, 1995
Los Angeles, California
F-17
<PAGE>
COMPARATOR SYSTEMS CORPORATION
SCHEDULE V - PROPERTIES EQUIPMENT IMPROVEMENTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
OTHER
CHANGES BALANCE AT
BALANCE AT RETIREMENT DEBIT &/OR END OF
CLASSIFICATION BEGINNING ADDITIONS OR SALES CREDIT PERIOD
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JUNE 30, 1995
PROPERTIES:
PATENTS & LICENSES 3,939,833 0 0 0 3,939,833
EQUIPMENT: MACHINERY 121,996 0 0 0 121,996
FURNITURE 38,976 0 0 0 38,976
TOOLING & PROTOTYPES 447,818 36,357 0 0 484,175
VEHICLE 3,500 0 0 0 3,500
---------- -------- -------- ---------- ----------
TOTALS $4,552,123 $ 36,357 $ - $ - $4,588,480
========== ======== ======== ========== ==========
FOR THE YEAR ENDED JUNE 30, 1994
PROPERTIES:
PATENTS & LICENSES 3,939,833 0 0 0 3,939,833
EQUIPMENT: MACHINERY 84,733 37,263 0 0 121,996
FURNITURE 38,152 824 0 0 38,976
TOOLING & PROTOTYPES 147,429 300,389 0 0 447,818
VEHICLE 0 3,500 0 0 3,500
---------- -------- -------- ---------- ----------
TOTALS $4,210,147 $341,976 $ - $ - $4,552,123
========== ======== ======== ========== ==========
FOR THE YEAR ENDED JUNE 30, 1993
PROPERTIES:
PATENTS & LICENSES 3,939,833 0 0 0 3,939,833
EQUIPMENT: MACHINERY 79,733 5,000 0 0 84,733
FURNITURE 38,152 0 0 0 38,152
TOOLING & PROTOTYPES 147,429 0 0 0 147,429
VEHICLE 10,000 0 (10,000) 0 0
---------- -------- -------- ---------- ----------
TOTALS $4,215,147 $ 5,000 $(10,000) $ - $4,210,147
========== ======== ======== ========== ==========
</TABLE>
F-18
<PAGE>
COMPARATOR SYSTEMS CORPORATION
SCHEDULE VI - ACCUMULATED DEPRECIATION
PROPERTIES, EQUIPMENT IMPROVEMENTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
OTHER
CHANGES BALANCE AT
BALANCE AT RETIREMENT DEBIT &/OR END OF
CLASSIFICATION BEGINNING ADDITIONS OR SALES CREDIT PERIOD
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JUNE 30, 1995
PROPERTIES:
PATENTS & LICENSES 1,274,552 231,752 0 0 1,506,304
EQUIPMENT: MACHINERY 88,634 7,606 0 0 96,240
FURNITURE 38,211 118 0 0 38,329
TOOLING & PROTOTYPES 122,988 26,066 0 0 149,054
VEHICLE 525 700 0 0 1,225
---------- -------- -------- -------- ----------
TOTALS $1,524,910 $266,242 $ - $ - $1,791,152
========== ======== ======== ======== ==========
FOR THE YEAR ENDED JUNE 30, 1994
PROPERTIES:
PATENTS & LICENSES 1,042,800 231,752 0 0 1,274,552
EQUIPMENT: MACHINERY 80,645 7,989 0 0 88,634
FURNITURE 38,152 59 0 0 38,211
TOOLING & PROTOTYPES 113,154 9,834 0 0 122,988
VEHICLE - 525 0 0 525
---------- -------- -------- -------- ----------
TOTALS $1,274,751 $250,159 $ - $ - $1,524,910
========== ======== ======== ======== ==========
FOR THE YEAR ENDED JUNE 30, 1993
PROPERTIES:
PATENTS & LICENSES 809,912 232,888 0 0 1,042,800
EQUIPMENT: MACHINERY 64,697 15,948 0 0 80,645
FURNITURE 38,152 0 0 0 38,152
TOOLING & PROTOTYPES 102,806 10,348 0 0 113,154
VEHICLE 500 0 (500) 0 0
---------- -------- -------- -------- ----------
TOTALS $1,016,067 $259,184 $ (500) $ - $1,274,751
========== ======== ======== ======== ==========
</TABLE>
F-19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 34,871
<SECURITIES> 0
<RECEIVABLES> 797,723
<ALLOWANCES> 0
<INVENTORY> 79,054
<CURRENT-ASSETS> 911,648
<PP&E> 363,799
<DEPRECIATION> 390,242
<TOTAL-ASSETS> 5,678,574
<CURRENT-LIABILITIES> 1,547,648
<BONDS> 0
<COMMON> 5,643,198
0
0
<OTHER-SE> (1,931,937)
<TOTAL-LIABILITY-AND-EQUITY> 5,678,574
<SALES> 0
<TOTAL-REVENUES> 90,161
<CGS> 0
<TOTAL-COSTS> 121,855
<OTHER-EXPENSES> 1,815,035
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,845,929
<INCOME-TAX> 800
<INCOME-CONTINUING> (1,846,729)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,846,729)
<EPS-PRIMARY> 0.003
<EPS-DILUTED> 0.003
</TABLE>
