<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended September 30th, 1995
Commission file number: 0-8951
COMPARATOR SYSTEMS CORPORATION
(Exact name of registrant as specified in charter)
Colorado 95-3151060
________________________________ _____________________
(State or other jurisdiction of I.R.S. Employer
Incorporation or organization Identification No.
4350 Von Karman, Suite 180, Newport Beach, CA 92660
___________________________________________________
(Address of principal executive offices) (Zip Code)
714 851-4300
____________
(Registrant's telephone number, including area code)
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
_____________ _____________
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the close of the period covered by this report.
Common Stock, $0.01 par value 581,516,697 shares
Preferred Stock, $5.00 par value 0 shares
__________________________________ __________________
Title of Class Number of shares
Outstanding
September 30th, 1995
Contents Index Appears on Page 2, sequentially numbered document.
Page 1 of 13
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I Page Number
Financial Information
Item 1. Financial Statements:
Condensed Unaudited Balance Sheets 3 & 4
Condensed Unaudited Statement of
Operations Three Months 5
Statement of Changes of Shareholders'
Equity 6
Condensed Unaudited Statement of Cash
Flow Three Months 7
Notes to Condensed Unaudited Financial
Statements 8, 9, 10
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 11
PART II Other Information 12
Signatures 13
</TABLE>
Page 2 of 13
<PAGE>
COMPARATOR SYSTEMS CORPORATION
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR
ENDED ENDED
SEPT. 30TH, 1995 JUNE 30th, 1995
---------------- ---------------
<S> <C> <C>
Notes
CURRENT ASSETS
Cash $ 4,296 $ 34,871
Accounts Receivable 798,122 797,723
Inventory 79,054 79,054
---------- ----------
TOTAL CURRENT ASSETS 881,471 911,648
---------- ----------
PROPERTY & EQUIPMENT NET 371,777 363,799
---------- ----------
PATENTS & LICENSES NET 2,375,591 2,433,529
---------- ----------
OTHER ASSETS
Deposits & Preferred expenses 146,645 146,644
Prepaid Fees 468,066 507,693
Investments 1,366,626 1,216,626
Notes Receivable 72,526 72,526
Accrued Interest Receivable 28,285 26,109
---------- ----------
TOTAL OTHER ASSETS 2,082,148 1,969,598
---------- ----------
TOTAL ASSETS $5,710,987 $5,678,574
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
Page 3 of 13
<PAGE>
COMPARATOR SYSTEMS CORPORATION
CONSOLIDATED CONDENSED UNAUDITED BALANCE SHEETS
June 30th
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR
ENDED ENDED
SEPTEMBER 30th, 1995 JUNE 30th, 1995
-------------------- ---------------
<S> <C> <C>
Notes LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 258,771 $ 241,171
Accrued Expenses 125,335 127,700
Sales Tax Payable - -
Accrued Payroll Taxes 7,790 7,790
Accrued Royalty Payable 42,000 42,000
Accrued Salary 99,365 68,291
Accrued Professional Services Payable 9,800 9,800
Judgments & Claims 323,536 323,536
Accrued Interest payable-Judgments
& Claims 163,117 155,028
Notes Payable 338,125 338,125
Accrued Interest Payable on Notes 210,529 202,776
Investment Notes Payable 31,431 31,431
------------ ------------
TOTAL CURRENT LIABILITIES 1,609,801 1,547,648
------------ ------------
LIABILITIES, OFFICERS & DIRECTORS
Accounts Payable 25,954 40,317
Accrued Salaries Payable 62,604 23,158
Notes Payable 322,374 322,374
Accrued Interest Payable on Notes 91,876 83,187
------------ ------------
TOTAL OTHER LIABILITIES 502,808 469,666
------------ ------------
TOTAL LIABILITIES 2,112,609 2,017,314
------------ ------------
SHAREHOLDERS; EQUITY
Common stock, $0.01 par value,
750,000,000 shares authorized,
shares issued, issuable and
outstanding 581,516,697 at
September 30th 1995 and
564,344,703 at June 30th, 1995 5,814,917 5,643,198
Treasury Shares 0 0
Preferred Stock, $5.00 par value,
50,000,000 authorized, no shares
issued 0 0
Additional Pain In Capital 18,003,267 17,653,826
Retained Earnings (Deficit) (20,219,806) (19,635,764)
------------ ------------
SHAREHOLDERS' EQUITY 3,598,378 3,661,260
------------ ------------
$ 5,710,987 $ 5,678,574
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
Page 4 of 13
<PAGE>
COMPARATOR SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED FISCAL YEAR
SEPTEMBER 30th ENDED
----------------------------- JUNE 30th
1995 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $ 20,926 $ 13,006 $ 90,161
------------ ------------ ------------
COST & EXPENSES
Cost of sales 0 0 0
Selling expenses 50,498 29,696 121,855
Administrative expenses 463,122 195,091 1,439,763
Depreciation 7,910 7,158 34,490
Amortization 57,938 57,938 231,752
Interest expenses 25,501 24,615 109,030
------------ ------------ ------------
TOTAL COST & EXPENSES 604,968 314,498 1,936,890
LOSS BEFORE INCOME TAXES (584,042) (301,492) (1,846,729)
PROVISION FOR INCOME TAXES 0 800 0
------------ ------------ ------------
NET LOSS $ (584,042) $ (302,292) $ (1,846,729)
------------ ------------ ------------
NET LOSS PER SHARE $ (0.0010) $ (0.0006) $ (0.0035)
------------ ----------- ------------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 576,014,046 515,237,915 525,395,100
============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
Page 5 of 13
<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 AT JUNE 30TH 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 AT JUNE 30TH 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 AT JUNE 30TH 1995 564,344,703 $5,643,448 $17,653,578 $(19,635,765) $ 3,661,260
Issuance of shares for:
Salaries 0
Services 6,393,333 63,933 127,867 191,800
Cash 3,200,000 32,000 64,000 96,000
Debt
Investment 7,578,661 75,786 157,574 233,360
Stock Cancellation -
Net Loss for Period (584,042) (584,042)
----------- ---------- ----------- ------------ -----------
BALANCE AT SEPT. 30TH 1995 581,516,697 $5,815,167 $18,003,019 $(20,219,807) $ 3,598,378
=========== ========== =========== ============ ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
Page 6 of 13
<PAGE>
COMPARATOR SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR
ENDED ENDED
SEPTEMBER 30th JUNE 30th
1995 1994 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
NET LOSS $(584,042) $(301,491) $(1,846,729)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH USED IN
OPERATING ACTIVITIES
Depreciation & Amortization 65,848 65,096 390,242
Issuance of common stock for services 191,800 0 115,835
Issuance of common stock for salaries 0 0 721,323
Issuance of common stock for debt/
investment 233,360 0 14,501
Cancellation of common stock 0 0 (51,621)
Write off for Bad Debts/Assets 0 5,300 16,000
Accrued Interest on notes receivable (2,176) (2,176) (17,934)
Liabilities, officers & directors (77,230) 40,422 (2,829)
CHANGES IN CYCLICLE ACCOUNTS:
Accounts receivable (399) (3,750) 2,447
Accounts payable 17,600 (133) (7,115)
Accrued expenses (2,365) 10,264 5,758
Sales Tax Payable 0 0 (1,476)
Accrued Payroll Taxes 0 0 (983)
Accrued Salary 31,074 37,580 61,593
Judgements & Claims & accrued
interest thereon 8,089 (4,805) 24,372
Notes Payable & accrued
interest thereon 7,753 46,225 36,113
--------- --------- -----------
NET CASH USED IN OPERATING ACTIVITIES (110,687) (107,468) (540,503)
CASH FLOW FROM INVESTING ACTIVITIES
Cash paid for equipment (15,888) (7,183) (36,357)
Cash received/(paid) from/(to)
deposits 9,566
--------- --------- -----------
TOTAL CASH FLOW FROM INVESTING
ACTIVITIES (15,888) (7,183) (26,791)
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of short term debt
Proceeds from issuing common
stock for cash 96,000 123,900 599,483
--------- --------- -----------
Increase/(decrease) in Cash (30,575) 9,249 32,189
Cash at beginning of period 34,871 2,682 2,682
Cash at end of period $ 4,296 $ 11,931 $ 34,871
========= ========= ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
Page 7 of 13
<PAGE>
COMPARATOR SYSTEMS CORPORATION
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30th 1995
1. Condensed Financial Statements
------------------------------
The condensed financial statements have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Company's Form 10-K on file with the Securities and Exchange Commission.
2. Significant Account Policies
----------------------------
The carrying value of properties and equipment are at original cost. Other
significant accounting policies are as follows:
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 expense as incurred;
significant renewals and betterment 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 issued and outstanding. Common share equivalents and contingent
shares issuable are not considered as their effect is anti-dilutive.
Page 8 of 13
<PAGE>
3. Inventories comprised the following:
-----------------------------------
<TABLE>
<CAPTION>
Quarter Ended Fiscal Year
September 30th Ended
1995 June 30th 1995
-------------- --------------
<S> <C> <C>
Raw Materials $30,780 $30,780
Work in Progress 36,179 36,179
Finished Goods 12,095 12,095
------- -------
Total Inventories $79,054 $79,054
======= =======
4. Property and Equipment:
----------------------
Quarter Ended Fiscal Year
September 30th Ended
1995 June 30th 1995
-------------- --------------
Equipment & Machinery $ 121,996 $ 121,996
Accum. Depreciation (96,861) (96,240)
Furniture & Fixtures 38,976 38,976
Accum. Depreciation (38,358) (38,329)
Molds & Prototypes 500,063 484,175
Accum. Depreciation (156,139) (149,054)
Vehicle 3,500 3,500
Accum. Depreciation (1,400) (1,225)
-------- ---------
Total Assets 664,535 648,647
Total Accum. Depreciation (292,758) (284,848)
--------- ---------
Property and Equipment Net $ 371,777 $ 363,799
========= =========
5. Patents and Licenses:
--------------------
Capitalized costs and accumulated amortization were as follows:
Quarter Ended Fiscal Year
September 30th Ended
1995 June 30th 1995
-------------- --------------
Original License Rights $ 255,586 $ 255,586
Patents 1989 (Green) 55,000 55,000
Patents 1989 (Froelich) 2,045,400 2,045,400
Licenses 1989 (TRI-G) 1,613,847 1,613,847
----------- -----------
TOTAL 3,939,833 3,939,833
Less: Accum. Amortization (1,564,242) (1,506,304)
----------- -----------
Total Patents & Licenses $ 2,375,591 $ 2,433,529
=========== ===========
</TABLE>
Page 9 of 13
<PAGE>
6. Investments:
-----------
Capitalized costs were as follows:
<TABLE>
<CAPTION>
Quarter Ended Fiscal Year
September 30th Ended
1995 June 30th 1995
-------------- --------------
<S> <C> <C>
Preferred Stock $ 250,000 $ 250,000
Valcorp Inc. 407,950 407,950
Sun Bird Tech 36,176 36,176
Interdec Corp 22,500 22,500
Wira Assets Bhd 500,000 500,000
International Financial Systems, Inc. 150,000 n/a
---------- ----------
Total $1,366,626 $1,216,626
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
Page 10 of 13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONDENSED STATEMENT OF OPERATIONS
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's earnings during the
periods included in the accompanying condensed statement of operations.
REVENUES
During the current period the Company acquired International Financial
Systems, Inc., which company is operated as a wholly-owned subsidiary. Revenue
for the period resulted from fingerprint comparison system operations and from
sales of services related to financial institution operating systems. No revenue
has yet been received from the Company's new software-based fingerprint
comparison technology for identity verification, which is designed both to
verify a "known" person's identity, and to determine the owner of a fingerprint
presented to the system for identification. Production prototypes of the
Company's new identification systems are nearing completion in preparation for
their introduction as new products in the MILIPOL 95 Exposition in Paris
commencing November 21, 1995. The Company is currently informed that the
contract for a fingerprint-secured identification card, on which it has been
working for some months with a foreign country, may be signed at that time;
pending the outcome of political developments in that country, the Company still
has no absolute assurance of being awarded the contract.
COSTS AND EXPENSES
Selling expenses continued to be incurred in furtherance of planned
domestic and international sales of the Company's newly-developed biometric
identification products; in furtherance of sales of newly-added computerized
time and attendance systems products; and in support of sales of credit union
and bank operating systems. Depreciation and Amortization are expensed
quarterly. Administration expenses reflect the Company's expanded operations,
and its engineering program to complete development of its new biometric
identification products. The Company now has twenty three employees and
consultants in the United States, one in Malaysia, and five in Honduras, where
the Company is in the process of establishing a sales and marketing subsidiary.
During the current quarter the Company recognized interest expense on unpaid
notes and judgements payable.
The Company continues to devote a major portion of the funds available to
it to the preparation for production of its latest biometric fingerprint
identity search and verification systems. The new design performs a "real-time"
scan of a finger and compares the resulting image with records stored in either
internal or remote system memory, or with a print encoded on a card, such as a
driver's license, passport, credit card, national identification card, resident
alien card, medical benefits card or welfare card. The design affords
significantly lower manufacturing costs, and permits very accurate identity
verification in less than one second, compared with up to four seconds for
earlier models.
The Company still operates on a limited budget, which situation has
continued to constrain its growth rate. Despite signed investment agreements, to
date funds promised to the Company under those agreements have not been
received. Negotiations are now underway with other sources of major financing
required to mount a full-scale sales and marketing program, and to establish
manufacturing capability to replace the Malaysian production facility the
Company lost in 1994.
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
Page 11 of 13
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceeding
----------------
There have been no changes in legal proceedings since the annual report
on Form 10-K for the year ended June 30th, 1995.
Item 2. Changes in Securities
---------------------
Not applicable
Item 3. Defaults upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters of a Vote of the Security Holders
-------------------------------------------------------
Not applicable
Item 5. Other Information
-----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits: None
b. Reports on Form 8-K
(1) The Company filed a Current Report on Form 8 K dated August 31,
1995, with respect to the appointment of Richard E. Floegel to the
Board of Directors.
(2) The Company filed a Current Report on Form 8 K dated September 28,
1995, with respect to the acquisition of International Financial
Systems, Inc.
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
Page 12 of 13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPARATOR SYSTEMS CORPORATION
Date: November 10th, 1995 By: /s/ GREGORY A. ARMIJO
------------------- ----------------------
Gregory A. Armijo
Vice President &
Corporate Secretary
Date: November 10th, 1995 By: /s/ ROBERT REED ROGERS
------------------- -----------------------
Robert Reed Rogers
Chairman, Treasurer,
Chief Executive Officer
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995
<PERIOD-START> JUL-01-1995 JUL-01-1995
<PERIOD-END> SEP-30-1995 JUN-30-1995
<CASH> 4,296 34,871
<SECURITIES> 0 0
<RECEIVABLES> 798,122 797,723
<ALLOWANCES> 0 0
<INVENTORY> 79,054 79,054
<CURRENT-ASSETS> 881,471 911,648
<PP&E> 371,777 363,799
<DEPRECIATION> 664,535 648,677
<TOTAL-ASSETS> 5,710,987 5,678,574
<CURRENT-LIABILITIES> 1,609,801 1,547,648
<BONDS> 0 0
<COMMON> 5,814,917 5,643,198
0 0
0 0
<OTHER-SE> (2,216,539) (1,981,938)
<TOTAL-LIABILITY-AND-EQUITY> 5,710,987 5,678,574
<SALES> 15,000 0
<TOTAL-REVENUES> 20,926 90,161
<CGS> 0 0
<TOTAL-COSTS> 50,498 121,855
<OTHER-EXPENSES> 554,470 1,815,035
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 25,501 109,030
<INCOME-PRETAX> (584,042) (1,846,729)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (584,042) (1,846,729)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (584,042) (1,846,729)
<EPS-PRIMARY> (0.001) (0.003)
<EPS-DILUTED> (0.001) (0.003)
</TABLE>
