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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 QSB
{x} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT 1934
FOR THE QUARTER ENDED MARCH 31, 1997
COMMISSION FILE NUMBER: 0-8951
COMPARATOR SYSTEMS CORPORATION
------------------------------
(Exact name of small business issuer as specified in its business charter)
Colorado 95-3151060
- ------------------------------- -----------------
(State or other jurisdiction of I.R.S. Employer
Incorporation or organization) Identification No.
4667 MacArthur Blvd., Suite 400, Newport Beach, CA 92660
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(Address of principal executive offices) (Zip Code)
(714) 851-4300
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the 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 _____ No __X__
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: March 31, 1997
The number of shares of Registrant's common stock outstanding as of March 31,
1997, was 614,234,838.
1
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CONTENTS
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PART I Page Number
Financial Information -----------
<S><C> <C> <C>
Item 1. Financial Statements:
Consolidated Unaudited Balance Sheets as of March 31, 1997
and Fiscal Year ended June 30, 1996 3
Consolidated Unaudited Statement of Income for Three Months and Nine Months
ending March 31, 1997 and 1996 4
Consolidated Unaudited Statement of Cash Flows for the Nine
Months ending March 31, 1997 and 1996 5
Notes to Consolidated Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II Other Information
Item 1. Legal Proceedings
Incorporated by reference to the Company's Annual Report on Form 10-KSB/A/A
for the year ended June 30, 1996
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. Exhibit 27
Financial Data Schedule
b. 1. The Company filed a Current Report on Form 8-K dated December 16, 1996 with
respect to the resignation of Armond J. Schroeder as President and Director
and appointment of Ms Marianne Bedford as Chairperson to the Board.
2 The Company filed a Current Report on Form 8-K dated April 3, 1997 with respect
to the resignation of Marianne Bedford as Chairman and Director as of March 21, 1997
and the Company dismissing her as President and CEO effective March 25, 1997.
SIGNATURES 8
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2
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COMPARATOR SYSTEMS CORPORATION
PART I. FINANCIAL INFORMATION
CONSOLIDATED UNAUDITED BALANCE SHEETS
Item 1. Financial Statements
<TABLE>
<CAPTION>
Nine Months Fiscal Year
ended ended
March 31, 1997 June 30, 1996
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ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,364 $ 42,980
Other receivables 25,511 30,675
Prepaid expenses and other current assets 0 9,355
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Total Current Assets 26,875 83,010
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PROPERTY AND EQUIPMENT:
Machinery and equipment 141,320 141,320
Furniture and fixtures 77,904 77,904
Tooling and molds 74,998 74,998
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Total property and equipment 294,222 294,222
Less accumulated depreciation (237,380) (217,662)
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Property and equipment, net 56,842 76,560
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DEPOSITS 0 $ 29,305
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TOTAL ASSETS $ 83,717 $ 188,875
============ =============
LIABILITIES & SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Judgments and claims $ 295,036 $ 296,536
Notes payable 1,032,232 529,422
Accrued salaries and taxes 1,291,146 1,035,782
Accrued expenses 759,727 471,590
Accrued interest 458,266 418,002
Notes payable to related party 90,000 412,374
Accrued expenses due to related party 3,330 113,580
Deferred income 0 23,715
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Total current liabilities 3,929,737 3,301,001
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SHAREHOLDERS' DEFICIT:
Preferred Stock - par value $5.00 per share
50,000,000 shares authorized, none issued
Common stock - par value $0.01 per share,
750,000,000 shares authorized,
614,234,838 shares and 610,334,838 shares
issued and outstanding at March 31, 1997
and June 30, 1996, respectively 6,142,350 6,103,350
Common stock subscribed 65,000 136,578
Additional Paid In Capital 18,680,337 18,582,759
Retained earnings (deficit) (28,733,707) (27,934,813)
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Total shareholders' deficit (3,846,020) (3,112,126)
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TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $ 83,717 $ 188,875
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
3
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COMPARATOR SYSTEMS CORPORATION
CONSOLIDATED UNAUDITED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Nine Months
ended March 31, ended March 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 5,484 $ 142,858 $ 256,563 $ 378,308
------------ ------------ ------------ ------------
OPERATING EXPENSES:
General and administrative 128,066 79,639 573,633 838,253
Marketing 3,954 181,677 192,657 538,429
Research and development - 124,048 1,500 179,842
Professional fees 10,078 22,385 203,230 111,110
------------ ------------ ------------ ------------
Total operating expenses 142,098 407,749 971,020 1,667,634
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (136,614) (264,891) (714,457) (1,289,326)
OTHER INCOME (EXPENSE):
Interest expense (28,478) (24,551) (84,437) (75,554)
Other income, net 0 0 20,926
------------ ------------ ------------ ------------
Total other expense, net (28,478) (24,551) (84,437) (54,628)
------------ ------------ ------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (165,092) (289,442) (798,894) (1,343,954)
PROVISION FOR INCOME TAXES 0 0
------------ ------------ ------------ ------------
NET LOSS $ (165,092) $ (289,442) $ (798,894) $ (1,343,954)
============ ============ ============ ============
NET LOSS PER SHARE:
Net loss $ (0.0003) $ (0.0005) $ (0.0013) $ (0.0023)
Weighted average shares outstanding 614,234,838 594,253,952 613,351,589 586,747,687
</TABLE>
See accompanying notes to consolidated financial statements
4
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COMPARATOR SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS
OF CASHFLOWS
FOR THE QUARTER ENDED MARCH 31
<TABLE>
<CAPTION>
Nine Months
ended March 31
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(798,894) $(1,343,953)
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Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 19,718 216,139
Issuance of common stock for services, salaries, debt, investment 0 503,823
Changes in operating assets and liabilities:
Other receivables 5,164 (147,988)
Prepaid expenses and other assets 9,355 0
Accrued expenses 448,300 540,834
Deposit 29,305 0
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Net cash used by operating activities (287,052) (231,145)
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CASH FLOWS USED BY INVESTING ACTIVITIES -
Capital expenditures 0 (189,860)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from subscription/issuance of common stock 65,000 435,050
Increase in borrowings 180,436 (44,817)
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Net cash provided by financing activities 245,436 390,233
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NET INCREASE/(DECREASE) IN CASH (41,616) (30,772)
CASH, BEGINNING OF YEAR 42,980 34,871
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CASH, END OF YEAR $ 1,364 $ 4,099
========= ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest 0 0
Cash paid for taxes 0 0
</TABLE>
See accompanying notes to consolidated financial statements
5
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Notes to Consolidated Unaudited Financial Statements
1. Basis of Presentation
The accompanying consolidated unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Regulation S-
B. Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. For
further information, refer to the consolidated financial statements and notes
thereto included in the Company's annual report on Form 10-KSB/A/A for the year
ended June 30, 1996, as amended June 20, 1997.
The balance sheet at June 30, 1996 has been derived from the audited financial
statements at that date but does not include all of the information and notes
required by generally accepted accounting principles for complete financial
statements.
2. Income Taxes
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.
3. 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.
6
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Comparator Systems Corporation
Item 2: Management's Discussion and Analysis of Financial Conditions
Overview
The Company has experienced an increasingly-critical shortage of working
capital, with priority for the usage of its very limited funds being given to
legal fees and essential Company survival expenses other than salaries. Indeed,
it does not presently have sufficient cash assets, without the borrowing of
funds from third parties, to pay the costs of legal counsel retained for the
continued representation of the Company in the Securities and Exchange
Commission ("SEC") litigation and for needed advice and assistance in compliance
with the disclosure and reporting requirements of the 1934 Act. As a result, the
Company's business operations, at present, are essentially dormant with
approximately $4,500 in funds available for operations as of June 20, 1997. In
addition, the Company has vacated its previous business offices and is now
utilizing, on a month-to-month basis, a 180 square foot executive suite, at 4667
Mac Arthur Boulevard, Suite 400, Newport Beach, California 92660, at a monthly
cost approximately of $625. Apart from the Officers and Directors, the Company
has no paid employees. The Company is not presently selling any products nor
does it have the components to manufacture or produce products.
Despite these extremely adverse operational and financial conditions, the
current board of directors believes the Company could continue in business if it
were able to raise additional capital of at least $125,000, which would be
utilized primarily to enable the Company to confirm its legal rights to the
Comparator 5000 fingerprint comparison device. The management of the Company is
aware, however, and acknowledges herein, that there are presently significant
legal issues as to the ownership rights that the Company may have to the
technology in the Comparator 5000 device. While the Company believes that the
facts relating to the development of the Comparator 5000 technology will
ultimately support Company claims to its rights to this fingerprint comparison
device, certain former consultant and employees of the Company dispute this
claim and continue their claim to the ownership of this device and the related
technology. In addition, the staff of the SEC has expressed concerns with the
Company's claims to ownership rights in the Comparator 5000 technology.
Accordingly, investors are cautioned that even if the Company were successful in
raising additional capital, of which there can be no assurance, there are
significant legal issues relating to ownership rights in the Comparator 5000
technology that will ultimately have to be resolved favorably to the Company, in
order for the Company to recommence business operations and to have any
opportunity to become financially viable.
The Company's transfer agent, United Stock Transfer (UST), notified the Company
on May 18, 1997 that they had exhausted its supply of the Company's stock
certificates and that funds were required to print new certificates. Funds were
sent to them for that purpose. Subsequent to the receipt of funds UST converted
the funds to other purposes in opposition to the requirement to print new
certificates. The Company was then notified that UST would no longer transfer
any stock certificates until such time as an unpaid amount claimed by UST was
paid in full. UST has been asked to provide detailed accounting as to the amount
claimed by UST. UST, as of the date of this filing, has not been able or is not
willing to provide documentation as to the amount or agreement to the amounts
owed to it. Investors and stockholders should be advised until such time as this
matter is resolved that UST will not transfer stock for any sales that occur.
7
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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: June 20, 1997 By: /s/ John D. Hinterleitner
----------------------------
John D. Hinterleitner
Corporate Secretary &
Chief Financial Officer
Date: June 20, 1997 By: /s/ Thomas C. Hanscome
--------------------------
Thomas C. Hanscome
Chairman and
Chief Executive Officer
8
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<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-START> JAN-01-1997 JUL-01-1995
<PERIOD-END> MAR-31-1997 JUN-30-1996
<CASH> 1,364 42,980
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 26,875 83,010
<PP&E> 294,222 294,222
<DEPRECIATION> 237,380 217,662
<TOTAL-ASSETS> 83,717 188,875
<CURRENT-LIABILITIES> 3,929,737 3,301,001
<BONDS> 0 0
0 0
0 0
<COMMON> 6,142,350 6,239,928
<OTHER-SE> 18,680,337 18,582,759
<TOTAL-LIABILITY-AND-EQUITY> 83,717 188,875
<SALES> 0 0
<TOTAL-REVENUES> 5,484 357,939
<CGS> 0 0
<TOTAL-COSTS> 142,098 2,352,023
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 28,478 115,421
<INCOME-PRETAX> (165,092) (2,101,513)
<INCOME-TAX> 0 800
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (165,092) (2,102,313)
<EPS-PRIMARY> (0.003) (0.004)
<EPS-DILUTED> 0 0
</TABLE>
