<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q SB
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER 8951
COMPARATOR SYSTEMS CORPORATION
(Exact name of small business issuer as specified in
its business charter)
Colorado 95-3151060
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
92 corporate Park, Suite C-314, Irvine, CA 92604
(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 / /
APPLICABLE TO CORPORATE ISSUERS
Sate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: December 31,
1997.
The number of shares of registrant's common stock outstanding as of
December 31, 1997 was 614,234,838.
<PAGE>
CONTENTS Page No.
PART I Financial Information
Item 1: Financial Statements:
Unaudited Balance Sheets as of December 30,
1997, and Fiscal year Ended June 30, 1997 3
Unaudited Statement of Income for the Three
Months and Six Months Ending December 31,
1997 and 1996 4
Unaudited Statement of Cash Flows for the
Three Months and Six Months Ending December
31, 1997 and 1996 5
Item 2: Management' 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 for the year
ended June 30, 1997 and Quarterly Report on
Form 10-QSB for the period ended September
30, 1998
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. Reports on Form 8-K
None
SIGNATURES 8
2
<PAGE>
<TABLE>
COMPARATOR SYSTEMS CORPORATION
PART 1. FINANCIAL INFORMATION
UNAUDITED BALANCE SHEETS
Item 1. Financial Statements
<CAPTION>
Six Months Fiscal Year
ended ended
December 31, 1997 June 30, 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 3,711 $ 2,523
Other receivable 14,744 14,744
Total Current Assets 15,115 17,267
PROPERTY AND EQUIPMENT:
Machinery and equipment 139,551 139,551
Furniture and fixtures 60,177 60,177
Tooling and molds 74,998 74,998
Total property and equipment 274,666 274,666
Less Accumulated Depreciation (257,166) (254,666)
Property and equipment, net 17,500 20,000
TOTAL ASSETS $ 36,156 $ 37,267
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Judgments and claims $ 375,596 $ 295,036
Notes payable 1,279,862 1,181,962
Accrued salaries and taxes 1,434,618 1,363,568
Accrues expenses 659,331 634,651
Accrued interest 631,490 577,114
Accrued expenses due to officers 1,450 35,800
Total Current Liabilities 4,382,347 4,088,131
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 6,142,277 6,142,350
750,000,000 authorized, 614,234,838
shares issued and outstanding at
Dec. 31, 1997, and Sept. 30, 1997
Additional paid-in capital 18,680,277 18,680,277
Retained earnings (deficit) (29,169,019) (28,873,491)
Total Shareholders' Deficit (4,346,392) (4,050,864)
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT $ 35,955 $ 37,267
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
COMPARATOR SYSTEMS CORPORATION
UNAUDITED STATEMENT OF INCOME
<CAPTION>
Three Months Six Months
ended December 31, ended December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES $ 0 $ 47,874 $ 0 $ 231,079
OPERATING EXPENSES:
General and adminis-
trative 175,192 203,039 191,164 445,567
Marketing 0 127,090 0 188,703
Research and develop-
ment 0 0 0 1,500
Professional fees 39,247 129,460 49,987 193,152
Total operating
expenses (214,435) (459,589) (241,151) (828,922)
LOSS FROM OPERATIONS (214,435) (311,715) (241,151) (577,843)
OTHER INCOME (EXPENSE)
Interest expense (27,188) (28,664) (54,376) (55,959)
Other income, net 0 0 0 0
Total other expense,
net (27,188) (28,664) (54,376) (55,959)
LOSS BEFORE PROVISION
FOR INCOME TAXES (241,627) (340,379) (295,527) (633,802)
NET LOSS $ (241,627) $ (340,379) $ (295,527) $ (633,802)
NET LOSS PER SHARE:
Net loss $ (0.00039) $ (0.0006) $ (.00042) $ (0.0010)
Weighted average
shares outstanding 614,234,838 611,609,965 614,234,838 611,609,965
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
<TABLE>
COMPARATOR SYSTEMS CORPORATION
STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended December 31, 1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(295,527) $(633,802)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization 2,500 13,145
Provisions for doubtful accounts
Issuance of common stock for services,
salaries, debt, investment
Changes in operating assets and
liabilities, other receivable
Other receivables 5,164
Prepaid expenses and other assets 2,289
Accrued expenses 352,361
Net cash used by operating activities (293,027) (260,843)
CASH FLOWS USED BY INVESTING ACTIVITIES:
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from subscriptions/issuance
of common stock 65,000
Increase in borrowings 97,900 158,436
Net cash provided by financing
activities 97,900 223,436
NET INCREASE (DECREASE) IN CASH (195,127) (37,407)
CASH, BEGINNING OF YEAR 2,523 42,980
CASH, END OF YEAR $ 3,711 $ 5,573
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for interest 0 1,350
Cash paid for taxes 0
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
Notes to Unaudited Financial Statements
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principals 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 financial statements and notes thereto
included in the Company's annual report on Form 10-KSB for the year ended June
30, 1997.
The balance sheet at June 30, 1997 has been derived form 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
<PAGE>
Comparator Systems Corporation
Item 2: Management's Discussion and Analysis of Financial Conditions
Overview
The Company continues to experience 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
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 $3,700 in funds
available for operations as of December 31, 1997. Apart from the Officers
and Directors (who have deferred their salaries), 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 $500,000. This
additional capital, if available, should be sufficient for the
commercialization of the Company's prior technology (separate and distinct
from the Company's Comparator 5000 technology) in conjunction with existing
synergistic, state of the art, mainstream, public domain technologies.
Management feels that the combination of the above will place the Company
in a position to market a biometric identity system utilizing the Company's
technologies and that of others that is card based and portable. 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. 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 have to be resolved in order for the Company to market that technology and
to have any opportunity to make that technology financially viable.
7
<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: March 15, 1998 By /s/ John D. Hinterleitner
___________________________
John D. Hinterleitner
Corporate Secretary &
Chief Financial Officer
Date: March 15, 1998 By: /s/ Thomas C. Hanscome
___________________________
Chairman and
Chief Executive Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 3,711
<SECURITIES> 0
<RECEIVABLES> 14,744
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 274,666
<DEPRECIATION> 257,166
<TOTAL-ASSETS> 36,156
<CURRENT-LIABILITIES> 4,382,347
<BONDS> 0
0
0
<COMMON> 6,142,277
<OTHER-SE> (10,488,742)
<TOTAL-LIABILITY-AND-EQUITY> 36,156
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 241,151
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,376
<INCOME-PRETAX> (295,527)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (295,527)
<EPS-PRIMARY> (.003)
<EPS-DILUTED> (.003)
</TABLE>
