<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-9940
FINGERMATRIX, INC.
New York 13-2854686
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
145 Palisade Street, Dobbs Ferry, New York 10522-1617
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (914) 693-1050
None
(Former name, former address and former fiscal year, if changes since
last report)
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 and
Exchange Act of 1934 during the preceding twelve months (or for such
shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at December 31, 1996
Common stock $.01 par value 8,746,469
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
The accompanying financial statements and information are
submitted as required by Form 10-Q. The financial information
does not include all disclosures that are required by generally
accepted accounting principles.
In the opinion of management, all adjustments that are
necessary to present fairly, the financial position of
Fingermatrix, Inc. ("the Company") for the period included,
have been made.
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PART I - FINANCIAL STATEMENTS
FINGERMATRIX, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
December 31, September 30,
1996 1996
-------- --------
Current assets:
Cash and cash equivalents $258,745 $404,986
Inventories 148,288 78,870
Prepaid expenses and
other current assets 40,815 156,842
-------- --------
Total current assets 447,848 640,698
-------- --------
Property and equipment, net of
accumulated depreciation of
$49,312; $64,600 at
September 30, 1996 162,710 174,308
-------- --------
Patents, net of accumulated
amortization of $111,732;
$108,180 at September 30, 1996 129,801 133,353
Deposits 13,185 13,605
-------- --------
142,986 146,958
-------- --------
Total assets $753,544 $961,964
======== ========
See notes to financial statements.
1
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FINGERMATRIX, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
1996 1996
------ ------
Liabilities:
Accounts payable - trade $ 89,996 $ 1,291
Accrued expenses 70,255 126,459
Current portion of long-term debt 217,000 504,839
----------- -----------
Total liabilities 377,251 632,589
----------- -----------
Stockholders' equity:
Common stock - $.01 par value:
20,000,000 shares authorized;
8,746,469 and 8,206,150 shares
issued and outstanding 87,465 82,062
Additional paid in capital 61,025,977 60,452,875
Deficit accumulated during
the development stage (60,737,149) (60,205,562)
----------- -----------
Stockholders' equity 376,293 329,375
----------- -----------
Total liabilities and
stockholders' equity $ 753,544 $ 961,964
=========== ===========
See notes to financial statements.
2
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FINGERMATRIX, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
--------- ---------
Revenues:
Net sales $ 3,400 $ -
Interest income 675 3,118
--------- ---------
4,075 3,118
--------- ---------
Expenses:
Operating costs 225,033 241,557
General and administrative 305,020 199,509
Interest 5,009 22,779
--------- ---------
535,662 463,845
--------- ---------
Net loss $(531,587) $(460,727)
--------- ---------
--------- ---------
(Loss) per share $ (.06) $ (.11)
--------- ---------
--------- ---------
Weighted average number
of shares outstanding 8,485,369 4,126,947
--------- ---------
--------- ---------
See notes to financial statements.
3
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PART I - FINANCIAL STATEMENTS
FINGERMATRIX, INC.
(A Development Stage Company)
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Common Stock Additional Development
----------------- Paid-In Stage
Share Amount Capital Deficit Total
----- ------ ------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance, September 30,
1996 8,206,150 $ 82,062 $60,452,875 $(60,205,562) $ 329,375
Warrants exercised 40,319 403 78,134 - 78,537
Shares issued pursuant
to private placement 500,000 5,000 494,968 - 499,968
Net loss for the three
months ended
December 31, 1996 - - - (531,587) (531,587)
--------- -------- ----------- ------------ ---------
Balance, December 31,
1996 8,746,469 $ 87,465 $61,025,977 $(60,737,149) $ 376,293
--------- -------- ----------- ------------ ---------
--------- -------- ----------- ------------ ---------
</TABLE>
See notes to financial statements.
4
<PAGE>
PART I - FINANCIAL STATEMENTS
FINGERMATRIX, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
Cash flows from operating activities:
Net loss $(531,587) $ (460,727)
--------- ----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 15,092 4,691
Amortization 3,552 3,300
Increase (decrease) in cash flows from
changes in operating assets and
liabilities:
Prepaid expenses 116,447 (6,144)
Inventory (69,418) -
Accounts payable 88,705 (20,086)
Accrued expenses (144,043) (573,990)
--------- ----------
Net cash used in operating activities (521,252) (1,052,956)
--------- ----------
Cash flows from investing activities:
Acquisition of property and equipment (3,494) (30,238)
--------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 578,505 765,958
Repayment of notes payable (200,000) (200,000)
Repayment of long-term debt - (176,040)
--------- ----------
Net cash provided by financing activities 378,505 389,918
--------- ----------
Net decrease in cash (146,241) (693,276)
Cash, beginning of period 404,986 1,099,402
--------- ----------
Cash, end of period $ 258,745 $ 406,126
--------- ----------
--------- ----------
Supplemental disclosures:
Increase in stockholders' equity
resulting from issuance of stock
in lieu of bonuses $ 43,875
----------
----------
See notes to financial statements.
5
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FINGERMATRIX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1996
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared
in conformity with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and the
applicable rules of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
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. Operating results for the three
month period ended December 31, 1996 are not necessarily indicative of
the results that may be expected for the year ending September 30, 1997.
For further information, refer to the financial statements and footnotes
for the years ended September 30, 1996, 1995, and 1994.
Business operations
The Company has been in the development stage and, accordingly,
has directed its efforts and resources to product and prototype
development and production planning of its electronic fingerprint
identification systems. The Company operated as a debtor in possession
pursuant to Chapter 11 of the Federal Bankruptcy Code until September,
1994, at which date a Trustee was appointed. On March 31, 1995, a Plan
of Reorganization was confirmed and, accordingly, the Company exited
from protection of the Bankruptcy Court and the Company's Management was
transferred to a Board of Directors.
2. Stock Warrants
In addition to the common shares issued pursuant to the terms of
the reorganization plan, the Company issued three classes of common
stock warrants, Series A, B and C. The number of warrants issued for
the preceding three months is detailed in the chart below.
6
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FINGERMATRIX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1996
2. Stock Warrants (continued)
Summary of warrants exercised and outstanding:
Number of Number of
Warrants Warrants
Outstanding Outstanding Total
at at Exercise Potential
September 30, Warrants December 31, Price Conversion
Class 1996 Exercised 1996 Per Share Amounts
----- ------------ --------- ----------- --------- ----------
B Warrants 1,245,681 40,319 1,205,362 $2.00 $2,410,724
C Warrants 100,000 - 100,000 $ .01 $ 1,000
Class B warrants entitle the holder thereof to purchase for $2.00 one
share of common stock in exchange for one warrant. These warrants expire
January 15, 1997.
Class C and additional Warrants entitle the holder thereof to
purchase for $.01 one share of common stock in exchange for one warrant.
Between October 1, 1996 and December 31, 1996, warrants were
exercised generating $78,537 and resulting in the issuance of 40,319 common
shares. Class A Warrants expired January 15, 1996.
7
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the condensed Financial Statements of the Company and notes thereto
annexed hereto.
Liquidity and Capital Resources
After nearly twenty years of operation and a bankruptcy
reorganization, the Company is still a development stage company and it
still has not yet achieved a sufficient volume of sales to cover the large
expenditures required for product development, production engineering,
tooling, equipment, and promotion and sale of its products. As a
consequence, the Company has continuously operated at a loss from its
inception to the present. It has been and is currently dependent on the
sale of its securities to fund its operations.
By filing for relief under the Bankruptcy Law, the Company expected
to shed itself of a substantial portion of the burden of its prior
capitalization and, to a lesser extent, of its general unsecured debt, so
as to be able to finance further development and marketing of its
fingerprint identification technology, which appeared to be much more
advanced in many areas than the technology being used by others.
During the quarter ended December 31, 1996, the Company received
$45,000 from the conversion of its warrants issued under the Bankruptcy
Plan.
The Company had as of December 31, 1996 cash in the sum of $259,000,
and working capital of $70,500. The monthly costs of the Company for the
quarter ended December 31, 1996 averaged $166,000. Based upon continuation
of such monthly operating costs, the Company has sufficient capital to
continue for approximately 1-1/2 months from December 31, 1996 assuming
that it has no revenues from sales of its products and services and that
it does not raise additional capital through the sale of its securities.
While the Company is expecting orders for its Single Print Scanner, at this
time, however, it does not have any substantial orders, nor can it
represent that any will be received.
8
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)
The monthly operating costs do not take into account the remaining
payment which the Company has to make on the bankruptcy obligation. The
remaining payment owed on the bankruptcy obligation to SIS is $217,000 due
April 19, 1997. The Company has paid on the bankruptcy obligations through
December 31, 1996 a total of $2,104,000, all of its financed from funds
raised from the equity lenders and the private placement.
In order to finance funding for operations of the Company as well as
to pay for the bankruptcy obligations, the Company may seek such funding
through sales of its securities in private placements exempt from
registration under the Securities Act. Also refer to footnote 2 to the
Condensed Financial Statements, that discusses the outstanding warrants
available for conversion at December 31, 1996.
Results of Operations
During the three months ended December 31, 1996 and 1995, the Company
had revenues from sales of $3,400 and $ -0-, respectively. During the same
period, operating costs decreased $16,500, or 7%, as compared to the
corresponding prior year period. This is primarily attributable to a drop
in consulting expenses. The main components of operating expenses are
payroll and related employment costs, outside consulting development costs,
and research and development costs. Said costs aggregated $218,000 for the
1996 period, as compared with $186,000 for 1995.
General and administrative expenses increased $106,000 in the 1996
quarter, as compared to a decrease of a similar amount in 1995. The 1996
period included higher professional and accounting fees, higher payroll and
related taxes, higher depreciation expense resulting from the acquisition
of fixed assets, and higher telephone and traveling expenses. The other
components of general and administrative expenses remained relatively
constant, as compared with the prior year.
Interest expense decreased from $22,800 in 1995 to $5,000, or 80%, in
1996. This is the result of the debt repayments made during the year as
a result of the bankruptcy plan.
9
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits.
(b)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FINGERMATRIX, INC.
(Registrant)
Dated 2/13/97 By
Thomas T. Harding, President
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> $258,745 $404,986
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 148,288 78,870
<CURRENT-ASSETS> 447,848 640,698
<PP&E> 212,022 238,908
<DEPRECIATION> 49,312 64,600
<TOTAL-ASSETS> 753,544 961,964
<CURRENT-LIABILITIES> 377,251 632,589
<BONDS> 0 0
0 0
0 0
<COMMON> 87,465 82,062
<OTHER-SE> 287,828 247,313
<TOTAL-LIABILITY-AND-EQUITY> 753,544 961,964
<SALES> 3,400 0
<TOTAL-REVENUES> 4,075 3,118
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 530,653 441,066
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,009 22,779
<INCOME-PRETAX> (531,587) (460,727)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (531,587) (460,727)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (531,587) (460,727)
<EPS-PRIMARY> $ (.06) $ (.11)
<EPS-DILUTED> 0 0
</TABLE>
