<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 6 months period ended March 31, 1997
--------------------------------------------
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 March 31, 1997
- --------------------------- -----------------------------
Common stock $.01 par value 9,242,911
<PAGE>
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.
<PAGE>
PART I - FINANCIAL STATEMENTS
FINGERMATRIX, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, September 30,
---------- -------------
1997 1996
---------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $282,199 $404,986
Inventories 147,458 78,870
Prepaid expenses and
other current assets 71,564 156,842
-------- --------
Total current assets 501,221 640,698
-------- --------
Property and equipment, net of
accumulated depreciation of
$65,004; $64,600 at
September 30, 1996 147,618 174,308
-------- --------
Patents, net of accumulated
amortization of $115,284;
$108,180 at September 30, 1996 126,249 133,353
Deferred charges 16,841 -
Deposits 12,805 13,605
-------- --------
155,895 146,958
-------- --------
Total assets $804,734 $961,964
======== ========
</TABLE>
See notes to financial statements.
1
<PAGE>
FINGERMATRIX, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, September 30,
----------- -------------
1997 1996
----------- -------------
<S> <C> <C>
Liabilities:
Accounts payable - trade $ 103,144 $ 1,291
Accrued expenses 81,637 126,459
Current portion of long-term debt 117,000 504,839
----------- -----------
Total liabilities 301,781 632,589
----------- -----------
Stockholders' equity:
Common stock - $.01 par value:
20,000,000 shares authorized;
9,242,911 and 8,206,150 shares
issued and outstanding 92,430 82,062
Additional paid in capital 61,760,547 60,452,875
Deficit accumulated during
the development stage (61,350,024) (60,205,562)
----------- -----------
Stockholders' equity 502,953 329,375
----------- -----------
Total liabilities and
stockholders' equity $ 804,734 $ 961,964
=========== ===========
</TABLE>
See notes to financial statements.
2
<PAGE>
PART I - FINANCIAL STATEMENTS
FINGERMATRIX, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31
--------------------------------- -------------------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 75 $ - $ 3,475 $ -
Interest income 2,525 8,933 3,200 12,051
--------- --------- ---------- ----------
2,600 8,933 6,675 12,051
--------- --------- ---------- ----------
Expenses:
Operating costs 247,959 238,624 450,548 429,511
General and administrative 363,259 330,573 691,323 589,122
Interest 4,257 21,466 9,266 44,245
--------- --------- ---------- ----------
615,475 590,663 1,151,137 1,062,878
--------- --------- ---------- ----------
Net loss $(612,875) $ (581,730) $(1,144,462) $(1,050,827)
========= ========== =========== ===========
Loss per share $ (.07) $ (.10) $ (.13) $ (.20)
========= ========== =========== ============
Weighted average number of
shares outstanding 9,091,451 6,055,961 8,788,410 5,091,454
========= ========== =========== ===========
</TABLE>
3
<PAGE>
PART I - FINANCIAL STATEMENTS
FINGERMATRIX, INC.
(A Development Stage Company)
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 1997
<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 175,486 1,755 347,716 - 349,471
Shares issued pursuant
to private placement 861,275 8,613 959,956 - 968,569
Net loss for the six
months ended
March 31, 1997 - - - (1,144,462) (1,144,462)
--------- -------- ----------- ------------ -----------
Balance, March 31,
1997 9,242,911 $ 92,430 $61,760,547 $(61,350,024) $ 502,953
========= ======== =========== ============ =========
</TABLE>
4
<PAGE>
PART I - FINANCIAL STATEMENTS
FINGERMATRIX, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,144,462) $(1,050,827)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 30,184 12,165
Amortization 7,104 6,600
Increase (decrease) in cash flows from changes in operating assets and
liabilities:
Prepaid expenses 85,278 (6,771)
Inventory (68,588) -
Deposits 800 -
Accounts payable 101,853 (1,884)
Accrued expenses (132,659) (556,024)
Deferred charges (16,841) -
Other current assets - (6,000)
---------- ----------
Net cash used in operating activities (1,137,331) (1,602,741)
---------- ----------
Cash flows from investing activities:
Acquisition of property and equipment (3,496) (83,557)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,318,040 2,330,369
Repayment of notes payable (300,000) (200,000)
Payment of current portion
of long-term debt - (176,040)
--------- ----------
Net cash provided by financing activities 1,018,040 1,954,329
--------- ---------
Net (decrease) increase in cash (122,787) 268,031
Cash, beginning of period 404,986 1,099,402
--------- ----------
Cash, end of period $ 282,199 $1,367,433
========= ==========
Supplemental disclosures:
Increase in stockholders' equity
resulting from issuance of stock
in lieu of bonuses $ - $ 302,625
========= =========
</TABLE>
See notes to financial statements.
5
<PAGE>
FINGERMATRIX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1997
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 six month period
ended March 31, 1997 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 several classes of common stock
warrants, Series A, B and C, Special Class A, and Special Class B. The number of
warrants issued for the preceding six months is detailed in the chart below.
6
<PAGE>
FINGERMATRIX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1997
2. STOCK WARRANTS (continued)
Summary of warrants exercised and outstanding:
<TABLE>
<CAPTION>
Number of Number of
Warrants Warrants
Outstanding Outstanding Total
at at Exercise Potential
September 30, Warrants March 31, Price Conversion
Class 1996 Exercised 1997 Per Share Amounts
----- ------------- --------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
B Warrants 1,245,681 175,486 - - -
C Warrants 100,000 - 100,000 $ .01 $ 1,000
Special A 285,000 - 285,000 $1.00 $285,000
Warrants
Special B 205,000 - 205,000 $2.00 $410,000
Warrants
</TABLE>
Class B warrants entitle the holder thereof to purchase for $2.00 one
share of common stock in exchange for one warrant. These warrants expired
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.
Special Class A warrants entitle the holder thereof to purchase for
$1.00 one share of common stock in exchange for one warrant. These
warrants will expire July, 2000.
Special Class B warrants entitle the holder thereof to purchase for
$2.00 one share of common stock in exchange for one warrant. These
warrants will expire July, 2001.
Between October 1, 1996 and March 31, 1997, 175,486 warrants were
exercised generating $349,471 and resulting in the issuance of 175,486 common
shares. Class A Warrants expired January 15, 1996.
7
<PAGE>
FINGERMATRIX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1997
3. STOCK OPTIONS
In addition to the warrants, there are 2 stock option plans. Details
are listed below:
A) 276,000 shares are reserved for the issuance upon the exercise of
options granted under the Company's Employee Incentive Stock Option Plan with
varying exercise prices from $1.75 to $2.375 expiring July 21, 2005.
B) 300,000 shares reserved for the issuance upon the exercise of
options granted under the Company's Directors' Stock Option Plan at an
exercise price of $2.375 expiring July 21, 2005.
8
<PAGE>
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 six months ended March 31, 1997, the Company received
$350,972 from the conversion of its warrants issued under the Bankruptcy Plan.
Additionally, the Company grossed $510,000 as a result of 361,255 shares issued
under Regulation S. On January 28, 1997, 313,720 shares were issued at an
exercise price of $1.434 and on February 10, 1997, 47,555 shares were issued at
an exercise price of $1.2617. A commission of 8% or $40,800 was paid as a result
of said investment.
The Company had as of March 31, 1997 cash in the sum of $282,000, and
working capital of $200,000. The monthly costs of the Company for the six months
ended March 31, 1997 averaged $190,000. Based upon continuation of such monthly
operating costs, the Company has sufficient capital to continue for
approximately 1-1/2 months from March 31, 1997 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.
9
<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 $117,000 due May 18, 1997.
The Company has paid on the bankruptcy obligations through March 31, 1997 a
total of $2,204,000, all of it 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 has had to seek and shall seek such
funding through sales of its securities in private placements exempt from
registration under the Securities Act.
RESULTS OF OPERATIONS
During the six months ended March 31, 1997 and 1996, the Company had
revenues from sales of $3,400 and $ -0-, respectively. During the same period,
operating costs decreased $30,000, 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 $435,400 for the 1997 period, as compared with $417,500
for 1996.
General and administrative expenses increased $160,000 for the six months
ended March 31, 1997, as compared to an increase of $20,000 in 1996. The 1997
period included higher professional and accounting fees, higher payroll and
related taxes, higher depreciation expense resulting from the acquisition of
fixed assets needed for anticipated sales, and higher telephone and traveling
expenses incurred in the solicitation of business. The other components of
general and administrative expenses remained relatively constant, as compared
with the prior year.
Interest expense decreased from $44,200 in 1996 to $9,200, or 80%, in 1997.
This is the result of the debt repayments made during the year as a result of
the bankruptcy plan.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits.
(b) Form 8K, February 7, 1997, reporting sale of 313,720 shares of
common stock under Regulation S exemption aggregating in gross $450,000.
Form 8K, February 28, 1997 reporting sale of 47,555 shares of
common stock under Regulation S exemption aggregating in gross $60,000.
Said form 8K's are incorporated here in reference.
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 By
--------------- --------------------------------
Thomas T. Harding, President
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1996
<PERIOD-END> MAR-31-1997 SEP-30-1996
<CASH> 282,199 404,986
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 147,458 78,870
<CURRENT-ASSETS> 501,221 640,698
<PP&E> 212,622 238,908
<DEPRECIATION> 65,004 64,600
<TOTAL-ASSETS> 804,734 961,964
<CURRENT-LIABILITIES> 301,781 632,589
<BONDS> 0 0
0 0
0 0
<COMMON> 92,430 82,062
<OTHER-SE> 410,523 247,313
<TOTAL-LIABILITY-AND-EQUITY> 804,734 961,964
<SALES> 3,475 0
<TOTAL-REVENUES> 6,675 12,051
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,141,871 1,018,633
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,266 44,245
<INCOME-PRETAX> (1,144,462) (1,050,827)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,144,462) (1,050,827)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,144,462) (1,050,827)
<EPS-PRIMARY> (.13) (.20)
<EPS-DILUTED> 0 0
</TABLE>
