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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 0-2027
SAFLINK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4346070
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
18300 N.E. UNION HILL ROAD, SUITE 270, REDMOND, WASHINGTON 98052
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(425) 881-6766
(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 SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
THERE WERE 19,487,141 SHARES OF SAFLINK CORPORATION'S COMMON STOCK
OUTSTANDING AS OF MAY 12, 2000.
TOTAL NUMBER OF PAGES: 14 EXHIBIT INDEX BEGINS ON PAGE 14
<PAGE>
SAFLINK CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
a. Condensed Consolidated Balance Sheets
as of March 31, 2000 and December 31, 1999...................1
b. Condensed Consolidated Statements of Operations
for the three months ended March 31, 2000 and 1999...........2
c. Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and 1999...........3
d. Notes to Condensed Consolidated Financial Statements.........4
Item 2. Management's Discussion and Analysis of Financial
Condition and Result of Operations..........................7
Item 3. Quantitative and Qualitative Disclosures about Market Risk..11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................12
Signature.....................................................................13
<PAGE>
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PART 1 - FINANCIAL INFORMATION
================================================================================
ITEM 1. FINANCIAL STATEMENTS
SAFLINK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
2000 1999
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,184 $5,335
Accounts receivable, net 337 180
Inventory 28 38
Investments 579 739
Prepaid expenses and other current assets 366 286
-------------------- -------------------
Total current assets 5,494 6,578
Furniture and equipment, net 286 204
Other assets 60 -
-------------------- -------------------
$ 5,840 $ 6,782
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 634 $ 602
Deferred revenue 557 582
-------------------- -------------------
Total current liabilities 1,191 1,184
Stockholders' equity:
Series A Preferred Stock - Liquidation preference of $10,000,000
in aggregate as of March 31, 2000 and December 31, 1999 1 1
Series D Preferred Stock - Liquidation preference of $5,194,000 and
$5,071,000 in aggregate as of March 31, 2000 and December 31,
1999, respectively 1 1
Common stock 195 186
Additional paid-in capital 55,794 54,577
Accumulated other comprehensive income 41 201
Accumulated deficit (51,383) (49,368)
-------------------- -------------------
4,649 5,598
-------------------- -------------------
$ 5,840 $ 6,782
==================== ===================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
SAFLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
----------------- ----------------
<S> <C> <C>
Products and services:
Software $ 140 $ 61
Hardware 216 15
Services and other 60 -
----------------- ----------------
416 76
Post contract services - 97
----------------- ----------------
Total revenue 416 173
Cost of products and services sold:
Software and services 20 -
Hardware 181 28
Post contract services - 67
----------------- ----------------
Total cost of revenue 201 95
----------------- ----------------
Gross profit 215 78
Operating expenses:
Product development 971 268
Sales and marketing 445 295
Minimum royalty payment - 125
Relocation expense 88 -
General and administrative 664 453
----------------- ----------------
Total operating expenses 2,168 1,141
----------------- ----------------
Loss from operations (1,953) (1,063)
Interest and other income 61 10
----------------- ----------------
Net loss (1,892) (1,053)
Preferred stock dividend 123 -
----------------- ----------------
Net loss attributable to common stockholders $ (2,015) $ (1,053)
================= ================
Basic and diluted loss per common share $ (0.11) $ (0.06)
================= ================
Weighted average number of common shares outstanding 19,094,460 16,741,319
================= ================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
SAFLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
---------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,892) $ (1,053)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock compensation 107 -
Depreciation 45 79
Changes in assets and liabilities:
Accounts receivable (157) 115
Inventory 10 18
Prepaid expenses and other current assets (80) 21
Other assets (60) -
Accounts payable and accrued liabilities 32 (101)
Deferred revenue (25) (67)
---------------- -----------------
Net cash used in operating activities (2,020) (988)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture and equipment (127) (37)
---------------- -----------------
Net cash used in investing activities (127) (37)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock upon exercise of employee stock options
and investor warrants 996 131
---------------- -----------------
Net cash provided by financing activities 996 131
---------------- -----------------
Net decrease in cash and cash equivalents (1,151) (894)
Cash and cash equivalents at beginning of period 5,335 1,736
---------------- -----------------
Cash and cash equivalents at end of period $ 4,184 $ 842
================ =================
NON CASH FINANCING AND INVESTING ACTIVITIES:
Change in market value of investment $ 160 $ -
Preferred stock dividend 123 -
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
SAFLINK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited and
condensed and, therefore, do not contain certain information included in the
annual consolidated financial statements of SAFLINK Corporation and its
wholly-owned subsidiary, SAFLINK International, Inc., (the "Company" or
"SAFLINK"). In the opinion of management, all adjustments (consisting only of
normally recurring items) it considers necessary for a fair presentation have
been included in the accompanying consolidated financial statements.
The Company's condensed consolidated interim financial statements are
not necessarily indicative of results to be expected for a full fiscal year and
should be read in conjunction with its consolidated financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, as filed with the Securities and Exchange
Commission (the "SEC") on March 22, 2000.
Certain items in the 1999 financial statements and the notes thereto
have been reclassified to conform with the 2000 presentation of such items.
2. INVESTMENTS
At March 31, 2000, investments consist of a $100,000 bank time
certificate of deposit and an investment in publicly traded equity securities of
approximately $479,000. The time certificate of deposit is carried at cost and
the equity securities are classified as available-for-sale and are recorded at
fair value. Unrealized gains and losses on the available-for-sale equity
securities are reflected as a component of other comprehensive income until
realized. Realized gains and losses from the sale of available-for-sale equity
securities are determined on a specific identification method. There were no
realized gains or losses during the three months ended March 31, 2000.
A decline in market value of the available-for-sale equity securities
below cost that is deemed to be other than temporary results in the reduction in
the carrying amount to fair value. The impairment is charged to earnings and a
new cost basis for the security is established. Dividend income is recognized
when earned.
The Company has recorded deferred revenue of approximately $274,000 and
$329,000 as of March 31, 2000 and December 31, 1999, respectively, in connection
with the receipt of the equity securities as part of a strategic arrangement.
For the three months ended March 31, 2000, the Company has recorded non-cash
revenue related to this arrangement of $55,000. The Company did not record any
non-cash revenue for the comparable period in 1999.
3. STOCKHOLDERS' EQUITY
During the quarter ended March 31, 2000, the Company issued 345,897
shares of Common Stock upon exercise of stock options exercised by certain
employees pursuant to provisions of the Company's 1992 Stock Incentive Plan (the
"Plan") and 520,585 shares of Common Stock upon exercise of investor warrants.
The options had exercise prices ranging from $0.64 to $4.68 per share, which
equaled fair values on the dates of grant. The warrants had an exercise price of
$1.00 per share.
4. SIGNIFICANT CUSTOMERS
Two customers accounted for approximately 62% and 11% of the Company's
revenues for the quarter ended March 31, 2000. Three customers accounted for
approximately 32%, 23%, and 12% of the Company's revenues for the quarter ended
March 31, 1999.
4
<PAGE>
SAFLINK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. COMPREHENSIVE LOSS
For the quarter ended March 31, 2000, total comprehensive loss was
$2,052,000, which consisted of a net loss of $1,892,000 and unrealized holding
losses on investments of $160,000. For the quarter ended March 31, 1999, total
comprehensive loss was $1,053,000, which equaled the net loss for the quarter.
6. NET LOSS PER SHARE
In accordance with Statement of Financial Accounting Standard No. 128,
"Earnings Per Share", the Company has reported both basic and diluted net loss
per common share for each period presented. Basic net loss per common share is
computed on the basis of the weighted-average number of common shares
outstanding for the period. Diluted net loss per common share is computed on the
basis of the weighted-average number of common shares plus dilutive potential
common shares outstanding. Dilutive potential common shares are calculated under
the treasury stock method. Securities that could potentially dilute basic income
per share consist of outstanding stock options and warrants and convertible
preferred stock. Net loss attributable to common stockholders includes net loss
and preferred stock dividends. As the Company had a net loss available to common
stockholders in each of the periods presented, basic and diluted net loss per
common share are the same. All outstanding warrants and stock options to
purchase common shares were excluded because their effect was anti-dilutive.
Potential common shares consisted of options and warrants to purchase
approximately 3.8 million and 2.5 million common shares at March 31, 2000 and
1999, respectively, and preferred stock convertible into approximately 6.3
million and 2.6 million common shares at March 31, 2000 and 1999, respectively.
7. SEGMENT INFORMATION
Operating segments are revenue-producing components of the enterprise
for which separate financial information is produced internally for the
Company's management. Under this definition, the Company operated, for all
periods presented, as a single segment.
8. LEGAL PROCEEDINGS
On June 16, 1999, International Interest Group, Inc. ("IIG") filed suit
against the Company and Mr. J. Anthony Forstmann, a former director and chairman
of the Company, in the Superior Court of the State of California for the County
of Los Angeles (Civil Action No.: BC212033). This lawsuit relates to the alleged
failure of the Company to perform under the terms of a settlement agreement
relating to another lawsuit filed by IIG. The complaint alleges three causes of
action: (i) the Company's breach of contract with IIG causing IIG to sustain
damages in excess of $1.0 million; (ii) fraud; and (iii) recission by IIG
against the Company and Mr. Forstmann. On the first and second causes of action,
IIG has asked the court for actual contract damages, consequential damages, and
attorney fees and costs incurred in the prosecution of these actions. On the
second cause of action, IIG has also asked for punitive damages. On the third
cause of action, IIG has asked for a judicial order of recission restoring to
IIG all rights, causes, claims and remedies in the lawsuit. On all causes of
action, IIG seeks all
5
<PAGE>
SAFLINK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
recoverable costs of suit incurred, prejudgment interest on all causes of
action, and other relief the court deems just and proper. The second and third
causes of action have been dismissed with prejudice. The Company does not
believe the remaining claims have any merit and it intends to vigorously defend
itself in this lawsuit.
9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133)
in June 1998. This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that entities recognize
all derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as a hedge. The accounting for changes in the fair
value of a derivative depends on the intended use of the derivative and the
resulting designation. SFAS No. 133, as amended by SFAS No. 137, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. The
adoption of SFAS No. 137 is not expected to have a material impact on the
Company's consolidated financial statements.
Statement of Position No. 98-9 amends certain paragraphs of SOP No.
97-2, Software Revenue, to require using the "residual method" of revenue
recognition for multiple-element arrangements involving software bundled with
one or more undelivered elements. This SOP is effective for the Company
beginning January 1, 2000. The adoption of this statement did not have a
material impact on the Company's consolidated financial statements.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101 ("SAB No. 101") "Revenue Recognition in Financial
Statements". SAB No. 101 provides guidance on revenue recognition issues. The
SAB as amended is effective no later than the second quarter of the 2000 fiscal
year. The Company has not yet determined the impact, if any, that SAB No. 101 is
expected to have on the Company's consolidated financial statements.
In March 2000, FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation: an interpretation of APB
Opinion No. 25," which is effective July 1, 2000. This interpretation provides
guidance for applying provisions of APB Opinion No. 25. The Company has not yet
determined the impact, if any, FIN No. 44 is expected to have on the Company's
consolidated financial statements.
6
<PAGE>
SAFLINK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FACTORS THAT MAY AFFECT FUTURE RESULTS
Except for the historical information contained herein, certain of the
matters discussed in this quarterly report are "forward-looking statements" as
defined in Section 21E of the Securities Exchange Act of 1934, as amended, which
involve certain risks and uncertainties which could cause actual results to
differ materially from those discussed herein. In addition to other information
contained in this quarterly report, the following factors, among others, may
have affected, and in the future could affect our actual results and could cause
future results to differ materially from those in any forward looking statements
made by or on behalf of the Company. Factors that could cause future results to
differ from expectations include, but are not limited to, the following:
o control of the Company;
o our need for additional funds;
o our limited operating history and substantial accumulated net
losses;
o the SmallCap Market eligibility and maintenance requirements;
o the possible delisting of our Common Stock from the SmallCap
Market;
o technological and market uncertainty;
o rapid changes in technology;
o competition;
o our dependence upon software licensors;
o our ability to retain key employees and to attract high quality
new employees;
o shares eligible for future sale could adversely affect our
ability to raise capital and the market price for our stock;
o there is a limited public market for our common stock;
o the market price for our stock has been and may continue to be
volatile;
o our dependence on significant growth in the biometrics market;
o our marketing partners ability to promote our products; and
o our failure to pay dividends.
These factors are discussed in greater detail in our Annual Report on Form 10-K
filed with the SEC on March 22, 2000.
A. RESULTS OF OPERATING ACTIVITIES
We incurred net losses attributable to common stockholders of
approximately $2.0 million and $1.1 million for the three-month periods ended
March 31, 2000 and 1999, respectively. The increase in net loss of approximately
$962,000 was primarily due to an increase in operating expenses of approximately
$1.0 million and an increase in preferred stock dividends of approximately
$123,000, partially offset by an increase in gross profit of approximately
$137,000.
REVENUE AND COST OF REVENUE
Revenue of $416,000 for the three months ended March 31, 2000 increased
approximately $243,000 (140%) from revenue of approximately $173,000 for the
three months ended March 31, 1999. Revenue from sales of commercial products and
services increased approximately $340,000 (447%) to approximately $416,000 for
the three months ended March 31, 2000 from approximately $76,000 for the three
months ended March 31, 1999. Post contract services revenue decreased by
approximately $97,000 (100%) due to the Company's decision to divest itself of
contracts to manage the identification and authentication aspects of the
Connecticut and New Jersey welfare systems in early 1999.
7
<PAGE>
SAFLINK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
The approximately $106,000 increase in cost of revenue was primarily
attributable to the increase in revenue.
The Company's gross margin percentages for the three-month periods
ended March 31, 2000 and 1999 were approximately 52% and 45%, respectively. The
changes from 1999 to 2000 were primarily due to a change in product mix which
included the elimination of post contract services revenue and a higher level of
hardware and software sales in 2000.
OPERATING EXPENSES
Total operating expenses for the three months ended March 31, 2000
increased approximately $1.0 million (90%) to approximately $2.2 million from
approximately $1.1 million for the same period in 1999. This increase was
primarily due to the expansion of product development, sales and marketing
activities and, to a lesser degree, the relocation of the Company's headquarters
to Redmond, Washington, partially offset by the expiration of our obligation to
make minimum royalty payments of $125,000 per quarter to Cogent Systems, Inc.
The following table provides a breakdown of the dollar and percentage changes in
operating expenses for the three months ended March 31, 2000, as compared to the
same period in 1999:
(Dollars in thousands) Increase Increase
(Decrease) (Decrease)
----------------- -----------------
Product development $ 703 262%
Sales and marketing 150 51
Minimum royalty payments (125) (100)
Relocation 88 N.M.*
General and administrative 211 47
----------------- -----------------
$ 1,027 90%
================= =================
* Not meaningful
PRODUCT DEVELOPMENT - The increase in product development expenses was primarily
due to the addition of new staff to enhance current products and develop new
products to meet anticipated demand for our products as organizations begin to
redirect their information technology expenditures from Y2K remediation efforts
to enhanced Internet and network security solutions. We expect to continue to
incur product development expenses as we continue to develop additional products
and enhance existing products.
SALES AND MARKETING - The increase in sales and marketing expenses was primarily
due to increases in employee expenses, travel, and advertising expenses as we
added new staff to market our products to both commercial and governmental
organizations as they begin to redirect their information technology
expenditures to enhanced Internet and network security solutions. The sales
cycle for our products has taken longer to develop than management anticipated
due to, among other things, the lack of industry standards and acceptance by the
commercial market, the cost of hardware associated with the technology, and the
extended period of time potential customers require to test, evaluate and pilot
applications. However, we believe that a convergence of factors, including
recent decreases in
8
<PAGE>
SAFLINK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
hardware costs as well as the development of industry standards, will lead to
greater market acceptance of biometric security solutions and we expect our
sales and marketing expenses to continue to increase as we continue to expand
our sales and marketing activities.
GENERAL AND ADMINISTRATIVE - The increase in general and administrative expenses
was primarily due to additions to infrastructure to support our increased
product development and sales and marketing activities and we expect general and
administrative costs to continue to increase if sales of our products increase.
B. LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL
Cash and working capital as of March 31, 2000 were approximately $4.2
million and $4.3 million, respectively, compared to approximately $5.3 million
and $5.4 million, respectively, as of December 31, 1999. The decrease in the
Company's cash and working capital as of March 31, 2000 compared to December 31,
1999 was primarily due to net operating losses, partially offset by proceeds of
approximately $1.0 million upon the exercise of employee stock options and
investor warrants during the quarter ended March 31, 2000.
Cash as of May 12, 2000 was approximately $3.3 million. The decrease
from March 31, 2000 was primarily due to net operating losses. Absent a
significant increase in sales, which itself may require a significant increase
in working capital, we will require significant additional funds to continue our
operations into the year 2001. The options we are reviewing to obtain additional
financing include, but are not limited to, the sale and issuance of stock, the
sale and issuance of debt, the sale of certain of our assets and entering into
an additional strategic relationship or relationships to either obtain the
needed funding or to create what we believe would be a better opportunity to
obtain such funds. In addition, we are seeking to raise additional capital to
accelerate our product development and sales and marketing efforts as well as to
redeem the Series D convertible preferred stock. It is possible that any such
additional infusion of capital would be in the form of the sale and issuance of
additional shares of our common stock or securities that are convertible into
our common stock, which could substantially increase the number of shares of
common stock outstanding on a fully-diluted basis. The failure to obtain such
additional funds could cause us to cease or curtail operations. Even if such
additional funding is obtained, there is no assurance that we will be able to
generate significant sales of our products or services, or, if we are able to
consummate significant sales, that any such sales would be profitable.
DIVIDENDS
Since its incorporation, the Company has not paid or declared dividends
on the Common Stock, nor does it intend to pay or declare cash dividends on its
Common Stock in the forseeable future.
YEAR 2000 EXPOSURE
The Year 2000 ("Y2K") problem is the result of computer programs being
written using two digits (rather than four) to define the applicable year.
Computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than 2000, which could result in
9
<PAGE>
SAFLINK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
miscalculations or system failures. We recognized the need to ensure that our
operations would not be adversely impacted by Year 2000 software failures and
therefore took appropriate action to address the potential impact of the Year
2000 problem. We have not experienced, and we do not expect to experience, any
systems failures or other losses as a result of the Y2K problem and addressing
potential problems did not have a material adverse impact on our business,
condition (financial or otherwise), results or operations, prospects, or cash
flows.
10
<PAGE>
SAFLINK CORPORATION
QUANTITIVE AND QUALITATIVE DISCLOSURES
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE, INVESTMENT and FOREIGN CURRENCY RISK. The Company's
exposure to market rate risk for changes in interest rates relates primarily to
the Company's time certificate of deposit included in its investment portfolio.
Investments in the fixed rate earning instruments carry a degree of interest
rate risk as their fair market value may be adversely impacted due to a rise in
interest rates. The Company also invests in equity securities of a publicly
traded foreign company. This investment is included in short-term investments
and is accounted for under the cost method since ownership is less than 20% and
the Company does not exert significant influence over its operations. Such an
investment is subject to significant fluctuations in fair market value due to
the general volatility of the foreign market. As a result, financial results
could be adversely affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets.
Due in part to these factors, the Company's future investment income
may fall short of expectations due to changes in interest rates, foreign
currency exchange rates and foreign economies or the Company may suffer losses
if forced to sell securities which have declined in market value due to changes
in interest rates, foreign currency exchange rates and foreign economies. At
March 31, 2000, the Company owned a time certificate of deposit in the amount of
$100,000 and equity securities in the amount of $479,000.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number
------
27 Financial Data Schedule (Electronic filing only)
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on April 27,
2000 reporting a change in the Company's certifying accountant.
12
<PAGE>
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.
SAFLINK CORPORATION
DATE: May 15, 2000 BY: /s/ JAMES W. SHEPPERD
----------------------------
James W. Shepperd
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
EXHIBIT 27 - Financial Data Schedule (Electronic Filing Only)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,184
<SECURITIES> 579
<RECEIVABLES> 350
<ALLOWANCES> 13
<INVENTORY> 28
<CURRENT-ASSETS> 5,494
<PP&E> 1,350
<DEPRECIATION> 1,064
<TOTAL-ASSETS> 5,840
<CURRENT-LIABILITIES> 1,191
<BONDS> 0
0
2
<COMMON> 195
<OTHER-SE> 4,452
<TOTAL-LIABILITY-AND-EQUITY> 5,840
<SALES> 416
<TOTAL-REVENUES> 416
<CGS> 201
<TOTAL-COSTS> 2,168
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (61)
<INCOME-PRETAX> (1,892)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,892)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,892)
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
