UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to __________________
Commission File Number: 0-18856
DIGITAL BIOMETRICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1545069
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
5600 Rowland Road, Minnetonka, Minnesota 55343
(Address of principal executive offices) (Zip Code)
(612) 932-0888
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed 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 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 filing requirements
for the past 90 days. [x] Yes [ ] No
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date.
Common Stock, $.01 par value July 31, 1997 - 12,331,538 shares
(Class) (Outstanding)
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
INDEX
PART I - FINANCIAL INFORMATION:
PAGE
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
BALANCE SHEETS 3
STATEMENTS OF OPERATIONS 4
STATEMENTS OF CASH FLOWS 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND 15
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS 24
ITEM 6. (a) EXHIBITS 24
(b) REPORTS ON FORM 8-K 24
SIGNATURES 25
EXHIBIT 11 STATEMENT RE: COMPUTATION OF LOSS
PER SHARE 26
EXHIBIT 27 FINANCIAL DATA SCHEDULE 27
TENPRINTER(R) and the Company's mechanical hand logo have been registered as
trademarks with the U.S. Patent and Trademark Office. The Company has applied
for registration of the SQUID(TM) trademark. In addition, FC-5(TM), FC-6(TM),
FC-7(TM), FC-11(TM), FC-21(TM) and FC-22(TM) are trademarks of the Company.
<PAGE>
DIGITAL BIOMETRICS, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 2) $ 318,163 $ 466,990
Accounts receivable, less allowance for doubtful accounts of $557,274 and
$692,534, respectively 5,096,513 5,676,849
Inventory (note 4) 2,302,534 3,633,659
Prepaid expenses and other costs 327,721 208,349
------------ ------------
Total current assets 8,044,931 9,985,847
------------ ------------
Property and equipment 1,899,137 2,471,754
Less accumulated depreciation and amortization (1,011,390) (1,089,026)
------------ ------------
887,747 1,382,728
------------ ------------
Marketable securities (notes 2 and 3) 4,470,950 5,690,371
Patents, trademarks, copyrights and licenses, net of accumulated amortization of
$159,343 and $192,899, respectively 85,989 123,017
Deferred issuance costs on convertible debentures, net of accumulated amortization of
$196,854 and $172,476, respectively (note 7) -- 127,408
------------ ------------
$ 13,489,617 $ 17,309,371
============ ============
Current liabilities:
Accounts payable $ 965,195 $ 1,103,174
Line of credit advances (note 5) 2,240,000 1,255,000
Deferred revenue 703,330 649,178
Accrued expenses (note 6) 1,558,930 1,471,908
------------ ------------
Total current liabilities 5,467,455 4,479,260
Convertible debentures (note 7) -- 2,374,739
------------ ------------
Total liabilities 5,467,455 6,853,999
------------ ------------
Stockholders' equity (note 8):
Common stock, $.01 par value. Authorized, 20,000,000 shares; issued
and outstanding 12,331,538 and 10,777,288 shares, respectively 123,315 107,773
Additional paid-in capital 42,383,646 39,743,380
Unrealized losses on marketable securities (notes 2 and 3) (62,941) (134,753)
Deferred compensation (87,000) (96,000)
Notes receivable from sale of common stock (117,623) (117,623)
Accumulated deficit (34,217,235) (29,047,405)
------------ ------------
Total stockholders' equity 8,022,162 10,455,372
Commitments and contingencies (notes 9 and 10)
------------ ------------
$ 13,489,617 $ 17,309,371
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DIGITAL BIOMETRICS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Sales:
Identification systems $ 1,889,894 $ 662,233 $ 6,862,651 $ 3,715,938
Maintenance and other services 422,630 383,454 1,213,860 1,107,794
------------ ------------ ------------ -----------
Total sales 2,312,524 1,045,687 8,076,511 4,823,732
------------ ------------ ------------ -----------
Cost of sales:
Identification systems 1,310,769 498,086 4,646,112 2,148,949
Maintenance and other services 544,929 477,718 1,536,809 1,262,678
Non-recurring charges (note 11) 1,529,118 -- 1,529,118 --
------------ ------------ ------------ -----------
Total cost of sales 3,384,816 975,804 7,712,039 3,411,627
------------ ------------ ------------ -----------
Gross margin (1,072,292) 69,883 364,472 1,412,105
------------ ------------ ------------ -----------
Selling, general and administrative expenses:
Sales and marketing 498,019 558,686 1,730,447 1,679,832
Engineering and development 670,129 1,079,246 1,942,466 3,204,244
Depreciation and amortization 81,215 136,977 245,243 430,219
General and administrative 490,713 770,229 1,275,845 1,745,854
Non-recurring charges (note 11) 330,319 -- 330,319 --
------------ ------------ ------------ -----------
Total expenses 2,070,395 2,545,138 5,524,320 7,060,149
------------ ------------ ------------ -----------
Loss from operations (3,142,687) (2,475,255) (5,159,848) (5,648,044)
Interest income 70,870 125,239 240,124 496,369
Interest expense (31,494) (116,734) (242,689) (2,592,622)
Loss on disposal of fixed assets -- -- (7,417) --
------------ ------------ ------------ -----------
Net loss $ (3,103,311) $ (2,466,750) $ (5,169,830) $(7,744,297)
============ ============ ============ ===========
Loss per common share $ (0.25) $ (0.23) $ (0.45) $ (0.86)
============ ============ ============ ===========
Weighted average common shares outstanding 12,296,752 10,565,580 11,574,448 9,011,169
============ ============ ============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DIGITAL BIOMETRICS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-----------------------------
1997 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,169,830) $ (7,744,297)
Adjustments to reconcile net loss to net cash used in
operating activities:
Provision for doubtful accounts receivable 5,000 45,364
Deferred compensation amortization 27,000 144,513
Depreciation and amortization 445,118 653,457
Loss on disposal of fixed assets and tooling 227,580 7,773
Interest expense amortization for the intrinsic
value of the beneficial conversion feature of
convertible debentures -- 1,923,529
Interest expense on debentures converted into
common stock 274,474 478,335
Changes in operating assets and liabilities:
Accounts receivable 575,336 (977,252)
Inventories 1,331,125 (3,035,435)
Prepaid expenses (119,372) (51,994)
Accounts payable (137,979) 555,659
Deferred revenue 54,152 535,687
Accrued expenses 262,311 46,575
----------- ------------
Net cash used in operating activities (2,225,085) (7,418,086)
----------- ------------
Cash flows from investing activities:
Purchase of property and equipment (114,950) (792,123)
Proceeds from marketable securities 1,219,421 --
Patents, trademarks, copyrights and licenses (25,738) (27,002)
----------- ------------
Net cash provided by (used in) investing activities 1,078,733 (819,125)
----------- ------------
Cash flows from financing activities:
Exercise of warrants 12,525 315,000
Issuance of convertible debentures -- 10,109,750
Net line of credit advances (repayments) 985,000 (1,450,000)
----------- ------------
Net cash provided by financing activities 997,525 8,974,750
----------- ------------
Increase (decrease) in cash and cash equivalents (148,827) 737,539
Cash and cash equivalents at beginning of period 466,990 367,866
----------- ------------
Cash and cash equivalents at end of period $ 318,163 $ 1,105,405
=========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DIGITAL BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Digital Biometrics, Inc., (the Company) was incorporated in Minnesota
in May, 1985 and reincorporated in Delaware in December, 1986. The Company is a
developer, manufacturer, marketer and integrator of computer systems-based
products for the identification of individuals. The Company's principal product,
the TENPRINTER(R) system, is a computer based, inkless "live-scan" fingerprint
system that electronically reads a fingerprint and creates a digital image,
which can then be printed on an attached printer and/or transmitted
electronically to a central printing or storage site. The TENPRINTER system is
designed for use by, and is being actively marketed to, law enforcement agencies
and other organizations requiring a high resolution fingerprint image for
identification cards or similar applications.
The Company's performance in any one quarter is not necessarily
indicative of sales trends or future performance. The nature of the law
enforcement market and the government procurement process are expected to
continue to produce an irregular and unpredictable revenue cycle for the
Company.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the 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. For further
information, refer to financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended September 30, 1996.
The presentation of fiscal year 1996 operating results includes
reclassifications between "identification systems" cost of sales and
"maintenance and other services" cost of sales to reflect comparability to
fiscal year 1997 classification.
(2) ACCOUNTING POLICIES
SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The Company extends credit to state and local governments in connection
with sales of products to law enforcement agencies. Approximately 82% of
customer accounts receivable at June 30, 1997, were from government agencies. At
June 30, 1997, approximately 29% of customer accounts receivable was from a
single governmental customer. For the three-month period ended June 30, 1997,
sales to two customers accounted for 18% and 15% of sales. Sales to one
different customer during the three-month period ended June 30, 1996, accounted
for 19% of period sales. For the nine-month period ended June 30, 1997, sales to
two customers accounted for 22% and 19% of sales. Sales to two different
customers during the nine-month period ended June 30, 1996, accounted for 30%
and 10% of period sales. Export sales for the three-month periods ended June 30,
1997, and June 30, 1996, were less than 1% of period sales. Export sales for the
nine-month period ended June 30, 1997, were 5% of period sales as compared to
25% for the same period in 1996.
<PAGE>
DIGITAL BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(2) ACCOUNTING POLICIES (CONTINUED)
MARKETABLE SECURITIES
Marketable securities consist primarily of collateralized mortgage
backed securities (see note 3). The Company has adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (SFAS 115). Under SFAS 115, the Company classifies its
marketable debt securities as available for sale and records these securities at
fair market value. Net realized and unrealized gains and losses are determined
on the specific identification cost basis.
WARRANTY COSTS
Estimated product warranty costs are accrued at date of shipment.
Accrued warranty costs at June 30, 1997, were $667,000 compared with $129,000 at
September 30, 1996. The three-month period ended June 30, 1997, includes an
addition to the warranty reserve of $524,000 for warranty reserve funding for
warranty items mainly associated with the introduction and rollout of the
S-Series which were quantified during the quarter.
REVENUE AND REVENUE RECOGNITION
Revenues from product sales are generally recognized on the date of
shipment. The Company's standard terms of sale are payment due net in thirty
days, f.o.b. Digital Biometrics, Inc. Terms of sale and shipment for certain
procurements by municipal or other government agencies may, however, be subject
to negotiation. In cases where the Company is required to purchase a performance
bond or to deposit collateral in accordance with the terms of a contract, the
Company's policy is to defer revenues under such contracts until the amount
shipped exceeds the amount of the performance collateral or until the security
is released by the bonding company. Maintenance revenues are recognized over the
life of the contract on a straight-line basis.
For contracts where a performance bond, collateral or customer
acceptance is required, revenue is not recognized until collateral requirements
have been satisfied and customer acceptance has occurred. The Company's
performance for any period is not necessarily indicative of sales trends or
future performance. The nature of the law enforcement market and the government
procurement process are expected to result in an irregular and unpredictable
revenue cycle for the Company.
ENGINEERING AND DEVELOPMENT ARRANGEMENTS
Engineering and development costs are expensed as incurred. Engineering
and development expenses for the nine-month period ended June 30, 1996 are net
of reimbursements of $462,000 from a company with which there was a teaming
agreement on an international development project.
<PAGE>
DIGITAL BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(2) ACCOUNTING POLICIES (CONTINUED)
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments and certificates of deposit purchased with an
original maturity date of three months or less to be cash equivalents. Cash
equivalents include primarily U.S. Government money market funds and A-1, P-1
rated commercial paper.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Nine Months Ended
June 30,
----------------------
1997 1996
---------- --------
Cash paid during the period for interest $162,803 $9,866
========== ========
For supplemental disclosure of non-cash investing and financing
activities see notes 7 and 8.
NET LOSS PER COMMON SHARE
Net loss per common share is determined by dividing the net loss by the
weighted average number of shares of common stock. Common share equivalents have
been excluded from the computation of net loss per share as their effect is
anti-dilutive.
INCOME TAXES
The Company has adopted the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the expected future tax consequences of temporary
differences between the financial statement carrying amount and tax basis of
assets and liabilities. The Company provides for deferred taxes at the enacted
tax rate that is expected to apply when the temporary differences reverse.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
DIGITAL BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(3) MARKETABLE SECURITIES
Investments in marketable securities have maturities ranging from 2005
to 2016.The unrealized loss for available-for-sale marketable securities is as
follows.
June 30, September 30,
1997 1996
------------ ------------
Fair market value $4,470,950 $5,690,371
Amortized cost 4,533,891 5,825,124
------------ ------------
Unrealized loss $ (62,941) $ (134,753)
============ ============
Unrealized gains and losses are reflected as a separate component of
stockholders' equity. A decline in the market value of any available-for-sale or
held-to-maturity security below cost that is deemed other than temporary results
in a charge to operations resulting in the establishment of a new cost basis for
the security. Realized losses on sales of marketable securities are reported as
a reduction in interest income. There were no realized losses on sales of
marketable securities for the three and nine-month periods ended June 30, 1997,
or 1996.
(4) INVENTORY
Inventory is valued at standard which approximates the lower of
first-in, first-out (FIFO) cost or market. Inventory consists of the following:
June 30, September 30,
1997 1996
------------ ------------
Raw materials $1,194,121 $1,934,371
Work in process 765,071 717,696
Finished goods 343,342 981,592
------------ ------------
$2,302,534 $3,633,659
============ ============
(5) LINES OF CREDIT
The Company has a $4,000,000 line of credit with Norwest Bank Minnesota
N.A. Borrowings under this line of credit are secured by marketable securities
and are limited to 80% of the market value of the marketable securities held as
collateral by the bank. Borrowings under the line were $2,240,000 on June 30,
1997, and bear interest at rates ranging from 7.92% to 8.5%. Depending on the
timing of accounts receivable collection, the line may reach the maximum
borrowings allowed during fiscal 1997. The line is payable upon demand and
expires in May, 1998.
<PAGE>
DIGITAL BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(5) LINES OF CREDIT (CONTINUED)
The Company entered into a receivables financing line of credit
effective October 1, 1996, for the lesser of eligible receivables or $3,500,000
with Norwest Business Credit. Borrowings under this line of credit are secured
by all of the Company's assets. The line bears interest at 1.5% above the prime
rate (8.5% at June 30, 1997), is payable upon demand and expires in September
1997. There were no borrowings under the line at June 30, 1997.
The Company has a $200,000 line of credit with First Bank Minneapolis,
secured by cash deposits. Borrowings under the line bear interest at the prime
rate (8.5% on June 30, 1997) and are payable upon demand. The line expires in
March, 1998. There were no amounts borrowed under the line at June 30, 1997.
(6) ACCRUED EXPENSES
June 30, September 30,
1997 1996
------------ ------------
Accrued expenses consist of:
Accrued salaries $ 426,386 $ 442,701
Accrued vacation 112,474 112,665
Accrued interest payable 9,854 205,529
Payroll taxes payable 3,149 55,561
Sales taxes payable 4,355 22,953
Accrued warranty 666,724 128,500
Other accrued expenses 335,988 503,999
------------ ------------
$1,558,930 $1,471,908
============ ============
Accrued salaries at June 30, 1997, and September 30, 1996, include
$61,000 and $330,000, respectively, for severance costs related to the
retirement of the Company's former president and chief executive officer.
<PAGE>
DIGITAL BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(7) CONVERTIBLE DEBENTURES
On September 29, 1995, the Company completed a private placement to
offshore accredited investors of $10,900,000 of 8% Convertible Debentures due
September 29, 1998, (the "Debentures"). Net proceeds to the Company after
placement fees but before legal and other expenses were $10,109,750. The
Debentures were convertible one third after 45 days, one third after 75 days and
one third after 105 days at the option of the Debenture holder. The Company had
the right to redeem the debentures prior to conversion. The conversion price was
equal to the lesser of $7.00 per common share or 85% of the average trading
price for any five consecutive trading days before conversion. This beneficial
conversion feature had an intrinsic value of $1,924,000 which was recorded as a
charge to interest expense. The intrinsic value of the beneficial conversion
features was allocated to additional paid-in capital with the resulting discount
on the debt resulting in a non-cash interest expense charge to earnings (loss)
over the vesting period of the conversion feature. Interest accrued on the
Debentures was payable in common stock at the time of conversion at the
conversion price as described above. In addition to the cash placement fee, a
warrant to purchase 112,893 shares of the Company's common stock at $8.40 per
share was granted to the placement agent for this offering. The warrant was
valued at $112,893, which is reflected as a discount on the Debentures and was
amortized as interest expense over the term of the Debentures. Net proceeds to
the Company are being used for working capital, product development and other
general corporate purposes.
As of June 30, 1997, the Company has issued 4,237,748 shares of common
stock for the conversion of principal aggregating $10,900,000 of the 8%
Convertible Debentures plus $557,000 of accrued interest at an average
conversion price of $2.70 per share. For the nine-month period ended June 30,
1997, the Company has issued 1,485,880 shares of common stock for the conversion
of principal aggregating $2,450,000 of the 8% Convertible Debentures plus
$264,000 of accrued interest at an average conversion price of $1.83 per share.
In the three-month period ended June 30, 1997, the Company issued 263,916 shares
of common stock upon the conversion of principal aggregating $400,000 of the 8%
Convertible Debentures plus $49,000 of accrued interest at an average conversion
price of $1.70 per share.
<PAGE>
DIGITAL BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(8) STOCKHOLDERS' EQUITY
During the three-month period ended June 30, 1997, the Company granted
340,850 shares pursuant to discretionary stock option awards to certain of its
executive officers and employees. These options are exercisable at prices
ranging from $2.0625 to $2.25 per share which expire in 2007.
Effective June 9, 1997, the Company canceled stock options of certain
non-officer employees for the purchase of 113,000 shares of the Company's common
stock at exercisable prices ranging from $6.125 to $13.625 and reissued new
stock options to non-officer employees for the purchase of 113,000 shares
exercisable at a price of $2.25 per share which expire in 2007.
(9) LEASE COMMITMENTS
The Company leases its primary office and production facility under an
operating lease that expires in April, 2001. Annual base rent under the lease
agreement is approximately $237,000 and the Company is obligated to pay a pro
rata share for property taxes, maintenance and other operating expenses. The
Company leases a separate sales and service office in Los Angeles, California
under an operating lease that expires in December, 1997. Rent expense, property
taxes, maintenance and other lease operating expenses for the nine months ended
June 30, 1997, and 1996 was $300,000 and $246,000, respectively.
(10) LITIGATION
On June 1, 1995, the Company filed a complaint for patent infringement
against Identix, Inc., of Sunnyvale, California, in the United States District
Court for the Northern District of California. The complaint alleged that
Identix has willfully and deliberately infringed a Company patent through the
manufacture, use and/or sale of competing products. The complaint sought, among
other things, an injunction prohibiting further infringement as well as
unspecified monetary damages. Identix responded to the complaint alleging, among
other purported defenses, non-infringement and patent invalidity.
On August 27, 1996, the judge assigned to the case granted a partial
summary judgment in favor of Identix dismissing the Company's claims of patent
infringement with respect to Identix's Touchprint 600 product line. A
predecessor product, the Touchprint 900, received a similar ruling in favor of
Identix on December 20, 1996. During January 1997, the Company filed an appeal
of the court's decision of non-infringement. The interpretation of patents will
ultimately be decided by the special patent Court of Appeals in Washington D.C.
However, a prediction of the final outcome of the appeal is not possible. In the
event the Company does not prevail in this litigation, its competitive position
could be adversely affected.
There are no other material claims pending or, to the Company's
knowledge, threatened against the Company.
<PAGE>
DIGITAL BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(11) NON-RECURRING CHARGES
Non-recurring charges of $1,859,000 were recorded during the
three-month period ended June 30, 1997. Of this amount, $1,529,000 was charged
to cost of sales and includes $838,000 of inventory adjustments for technical
obsolescence, $524,000 of warranty reserve funding for warranty items mainly
associated with the introduction and rollout of the S-Series which were
quantified during the quarter, $132,000 for estimated committed losses on
maintenance contracts, and $35,000 for the write-off of tooling. Non-recurring
charges to operating expenses were $330,000 and include the write-off of assets
with no future value, and to a lesser extent, equipment disposals.
The net loss per share for the three- and nine-month periods ended June
30, 1997, were negatively impacted by $0.15 and $0.16, respectively, with these
non-recurring charges.
<PAGE>
DIGITAL BIOMETRICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
FACTORS THAT MAY AFFECT OPERATING RESULTS
The statements contained in this Report on Form 10-Q that are not
purely historical are forward looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, including statements regarding the Company's expectations, hopes,
intentions or strategies regarding the future. All forward looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward looking statements. It is important to note that the Company's actual
results could differ materially from those in such forward looking statements.
Some of the factors that could cause actual results to differ materially are set
forth below under the caption "Forward Looking Comments and Matters That May
Affect Operating Results."
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company develops, manufactures, assembles and markets
identification products and integrates these products in customer computing and
communications environments. Most of the Company's sales have been to state and
local law enforcement agencies and, to date, have consisted primarily of
TENPRINTER systems and related peripheral equipment and software.
The nature of the law enforcement market and the government procurement
process is subject to budgetary, economic and political considerations which may
vary significantly from state to state and among different agencies. These
market characteristics, along with the recent and continuing development of the
live-scan electronic fingerprint industry, have resulted in and are expected to
continue to result in an irregular revenue cycle for the Company and any
prediction of future trends is inherently difficult. The Company believes,
however, that its principal product line, which is designed to be sold to law
enforcement agencies, is a leader in its marketplace. To the extent that funds
become available to such customers for procurement purposes, the Company should
benefit from the continuing development of this market.
The Company generally recognizes product sales on the date of shipment.
Although the Company's standard terms of sale are payment due net in 30 days,
f.o.b. the Company, the average length of time for receipt of payment exceeds
the terms. Terms of sale and shipment for certain procurements by municipal or
other government agencies may be subject to negotiation. In cases where the
Company is required to purchase a performance bond or to deposit collateral in
accordance with the terms of a contract, the Company's policy is to defer
recognition of revenues from such contracts until the amount shipped exceeds the
amount of the performance collateral or until the security is released by the
bonding company. Maintenance revenues are recognized over the life of the
contract on a straight-line basis. Maintenance costs are expensed as incurred.
Losses on maintenance contracts are recognized during the period when such
losses are determined.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Total sales were $2,313,000 for the three months ended June 30, 1997,
compared with $1,046,000 for the same prior-year period. Identification system
product sales were $1,890,000 compared with $662,000 in 1996. The increase is
due primarily to an increase in the number of TENPRINTER systems sold during the
three months ended June 30, 1997. Limited sales of peripheral and networking
equipment occurred during the current year three-month period as compared to the
prior-year period.
For the three-month period ended June 30, 1997, sales to two customers
accounted for approximately 18% and 15% of total sales. Sales to one different
customer during the three months ended June 30, 1996, accounted for
approximately 19% of total sales. Export sales for the three-month periods ended
June 30, 1997, and June 30, 1996, were less than 1% of period sales.
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Product maintenance and service revenues were $423,000 for the three
months ended June 30, 1997, compared with $383,000 for the same prior-year
period. This increase is due primarily to a larger installed base of TENPRINTER
systems.
Overall gross margins for the three months ended June 30, 1997, were
negative 46% as compared with 7% of sales for the same prior-year period.
Overall gross margins were negatively impacted by 66% during the current-year
three-month period due to non-recurring charges to cost of sales of $1,529,000.
These charges include $838,000 of inventory adjustments for technical
obsolescence, $524,000 for warranty reserve funding for warranty items mainly
associated with the introduction and rollout of the S-Series which were
quantified during the quarter, $132,000 for estimated committed losses on
maintenance contracts, and $35,000 for the write-off of tooling. Of the total
charges to cost of sales, approximately $873,000 has no impact on future cash
flows.
Sales and marketing expenses for the three-month period ended June 30,
1997, were 22% of total sales compared to 53% for the same three-month
prior-year period. This decrease is due primarily to a higher volume of sales
and a lower number of personnel and related salary expenses during the
current-year three-month period. Engineering and development expenses were 29%
of total sales for the three-month period ended June 30, 1997, compared to 103%
for the same period a year ago. This decrease is due primarily to a higher
volume of sales, reduced new product development costs and cost containment
measures, during the current three-month period. General and administrative
expenses for the three-month periods ended June 30, 1997, and 1996, were 21% and
74%, respectively, of total sales. This decrease is due primarily to a higher
volume of sales and reduced legal expenses related to a patent infringement suit
during the current three-month period.
Depreciation and amortization costs decreased to $81,000 for the three
months ended June 30, 1997, from $137,000 for the same prior-year period,
primarily due to reduced software amortization costs of information systems
products that were written off during the fourth quarter of fiscal year 1996.
Operating expenses during the three-month period ended June 30, 1997,
include non-recurring charges of $330,000 and include the write-off of assets
with no future value, and to a lesser extent, equipment disposals. The total
charge of $330,000 has no effect on future cash flows.
Interest income decreased to $71,000 for the three months ended June
30, 1997, from $125,000 for the same period in 1996, primarily due to lower
balances of cash and marketable securities.
Interest expense decreased to $31,000 for the three months ended June
30, 1997, from $117,000 for the same prior-year period, primarily due to the
conversion of 8% convertible debentures partially offset by an increase in
borrowing under a line of credit.
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
The Company incurred a net loss for the three-month period ended June
30, 1997, of $3,103,000 ($0.25 per share) as compared with $2,467,000 ($0.23 per
share) for the same prior-year period. The net loss for the three-month period
ended June 30, 1997, includes non-recurring charges of $1,859,000 ($0.15 per
share).
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996
Total sales were $8,077,000 for the nine months ended June 30, 1997,
compared with $4,824,000 for the same prior-year period. Identification system
product sales were $6,863,000 compared with $3,716,000 in 1996. The increase is
due primarily to an increase in the number of TENPRINTER systems sold during the
nine months ended June 30, 1997, offset by volume discounts offered to two
customers. Limited sales of peripheral and networking equipment occurred during
the current-year nine-month period as compared to the same prior-year period.
For the nine-month period ended June 30, 1997, sales to two customers
accounted for approximately 22% and 19% of total sales. Sales to two different
customers during the nine months ended June 30, 1996 accounted for approximately
30% and 10% of total sales. Export product sales for the nine-month period ended
June 30, 1997, were 5% of period sales as compared to 25% for the same period in
1996.
Product maintenance and service revenues were $1,214,000 for the nine
months ended June 30, 1997, compared with $1,108,000 for the same prior-year
period. This increase is due primarily to a larger installed base of TENPRINTER
systems, although, due to installation delays caused by technical factors the
increase in maintenance revenue is less then the increase in units shipped.
Overall gross margins for the nine months ended June 30, 1997, were 5%
as compared with 29% of sales for the same prior-year period. Overall gross
margins were negatively impacted by 18% during the current-year nine-month
period due to non-recurring charges to cost of sales of $1,529,000. These
charges include $838,000 of inventory adjustments for technical obsolescence,
$524,000 for warranty reserve funding for warranty items mainly associated with
the introduction and rollout of the S-Series which were quantified during the
quarter, $132,000 for estimated committed losses on maintenance contracts, and
$35,000 for the write-off of tooling. Of the total charges to cost of sales,
approximately $873,000 has no impact on future cash flows.
Sales and marketing expenses for the nine-month period ended June 30,
1997, were 21% of total sales compared to 35% for the same nine-month prior-year
period. This decrease is due primarily to a higher volume of sales and a lower
number of personnel and related salary expenses, offset by higher promotional
costs during the current-year nine-month period. Engineering and development
expenses were 24% of total sales for the nine-month period ended June 30, 1997,
compared to 66% for the same period a year ago. This decrease is due primarily
to a higher volume of sales and reduced new product development costs during the
current nine-month period. Engineering and development expenses for the
nine-month period ending June 30, 1996 are net of
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
reimbursements of $462,000 related to an international development project.
General and administrative expenses for the nine-month periods ended June 30,
1997, and 1996 were 16% and 36%, respectively, of total sales. This decrease is
due primarily to a higher volume of sales and reduced legal expenses related to
a patent infringement suit during the current nine-month period.
Depreciation and amortization costs decreased to $245,000 for the nine
months ended June 30, 1997, from $430,000 for the same prior-year period,
primarily due to reduced software amortization costs of information systems
products that were written off during the fourth quarter of fiscal year 1996.
Operating expenses during the nine-month period ended June 30, 1997,
include non-recurring charges of $330,000 and include the write-off of assets
with no future value, and to a lesser extent, equipment disposals. The total
charge of $330,000 has no effect on future cash flows.
Interest income decreased to $240,000 for the nine months ended June
30, 1997, from $496,000 for the same period in 1996, primarily due to lower
balances of cash and marketable securities.
Interest expense decreased to $243,000 for the nine months ended June
30, 1997, from $2,593,000 for the same prior-year period, primarily due to a
non-cash charge of $1,924,000 during the nine-month period ended June 30, 1996,
for the intrinsic value of the beneficial conversion feature of convertible
debentures, and to a lesser extent, conversions of 8% convertible debentures.
The Company incurred a net loss for the nine-month period ended June
30, 1997, of $5,170,000 ($0.45 per share) as compared with $7,744,000 ($0.86 per
share) for the same prior-year period. The net loss for the nine-month period
ended June 30, 1997, includes non-recurring charges of $1,859,000 ($0.16 per
share). The net loss for the nine-month period ended June 30, 1996 includes a
non-cash interest expense of $1,924,000 ($0.21 per share).
INFLATION
The Company does not believe inflation has significantly impacted
revenues or expenses.
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
NET OPERATING LOSS CARRYFORWARDS
At June 30, 1997, the Company had carryforwards of net operating losses
of approximately $29,200,000 that may allow the Company to reduce future income
taxes that would otherwise be payable. Of this amount approximately $2,200,000
relates to compensation associated with the exercise of non-qualified stock
options which, when realized, would result in approximately $880,000 credited to
additional paid-in capital. The carryforwards expire annually beginning in 1999.
The annual limitation on use of net operating losses is calculated by
multiplying the value of the corporation immediately prior to the change in
ownership by the long-term federal tax exempt rate. A total of $3,700,000 of the
net operating loss carryforwards at June 30, 1997, is subject to an annual net
operating loss limitation, estimated at $350,000, resulting from the change in
control of the Company which occurred, for income tax purposes, on December 14,
1990, the date of the Company's initial public offering. If the limited
carryforward amount for any tax year exceeds the regular taxable income for such
year, then the unused portion may generally be carried forward to increase the
annual limitation for the following year. Utilization of net operating losses
aggregating $25,500,000 which were incurred subsequent to the change of
ownership are not limited. However, any future ownership change could create a
limitation with respect to these loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
CURRENT AND FUTURE OPERATIONS
The Company's business has included large contract awards from
international, state and local law enforcement agencies and it is expected that
this will continue. Collection of receivables related to billings of these
contract amounts is often protracted.
The Company's performance in any one reporting period is not
necessarily indicative of sales trends or future performance. The nature of the
law enforcement market and the government procurement process are expected to
continue to result in an irregular and unpredictable revenue cycle for the
Company.
Net cash used in operating activities was $2,225,000 for the nine
months ended June 30, 1997, compared with $7,418,000 for the same prior-year
period. The decrease in cash used in operating activities was primarily a result
of a smaller net loss during the nine-month period in 1997 adjusted for changes
in operating assets and liabilities. Cash flows from changes in operating assets
and liabilities changed from cash used of $2,927,000 during the prior-year
nine-month period to $1,966,000 of cash provided during the same current-year
period. This $4,893,000 change in cash flow from operating assets and
liabilities resulted primarily from collections of accounts receivable and lower
inventory balances on June 30, 1997. Non-cash charges of $1,203,000 were
recorded during the current-year nine-month period relating to inventory
adjustments for technical obsolescence, discontinued tooling, equipment
disposals and other miscellaneous charges.
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Net cash provided by investing activities was $1,079,000 for the nine
months ended June 30, 1997, as compared with $819,000 net cash used in investing
activities for the same prior-year period. Net cash provided by investing
activities during the current nine-month period includes $1,219,000 from the
proceeds from marketable securities. Capital expenditures for the nine-months
ended June 30, 1996 were primarily for engineering and manufacturing test
fixtures. The Company's business does not require significant amounts of cash
for capital expenditures because substantial amounts of the manufacturing and
assembly processes utilized in the production of current products are performed
by outside vendors, as directed by the Company. Specifically, the Company
purchases electronics modules and standard mechanical assemblies from
manufacturers of such goods. In addition, sheet metal components, optical
components and specialized electronics modules are designed by the Company and
manufactured to the Company's specifications by outside sources.
Net cash provided by financing activities was $998,000 for the nine
months ended June 30, 1997, primarily from borrowings on lines of credit. Net
cash provided by financing activities was $8,975,000 for the nine months ended
June 30, 1996, due to cash received from the issuance of 8% convertible
debentures and repayments of outstanding borrowings on lines of credit.
Borrowings under lines of credit were $2,240,000 at June 30, 1997. There were no
borrowings under lines of credit on June 30, 1996.
At June 30, 1997, the Company had $318,000 in cash and cash equivalents
and $4,471,000 in marketable securities, which are classified as available for
sale. The unrealized loss on marketable securities at June 30, 1997, was
$63,000. These marketable securities are collateral for borrowings under a line
of credit.
The Company has a $4,000,000 line of credit with Norwest Bank Minnesota
N.A. Borrowings under this line of credit are secured by marketable securities
and are limited to 80% of the market value of marketable securities held as
collateral by the bank. Borrowings under the line were $2,240,000 on June 30,
1997, and bear interest at rates ranging from 7.92% to 8.5%. Depending on the
timing of accounts receivable collection, the line may reach the maximum
borrowings allowed during fiscal 1997. The line is payable upon demand and
expires in May, 1998.
The Company entered into a receivables financing line of credit
effective October 1, 1996, for the lesser of eligible receivables or $3,500,000
with Norwest Business Credit. Borrowings under this line of credit are secured
by all assets of the Company. The line bears interest at 1.5% above the prime
rate (8.5% at June 30, 1997), is payable upon demand and expires in September,
1997. There were no borrowings under the line at June 30, 1997.
The Company has a $200,000 line of credit with First Bank Minneapolis,
secured by cash deposits. Borrowings under the line bear interest at the prime
rate (8.5% on June 30, 1997), are payable upon demand and expires in March,
1998. There were no amounts borrowed under the line at June 30, 1997.
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Due primarily to continuing operating losses, the Company has not yet
achieved positive cash flow. Management believes that cash and cash equivalents,
investments, accounts receivable and working capital provided from operations,
together with available financing sources, may be sufficient to meet current and
foreseeable operating requirements, however additional financing may be
required. As a result, on June 25, 1997, the Company announced the retention of
the investment banking firm of Greene Holcomb & Lannin to advise the Company
regarding various strategic alternatives including joint ventures, technology
licensing, acquisition of other businesses or product lines, recapitalizaiton,
and sale of all or a portion of the Company's assets or businesses. There can be
no assurance that additional financing, should it be required, will be available
at terms acceptable to the Company.
ACCOUNTING PRONOUNCEMENTS
In February, 1997, the Financial Accounting Standards Board (FASB)
released Statement of Financial Accounting Standards (SFAS) No. 128, Earnings
Per Share, and No. 129, Disclosure of Information about Capital Structure. Both
SFAS No. 128 and No. 129 will be implemented by the Company in the quarter ended
December 31, 1997, and will have no significant impact on the Company's
previously disclosed earnings per share or capital disclosures.
In addition, in June, 1997, the FASB issued SFAS No. 130, Reporting
Comprehensive Income, and No. 131, Disclosures about Segments of an Enterprise
and Related Information. Both SFAS No. 130 and No. 131 will be implemented by
the Company in fiscal 1999. The Company has not yet completed its analysis on
the impact of these two pronouncements.
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
FORWARD LOOKING COMMENTS AND MATTERS THAT MAY AFFECT OPERATING RESULTS
Except for the historical information contained in this Form 10-Q, the
matters discussed herein are forward looking statements made within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and involve risks and uncertainties. Factors that may
affect future performance of the Company include successful development and
introduction of new products; continued feature enhancement, quality improvement
and cost reduction of current products; market acceptance of the Company's
products; integration of the Company's products into existing and future
customer computing and communications networks and the interoperability of the
Company's products with those of other vendors; the availability of new
employees experienced in present and contemplated markets; successful expansion
of distribution channels for products through OEMs and others; successful
penetration of new markets; the availability of capital on terms and conditions
acceptable to the Company; the development and successful management of
strategic partnerships and alliances with other companies; changes in general
economic conditions; availability of funding where customer procurements are
dependent on state or federal government grants and general tax funding;
concentrations of accounts receivable and other credit risk in single large
customers; or cost and availability of components. In addition, markets for the
Company's products are characterized by significant and increasing competition,
and the Company's financial results may be adversely affected by the actions of
existing and future competitors, including the development of new technologies,
the introduction of new products, and price reductions by such competitors to
gain or retain market share. It is important to note that the Company's actual
results could differ materially from those in such forward looking statements
and the Company assumes no obligation to update such forward looking statements.
LAW ENFORCEMENT AND REGULATORY AGENCY MARKET
The Company's performance in any one reporting period is not
necessarily indicative of sales trends or future performance. Law enforcement
agencies are subject to political and budgetary constraints and the nature of
the law enforcement market and the government procurement process are expected
to continue to result in an irregular and unpredictable revenue cycle for the
Company.
The Company extends credit to state and local governments in connection
with sales of products to law enforcement agencies. Approximately 82% of
customer accounts receivable at June 30, 1997, were from government agencies. At
June 30, 1997, approximately 29% of customer accounts receivable was from a
single governmental customer. Sales to this and other customers requiring large
and sophisticated networks of TENPRINTER systems and peripheral equipment often
include technical requirements which are not fully known at the time
requirements are specified by the customer. In addition, contracts may specify
performance criteria which are required to be satisfied before the customer
accepts the products and services.
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
FORWARD LOOKING COMMENTS AND MATTERS THAT MAY AFFECT OPERATING RESULTS
(CONTINUED)
Generally, it is only upon completion of customer requirements, which
time periods are unpredictable and which may involve investment of additional
Company resources, that accounts receivable are collected. These investments of
additional resources are accrued when amounts can be estimated but, however, may
be uncompensated and, other than increased customer loyalty, negatively impact
profit margins and the Company's liquidity.
GAMING AND OTHER COMMERCIAL MARKETS
The Company has completed development of a prototype of its TRAK-21
player tracking data capture system which has been successfully demonstrated in
laboratory conditions. A prior version of TRAK-21 has been tested in a casino
environment. It has not been determined whether or not the TRAK-21 system will
be able to compete, on the basis of price and performance, with player tracking
systems of competitors whose systems have been marketed for longer periods of
time and whose financial and other resources are far greater than that of the
Company. The Company is currently engaged in the development of partnership
relationships for the marketing and distribution of the TRAK-21 product;
however, there is assurance that such partnerships will be developed, and if
developed will result in the successful distribution of this product.
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 1, 1995, the Company filed a complaint for patent
infringement against Identix, Inc., of Sunnyvale, California, in the
United States District Court for the Northern District of California.
The complaint alleged that Identix has willfully and deliberately
infringed a Company patent through the manufacture, use and/or sale of
competing products. The complaint sought, among other things, an
injunction prohibiting further infringement as well as unspecified
monetary damages. Identix responded to the complaint alleging, among
other purported defenses, non-infringement and patent invalidity.
On August 27, 1996, the judge assigned to the case granted a
partial summary judgment in favor of Identix dismissing the Company's
claims of patent infringement with respect to Identix's Touchprint 600
product line. A predecessor product, the Touchprint 900, received a
similar ruling in favor of Identix on December 20, 1996. During
January, 1997, the Company filed an appeal of the court's decision of
non-infringement. The interpretation of patents will ultimately be
decided by the special patent Court of Appeals in Washington D.C.
However, a prediction of the final outcome of the appeal is not
possible. In the event the Company does not prevail in this litigation,
its competitive position could be adversely affected.
There are no other material claims pending or, to the
Company's knowledge, threatened against the Company.
ITEM 6. (a) EXHIBITS
Exhibit 11 Statement re: Computation of loss per share
Exhibit 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
On April 15, 1997, the Company filed a report on Form 8-K
related to the conversion of $400,000 of 8% Convertible Debentures and
$48,658 of accrued interest into 263,916 shares of the Company's common
stock.
<PAGE>
DIGITAL BIOMETRICS, INC.
THREE MONTHS ENDED JUNE 30, 1997
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.
DIGITAL BIOMETRICS, INC.
(Registrant)
August 13, 1997 s/ John J. Metil
-------------------------------------
John J. Metil
Chief Operating and Financial Officer
EXHIBIT 11.0
DIGITAL BIOMETRICS, INC.
STATEMENT RE: COMPUTATION OF LOSS PER SHARE
The per share computations are based on the weighted average number of common
shares outstanding during the periods.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------------------- ----------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares outstanding at beginning of period 12,060,122 9,374,189 10,777,288 7,833,633
Shares issued under retirement plan -- -- 41,798 16,831
Restricted stock awards, net of forfeitures -- -- 19,072 17,456
Exercise of options and warrants 7,500 -- 7,500 157,500
Shares issued from debenture and related interest
conversion 263,916 1,342,808 1,485,880 2,691,577
------------ ------------ ------------ ------------
Shares outstanding at end of period 12,331,538 10,716,997 12,331,538 10,716,997
============ ============ ============ ============
Weighted average shares outstanding (A) 12,296,752 10,565,580 11,574,448 9,011,169
============ ============ ============ ============
Net loss $ (3,103,311) $ (2,466,750) $ (5,169,830) $ (7,744,297)
============ ============ ============ ============
Loss per common share $ (0.25) $ (0.23) $ (0.45) $ (0.86)
============ ============ ============ ============
</TABLE>
(A) Stock options and other common share equivalents are not included in the
calculation of the net loss per common share for the three- and nine-month
periods ended June 30, 1997 and 1996 as their effect is antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000868373
<NAME> DIGITAL BIOMETRICS INC
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 318,163
<SECURITIES> 4,470,950
<RECEIVABLES> 5,653,787
<ALLOWANCES> 557,274
<INVENTORY> 2,302,534
<CURRENT-ASSETS> 8,044,931
<PP&E> 1,899,137
<DEPRECIATION> 1,011,390
<TOTAL-ASSETS> 13,489,617
<CURRENT-LIABILITIES> 5,467,455
<BONDS> 0
0
0
<COMMON> 123,315
<OTHER-SE> 7,898,847
<TOTAL-LIABILITY-AND-EQUITY> 13,489,617
<SALES> 6,862,651
<TOTAL-REVENUES> 8,076,511
<CGS> 4,646,112
<TOTAL-COSTS> 7,712,039
<OTHER-EXPENSES> 5,524,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 242,689
<INCOME-PRETAX> (5,169,830)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,169,830)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,169,830)
<EPS-PRIMARY> (0.45)
<EPS-DILUTED> (0.45)
</TABLE>
