NEWPORT BEACH, Calif. --May 10, 1996 -- In
response to questions raised by the NASD, Comparator Systems Corp.
(NASDAQ:IDID) wishes to clarify certain information.
In a news release dated May 9, 1995 Comparator indicated that a
cash infusion from a foreign investor was imminent. Subsequent to
that release, the British financier failed to perform against the
signed contract, and that funding did not take place. The company
did not then announce that the funding was not, after all, imminent.
The company did not take legal action against the investor due
to the high cost of litigating a case in a foreign country.
Although the company is presently in negotiation with a number of
funding sources, the $2.5 million which it now seeks to initiate
full-scale manufacturing and marketing has not yet been obtained.
Comparator wishes to clarify that while the company has
announced two joint marketing agreements during recent weeks, there
have not yet been any units of its Series 5000 products sold. This
new product line will be introduced to the market at the
CardTech/SecurTech Exhibition in Atlanta, Ga. on May 14-16, 1996.
The company confirms, however, that sales of its Credit Union and
Banking software products have occurred in Central America and in
the United States. Total sales of financial institution operating
systems and accounting systems for the six months ending March 31,
1996 were $366,456.96.
The company is clarifying certain points with respect to its 10-
K Report for the fiscal year ending June 30, 1995:
The patents listed on the balance sheet in the company's 10-K
report for the fiscal year ending June 30, 1995 are for
Comparator's Model ID-1 and Model ID-2 fingerprint comparison
systems. The patents on the Model ID-1 have expired but the
company nevertheless feels that its proprietary knowhow
provides sufficient protection, and that the ID-1 and/or its
upgrades is marketable in developing countries. At the time
of the 1995 report, the company had not yet filed any new
patent applications. The Model ID-1 was carried in 1995 at
an amortized value of $18,319.50, which represented 0.32% of
the company's total assets at that time. The balance of the
patent value shown in the balance sheet of the company's 1995
10-K Report, carried at actual cost less amortization, was
$2,415,209.60. This amortized value is attributable to the
Model ID-2 Comparator, a transitionary product between the
Model ID-1 and the new 5000 Series. The ID-2 has been
produced in engineering prototype but is not in production.
The company has done sufficient market research in developing
countries and it is the company's belief that there is a
significant third-world market for the ID-2. The
whole-finger optical approach employed in the ID-2 is one of
the technological foundations for optical methodology
employed in the new software-based 5000 Series. The company
is reviewing the valuation of these earlier patents. Two new
patent applications have now been filed but their value has
not yet been reflected in the company's financial statements.
Comparator is carrying a $744,978.97 account receivable as
the result of a 1993 embezzlement by the company's Corporate
Secretary (subsequently terminated), consisting of $81,613.21
in cash, and the balance in common stock of the company.
This was reflected in the company's 8-K Report dated March
15, 1994 and also described in its previous 10-K reports. On
Oct. 27, 1995 the company filed a civil suit, which it is
pursuing, against 34 individuals involved, and has to date
recovered 2,725,000 shares of stock, representing 10.97% of
the total account receivable. The company will review the
valuation of this account receivable in light of the ongoing
litigation and the ongoing recovery of funds. It appears
that substantial recovery may be unlikely. This account
receivable represents 13.1% of total assets.
Comparator is reviewing the current valuation of certain
investments carried on the balance sheet in the company's 10-K
Report for the fiscal year ending June 30, 1995. These items are
under review with the company's auditor's to determine whether
any decreases in valuation are appropriate. The cumulative value
of these investments represents 21.4% of the company's total
assets as reflected in the 1995 balance sheet, and before
recognition of the value of the new patent applications.
The total of the account receivable, patents and investments
noted above is $4,395,133.64, representing 77.4% of the
company's total assets at the time of the June 1995 report.
The company is addressing these issues, while completing
preparations for the introduction of Comparator's Series 5000
fingerprint comparison systems at the CardTech/SecurTech Exhibition
CONTACT: Comparator Systems Corp., Newport Beach, Calif.
Robert Reed Rogers/Richard E. Floegel, 714/851-4300