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, 2003
COMMISSION FILE NUMBER 0-20270
SAFLINK CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
95-4346070 (I.R.S. Employer Identification No.) |
777 108th Ave NE, Bellevue, Washington 98004
(Address of principal executive offices and zip code)
(425) 278-1100
(Registrant’s telephone number, including area code)
11911 NE 1st Street, Suite B-304, Bellevue, WA 98005
(Former address of principal executive offices)
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No x
There were 25,908,372 shares of SAFLINK Corporation’s common stock outstanding as of May 7, 2003.
SAFLINK Corporation
FORM 10-Q
For the Quarter Ended March 31, 2003
| Part I. |
Financial Information |
|||||
| Item 1. |
Financial Statements (Unaudited) |
|||||
| a. |
Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 |
3 | ||||
| b. |
Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002 |
4 | ||||
| c. |
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002 |
5 | ||||
| d. |
6 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||||
| Item 3. |
20 | |||||
| Item 4. |
21 | |||||
| Part II. |
Other Information |
|||||
| Item 1. |
21 | |||||
| Item 2. |
21 | |||||
| Item 6. |
22 | |||||
| 23 | ||||||
| 24 | ||||||
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SAFLINK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
| March 31, 2003 |
December 31, 2002 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
14,144 |
|
$ |
7,447 |
| ||
| Accounts receivable, net |
|
459 |
|
|
143 |
| ||
| Other current assets |
|
739 |
|
|
829 |
| ||
| Total current assets |
|
15,342 |
|
|
8,419 |
| ||
| Furniture and equipment, net |
|
306 |
|
|
199 |
| ||
| $ |
15,648 |
|
$ |
8,618 |
| |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
333 |
|
$ |
758 |
| ||
| Accrued expenses |
|
358 |
|
|
467 |
| ||
| Deferred revenue |
|
54 |
|
|
130 |
| ||
| Total current liabilities |
|
745 |
|
|
1,355 |
| ||
| Stockholders’ equity: |
||||||||
| Preferred stock |
|
— |
|
|
— |
| ||
| Common stock |
|
256 |
|
|
196 |
| ||
| Common stock subscribed |
|
121 |
|
|
— |
| ||
| Additional paid-in capital |
|
101,787 |
|
|
92,316 |
| ||
| Accumulated deficit |
|
(87,261 |
) |
|
(85,249 |
) | ||
| Total stockholders’ equity |
|
14,903 |
|
|
7,263 |
| ||
| $ |
15,648 |
|
$ |
8,618 |
| |||
See accompanying notes to condensed consolidated financial statements.
3
SAFLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
| Three months ended |
||||||||
| 2003 |
2002 |
|||||||
| Revenue: |
||||||||
| Product |
$ |
270 |
|
$ |
136 |
| ||
| Service |
|
327 |
|
|
60 |
| ||
| Total revenue |
|
597 |
|
|
196 |
| ||
| Cost of revenue: |
||||||||
| Product |
|
55 |
|
|
111 |
| ||
| Service |
|
84 |
|
|
27 |
| ||
| Total cost of revenue |
|
139 |
|
|
138 |
| ||
| Gross profit |
|
458 |
|
|
58 |
| ||
| Operating expenses: |
||||||||
| Product development |
|
481 |
|
|
402 |
| ||
| Sales and marketing |
|
1,003 |
|
|
359 |
| ||
| General and administrative |
|
996 |
|
|
961 |
| ||
| Total operating expenses |
|
2,480 |
|
|
1,722 |
| ||
| Operating loss |
|
(2,022 |
) |
|
(1,664 |
) | ||
| Interest expense |
|
— |
|
|
(38 |
) | ||
| Other income, net |
|
10 |
|
|
8 |
| ||
| Net loss |
|
(2,012 |
) |
|
(1,694 |
) | ||
| Preferred stock dividend |
|
— |
|
|
4,731 |
| ||
| Net loss attributable to common stockholders |
$ |
(2,012 |
) |
$ |
(6,425 |
) | ||
| Basic and diluted loss per common share: |
||||||||
| Net loss |
$ |
(0.09 |
) |
$ |
(0.16 |
) | ||
| Preferred stock dividend |
|
— |
|
|
(0.45 |
) | ||
| Net loss attributable to common stockholders |
$ |
(0.09 |
) |
$ |
(0.61 |
) | ||
| Weighted average number of common shares outstanding |
|
21,874 |
|
|
10,557 |
| ||
See accompanying notes to condensed consolidated financial statements.
4
SAFLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Three months ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ |
(2,012 |
) |
$ |
(1,694 |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Stock-based compensation |
|
314 |
|
|
8 |
| ||
| Depreciation and amortization |
|
46 |
|
|
70 |
| ||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
|
(316 |
) |
|
(74 |
) | ||
| Other current assets |
|
(195 |
) |
|
(122 |
) | ||
| Accounts payable |
|
(425 |
) |
|
(296 |
) | ||
| Accrued expenses |
|
(109 |
) |
|
(49 |
) | ||
| Deferred revenue |
|
(76 |
) |
|
(37 |
) | ||
| Net cash used in operating activities |
|
(2,773 |
) |
|
(2,194 |
) | ||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
|
(153 |
) |
|
(1 |
) | ||
| Net cash used in investing activities |
|
(153 |
) |
|
(1 |
) | ||
| Cash flows from financing activities: |
||||||||
| Payments on notes payable |
|
— |
|
|
(1,435 |
) | ||
| Proceeds from exercises of stock options |
|
272 |
|
|
— |
| ||
| Proceeds from warrant exercises and issuance of common stock, net of issuance costs |
|
9,351 |
|
|
5,531 |
| ||
| Net cash provided by financing activities |
|
9,623 |
|
|
4,096 |
| ||
| Net increase in cash and cash equivalents |
|
6,697 |
|
|
1,901 |
| ||
| Cash and cash equivalents at beginning of period |
|
7,447 |
|
|
64 |
| ||
| Cash and cash equivalents at end of period |
$ |
14,144 |
|
$ |
1,965 |
| ||
| Non-cash financing and investing activities: |
||||||||
| Preferred stock dividend |
$ |
— |
|
$ |
4,731 |
| ||
| Conversion of note payable to common stock |
|
— |
|
|
1,506 |
| ||