A reorganized Fingermatrix hopes to leave its imprint on an industry it pioneered
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There's light at the end of the tunnel, according to the new president of Fingermatrix Inc., which expects to hire a few new employees this year and, by the middle of next year, make its first profit ever after a half-decade of turmoil that has included a shareholder revolt and 20 months of Chapter 11 operation.
The Dobbs Ferry manufacturer of electronic fingerprint imaging equipment is reengineering its products in response to gains made by competitors, said president Thomas T. Harding. "We've got to convince prospective customers that we have returned to some normalcy. We've already started making contacts with people. Hopefully, we won't make the same mistakes we made before."
Fingermatrix emerged from Chapter 11 bankruptcy protection on April 17 when the plan to reorganize the company and repay creditors took effect following approval by U.S. Bankruptcy Court Judge John J. Connelly. Cheeks were sent to creditors two days later, Harding said.
The company has eight employees, a number that should rise to "about 12" by year's end, said Harding. In 1988 Fingermatrix had a workforce of 70.
Harding said the company stands a "reasonable chance" of reaching nearly 400,000 in sales during the calendar year, with an eye to becoming profitable -- for the first time ever -- by the end or the fiscal year on May 31, 1996. He said sales had been negligible in recent months, but would not give an exact figure.
This month, Fingrmatrix expects to announce its first new product, a single-finger liquid platen scanner that produces a computerized picture or a fingerprint. The scanner could be used to control access to military facilities or computer rooms, or to prevent fraudulent voter registration. Potential foreign buyers have visited the company's offices; Harding declined to be more specific.
The company could forge links with government agencies trying to stop welfare fraud by fingerprinting recipients. In 1993 and early 1994, New York state used Fingermatrix equipment to fingerprint welfare recipients in Rockland and Onondaga counties under an 18-month pilot program. Rockland saved $74,000 a month and Onondaga, $604,000 a month.
But the fact that Fingermatrix does not market equipment for connecting separate social service offices with each other is an obstacle to obtaining large contracts. As a result, said Gordon R. Molesworth, the company will explore the possibility of forming partnerships with other suppliers before pursuing new business with state and local governments. Molesworth leads a group of shareholders who control half the company's stock.
Molesworth's group last year succeeded in ousting the company's previous management team, headed by founder Michael Schiller and his son, Scott. The Fingermatrix Stockholder Alliance sued Fingermatrix, the Schillers, and another director in 1993 in U.S. District Court after directors gave Michael Schiller effective control of the company. The board allowed him to acquire 12.25 million shares or stock for 2 cents a share at a time when the market price was 38 cents a share.
The alliance was formed when shareholders became irate over the $54 million in losses the company had suffered since its rounding in 17. In its nine-year-history, Fingermatrix has never made a profit.
The stock sale became moot, however, when Fingermatrix voluntarily filed for Chapter 11 bankruptcy protection, listing liabilities of $1.4 million and assets of $1.05 million. At the time, the company blamed its lass on research and development costs and slowing demand that stemmed from recession-related government spending cuts. The lawsuit was closed in October 1994.
Two months earlier, the alliance persuaded U.S. Bankruptcy Court Judge Stuart M. Bernstein to appoint Hal M. Hirsch, of the Purchase law firm Gainsburg & Hirsch, as a trustee to oversee Fingermatrix. Hirsch dismissed Michael Schiller and his management team in November.
In December, Hirsch approved a new management headed by Harding -- who twice in the late 19 had served as a consultant to the company -- along with engineers Michael McAdams and Dr. Daniel Marcus.
"When the new management look over, the company had no business plan, no operating plan, no development plan, and no budget. The first thing they had to do was build an infrastructure for running the company, and they did so in less than a month," Molesworth said.
The new management presented, and last month won approval for, a financial reorganization that would keep 50-percent equity ownership in the hands of the company's 9,000 shareholders -- 1.5 million of the company's 3 million outstanding shares. As of May 1, Fingermatrix' new shares were trading between $1.75 and $2.75 on the NASDAQ. The exchange delisted Fingermatrix in January 1993.
To raise more than $5 million in operating capital by year end, and another $5 million by the end of 16, the company has begun issuing one new stock share for every 12 old shares. For each new share, stockholders win get 1.66 new "A" warrants that can be exchanged for a new share at $1 per and a "B" warrant until the end of 1995. "B" warrants allow shareholders to buy stock at $2 a share until the end of 1996.
While in Chapter 11, Fingermatrix moved out of its longtime 27,000-square-foot headquarters at 30 Virginia Road in North White Plains and into 7,000 square feet of space at 145 Palisade St. in Dobbs Ferry.
The North White Plains building, jointly owned by Michael Schiller and two others, was sold in December 1993 for $700,000. The building reopened in January as the new location of C. R. Wallauer & Co.
Copyright Westfair Communications May 08, 1995 |
