A lot of stuff from the 10-K405/A:
"The Company's development programs have recently focused on: the next generation Biometric Security devices which are being developed to be faster, more reliable and cost effective than currently available devices; Biometric Security end user software applications; development of the recently introduced palm scanner; and enhancement of the Company's other live-scan products." Looks like IDX is working on a new generation of technology and still believes in the palm scanner.
The Sylvan JV "currently provides for fingerprinting services in ten United States cities." That's fewer than they hoped for, I'll bet.
Backlog information: "For its ANADAC services business, amounts in backlog are often not funded and, even if they are funded, are subject to cancellation by the contracting agency. Accordingly, the Company believes that backlog at any given time cannot be considered a meaningful indicator of future financial performance.
"Identix had product backlog of $4,865,000 on June 30, 1998, all of which is scheduled to be shipped and recognized as revenue in the current fiscal year. Identix had product backlog of $2,558,000 on June 30, 1997 and $1,677,000 on June 30, 1996.
"ANADAC had services backlog of $139,316,000 on June 30, 1998, of which $19,280,000 is scheduled to be provided and recognized as revenue in the current fiscal year. ANADAC had services backlog of $44,450,000 on June 30, 1997 and $54,372,000 on June 30, 1996."
Information on patents: "The Company holds the following patents: one U.S. patent expiring in 2004 and ten foreign patents on one version of the Company's optical fingerprint reading device; one U.S. patent expiring in 2008 and six foreign patents on a fingerprint analysis algorithm; one U.S. patent expiring in 2013 covering an enhanced method of recording a fingerprint; one U.S. patent expiring in 2014 on the Company's curved platen design palm scanner; one U.S. patent expiring in 2015 covering a different version of the Company's optical fingerprint reading device; and one U.S. patent expiring in 2016 covering a system for reducing smear in rolled fingerprint capture." Patents issue for 17 year terms, so it is easy to determine when each of these has issued. I hadn't seen a patent summary like this anywhere else. Any IDT patents, of course, aren't included above.
Workforce information: "As of September 1, 1998, Identix had 167 employees working in its products business, of whom 36 were engaged in research, development and engineering, 22 in production and production support, 80 in sales, marketing and field service and 29 in general administration and finance. As of September 1, 1998, Identix had 252 employees working in its services business, of whom 213 were service providers, 17 were engaged in sales and marketing and 22 were engaged in general administration and finance. None of Identix's employees is represented by a union and Identix has never experienced a work stoppage." Let's see, that seems to add up to 419 employees. IDT shouldn't add all that many more.
Number of shareholders: "As of September 1, 1998, there were 1,192 shareholders of record."
Now, here is something very interesting regarding F3 and F4 technologies: "The actual revenues from products acquired from Fingerscan based on the F3 and F4 technologies have been significantly less than the revenues estimated in determining the fair value of the in-process research and development acquired. In valuing the acquired in-process research and development, management of Fingerscan in 1996 estimated that F3 revenue for fiscal years 1997 through 2001 would be $160,000,000 and that F4 revenue for fiscal years 1998 through 2003 would be $45,000,000. The F3 technology was completed and incorporated into two products which were introduced toward the end of fiscal 1998. Currently forecasted revenue from F3 products is approximately 5,000,000. The F4 research and development project did not result in any discrete, identifiable product from which revenues are expected to be derived." In both projects, there were significant technical problems that took longer to overcome than originally expected. Further, the market demand for biometric security products based on these technologies has been smaller than originally expected due to the price of these products and a lack of market awareness. [My emphasis.] In other words, the results of the F3 technology were a major commercial disappointment (shouldn't IDX be doing everything to improve "market awareness"?) and the F4 technology was a failure. I guess we are waiting for F5 products to emerge.
In a subsequent discussion of the $4.7M Fingerscan R&D writeoff in 1996, IDX states: "There were two significant technologies in-process at the time of acquisition. 'F3' was expected to result in new products that were 1/20th the size and 1/10th the price of existing products. The second in-process technology, 'F4,' was expected to greatly enhance user access by eliminating the need for a smart card or access code and have far greater database scanning capabilities.
"Each project had a different likelihood of success. Identified risks for the F3 were significant remaining development issues, lack of working model or prototype and the high risk nature of the technology. Risks for the F4 included those for the F3 plus the risk that competitors would drive prices down quicker than anticipated, gaining market share before the F4 technology was viable in it targeted market. The discount factor applied to the future cash flows for these in-process technologies was 45% based on the independent assessment of the calculated weighted cost of capital and the risks associated with the in-process products. . . . At the time of acquisition, the in-process research and development charge represented a multiple of approximately 19 times Fingerscan's trailing twelve month research and development expenditures." At least they got a break on the acquisition price. The F3 product probably dropped the IDX bio-ID prices at least by half, although not to the $100 or less level IDX was apparently hoping for. |
