Thumbs up? Comparator leaves strong impression

David Henry; Julie Schmit

05/08/1996

USA Today

FINAL

Page 01B

Comparator Systems says it has a device to help tell if people are who they say

they are. The investment world wonders if Comparator is the company it says it

is.

Last Thursday, Comparator was an obscure company with a dubious past and

only a few thousand dollars in cash. Its stock occasionally traded for about a

nickel a share. Friday, Comparator rocketed into view as the most-active stock

ever on the Nasdaq stock market, a title it held again Monday and Tuesday.

Daily volume the last three sessions has ranged from 123 million to 176 million

shares. It accounted for nearly one-quarter of Nasdaq's total volume each day.

And the price? From 6.25 cents on Thursday, the stock shot to $17/8 Tuesday

before settling down to close at 87.5 cents. At 87.5 cents and with about 605

million shares outstanding, the stock market is saying the company is worth more

than half a billion dollars. ``That's ludicrous,'' says Greg Armijo, vice president

for operations at Comparator.

Comparator is a start-up company that's been trying to get going for 20 years. Its

stated aim is to make and sell devices for checking identifications by using

fingerprints.

The company has 29 employees, including part-time consultants. It hasn't been

able to make its payroll for 11 of the past 13 years, CEO Robert Rogers says.

Employees have often received stock in lieu of cash, according to Rogers and

company filings to the Securities and Exchange Commission. Comparator has

only $4,000 in the bank, down from $7,000 Dec. 31. It has no manufacturing

plants and its only property is a leased 5,900-square-foot office in Newport

Beach, Calif.

Armijo insists Comparator's prospects are good. But given Comparator's lousy

financial condition and bad reputation as a public company, he says the stock

trading ``is insane.''

It is not clear what, if anything, Comparator's story means. The company's

technology could turn out to be a winner. But this also may simply be a rare

occasion when a tiny stock bursts into national view on blind speculation by

individual investors and opportunistic selling and trading by unseen denizens of

the penny-stock world.

Armijo says the skyrocketing stock price is casting a bad light on his company.

He says no one in the company is responsible for the stock's run-up, and that he

has looked at records with the company's stock transfer agent and can't figure out

who is behind the frantic trading. ``We're being held accountable for market

action,'' Armijo says.

Adds CEO Robert Rogers, ``None of us can account for it.''

The stock started moving, Armijo notes, on Friday, the business day before

Comparator issued a press release to drum up attention for its product

introduction at a trade show in Atlanta.

The product, under development since the late 1980s, could be used for a variety

of purposes by businesses and government agencies verifying IDs, according to

the company's announcement. Among them: quickly checking fingerprints of

people boarding airplanes; cashing checks; using credit cards; clearing

immigration; buying prescription drugs; getting money from ATMs; and

collecting welfare benefits. The product, called Biometric Identity Verification,

would cost about $3,000.

Says Rogers: ``We have a large market that we're now ready to attack.'' The

company believes there is new demand for such products because businesses are

more concerned about losses from fraud and less concerned about privacy.

But others in the fingerprint ID business doubt Comparator's ability to be a

important player in the fledgling industry.

``I've never run into them in the marketplace,'' says Randy Fowler, president of

Identix, the undisputed industry leader based in Sunnyvale, Calif. ``I know

they've been around for 20 years, but I've never seen a product.'' Adds Wall

Street analyst John Doss with Dominick & Dominick: ``I'm somewhat

suspicious.''

MasterCard said Tuesday that a fingerprint technology it will soon unveil is not

the work of Comparator, Bloomberg Business News reported.

The new product was not on hand at the Newport Beach office Tuesday when a

reporter asked to see it. Armijo said the devices were being assembled nearby by

a group of engineers. Officials said that open personal computers with wires

dangling were other new products in development.

Comparator first sold stock to the public in 1979. The issue was underwritten by

Blinder, Robinson & Co. of Englewood, Colo., one of the most notorious chains

of penny-stock boilerrooms in recent history. Blinder Robinson closed after

prolonged battles with the Securities and Exchange Commission, and chairman

Meyer Blinder was sentenced to nearly four years in prison.

After Blinder brought out Comparator at 10 cents a share, the stock soared to $2,

then fell to a penny.

Rogers says that dubious start was none of his business. He took over as CEO in

1983. At the time, the doors to Comparator were padlocked. It had no

equipment, capital or employees. Rogers, a chemist by training and management

consultant, says he said to himself at the time: ``If I can turn this company

around, and if this technology really works, I've got another Xerox.''

He recruited a small band of retired engineers. Comparator finished the design of

its first and only fingerprint product in 1984. The device -- which was about the

size of a VCR -- was sold to some prisons and law enforcement agencies. But the

equipment was slow, the technology was cumbersome and sales lagged. The

company kept losing money and dropped the product, promising to develop one

for sale to businesses.

In search of capital, Comparator signed a deal in 1992 for $22 million from

foreign investors who required that the company open a manufacturing plant in

Malaysia. But the backers paid only 10% of the money and then pulled out,

Armijo says.

Rogers says the investors backed out because of big losses they suffered in the

Malaysian stock market. Meanwhile, a company executive in the USA allegedly

absconded with more than $800,000, according to company filings to the SEC.

Wall Street has seen stocks run up on promises of new contracts for new

products before. In early 1993, shares of Spectrum Information soared to $131/8

on excitement over several patents the company held on technologies used to

transmit data from wireless phones. The company said it had a contract with

AT&T worth ``hundreds of millions.''

But a week later, AT&T said the Spectrum contract was worth ``a few million

dollars.'' The stock tumbled. Lawsuits and investigations followed. Spectrum

filed for Chapter 11 bankruptcy protection in January 1995. Its stock currently

trades at 35 cents.

Rogers says he's not surprised at the skepticism surrounding Comparator. The

proof, he says, is in the coming product.

Rogers says Comparator is negotiating with two countries to set up national ID

card systems. And a U.S. airline wants to set up a fingerprint boarding system.

He also says Comparator's technology is soon to be used by one company that

provides prison security systems.

Who are the customers? Rogers won't say.

Contributing: Jonathan Lovitt in Los Angeles and Jeff Mangum

TEXT OF INFO BOX BEGINS HERE:

About Comparator

Business: Personal identification systems

Founded: 1976

Initial public offering: 1979

Chairman, CEO: Robert Reed Rogers

President: Richard Floegel

Headquarters: Newport Beach, Calif.

Employees: 29

Sources: Comparator Systems, USA TODAY

research by Tammi Wark

GRAPHIC, Color, Sam Ward, USA TODAY , Source: Bloomberg Business

News(Line graph); PHOTO, Color, CNBC-TV; Caption: Robert Rogers:

COMPARATOR SYSTEMS CHMN. & CEO