<PAGE>
                                 FORM 10-K

                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                      SECURITIES EXCHANGE ACT OF 1934

               For the fiscal year ended September 30, 1996
                       Commission File Number 0-9940

                            FINGERMATRIX, INC.
          (Exact name of registrant as specified in its charter)


             NEW YORK                                         13-2854686
    (State or other jurisdiction of                        (I.R.S. Employer
    incorporation or organization)                        Identification No.)

     145 Palisade Street
     Dobbs Ferry, New York                                      10522-1617
    (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code:  (914) 693-1050

Securities registered pursuant to Section 12 (b) of the Act:

                                                    Name of Each Exchange 
         Title of Each Class                         on Which Registered   
         -------------------                        ---------------------
                Common                                       None

Securities registered pursuant to section 12(g) of the Act:
                                  Common  
                             (Title of Class)

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
requirement for the past 90 days.

                        Yes   /X/        No   / /   

Indicate by check mark if disclosure of delinquent filers pursuant to 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.  [ ]

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                        Yes   /X/         No  / /    

The number of shares outstanding of registrant's one class of common stock, as
of September 30, 1995, was 3,945,404, and as of September 30, 1996 was 
8,206,150.

<PAGE>
                    DOCUMENTS INCORPORATED BY REFERENCE
              Form 10-K for the year ended September 30, 1995
                            ("1995 Form 10-K")

                                  PART I

Item 1.  BUSINESS.

(a) Technology of Registrant's Business and Products of
Registrant.

    See "Description of Technology Involved In Registrant's
Business" and "Registrant's Products" in 1995 Form 10-K, Part I,
Item 1. 

(b) Developments in Registrant's Products since October 1, 1995.

    1.   Single Fingerprint Access System.   The Registrant
completed development of a ready-to-sell single fingerprint access
system known as CHEK/ONE in July 1996.  This system allows for the
enrollment of the fingerprint(s) of individuals, assignment of a
PIN or other identifying characteristic to these enrollees, and use
of the combination of PIN and fingerprint to gain access to certain
privileges.  This system is intended for use in commercial, industrial,
and government applications where secure control of access is required.  
The CHEK/ONE employs fingerprint scanners in a terminal, a multiplexer board 
and frame grabber board housed in an IBM compatible Personal Computer ("PC"), 
and computer programs to control the process and report on results.  The 
scanner used in the CHEK/ONE was developed by the Registrant in 1995.  
The Registrant is marketing the CHEK/ONE to large manufacturers and
distributors of access control systems such as manufacturers of
Social Program Systems.  Two of these manufacturers are testing the
product for incorporation in their systems.  The Registrant is also
seeking orders from dealers in computer equipment and supplies who
would re-sell the CHEK/ONE to their customers on a value added
basis.

    2.   Forensic Quality Ten Print Scanner.     The development
of a ten fingerprint identification scanner, named "CHEK/TEN", (the
successor to the LPS14 Scanner) which the Registrant believes meets
the standards of the Federal Bureau of Investigation ("FBI") was
completed in the last days of November 1996. FBI certification
tests were conducted by Registrant in the first half of December
1996.  This test data was then submitted to the FBI with a request
that this scanner be granted certification for use as a "Live Scan"
fingerprint scanner which generates electronic fingerprint records.
Although Management believes that the FBI will grant certification
based upon the test conducted, Registrant makes no representation
to such effect.
                                
                                2

<PAGE>
  
    3.   Booking Station.    Concurrent with the development and
testing of the Forensic Quality Scanner, CHEK/TEN, the Registrant
has been designing the CHEK/TEN Booking Station for use at police
stations upon the arrest of a criminal suspect.  A working
prototype has been manufactured and is awaiting testing by police
agencies.  The booking station employs the CHEK/TEN in scanning of
fingerprints under control of the computer programs in a PC.  Other
information describing the suspect or applicant is recorded at
nearly the same time as the fingerprint scanning.  This includes
name, address, height, weight, hair and eye color, and optionally,
a picture.  Data collected in this manner is to be stored on the
various magnetic and optical storage devices offered with the
booking station.  All of the necessary components that comprise a 
booking station are housed in a kiosk suitable for the police
station environment.  The booking station is expected to be
marketed through dealers and other representatives of the
Registrant.  No orders for the booking station have been received
thus far.

    4.   Availability of Parts and Supplies and Manner of
Manufacture.  The Registrant expects to subcontract out parts
and some assembly for the CHEK/ONE, CHEK/TEN, and the Booking
Station.  Except for the optical prisms in the scanner, most of
the parts are off the shelf items available from more than one
manufacturer.  Accordingly, Registrant does not anticipate problems
in manufacturing or delivering these products.

    5.   Pricing.  The prices of the Chek/One and Chek/Ten will
vary with the number of units ordered and certain options which
are selected by the buyer.  No prices have been set for the
Chek/Ten or the Booking Station.

(c) Competition.

    In the development and marketing of fingerprint identification
systems, the Registrant faces domestic and foreign competition from
companies with far greater resources than it has.  Based upon
comparative testing of the Registrant's prototype scanner and those
of other manufacturers, the Registrant believes that the CHEK/ONE
is superior to those of competitors.

    The CHEK/TEN forensic quality scanner utilizes a design
proprietary to the  Registrant.   From reviews of the
specifications and performance capabilities of forensic quality
scanners manufactured by competitors, the management of Registrant
believes that the CHEK/TEN exceeds the performance of forensic
quality scanners of competitors.  Accordingly, the Registrant
should find a niche in supplying such scanners to original
equipment manufacturers of and contractors for Automated
Fingerprint Identifications Systems (AFIS) and Fingerprint Access

                                  3

<PAGE>
Control Systems (FACS). Thus far, however, the Registrant does not
have any orders for either the CHEK/ONE  and the CHEK/TEN. 

(d) Dependence on Suppliers.

    A number of different finished and raw material components are
utilized by the Registrant during production.  Among the finished
components are integrated circuits, resistors, capacitors and other
electronic devices, all of which are generally available from
multiple sources.  The Registrant also purchases metal and plastic
casings, motors, and optical equipment which are also available
from multiple sources.  Based upon experience, the Registrant has
not had any difficulty in purchasing any of the necessary
components or materials for its products, because of the general
availability of such components and materials from a number of
sources.  Consequently, a loss of one or more suppliers should not
impair the Registrant's ability to fill orders.

(e) Dependence on Customers.

    The Registrant has been in the development stage from
its inception, and, since it has come out from under the protection
of Chapter 11 of the Bankruptcy Laws, the Registrant thus far has
no significant orders placed with it.  By reason thereof, it can
not now be determined if the Registrant shall in the future be
dependent on any one or more customers.

(f) Employee Relationships.

    The Registrant currently employs nineteen persons, of whom
fifteen employees are technical staff having advanced degrees in
physics, mathematics, engineering and computer sciences.  None
of its employees are unionized, and all employments are "at will",
i.e., an employee can leave or be terminated at anytime.  The
Registrant has granted options to all of its employees.  The
Registrant does provide hospital and medical benefits.  All
employees are required to sign agreements assigning their rights
in any patents or trade secrets to the Registrant arising out of
the work they perform, and promising not to disclose or to use
any confidential information pertinent to the Registrant and its
products.

(g) Significant Contracts.

    The Registrant has entered into one contract and is
contemplating entry into similar contracts whereby the contractor
agrees to act as a value added reseller ("VAR") for the products
of the Registrant.  Under these VAR contracts, the contractor

                             4

<PAGE>

purchases at mutually agreed prices from Registrant and resells at
such prices as the reselling contractor determines.  

    Apart from one VAR contract, the Registrant presently does not
have any significant contracts with any suppliers, customers,
employees, or agencies.  It does have an employment agreement with
its President, Thomas T. Harding.  See "Executive Compensation"
1995 Form 10-K, Part III, Item 11.

(h) Patents and Other Intellectual Property Rights.

    Patents and Know How

    The Registrant holds United States patents on devices,
some of which are incorporated in the Registrant's current
products, but all of which pertain to the technology applicable
to the Registrant's products.  It has applied for a patent with
the United States Patent and Trademark Office ("Patent Office")
on one device.  The Registrant has had patents issued by foreign
countries, but some may have lapsed because of Registrant's failure
to maintain same through the payment of requisite fees which
failure occurred prior to the Registrant coming out the bankruptcy
reorganization.

    The competitive nature of the Registrant's industry
makes the patents and patent applications important to the
Registrant.  However, there is no assurance that the issued
patents, or the patents applied for, will prove enforceable,
or that the Registrant will derive any competitive advantage
therefrom.  The Registrant also has other patents which,
because of technological advancements, it no longer considers
important and have allowed some to lapse.

    The Registrant also relies on unpatented know-how and trade
secrets and continuing research and development.  As a result, the
Registrant may not have any protection from other parties who
independently develop the same know-how and trade secrets.  While
the Registrant's management is not aware that any of its products
infringe on any outstanding patents of others, the manufacture and
sale of the Registrant's proposed products may infringe on patents
of third parties.  If such be the case, failure to obtain needed
licenses from such third parties could have a material adverse
effect on the Company's ability either to complete the development
of a certain product or to arrange for its manufacture and
marketing.

                               5

<PAGE>
    Trademarks

    In June 1996, the Registrant adopted the following trademarks
in the marketing of its products and services:

    (i)  CHEK/ONE, which refers to the single fingerprint scanning
system; (see: "Developments in Registrant's Products Since October
1, 1995", Part I, Item 1(b) above);

    (ii) CHEK/TEN, which refers to the ten fingerprint scanning
system; (see: "Developments in Registrant's Products Since October
1, 1995," Part I, Item 1(b) above).

    On July 1, 1996, the Registrant applied for registration of
CHEK/ONE and CHEK/TEN with the United States Patent and Trademark
Office.

    Apart from CHEK/ONE and CHEK/TEN trademarks, the Registrant
currently uses trademarks and trade names which have not been
registered with the United States Patent and Trademark Office or
in any foreign government trademark offices.  The Company does,
however, believe that it has established common law rights to
the use of all of its trademarks which, in combination with the
Company's name, are used to indicate the origin of the products
to which they are applied and to distinguish them from the products
of competitors.  The Company regards its trademarks important to
its business.  As to unregistered trademarks, the Company will not
be able to avail itself of the protection granted to Federally
registered marks under Federal law.  Certain rights are, however,
protected under the provisions of the Lanham Act and under state
law in respect of unregistered or common law trademarks.

    The Registrant also has registered trademarks with the
United States Patent and Trademark Office for products it is
not presently marketing,

(i) Other Factors Affecting Registrant's Business.

    Compliance with Environmental and Occupational
    Safety and Health Laws

    The Registrant believes that it is in compliance with all
federal, state and local environmental laws and regulations
applicable to it business and products.  In view of the
Registrant's policy not to manufacture components for its products
such as electronic boards, but only to assemble and install such
components into its products, it does not expect that it will have
to incur any significant expense with respect to protecting the
environment from pollution.  Accordingly, such assembly and

                                  6

<PAGE>

installation shall not require the Registrant to be involved with
"hazardous substances", and "pollutants and contaminants" as
defined in 42 U.S. Code section section 9601, et. seq.
    
         The Registrant believes that its office and other work
places are in compliance with the occupational safety and health
laws.

Item 2.  PROPERTIES.

    The Registrant currently operates out of a 5,600 square foot
facility located on the first floor of a multi-story concrete and
steel loft building at 145 Palisade Street, Dobbs Ferry, New York,
which it leases from an independent third party, Commerce and
Industry Associates under a written lease which commenced on
November 15, 1993 and terminates November 14, 1998.  The annual
rent for the first floor facility increases at November 15 of each
year with the annual rent for the period November 15, 1995 to
November 14, 1996 being $49,414; for the twelve month period
between November 15, 1996 and November 14, 1997, the annual rent
will be $51,885; and from November 15, 1997 until November 14,
1998, the annual rent will be $54,479.  All of these annual rents
are payable in equal monthly installments.  In the basement of the
same building the Registrant also leases on a month-to-month basis
from Commerce and Industry Associates about 800 square feet of
storage space, which lease commenced on March 1, 1995.  The rental
for the basement is $750 per month plus  electricity.  The Registrant
believes that the facilities are sufficient for its needs at
least to the expiration of the lease for the first floor space. 
Registrant does not anticipate a problem with respect to continuing
to renew the lease to the basement storage facilities for the next
several months.

    The Registrant has no other interest in real properties,
whether by outright ownership, lease or mortgage.

Item 3.  LEGAL PROCEEDINGS.
         
(a) Pending Litigation.

    There is no pending litigation against the Registrant.  

    In June, 1996, Michael Schiller, former Chief Executive
Officer and Chairman of the Registrant, brought a proceeding in
the United States Bankruptcy Court for the Southern District of
New York to compel the removal of a legend from the certificate
issued to him for 200,000 shares of the Registrant's Common stock. 
The legend restricted the sale or transfer of the shares except in

                                7

<PAGE>

accordance with the Securities Act of 1933, as amended.  These
shares were issued to Mr. Schiller upon exercise of warrants to
purchase the Registrant's common Stock at one penny per share. 
These penny warrants were granted to Mr. Schiller by the trustee
of the Registrant in compromise and settlement of his claims
against the Registrant's Chapter 11 bankruptcy estate for unpaid
salary and other matters pursuant to an order of the Bankruptcy
Court.  It was Mr. Schiller's claim that the shares to be issued
to him were free for him to sell in accordance with <section>1145 of the
Bankruptcy Law (11 US Code section 1145).  The Registrant, relying on
the statement of the trustee that the warrants and the underlying
shares were not intended to be exempt from the Securities Act of
1933, as amended, opposed the removal of the restrictive legend. 
The Bankruptcy Court, Judge Lifland, found that the shares were
exempt under section 1145 and could be freely sold by Mr. Schiller,
and ordered the Registrant to have the legend removed, which was done
in August, 1996.  

(b) Threatened Litigation.

    The Registrant is not aware of any threatened litigation
against it.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    On August 6, 1996, the annual shareholders meeting was
held, which was the first meeting after the Registrant had been
reorganized pursuant to Chapter 11 of the Bankruptcy Law.  At this
meeting, the shareholders elected the same slate of directors as
those who had been designated in the Second Amended Plan of
Reorganization dated March 10, 1995 ("The Plan"), to wit:  Thomas
T. Harding, Gordon R. Molesworth, Lewis Schiller, Seth Lukash, and
Fred I. Sonnenfeld.1   The independent certified public accounting
firm of Farber, Blicht & Eyerman, L.L.P. was authorized to be
retained as the Registrant's independent auditors for the year
ended September 30, 1996.  In addition, the shareholders ratified
and approved the Employee Stock Option Plan and the Directors Stock
Option Plan for non-employee directors, both of which plans were
adopted by the Registrant's Board of Directors.  (See:"EXECUTIVE
COMPENSATION-Employee Stock Option Plan" Part III, Item 11, below.) 
Annexed as an exhibit hereto is the tabulation of the votes cast
for and against and abstentions with respect to the election of
directors, and the approvals of the Employee Stock Option Plan, the
Director Stock Option Plan and the engagement of the independent
auditors.

--------
1  In October 1996, Lewis Schiller resigned as a director.

                                 8

<PAGE>
                                  PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
         STOCKHOLDER MATTERS.                            

(a) Market Information.

    Since April 19, 1995, the date that Registrant's securities
were distributed pursuant to the Second Amended Plan of
Reorganization dated as of March 10, 1995("the Plan"), Registrant's
Common Stock has been trading on the National Association of
Security Dealers Automatic Quotation System's Electronic Bulletin
Board.  The following table shows the low and high bid prices of
the Common Stock for the quarters ended June 30, 1995, September
30, 1995, December 31, 1995, March 31, 1996, June 30, 1996 and
September 30, 1996:

<TABLE>
<CAPTION>
                                   Common Stock
                                  ---------------

                             1995                 1996
                             ----                 ----
                         Low      High        Low      High
                         ---      ----        ---      ----      
<S>                     <C>       <C>        <C>      <C>
4th Quarter ended
September 30,           $1.75    $2.875      $2.50    $4.31      
  
1st Quarter ended
December 31,             ---      ---        $1.375   $2.50 

2nd Quarter ended
March  31,               ---      ---        $1.44    $1.69

3rd Quarter ended
June 30,                $1.50    $2.375      $1.81    $4.68

</TABLE>

         On  November 29, 1996, the low and high bid price per
share for the Registrant's Common Stock was $1.82 and $2.00.

                                 Warrants

    See "A-Warrants" and "B-Warrants" 1995 Form 10-K Part II,
Item 5, for history and description of these warrants.  Except for
A-Warrants held by certain individuals, all other A-Warrants
expired in January 1996 and therefore there are no A-Warrants

                                9
<PAGE>

available for sale to the public or for exercise by the public. 
There was no separate market for the A-Warrants.

                                B-Warrants

    Since September 30, 1996, the B-Warrants have been listed on
the National Association of Securities Dealers Automated Quotation
Systems Electronic Bulletin Board.  B-Warrants and the underlying
shares to be issued on exercise are exempt from registration under
the Securities Act pursuant to section 1145 of the U.S. Code.  As
of September 30, 1996, 323,281 B-Warrants were exercised at an
exercise price of $2.00 per share.  B-warrants expire 635 days
after the Distribution Date or by January 14, 1997.2  The following
are the low and high bid prices for the B-Warrants for the quarter
annual period ended September 30, 1996:
<TABLE>
<CAPTION>                              1996
                                       ---- 
                                  Low       High
                                  ---       ---- 
         <S>                     <C>        <C>
         4th Quarter ended
         September 30,           $0.48      $0.50  
</TABLE>
    As of November 29, 1996, the low and high bid price for
B-Warrants were $.12 and $.68.

(b) Number of Security Holders.

    Because a substantial proportion of Registrant's securities
are held in "street name", the following table only represents
the holders of record of Registrant's securities, and not the
beneficial owners thereof.  The number of holders of record were
as follows:
<TABLE>
<CAPTION>
                             As of September 30, 1996
                             ------------------------
         <S>                 <C>
         Common Stock                  9,183
         B-Warrants                      405
         C-Warrants                        3
--------
<FN>
2  B-Warrant certificates mistakenly state that the B-Warrants expire
September 28, 1996.
</TABLE>

                             10
<PAGE>
(c) Description of Securities.

    Although the Registrant's certificate of incorporation,
as amended in the Chapter 11 proceeding, provides for two classes
of stock, namely, preferred shares and common shares, only common
shares ($.01 par value) ("Common Stock") are issued and
outstanding.

    Common Shares.   Of the 20,000,000 shares of Common Stock
authorized, as of September 30, 1996, 8,206,150 shares were issued
and outstanding.  Subject to dividend rights of preferred shares,
if ever issued, holders of the shares of Common Stock are entitled
to dividends when, as and if declared by the Board of Directors out
of funds legally available for such purpose.  Holders of the common
shares are entitled to cast one vote for each share held at all
shareholder meeting for all purposes, including the election of
directors.  No holder of Common Stock has a preemptive or preferential
right to purchase or subscribe for any part of any unissued
or any additional authorized shares or any securities of the
Registrant convertible into shares.  On liquidation or dissolution,
the holders of shares of Common Stock are entitled to participate
equally in the assets of the Registrant, or the proceeds thereof,
after payment of all debts and liabilities of the Registrant and
after making provision for any preferences which may have been
granted to holders of preferred shares, when, as and if issued.

                     Of the 8,206,150 shares of Common Stock, as
of September 30, 1996, to the knowledge of Registrant's management 
2,219,350 shares are held by officers, directors and persons owning
more than 5% of the issued and outstanding common stock.  See Part
III, Item 12 "SECURITY OWNERS".
 
    Preferred Shares.  1,000,000 shares of preferred stock ($.01
par value) are authorized and none are issued or outstanding.  All
prior classes of preferred had been cancelled and exchanged for
Common Stock under the Plan.  The Preferred Stock may be issued in
one or more series by the Board of Directors without further shareholder
action and shall contain such terms and designations as the
Board of Directors may fix. 

                B-Warrants, C-Warrants, and Penny Warrants

    As of September 30, 1996, 1,245,681 B-Warrants were
outstanding.  For further details as to description of the
B-Warrants, see "B-Warrants" of 1995 Form 10-K, Part II, Item 5(a). 
Except for the A-Warrants granted to certain individuals who aided
in the financing of the reorganization (see "A-Warrants" of 1995
Form 10-K, Part II, Item 5 [a]), C-Warrants (described immediately
below) and stock options granted to officers, employees and

                                 11
<PAGE>

directors, there are no other outstanding warrants, options or
other rights to purchase Registrant's Common Stock or other
securities.  For details as to director and employee stock options,
see: "EXECUTIVE COMPENSATION", Part III, Item 11, below.

                             C-Warrants     

    C-Warrants were only issued to the three individuals who aided
in the financing of the reorganization, namely, Messrs. Gordon S.
Molesworth, Daniel Storr and Orville Riessen.  Each C-Warrant is
entitled to purchase one share of Common Stock at the exercise
price of $.01 per share.  The C-Warrants are separately tradeable,
and they and the underlying shares to be issued on exercise are
exempt from registration under the Securities Act pursuant to section1145
of the U.S. Code.  C-Warrants expire five years from date of
Distribution or by April 17, 2000.   

(d) Dividends.
    
    The Registrant has not issued any cash dividends on any of its
securities both before and after becoming a Debtor under Chapter 11
of the federal Bankruptcy Law.  It does not contemplate issuing any
cash dividends in the near future.

(e) Recent Sales of Securities.

    A.   Securities Intended To Be Issued And Actually Issued
         Under The Plan.
    
    Under the Plan which was confirmed on March 31, 1995, the
authorized common stock was reduced from 40,000,000 shares of
$.02 par value common stock ("Old Common Stock") to 20,000,000
shares of $.01 par value common stock ("Common Stock").  In
addition to providing for issuance of Common Stock, the Plan
provided for the issuance of A-Warrants, B-Warrants and C-Warrants. 
Accompanying the issuance of each share of Common Stock was an
1 and 2/3 A-Warrants to purchase 1 and 2/3 shares of Common Stock
at $1.00 per share.  Upon exercise of the A-Warrant, the holder
thereof received 1/2 B-Warrant exercisable at $2.00 per share. 
Except for A-Warrants issued to Messrs. Molesworth, Storr and
Riessen, the A-Warrants had to be exercised within 270 days of
the "Distribution Date" of April 19, 1995, or by January 16, 1996,
and the B-Warrants have to be exercised within 635 days of the
Distribution Date or by January 14, 1997, after which dates the

                             12
<PAGE>

warrants expire.3   Of the 20,000,000 shares of Common Stock,
11,962,500 shares of Common Stock were intended to be issued or
reserved for issuance under the Plan.  However, only, 2,222,738
shares of Common Stock were issued to the persons entitled thereto
under the Plan in April 1995.  Subsequent thereto, pursuant to
exercise of A-Warrants through January 1996, 2,773,800 A-Warrants
were exercised to purchase like number of shares of Common Stock
at $1.00 per share.  In addition, since April 19, 1995 through
September 30, 1996, 323,281 B-Warrants were exercised to purchase
at two dollars per share a like number of shares of Common Stock. 
See,"Securities Intended to be Issued Under the Plan" and
"Securities Issued Under the Plan", 1995 Form 10-K, Part II,
Paragraphs A & B of Item 5, for the amount of shares intended to
be issued and the amount actually issued and reserved for issuance,
as well as a description of the underlying basis for such issuance.

    Since April 1995, 200,000 C-Warrants were exercised at a
price of $.01 per share to purchase like number of shares of
Common Stock.  As of September 30, 1996, 100,000 C-Warrants are
outstanding.
         
    B.   Securities Issued Post-Confirmation.

    (i)  Sale to P.T. Dolak

    Unable to raise the capital financing contemplated under the
Plan from the Equity Lenders, the Registrant, on or about August
30, 1995, entered into a private placement agreement with PT. Dolak
Permei (also known as P.T. Dolok Permai) ("Dolak"), an Indonesian
company, totally independent of the Registrant, whereby the
Registrant would sell 2,000,000 shares of Common Stock at a price
of $1.00 per share for an aggregate price of $2,000,000. 
$1,000,000 of the $2,000,000 purchase price was paid in September,
1995, and thereafter the balance was to be paid in monthly
installments of $100,000, commencing January 1, 1996.  By March
1996, Dolak had purchased 1,100,000 shares for $1,100,000, at which
time Dolak requested a deferral of the remaining purchases until
June 1, 1996 when monthly purchases of 100,000 shares at $1 per
share resumed.    By December 2, 1996, Dolak had purchased the
entire 2,000,000 shares of Common Stock for an aggregate price of
$2,000,000. The shares issued to Dolak were sold in accordance with
Regulation S promulgated under the Securities Act with a
restriction barring sale one year from issue of each purchase of
shares. 

--------
3  The A-Warrants and B-Warrants attendant to the C-Warrants issued to
Messrs. Molesworth, Riessen and Storr expire not earlier than July 16, 2000.
[See page 19 of the Seconded Amended Plan of Reorganizaiton dated as of 
March 10, 1995, Exhibit 2(i) of the 1995 Form 10-K].

                                 13
<PAGE>
    In the Stock Purchase Agreement, Dolak represented to the
Registrant that it was purchasing the shares for its own account or
as fiduciary for one or more trusts, and that Dolak and each of the
trusts are accredited investors within the meaning of Rule 501(a)
of Regulation D promulgated under the Act.

    In October 1996, Dolak sold or transferred 500,000 shares of
Common Stock to approximately fifty entities, and by the addresses
listed for these entities and according to the representation of
Dolak, each entity is a "non-U.S. persons" as that term is defined
in Rule 902 (i) of Regulation S promulgated under the Securities
Act of 1933, as amended. 

    (ii) Sale to Tampa Fund

    In May, 1996, the Fireman's and Policeman's Pension Fund of
Tampa Florida ("Tampa Fund") authorized the conversion of the
Promissory Note in the sum of $250,000 into 250,000 restricted
shares of Common Stock.  The Promissory Note was originally issued
in November 1994 in exchange for a loan of $250,000 to the
Registrant after approval by the United States Bankruptcy Court. 
Under the original conversion terms, the loan was to be converted
into two and one-half(2 1/2%) percent of the equity at confirmation
date which would have entitled the Tampa Fund to 75,000 shares of
the Common Stock, or a price of over $3.00 per share.  In order to
have the conversion price be closer to market and to recognize the
aid given by the Tampa Fund to the Registrant during the bankruptcy
proceeding, the Board of Trustees amended the conversion right to
$1.00 per share.

    The Registrant shall seek additional financing through private
placements of its securities.  It makes no representations that it
will able to secure such financing  See: Item 7, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS".

                              14
<PAGE>

Item 6.  SELECTED FINANCIAL DATA.

    Set forth below is certain selected financial data4 of the
Registrant as of and for the years ended September 30, 1996, 1995,
1994, and May 31, 1993, and 1992, and four-month period ended
September 30, 1993.
<TABLE>
<CAPTION>

                                                                       Four months
                                    Years ended                           ended                   Years ended
                                    September 30,                      September 30,                 May 31,
                                    ------------                      -------------                -----------
                          1996          1995            1994                1993               1993            1992
                          ----          ----            ----                ----               ----            ----

<S>                  <C>            <C>            <C>                <C>                  <C>            <C>
Net revenues         $   24,538     $    3,277     $   29,764          $  120,351           $   44,655     $  258,405
                     ----------     ----------     ----------          ----------           ----------     ----------
                     ----------     ----------     ----------          ----------           ----------     ---------- 

Loss before extra-
ordinary items      ( 2,597,937)   ( 1,772,429)   ( 2,604,658)        (   903,462)         ( 3,671,988)   ( 3,334,190)
                     ----------     ----------     ----------          ----------           ----------     ----------
                     ----------     ----------     ----------          ----------           ----------     ---------- 

Extraordinary credit     --          1,781,128         --                  --                   --             --    
                     ----------     ----------     ----------          ----------           ----------     ----------
                     ----------     ----------     ----------          ----------           ----------     ---------- 

Earnings (loss) per
common share:(*)
Before extraordinary
credit                     (.42)          (.93)         (2.41)               (.88)               (3.32)         (2.98)

Extraordinary credit         --            .93           --                 --                 --        --

weighted average number
of common shares(*)     5,843,633    1,907,431      1,227,222          1,227,222             1,214,526       1,117,736

Balance Sheet Information

Working capital
 (deficiency)               8,109   (  770,388)    ( 4,128,894)       ( 2,136,596)         ( 1,619,180)      1,015,143

Total assets              961,964    1,275,296         199,751            211,072              442,151       2,315,743

Total liabilities         599,900    2,431,304       4,166,080          2,168,543            1,694,760         754,120

Shareholder's equity
   (deficiency)           329,375  ( 1,156,008)    ( 3,966,329)       ( 1,957,471)         ( 1,252,609)      1,561,623

Shareholder's equity
(deficiency) per
common share)(*)            (.04)         (.07)           (.24)              (.12)                (.32)           1.36
                            -----         -----           -----              -----                -----           ----
                            -----         -----           -----              -----                -----           ----

(*)  Retroactively adjusted to reflect 0.7 for 1 stock split effected on April, 1995.
--------
<FN>
4   See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS" and "FINANCIAL STATEMENTS" for further financial data.
</TABLE>

                              15
<PAGE>
Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS              

         The following discussion and analysis should be read in
conjunction with the Financial Statements of the Company and notes
thereto annexed hereto.

Liquidity and Capital Resources

    Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operation-Liquidity and Capital
Resources" of the 1995 Form 10-K, Part II, Item 7, as to
Registrant's lack of revenues and dependence upon the sale of
its securities to fund the operations of the Registrant.  Such
dependence continued throughout the fiscal year ended September 30,
1996 as the Registrant had no sales revenues.  Based upon present
lack of substantial firm sales orders, it is likely that the
Registrant will be dependent upon financing through sale of its
securities to maintain its operation for a substantial portion 
of the year ending September 30, 1997, if not for the entire fiscal
year.

    In the fiscal year ended September 30, 1996, the Registrant
secured $3,398,922 in equity financing through the private sales of
its common stock and the exercise of A-Warrants and B-Warrants. 
A substantial proportion of the capital raised by the Registrant
since its exit from reorganization in April 1995, namely,
$1,109,947, was paid to creditors and secured creditors under
the Plan, of which $663,823 was paid in the fiscal year ended
September 30, 1996, leaving a balance of $504,839 plus interest
at approximately 10.5% per annum.  As of November 30, 1996, the
Registrant paid an additional $287,839, leaving a balance of
$217,000 plus interest which is to be paid in April, 1997, to one
remaining creditor, SIS Capital Corp.  Such payments to creditors
drained away much needed capital for the development of the
Registrant's products, and contributed to the delay in being able
to market the products.  Upon the final payment to SIS Capital
Corp. scheduled for April 1997, the Registrant shall be debt free,
assuming the Registrant does not raise additional capital through
bank or other debt financing, and Registrant shall able to apply
capital raised through sale of its securities exclusively to the
development and marketing of its products.  
    
    As of September 30, 1996, Registrant had cash or cash
equivalents in the sum of $404,986.  The Registrant had on that
date working capital of only $8,109.  This working capital was
reduced by the portion of the Bankruptcy Obligations payable within
one year.  As stated above, the Registrant raised $3,290,298 in
equity financing for the year ended September 30, 1996.  The
monthly operating costs of Registrant for such fiscal year averaged
$208,000.  Based upon recent monthly operating costs of $180,000,
and based upon an additional $500,000 investment by P.T. Dolak and

                                 16
<PAGE>

exercise of B-Warrants of approximately $45,000, the Registrant
has sufficient capital to continue for at least two months from
November 30, 1996 assuming that it has no revenues from sales of
its products and services and that it does not raise additional
capital through the sale of its securities.  

    The monthly operating costs do not take into account
the remaining payment of $217,000 which the Registrant has to make
on the Bankruptcy Obligations5 to SIS Capital Corp. on April 19,
1997.  The Registrant has paid on the Bankruptcy Obligations
through November 30, 1996 a total of $2,111,878, all of it financed
from funds raised from the Equity Lenders and the Private
Placement.

    In order to finance funding for operations of the Registrant
as well as to pay for the Bankruptcy Obligations, Registrant shall
seek such funding through sales of its securities in private
placements exempt from registration under the Securities Act.  In
this regard, there are currently outstanding 1,245,681 B-Warrants,
which if totally exercised would result in approximately $2,490,000
of working capital.  The Registrant makes no representation that
any of said B-Warrants will be exercised.

Results of Operations

         During the thirty-six month period from October 1, 1993
to September 30, 1996, the Registrant's revenues from sales
aggregated to approximately $57,500 (inclusive of interest
revenues) as contrasted to the cost and expenses of operations
during this thirty-six month period aggregating approximately
$6,908,500.  Of these costs and expenses, research and development
during this thirty-six month period aggregated approximately
$2,870,000; selling, general and administrative expenses totalled
approximately $3,406,700, and interest and amortization of debt
cost aggregated approximately $160,000, for a total of $6,436,700. 
Included in the $3,406,700 were the bankruptcy administration costs
of approximately $714,000, which cost should be non-recurring.

    The following is an analysis of the results of operations
for the last three fiscal years ended September 30, 1996, 1995
and 1994.
[FN]
5   Bankruptcy Obligations are (i) debts to unsecured creditors of
approximately $540,000, (ii) debts to SIS Capital Corp. of approximately
$1,067,000 and (iii) administrative costs and professional fees aggregating
approximately $714,000.

                                    17
<PAGE>
    For the Y/E September 30, 1996:

    During this annual period, the Registrant had no sales
revenue. The prior fiscal year, as noted below, had $268.  Research
and development costs were $1,358,059 as compared to the prior
fiscal year of $751,437. These increased research and development
costs were attributable to refining the operation of the Chek/One,
attempting to achieve F.B.I. standards for the Chek/Ten, and
manufacturing proto-types for the Chek/One, Chek/Ten and the
Booking Station for "beta testing" by prospective customers. 
Selling, general and administrative costs for this fiscal year were
$1,203,020 as contrasted to $701,246 in the prior fiscal year.  The
approximate $502,000 increase in these costs were in part
attributable to having five additional full time employees plus
five other employees who had worked for only part of the prior
fiscal year. In addition, approximately $120,000 was paid in
accounting and legal fees to enable the Registrant to update the
disclosure and financial statements required under the section12 of the
Securities Exchange Act for the three prior fiscal years and a four
month stub period. The debt expense on the moneys owed to SIS
Capital Corp. pursuant to the Second Amended Plan of Reorganization
$61,396 as compared to $62,985 in the prior year.

    For the Y/E September 30, 1995:

    During this period, the Registrant had only $268 in sales
revenue.  Research and development was $751,437 as compared to the
prior fiscal period of $760,549.  The research and development
costs were expended on development of the LPS-12 (now the
CHEK/ONE), the LPS-14 (now the CHEK/TWO), and the booking station. 
Selling and general administration costs were $701,246 as compared
to $788,329 for the year ended September 30, 1994.    

    For the Y/E September 30, 1994:

    During this annual period, the Registrant had sales and
service contract revenue of $28,770 and $994 of interest income. 
The sales revenue was derived from rental of systems to the
State of New York.  Research and development costs were $760,549
as contrasted to $542,970 for the four month period ended
September 30, 1993 and $906,436 for the year ended May 31, 1993. 
The research and development costs for the year ended September 30,
1994 were primarily expended on developing a FACS for New York
State and New York City Departments of Welfare, and another FACS
for the Jamaican government, which research and development costs
were not recouped.  The selling and general administrative expenses
were $788,329 as compared to $277,843 for the four month period
ended September 30, 1993 and $1,513,594 for the year ended May 31,
1993.  Such reduction was due to discharge of personnel occasioned
by the Chapter 11 Proceeding.  Bankruptcy cost of administration

                           18
<PAGE>
was $454,054 for this period.  Amortization of deferred
compensation and write off of stock options granted to three 
employees at below market price in the sum of $595,800 was taken in
this period.  Such amortization had no effect on cash flow.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The financial statements and supplementary data required
by Part II, Item 8, are included in Part IV, as indexed at Item
14(a)(1).

Item 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DATA
         CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT 

         There are no disagreements between the management
of Registrant and the accounting firm of Farber, Blicht &
Eyerman, L.L.P.

                                19
<PAGE>
                                 PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         All of the four directors listed below, as well as one,
Lewis Schiller, were appointed pursuant to the Plan at its
effective date of April 17, 1995, and they held office until the
annual meeting of the Registrant on August 6, 1996, at which time
they each stood for re-election.  All were re-elected.  See Part I,
Item 4 above.  However, on October 21, 1996, Lewis Schiller
resigned as a director of Registrant because of the pressure of
other corporate business than that of the Registrant.  The vacancy
created by Mr. Schiller's resignation has not thus far been filled.

         For the present, the only executive officers of
Registrant are Thomas T. Harding, President and Gordon R.
Molesworth, Secretary, with Mr. Harding also performing the
functions of Treasurer, as required.  While Mr. Molesworth's
company, Molesworth Associates, Inc., receives compensation as a
consultant to the Registrant, only Mr. Harding is an employee of
Registrant.  At present the Directors receive no compensation for
their duties as such, but upon the Registrant achieving sufficient
income from operations, it is intended that the Directors shall
receive a cash stipend for attending meetings and performing other
acts.  The non-employee Directors for their efforts however have
each received options under Director Stock Option Plan to purchase
75,000 shares of Common Stock at an exercise price of $2.375 per
share, the market price on July 21, 1995, the date of the grant of
the option.  While the options granted to each non-employee
director is 75,000 shares, only 37,500 shares are exercisable
during the first year following the grant and thereafter, on each
of the anniversary date of the grant options to purchase 12,500
shares become exercisable, provided the non-employee director is
still a director of Registrant.

         Executive officers of the Registrant serve at the
pleasure of the Registrant's Board of Directors, or until the next
annual meeting of the Board of Directors and until their respective
successors have been elected and qualify.  Directors serve until
the next annual meeting of shareholders and until their respective
successors have been elected and qualify.

         There are no arrangements or understandings between any
Director and any other person regarding the nomination or election
of Directors and, likewise, there are no arrangements or understandings
between any officer and any other person regarding his election as an officer.

                                 20
<PAGE>
         Set forth below are the names, ages and positions of the
executive officers and all Directors of the Registrant.

<TABLE>
<CAPTION>

                               Director     Executive
    Name                Age     Since*      Officer Since      Position
    ----                ---    ---------    -------------      --------
  <S>                   <C>  <C>            <C>             <C>
  Thomas T. Harding     57   Jun. 14, 1995   Dec. 1994      President, Chief
                                                            Executive Officer
                                                            and Director
  
  Gordon R. Molesworth  79   Jun. 14, 1995   Jun. 14, 1996  Secretary, Director
  
  
  Seth M. Lukash        50   Jun. 14, 1995   N/A            Director
  
  Fred I. Sonnenfeld    69   Jun. 14, 1995   N/A            Director
  
<FN>  
  *  Directors first took office on June 14, 1995, although appointed under
  bankruptcy Plan of Reorganization as of April 17, 1995. 
</TABLE>

Business Background of Directors and Officers

         Set forth below is a brief description of the business
backgrounds of the officers and directors of the Registrant.

         Thomas T. Harding, President, Chief Executive Officer
and Director.  After a short period in November 1994 during which
Mr. Harding was a marketing and management consultant to the
Trustee, in December 1994 the Trustee with Bankruptcy Court
approval appointed Mr. Harding as president of the Registrant. 
From 1979 to 1994, Mr. Harding was a marketing and management
consultant to various corporate clients, among them the Registrant
for the period from 1982 to 1990.  Prior to 1979, Mr. Harding was
a corporate vice-president and division manager with Perkin-Elmer
(1976-1978), and division vice president of Litton Industries, Inc.
(1972-1975).  Mr. Harding holds a Bachelor of Science Degree in
Electronics from the University of Scranton and he did graduate
work at George Washington University in engineering administration.

         Gordon R. Molesworth, Secretary and Director. 
Mr. Molesworth was one of the leaders of the Registrant's Pre-Petition 
shareholders group and he was instrumental in partially
funding the financing of Registrant, both Post-Petition and Post-Confirmation. 
 He was appointed to the Board of Directors as a
representative for the shareholders Pre-Petition, as well as for

                                    21
<PAGE>
the new shareholders.  Through his company, Molesworth Associates
Inc., he also serves as communications consultant to the Company. 
He is the President of Molesworth Associates Inc., a communications
and public relations consultancy located in Green Valley, Arizona,
which has been in existence since 1959.  Prior to 1990, Mr.
Molesworth had been a consultant to the Registrant.

         Seth M. Lukash, Director.  He is Chairman and Chief
Executive Officer of Tridex Corporation, an electronic equipment
manufacturer listed on the NASDAQ stock market.  Mr. Lukash also
serves as a Director for the following organizations   Tanaka
Capital Management, Inc., an investment advisory firm located in
New York, NY, and JobDirect Inc., an Internet-based recruitment
organization located in Greenwich, CT.  Mr. Lukash is also the
Chairman of the Connecticut Chapter of the American Electronics
Association (AEA).  He also is a Board Member of the AEA.  He has
had no prior connection with Registrant and was chosen by reason of
his success with his own company.

         Fred I. Sonnenfeld, Director, is an attorney licensed to
practice in the State of New York for over forty years.  He is a
partner in Sonnenfeld & Richman who are counsel to the Registrant. 
Between 1990 and January, 1993, Mr. Sonnenfeld's law firm was
general counsel to the Registrant when his firm resigned such
position.  Mr. Sonnenfeld was one of three members of the committee
for general unsecured creditors.

                               22
<PAGE>
Item 11. EXECUTIVE COMPENSATION

         The following table sets forth all compensation paid by
the Company to each of its two executive officers fiscal year ended
September 30, 1996:
<TABLE>
<CAPTION>
                                           SUMMARY COMPENSATION TABLE

                                                                 Long-Term Compensation
                   Annual Compensation                Awards                         Payouts
                  --------------------          ---------------------------      -----------------------    
(a)             (b)     (c)      (d)            (e)            (f)               (g)        (h)
--------------------------------------------------------------------------------------------------------
<S>            <C>       <C>     <C>             <C>             <C>              <C>         <C>   
                                                                 Securities           
Name and                         Other Annual    Restricted      Underlying       LTIP      All Other
Principal      Salary    Bonus   Compensation    Stock Award(s)  Options/SARs     Payouts   Compensation
Position        ($)       ($)         ($)           ($)              ($)            ($)         ($)
---------------------------------------------------------------------------------------------------------
Thomas T.    $140,000(6)   0(7)        0             0(8)             0              0           0
Harding -
President,
Chief
Executive
Office
--------------------------------------------------------------------------------------------------------
Gordon R.       $0(9)      0           0            0                 0(10)          0           0
Molesworth--
Secretary
-------------------------------------------------------------------------------------------------------
</TABLE>
The total cash compensation to all executive officers (one in
number) for the fiscal year ended September 30, 1996 was
$140,000.00.  In addition, approximately $147,500 was paid to two
technical managerial employees for said fiscal year.  As of
September 30, 1996, the total annual payroll for all full time
technical and managerial staff, including the salary of the
President (at $140,000 per year), was approximately $1,000,000. 
Because of the Registrant's inability to offer cash bonuses, five
-------------
6  Mr. Harding's employment commenced in December, 1994.
7  Under the Plan, Mr. Harding received as a bonus for his work during the
bankruptcy proceding 115,000 shares of Common Stock.
8  115,000 shares of Common Stock were issued to Mr. Harding in January, 1996.
9  Pursuant to a written agreement with the Registrant made in April 1995,
Mr. Molesworth's company, Molesworth Associates, Inc. is paid $4,000 per
month plus expenses for consulting and public relations services it renders
to the Registrant.
10  Under the Plan, Mr. Molesworth received 250,000 A-Warrants and 150,000
C-Warrants for his services in reorganizing the Registrant and arranging
for financing of Registrant. He exercised 50,000 A-Warrants and 50,000
C-Warrants to receive 100,000 shares of Common Stock, which Mr. Molesworth
gave to his children.

                                 23
<PAGE>
technical employees received among them 19,500 shares of Common
Stock in October 1995 having a market value of $2.375 per share. 
The share certificates for these bonus shares bear a legend
restricting their sale, transfer, pledge or other disposition
except in accord with the Securities Act.

    Mr. Harding has an employment agreement with the
Registrant which commenced on the confirmation of the Plan (April
17, 1995) and which continued for one year thereafter.  The
employment agreement was automatically renewed on April 17, 1996
for one year and will be renewable year after year unless Mr.
Harding or Registrant gives notice to terminate the employment
relationship at least thirty days prior to the annual date of
renewal.  His annual salary under the employment agreement is
$140,000.  As additional compensation to Mr. Harding, the
employment agreement provides that he was to receive, and he did
receive on January 5, 1996, without any payment on his part,
115,000 shares of the Common Stock, having a bid price of $1.875
per share.  He also obtained an option to purchase 237,500 shares
of the Common Stock at an exercise price which shall be equal to
the "bid" price at the close of business on July 21, 1995 ($2 3/8
per share) in accordance with the Employee Stock Option Plan and
which will expire July 21, 2005.  The stock and the options were in
discharge of options contemplated to be granted under the Plan to
Mr. Harding.  Mr. Harding is reimbursed for all reasonable and
necessary expenses which he incurs in the performance of his
duties.  The Registrant paid him July 1995, the sum of $7,000 for
relocating himself and his family to the New York City area.  Apart
from the right to participate as an employee in whatever employee
benefit plans the Registrant shall afford to its employees, Mr.
Harding receives no other benefits and compensation other than
those set forth above.

    During the fiscal year ended September 30, 1995,
Mr. Sonnenfeld's law firm received no fees, and for the
period between October 1, 1995 through September 30, 1996, his
law firm received $91,125 in fees and was reimbursed $2,465.75
for disbursements.

Employee Stock Option Plan

    The Plan provided for reservation of 225,000 shares of Common
Stock to be issued under an Employee Stock Option Plan ("ESOP") to
be adopted by the Board of Directors.  Such an ESOP was adopted by
the Board of Directors on July 21, 1995, except that the Directors
increased the number of shares to 350,000.  The ESOP was approved
by the shareholders of the Registrant on August 6, 1996; the
shareholders also ratified the options granted to employees prior
to August 6, 1996.  

                              24
<PAGE>
     The ESOP provides for the granting of incentive stock options
("ISO"), non-qualified stock options, or both, which shall be
determined by a Compensation Committee made up of non-employee
members of the Registrant's Board of Directors.  The prices of the
options are to be determined by the Compensation Committee within
certain guidelines, namely, for non-qualified stock options, the
price per share may not be less than 85% of the "fair market value"
on the date of the grant of the option and for ISOs, the price per
share may not be less than 100% of the fair market value of a share
on date of grant (and not less than 110% of the fair market value
of a share for an employee who owns more than ten percent of the
outstanding securities of the Registrant.  The ESOP determines the
fair market value of a Registrant's share by anyone of the
following which are applicable: (i) the closing price on date of
the grant as reported on a national securities exchange; (ii) the
closing price on the date of the grant as reported by the National
Association of Securities Dealers Automatic Quotation System; (iii)
the average of the closing bid and asked prices on the date of the
grant as reported in the over-the-counter market; and (iv) and if
none of the foregoing are extant, then by determination of the
Compensation Committee. 

    As of September 30, 1996, the following ESOP options have been
granted to officers and employees of the Registrant:

<TABLE>
<CAPTION>

      Name or            Number of                                 Date                  Date
       Group           Shares Granted      Option Price           Granted              Expired  
-------------------------------------------------------------------------------------------------
<S>                       <C>                 <C>                <C>                  <C>
Thomas T. Hardin          237,500             $2.375             07/25/1995           07/21/2005
   
All Employees                            At varying prices      varying dates         07/21/2005
(19 in number)            308,000        of $1.75 low to        between 07/25/95
                                         $2.375 high            and 04/30/96
</TABLE>   
    Options may be granted up to ten years from July 21, 1995,
when the ESOP itself expires.

Non-Employee Directors' Stock Option Plan

    The Plan provided for 125,000 A-Warrants to be issued to each
of the non-employee directors.  In July 1995, the directors of
Registrant waived their rights to the A-Warrants and in lieu
thereof adopted a Director Stock Option Plan ("DSOP").  At annual
shareholders' meeting held on August 6, 1996, the shareholders
approved the DSOP as well as the options that had been granted
thereunder to non-employee directors.  The maximum number of shares
of the Common Stock which shall be reserved for the DSOP options is
500,000 shares.  The options under DSOP are effective for ten years
from DSOP's effective date, July 21, 1995.  Accordingly all DSOP
options expire on July 21, 2005.

                                25
<PAGE>
    DSOP is not an incentive stock option plan.  There are
currently three non-employee directors, namely, Messrs. Molesworth,
Lukash, and Sonnenfeld,11 who each shall have options to purchase
75,000 shares of Common Stock at the fair market value of the
Common Stock as of July 21, 1995, which was $2.375 per share.  Of
the options to purchase 75,000 shares of Common Stock, only options
to purchase 37,500 shares of Common Stock are exercisable during
the first year of the grant.  On each anniversary date after the
grant, options to purchase 12,500 shares of Common Stock become
exercisable, up to a total of 37,500 shares, provided the non-
employee director is still a director on the Registrant's Board of
Directors on each anniversary date.  Accordingly, as of September
30, 1996, each of the non-employee directors have options to
purchase 50,000 shares of Common Stock.  Any new directors
appointed or elected after the effective date are awarded option 
to purchase 25,000 shares of Common Stock at the fair market value 
of a share on the date of appointment or election.  On each
anniversary of the effective date the non-employee directors, if
they are still in office shall be entitled to an option to purchase
an additional 12,500 shares at the fair market value per share on
such anniversary.  Fair market value is determined in the same
manner as the ESOP, except that if there is no market for the
shares, then the Board of Directors in their discretion determine
the price.

401-K Plan

    Effective January 1, 1990, the Company established a 401(K)
defined contribution and trust plan which covers substantially all
officers and employees upon completion of six months employment. 
Officers and employees may contribute from 1% to 15% of their
compensation.  The Company may contribute to the fund at the
discretion of management.  During the forty months ended September
30, 1995, the Company did not make a contribution, nor has it done
since.  The Company has elected to pay the plan administrative
expenses, which were nominal, for this period.

--------
11  The options (to purchase 50,000 shares) granted to Lewis Schiller were
vitiated upon his resignation on October 21, 1996.

                                26
<PAGE>
Item 12. SECURITY OWNERS.

Non-Management Persons Having More Than 
A 5% Interest In Registrant's Securities.

    The following table sets forth information as of September 30,
1996 with respect to those persons who are not part of the
Registrant's Management known to the Registrant to be the
beneficial owner of more than five percent (5%) of Registrant's
one class of voting securities, common stock ($.01 par value):
                   
<TABLE>
<CAPTION>         
Name and Address of           Number of            Percent of
Beneficial Owner              shares held          class
--------------------------------------------------------------          
<S>                           <C>                  <C> 
1. PT. Dolak                  1,500,000            19%(12) 
   Permei                     shares                                    
                
2. Tampa                      540,120               7%   
   Firemen's                  shares
   Fund      

----------
<FN>
12  By December 2, 1996, P.T. Dolak Permei (Dolak) purchased an additional
500,000 shares of Common stock at $1.00 per share, but in October 1996,
Dolak transferred to approximately fifty persons who were "non-U.S. persons"
as that term is defined in Regulation S promulgated under the Securities Act
of 1933, as amended. Accordingly, the holdings of Dolak has not substantially
increased. For further details, see "MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS--Recent Sale of Securities--Securities Issued
Post-Confirmation," Part I, Item 5 (e) B. above.
</TABLE>

                                 27
<PAGE>               
Management Security Ownership

    The following table sets forth information as of September 30,
1996 with respect to the beneficial holdings of Management with
respect to the Common Stock and the A-Warrants, B-Warrants and
other options held:
<TABLE>
<CAPTION>
                                        Number of Shares        Percent
                        Number of      If All Options and          of
Name                    Shares          Warrants Exercised       Class 
------------------------------------------------------------------------
<S>                     <C>            <C>                      <C>
Thomas T. Harding       116,237              353,737(a)           1.64
Gordon R. Molesworth     48,491              451,203(b)           0.68
Seth Lukash                 0                 75,000(c)           0.00
Fred I. Sonnenfeld       14,500               75,000(d)           0.02

<FN>
------
(a)  Mr. Harding received 237,500 options to purchase 237,500 shares of the
Registrants New Common stock pursuant to the employment agreement described
in Item 11, "EXECUTIVE COMPENSATION" and a stock option agreement. The
option expires on July 25, 2005.
(b)  Mr. Molesworth received the following options and warrants:
          250,000 A-Warrants issued pursuant to the Plan exercisable
          at $1 per share expiring July 17, 2000 to purchase 
          250,000 shares;

          27,712 B-Warrants issued pursuant to the Plan exercisable
          at $2 per share expiring July 17, 2000 to purchase
          27,712 shares;
 
          150,000 C-Warrants issued pursuant to the Plan exercisable
          at $.01 per share expiring April 17, 2000 to purchase
          150,000 shares.

          75,000 share option granted pursuant to Directors Stock
          Option Plan ("DSOP") at $2.375 per share; only 50,000
          shares are exercisable.

(c)  Mr. Lukash received an option to purchase 75,000 shares of New Common
Stock pursuant to the Directors Stock Option Plan, of which only 50,000
shares are exercisable.

(d)  Mr. Sonnenfeld acquired his shares of the Common Stock as a general
unsecured creditor under the Plan. In addition, as a director he received
an option to purchase 75,000 shares of New Common Stock in accordance with
the Directors Stock Option Plan upon approval by shareholders, of which only
50,000 shares are exercisable. shareholder approval.
</TABLE>

                                      28
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND SPECIAL TRANSACTIONS.

SIS Capital Corp. and Shareholder Alliance 

    Reference is made to "SIS Capital Corp. and Shareholder
Alliance", 1995 Form 10-K, Part III, Item 13 for full details as
to these relationships and the transactions related thereto.  Of
the principal sum of $1,067,000 owed to SIS under the Plan, as of
November 30, 1996, there is owed $217,000 plus interest currently
at 8% per annum.  One payment remains to be paid in April, 1997, in
the said sum of $217,000.

Purchase of 2,000,000 Shares of Common Stock at $1.00 per Share.

    For reasons set forth in "MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS-Recent Sale of Securities-Securities 
Issued Post-Confirmation" , Part II, Item 5 (e) B above,
the Registrant sold 2,000,000 shares of its Common Stock to P.T.
Dolak Permei ("Dolak"), and Indonesian company at $1.00 per share
for an aggregate price of $2,000,000. Dolak represented to
Registrant that it was purchasing for its own account or as a
fiduciary.  The shares were purchased between September 6, 1995 and
December 2, 1996 in lots varying between 500,000 shares and 100,000
shares. During the time of purchase of the shares, the market price
for a share of Common Stock varied from a low of $1.375 to a high
$4.68. Each lot of shares purchased were restricted from resale for
a period of one year. In October 1996, Dolak transferred 500,000
shares to approximately fifty non-U.S. persons. For further
details, see  "MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS-Recent Sale of Securities-Securities Issued
Post Confirmation", Part II, Item 5(e) B above.  

                                29
<PAGE>
                                  PART IV


Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS.

         
         (a)  The following documents are included in Part II,
Item 8 of this report:


    1.  Report of Independent Auditors            F-1 & F-2

    2.  Balance Sheets as of September
        30,  1996, 1995                           F-3 & F-4

    3.  Statements of Operations for the
        three years ended September 30, 
        1996, 1995 and 1994, from inception
        to September 30, 1996                     F-5 & F-6

    4.  Statements of Shareholders' Equity
        (Deficiency) from inception (May 1976)
        to September 30, 1996                     F-7 to F-19

    5.  Statements of Cash Flows for the  
        three years ended September 30, 1996,  
        1995 and 1994                             F-20 to F-21

    6.  Statement of Changes of Financial 
        Position                                  F-22 & F-23

    7.  Notes to Financial Statements             F-24 to F-37

         (b)  Report on Forms 8-K:

         On July 10, 1996, the Registrant filed a Form 8-K with
respect to litigation commenced by Michael Schiller.  See "LEGAL
PROCEEDINGS - Pending Litigation", Part I, Item 3(a) of this
Form 10-K for result of this litigation.

         Subsequent to September 30, 1996, Registrant filed the
following Forms 8-K:

              1.   On November 5, 1996, pertaining to
    resignation of Lewis Schiller as a director.

              2.   On December 17, 1996, pertaining to sale
    of Common Stock to PT. Dolak.  See "CERTAIN RELATIONSHIPS
    AND SPECIAL TRANSACTIONS - Purchase of 2,000,000 Shares
    of Common Stock at $1.00 Per Share", Part I, Item 13 of
    this Form 10-K.

                                  30
<PAGE>
         (c)  Exhibits:

Exhibit                  Description of Exhibits
-------                  -----------------------
22                       Report of Results of Voting at the Annual Meeting 
                           of 8/6/96

                                   31
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated:  December   19, 1996

                             FINGERMATRIX, INC.

                               By: S/  Thomas T. Harding         
                                       Thomas T. Harding
                                       President

         Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.

Dated:  December  19, 1996
                             S/   Thomas T. Harding              
                                  Thomas T. Harding
                                  Chief Executive Officer
                                  and Director

Dated:  December  20, 1996
                             S/   Gordon R. Molesworth           
                                  Gordon R. Molesworth
                                  Secretary, Director


Dated:  December    , 1996
                             S/   Seth Lukash                   
                                  Seth Lukash, Director


Dated:  December  20, 1996
                             S/   Fred I. Sonnenfeld             
                                  Fred I. Sonnenfeld, Director

                               32
<PAGE>
           Supplemental Information to be Furnished With Reports
                Filed Pursuant to Section 15(d) of the Act.




         The annual report for the year ended September 30, 1996
and proxy material for 1997 annual meeting shall be subsequently
furnished to security holders of Registrant and copies thereof
shall be furnished to the Commission upon transmittal to the
security holders.

                               33
<PAGE>

                               EXHIBIT 22(i)

           REPORT OF RESULTS OF VOTE AT ANNUAL MEETING OF 8/6/96

<TABLE>
<CAPTION>

<S>                  <C>                                            <C>                   <C>         
A576-2000-0-011      AMERICAN STOCK TRANSFER & TRUST COMPANY        08/02/96              PAGE
                          *** PROXY TABULATION REPORT ***

</TABLE>

<TABLE>
<S>                                                <C>                             <C>
COMPANY: 2250 FINGERMATRIX INC (NEW)               MEETING DATE: 08/06/96          VOTED + NON-VOTED WITH MORE THAN 0 SHARES
              317929107                                                            ----DIRECTORS----        --PROPOSITIONS--
                                                                                           1       2                 1
ACCT. NUM.             NAME                            SHARES                12345678901234567890       123456789012345

</TABLE>

TOTAL OUTSTANDING SHARES:     7,632,791.090
TOTAL SHARES VOTED      :     4,444,646.000*
TOTAL PERCENTAGE VOTED  :            58.200


<TABLE>
<CAPTION>

                       VOTES FOR         PCT*           VOTES AGAINST*            VOTES ABSTAINED*                  UNVOTED
   <S>                 <C>                <C>            <C>                       <C>                            <C>

   DIRECTOR # 1        4,229,191.000      55             214,855.000
   DIRECTOR # 2        4,229,182.000      55             214,864.000
   DIRECTOR # 3        4,218,273.000      55             225,773.000
   DIRECTOR # 4        4,228,976.000      55             215,070.000
   DIRECTOR # 5        4,229,191.000      55             214,855.000

PROPOSITION # 1        3,520,578.000      46             131,531.000                111,623.000                   680,314.000
PROPOSITION # 2        3,300,636.000      43             349,292.000                113,804.000                   680,314.000
PROPOSITION # 4        4,424,618.000      57              11,355.000                  8,023.000                        50.000

<FN>

*203,908 additional shares voted at meeting making total shares 
voted 4,645,754; these 201,908 shares voted as follows:

                          FOR                             AGAINST                   ABSTAINED                        UNVOTED

   DIRECTOR # 1          1,908                                                       200,000
   DIRECTOR # 2          1,908                                                       200,000
   DIRECTOR # 3        201,908                                                       200,000
   DIRECTOR # 4          1,908                                                       200,000
   DIRECTOR # 5          1,908
PROPOSITION # 1        200,716                             1,192
PROPOSITION # 2                                          201,192
PROPOSITION # 4          1,908                                                       200,000

                                                               34
</TABLE>


<PAGE>

                             FINGERMATRIX, INC.
                       (A Development Stage Company)

                            FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

<PAGE>



                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                              TABLE OF CONTENTS




                                                           Page Number

Auditor's Report                                            F-1 - F-2

Balance Sheets                                              F-3 - F-4

Statements of Operations                                    F-5 - F-6

Statements of Stockholders' Equity (Deficiency)             F-7 - F-19

Statements of Cash Flows                                   F-20 - F-21

Consolidated Statement of Changes in Financial Position    F-22 - F-23

Notes to Financial Statements                              F-24 - F-37

<PAGE>

FARBER, BLICHT & EYERMAN, LLP                         
Certified Public Accountants  
                    255 Executive Drive, Suite 215    Telephone: (516) 576-7040
                    Plainview, NY 11803-1715          Facsimile: (516) 576-1232

To the Board of Directors
 and Stockholders of
Fingermatrix, Inc.
Dobbs Ferry, NY

     We have audited the accompanying balance sheets of Fingermatrix,
Inc. (a development stage company) as of September 30, 1996 and 1995,
and the related statements of operations, stockholders' equity
(deficiency in assets), and cash flows for the years then ended.  These
financial statements are the responsibility of the Company's management. 
Our responsibility is to express an opinion on these financial
statements based on our audits.

     We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for
our opinion.

     In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Fingermatrix, Inc. as of September 30, 1996 and 1995, and the results of
operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.

     The accompanying financial statements have been prepared assuming
that the  Company will continue as a going concern.  As discussed in
Notes 1a and 2 to the financial statements, the Company is a development
stage company that emerged from bankruptcy in April, 1995, generated no
revenue in 1996 and 1995, and has limited working capital at September
30, 1996.  These conditions raise substantial doubt about the Company's
ability to continue as a going concern.  The financial statements do not
include any adjustment that might result from the outcome of these
uncertainties.
                                    F-1
<PAGE>

To the Board of Directors
 and Stockholders of
Fingermatrix, Inc.
Page 2

     We were engaged to audit the statements of operations,
stockholders' deficiency in assets and cash flows for the year ended
September 30, 1994.  These financial statements are the responsibility
of the Company's management.  Because of the significance of the matters
discussed in the immediately following paragraph, the scope of our work
was not sufficient to enable us to express, and we do not express, an
opinion on the 1994 financial statements referred to above.

     We were unable to locate missing accounting and bookkeeping
records, which included, among other things, contracts and invoices for
the 1994 year, which precluded us from verifying cash receipts,
disbursements, purchases and revenues.  Additionally, related accounting
records of the Company's accounts receivable and payable were either
missing or incomplete.  Due to the loss of accounting records, there
were unreconciled differences in common stock as recorded by the Company
and the stock transfer agent.  We were unable to satisfy ourselves about
the above items by means of other auditing procedures.

                                    FARBER, BLICHT & EYERMAN, LLP

Plainview, New York
November 18, 1996, except for
Note 10e, which is as of 
December 2, 1996
                                    F-2
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                                BALANCE SHEETS

                         SEPTEMBER 30, 1996 AND 1995


                                    ASSETS
                                    ------

                                                1996         1995
Current assets:                                 ----         ----
 Cash and cash equivalents                    $404,986    $1,067,577
 Restricted cash (Note 1i)                       --           31,825
 Inventories (Notes 1c and 3)                   78,870         --    
 Prepaid expenses and
  other current assets                         156,842        20,855
                                              --------    ----------
Total current assets                           640,698     1,120,257
                                              --------    ----------
Property, plant and
 equipment--at cost
 (Note 1d):
  Equipment                                    206,281        44,964
  Leasehold improvements                        21,024          --   
  Furniture and fixtures                        11,603           561
                                              --------    ----------
                                               238,908        45,525
Less allowance for
 depreciation and 
 amortization                                   64,600        32,715
                                              --------    ----------
                                               174,308        12,810
                                              --------    ----------
Other assets:
 Patents (Note 1f)                             241,533       224,385
 Less accumulated
  amortization                                 108,180        94,961
                                              --------    ----------
                                               133,353       129,424
 Deposits                                       13,605        12,805
                                              --------    ----------
                                               146,958       142,229
                                              --------    ----------
Total assets                                  $961,964    $1,275,296
                                              --------    ----------
                                              --------    ----------

                  See notes to financial statements.

                                    F-3
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                                BALANCE SHEETS

                         SEPTEMBER 30, 1996 AND 1995


         LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)




                                                1996          1995
Current liabilities:                            ----          ----
 Accounts payable--trade                  $      1,291  $     34,965
 Accrued expenses (Note 4)                     126,459       977,677
 Note payable (Note 5)                            --         250,000
 Current portion of long-term debt
  (Note 6)                                     504,839       628,003
                                          ------------  ------------
Total current liabilities                      632,589     1,890,645

Long term debt (Note 6)                           --         540,659
                                          ------------  ------------
Total liabilities                              632,589     2,431,304
                                          ------------  ------------
Comments, commitments and 
 contingencies (Note 10)

Stockholders' equity (deficiency 
 in assets) (Note 7):
  Common stock--$.01 par value:
   20,000,000 shares authorized;
   8,206,250 and 3,945,404 shares
   issued and outstanding                       82,062        39,454
  Additional paid in capital                60,452,875    56,412,163
  Deficit accumulated during
   the development stage                   (60,205,562)  (57,607,625)
                                          ------------  ------------
Stockholders' equity (deficiency
 in assets)                                    329,375    (1,156,008)
                                          ------------  ------------
Total liabilities and stockholders'
 equity (deficiency in assets)            $    961,964  $  1,275,296
                                          ------------  ------------
                                          ------------  ------------

                     See notes to financial statements.
                                    F-4
<PAGE>

                                           FINGERMATRIX, INC.
                                      (A DEVELOPMENT STAGE COMPANY)
                                        STATEMENTS OF OPERATIONS
<TABLE>                                                                         
<CAPTION>
                                                                                                                       From
                                                                                                                     Inception   
                                                                                                                   (May 1976) to
                                                                  Years ended September 30,                         September 30,
                                                                  -------------------------
                                                     1996                 1995                   1994                 1996  (*)
                                                     ----                 ----                   ----                 ---------
<S>                                             <C>                 <C>                     <C>                   <C>
Revenues:
 Sales and service contracts                    $     --            $       268              $    28,770           $  3,432,750
 Interest income                                     24,538               3,009                      994              2,817,153
                                               ------------          -----------              ------------          -------------
     Total                                           24,538               3,277                   29,764              6,249,903
                                               ------------          -----------              ------------          -------------
Costs and Expenses:
 Cost of sales                                        --                   --                      --                 2,008,190
 Write down of inventory  (Note 3)                    --                   --                      --                 2,314,813
 Research and development (Note 1e)               1,358,059              751,437                  760,549            21,552,801
 Selling, general and
  administrative                                  1,203,020              701,246                  788,329            33,675,013
 Bankruptcy administration 
  costs (Note 2)                                      --                 260,038                  454,054               714,092
 Interest and amortization
   of debt expense                                   61,396               62,985                   35,690               669,161
 Amortization of deferred
  compensation--stock 
  options (Note 10i)                                  --                    --                    595,800             4,808,788
 Loss from investment in
  Unimark Credit Systems, Inc.                        --                    --                      --                1,145,768
 Liquidation damages                                  --                    --                      --                  702,118
                                               ------------          -----------              ------------          -------------
     Total costs and expenses                    2,622,475             1,775,706                2,634,422            67,590,744
                                               ------------          -----------              ------------          -------------
Loss before extraordinary item                  (2,597,937)           (1,772,429)              (2,604,658)          (61,340,841)
Extraordinary credit--gain on
 debt restructuring (Notes 1a,2)                    --                 1,781,128                    --                 1,781,128
                                               ------------          -----------              ------------          -------------
Net income (loss)                              $(2,473,840)          $     8,699              $(2,604,658)          $(59,559,713)
                                               ------------          -----------              ------------          -------------
                                               ------------          -----------              ------------          -------------
<FN>
(*) Not covered by Auditors' Report.
</TABLE>               
                                        See notes to financial statements.

                                                 F-5
<PAGE>




                                           FINGERMATRIX, INC.
                                      (A DEVELOPMENT STAGE COMPANY)
                                         STATEMENT OF OPERATIONS

                                               (Continued)
                                                                            
  
<TABLE>
<CAPTION>
                                                                Years ended September 30,
                                                                -------------------------
                                                     1996                 1995                   1994            
                                                     ----                 ----                   ----        
<S>                                             <C>                 <C>                     <C>              

Earnings (loss) per common 
 share (*):
  Before extraordinary credit                  $    (.42)            $    (.93)            $   (2.41)
  Extraordinary credit                                --                   .93                    -- 
                                               ----------            ----------            ----------

Net earnings (loss)
 per common share                              $    (.42)           $       --             $   (2.41)
                                               ----------            ----------            ----------
                                               ----------            ----------            ----------

Weighted average number
 of shares outstanding (*)                      5,843,633             1,907,431             1,227,222
                                               ----------            ----------            ----------
                                               ----------            ----------            ----------

<FN>
(*)  Retroactively adjusted to reflect reverse .07 for 1 stock split effected
in April, 1995, concurrent with bankruptcy plan confirmation.
</TABLE>
                             See notes to financial statements.
                                             F-6
<PAGE>

                                       FINGERMATRIX, INC.
                                (A DEVELOPMENT STAGE COMPANY)

                         STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                         FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996


<TABLE>
<CAPTION>
                                                                                                           
                                                                                                         Deficit
                                                        Common Stock                                   Accumulated  
                                           ---------------------------------------    Additional        During the
                                                         Price          Par Value       Paid-In         Development      
                                             Shares     Per Share         Total         Capital           Stage            Total
                                             ------     ---------       ---------       -------         -----------        -----
<S>                                          <C>       <C>              <C>            <C>             <C>             <C> 
Balance (at inception)
Common stock issued for cash                 564,458   $.20 to 2.00      $ 11,289      $  190,998      $     --        $   202,287 
Common stock issued for assets               691,500      .17              13,830         103,206            --            117,036
Net loss for the year                          --          --                --              --           (274,349)       (274,349)
                                           ---------                    --------       ----------      -----------     -----------
Balance at May 31, 1977(*)                 1,255,958       --             25,119          294,204         (274,349)         44,974

Common stock issued upon
 conversation of debt                        222,250      2.00             4,445          440,055            --            444,500
Net loss for the year                          --          --                --              --           (230,254)       (230,254)
                                           ---------                    --------       ----------      -----------     -----------
Balance at May 31, 1978(*)                 1,478,208       --             29,564          734,259         (504,603)        259,220
Common stock issued for cash                 170,000      2.00             3,400          336,600            --            340,000
Common stock issued for services              31,250      2.00               625           61,875            --             62,500
Net loss for the year                          --          --                --              --           (967,640)       (967,640)
                                           ---------                    --------       ----------      -----------     -----------
Balance at May 31, 1979(*)                 1,679,458      2.00            33,589        1,132,734       (1,472,243)       (305,920)
Common stock issued for
 liquidation damages                          32,964      2.00               659           65,269            --             65,928
Common stock issued for services              51,250      2.00             1,025          101,475            --            102,500
Common stock issued to 
 noteholder for waiving
 default on note                               2,825      2.00                57            5,593            --              5,650
Common stock issued in payment
 of old debt                                   1,000      2.00                20            1,980            --              2,000
Common stock issued upon
 conversion of debt                           88,393      2.83             1,769          248,231            --            250,000
Net loss for the year                           --         --                --              --         (1,221,278)     (1,221,278)
                                           ---------                    --------       ----------      -----------     -----------
Balance at May 31, 1980(*)                 1,855,890       --           $ 37,119       $1,555,282      $(2,693,521)    $(1,101,120)
                                           ---------                    --------       ----------      -----------     -----------

<FN>
(*)  Not covered by Auditors' Report.

</TABLE>
                                            See notes to financial statements.
                                                          F-7
<PAGE>



                                       FINGERMATRIX, INC.
                               (A DEVELOPMENT STAGE COMPANY)

                           STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                           FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
                                                                                                           
                                                                                                         Deficit
                                                        Common Stock                                   Accumulated  
                                           ---------------------------------------    Additional        During the
                                                         Price          Par Value       Paid-In         Development      
                                             Shares     Per Share         Total         Capital           Stage            Total
                                             ------     ---------       ---------       -------         -----------        ----- 
<S>                                         <C>         <C>             <C>            <C>              <C>            <C>
Balance at May 31, 1980(*)                  1,855,890      --           $ 37,119       $1,555,282       $(2,693,521)   $(1,101,120)

Common stock issued in public
 offering                                     500,000    $4.00            10,000        1,990,000            --          2,000,000
                                                                                              
Common stock issued upon exercise
 of warrants                                  339,353     3.00             6,787        1,011,272            --          1,018,059
Common stock issued upon
 recapitalization of debt                     594,275     2.21 to         11,885          613,683            --            625,568
                                                            3.00  
Common stock issued for services               18,000     2.00               360           35,640            --             36,000
Common stock and warrants issued 
 under settlement of lawsuit                   26,875     8.00               538          424,462            --            425,000
                                                                                                
Net loss for the year                            --        --               --              --           (1,614,141)    (1,614,141)
                                           ----------                     -------       ----------      -----------    -----------
Balance at May 31, 1981(*)                  3,334,393      --              66,689        5,630,339       (4,307,662)     1,389,366

Common stock issued upon
 exercise of warrants                        430,201     2.00 to            8,605        1,231,394           --          1,239,999
                                                           4.00

Warrants issued for services at
 an exercise price less than
 market value                                   --         --               --              50,000           --             50,000
Common stock issued for services             14,500     3.05 to              288            55,339           --             55,627
                                                          4.42
Common stock issued under 
 settlement of lawsuit                       16,241        --                325              (325)          --               --    
Net loss for the year                           --         --               --                --        (1,588,610)     (1,588,610)
                                          ---------                      --------        ----------     ----------     -----------
Balance at May 31, 1982(*)                3,795,335        --            $75,907         $6,966,747    $(5,896,272)    $ 1,146,382
                                          ---------                      --------        ----------     ----------     -----------
<FN>
(*)  Not covered by Auditors' Report.
</TABLE>
                                            See notes to financial statements.
                                                           F-8
<PAGE>



                                   FINGERMATRIX, INC.
                            (A DEVELOPMENT STAGE COMPANY)

                   STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                  FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
                                                                                                                  
                                                                                                          Deficit
                                                            Common Stock                                Accumulated  
                              Convertible      --------------------------------------     Additional     During the
                               Preferred                      Price         Par Value       Paid-In      Development      
                                 Stock           Shares     Per Share         Total         Capital        Stage           Total
                             ------------        ------     ---------       ---------       -------      -----------       ----- 
<S>                          <C>              <C>         <C>             <C>            <C>            <C>            <C>
Balance at May 31, 
 1982(*)                         --           3,795,335         --          $ 75,907      $ 6,966,747    $(5,896,272)   $1,146,382

Preferred stock and
 warrants issued in
 a public offering             6,600             --             --              --          5,464,995         --         5,471,595
Common stock issued 
 upon exercise of
 stock appreciation
 rights                          --              28,974         --               579          337,547         --           338,126
Common stock issued
 upon exercise of
 warrants                        --             549,126      $2.00 to         10,982        1,705,279         --         1,716,261
                                                                4.80 
Common stock issued
 upon conversion of
 preferred stock              (4,171)           834,100         --            16,682          (12,511)        --             --    
Warrants issued to an
 employee at an 
 exercise price less
 than market value               --              --             --              --              5,000         --             5,000
Common stock issued in
 payment of debt                 --              74,837       3.87            1,497           289,647         --           291,144
Warrants issued in 
 payment of debt                 --               --            --            --              121,184         --           121,184
Net loss for the year            --               --                          --                --        (2,899,728)   (2,899,728)
                             -------          ---------                   ---------        -----------   -----------    ----------
Balance at May 31,
 1983(*)                     $ 2,429          5,282,372                   $ 105,647        $14,877,888   $(8,796,000)   $6,189,964
                             -------          ---------                   ---------        -----------   -----------    ----------

<FN>

(*)  Not covered by Auditors' Report.

</TABLE>
                             See notes to financial statements.
                                           F-9
<PAGE>

                                FINGERMATRIX, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                  FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
                                                                                                                  
                                                                                                          Deficit
                                                            Common Stock                                Accumulated  
                              Convertible      --------------------------------------     Additional     During the
                               Preferred                      Price         Par Value       Paid-In      Development      
                                 Stock           Shares     Per Share         Total         Capital        Stage           Total
                             ------------        ------     ---------       ---------       -------      -----------       ----- 
<S>                          <C>              <C>         <C>             <C>            <C>            <C>            <C>
Balance at May 31, 
 1983(*)                     $  2,429          5,282,372                    $ 105,647     $14,877,888    $(8,796,000)   $6,189,964

Convertible preferred stock
 issued upon exercise of 
 warrants                         233             --           --               --            278,768          --          279,001
Common stock issued upon
 exercise of warrants            --              154,531    $2.00 to           3,091          516,899          --          519,990
                                                               5.00
Common stock issued upon
 conversion of preferred
 stock                          (627)            125,394       --              2,508          (1,881)          --             --    
Warrants issued for cash        --                --           --               --             5,000           --           5,000
Compensation expense
 relating to stock
 appreciation rights            --                --           --               --           355,500           --         355,500
Preferred cash dividends
 paid $1.00 per share           --                --           --               --          (224,747)          --        (224,747)
Net loss for the year           --                --           --               --        (4,002,829)                  (4,002,829)
                             -------           ----------                   --------     -----------    ------------  -----------
Balance at May 31, 1984(*)     2,035           5,562,297                     111,246      15,807,427     (12,798,829)   3,121,879

Convertible preferred stock
 issued upon exercise of 
 warrants                        193              --           --               --           229,307           --         229,500
Common stock issued upon
 exercise of warrants           --                44,437     2.75 to            889          244,238           --         245,127
                                                               5.00
Common stock issued upon con-
 version of preferred stock     (758)            151,546       --             3,031          (2,273)           --           --    
Warrants issued for cash        --                --           --              --            12,000            --          12,000
Compensation expense 
 relating to waiver of
 stock appreciation rights      --                --           --              --           230,675            --         230,675
Common stock issued in 
 private offering               --               383,164       --            7,663        1,727,709            --       1,735,372
Net loss for the year           --               --            --              --             --          (3,380,834)  (3,380,834)
                             -------           ---------                 ---------       -----------    ------------  -----------
Balance at May 31, 1985(*)   $ 1,470           6,141,444                 $ 122,829       $18,249,083    $(16,179,663) $ 2,193,719
                             -------           ---------                 ---------       -----------    ------------  -----------
<FN>
(*)  Not covered by Auditors' Report.
</TABLE>
                            See notes to financial statements.
                                         F-10
<PAGE>
        
                                    FINGERMATRIX, INC.
                              (A DEVELOPMENT STAGE COMPANY)
                    STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                    FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
                                                                                                                  
                                                                                             Deficit
                                                    Common Stock                           Accumulated  
                          Convertible  -------------------------------------  Additional   During the    Compensation
                           Preferred                   Price     Par Value     Paid-In     Development       Stock
                             Stock       Shares     Per Share      Total       Capital        Stage         Options        Total
                         ------------    ------     ---------    ---------     -------      ----------    ------------     ----- 
<S>                     <C>             <C>         <C>          <C>           <C>          <C>           <C>          <C>
Balance at May 31, 
1985(*)                  $  1,470      6,141,444     $  --      $122,829   $18,249,083   $(16,179,663)   $   --        $ 2,193,719
Common stock issued 
 upon conversion 
 of preferred stock           (97)        19,308        --           386          (289)         --           --             --   
Common stock issued 
 upon exercise
 of warrants                  --         473,541      .75 to       9,471      1,789,543         --           --        1,799,014
                                                        7.00
Common stock issued in 
 private offering             --         855,600     5.00 to     17,112       3,974,553         --           --        3,991,665
                                                       6.00
Common stock issued in 
 payment of debt              --          43,228     6.76           865         290,923         --           --          291,788
Issuance of stock options 
 for 300,000 shares           --            --          --          --        1,912,500         --       (1,912,500)       --    
Amortization of deferred 
 compensation stock options   --            --          --          --            --            --           63,750       63,750
Net loss for the year         --            --                      --            --       (3,223,374)       --       (3,223,374)
                          -------      ---------             ---------      -----------  ------------  -----------   ----------
Balance at May 31, 
1986 (*)                    1,373      7,533,121        --      150,663      26,216,313   (19,403,037)  (1,848,750)    5,116,562

Common stock issued upon
 conversion of 
 preferred stock             (250)        50,128        --       1,002             (752)        --           --            --    
Common stock issued upon 
 exercise of warrants         --         283,097     4.25 to     5,662        1,197,060         --           --        1,202,722
                                                       6.75
Common stock issued 
 upon exercise
 of stock options             --           3,000     6.00           60           17,940         --           --          18,000
Common stock issued 
 in payment of debt           --          86,116     3.00 to     1,722          181,505         --           --         183,227
                                                       5.25
Amortization of deferred 
 compensation--
 stock options               --            --           --        --              --            --         382,500      382,500
Net loss for the year        --            --                     --              --       (4,340,962)       --      (4,340,962)
                          -------      ---------             ---------      -----------  ------------  -----------   ----------
Balance at May 31, 
1987 (*)                  $ 1,123      7,955,462             $ 159,109      $27,612,066  $(23,743,999) $(1,466,250)  $2,562,049
                          -------      ---------             ---------      -----------  ------------  -----------   ----------
<FN>
(*) Not covered by Auditor's Report.

</TABLE>
                             See notes to financial statements.
                                          F-11
<PAGE>


                                    FINGERMATRIX, INC.
                              (A DEVELOPMENT STAGE COMPANY)
                     STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                     FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996


<TABLE>
<CAPTION>
                                                                                                                  
                                                                                             Deficit
                                                    Common Stock                           Accumulated  
                          Convertible  -------------------------------------  Additional   During the    Compensation
                           Preferred                   Price     Par Value     Paid-In     Development       Stock
                             Stock       Shares     Per Share      Total       Capital        Stage         Options        Total
                         ------------    ------     ---------    ---------     -------      ----------    ------------     ----- 
<S>                     <C>             <C>         <C>          <C>           <C>          <C>           <C>          <C>
Balance at May 31, 
1987(*)                 $ 1,123        7,955,462     $  --      $ 159,109   $27,612,066   $(23,743,999)  $(1,466,250)   $2,562,049

Common stock issued upon 
 conversation of rights    --          2,649,681     $5.00         52,994    11,876,291         --            --        11,929,285
Common stock issued upon
 exercise of warrants      --            450,164      4.64          9,003     2,014,610         --            --         2,023,613
Common stock issued 
 upon conversation
 of preferred stock         (64)          12,776        --            256          (192)        --            --            --    
Issuance of warrants 
 for 893,000 shares
 (net of retirement of
 warrants and options 
 for 446,500 shares)       --               --          --           --       1,724,062         --        (1,262,712)      461,350
Amortization of deferred 
 compensation--
 stock options             --               --          --           --           --            --           439,336       439,336

Net loss for the year      --               --                       --           --        (5,786,170)        --       (5,786,170)
                       --------       ----------               ----------   -----------   ------------   -----------   -----------
Balance at May 31, 
1988 (*)                  1,059       11,068,083                  221,362    43,226,837    (29,530,169)   (2,289,626)   11,629,463

Amortization of deferred 
 compensation--
 stock options             --               --          --           --           --            --           801,997       801,997

Net loss for the year      --               --                       --           --        (6,004,883)        --       (6,004,883)
                       --------       ----------               ----------   -----------   ------------   -----------   -----------
Balance at May 31, 
 1989 (*)              $  1,059       11,068,083               $  221,362   $43,226,837   $(35,535,052)  $(1,487,629)  $ 6,426,577
                       --------       ----------               ----------   -----------   ------------   -----------   -----------
<FN>
(*) Not covered by Auditor's Report.
</TABLE>
 
                              See notes to financial statements.
                                          F-12
<PAGE>

                                  FINGERMATRIX, INC.
                           (A DEVELOPMENT STAGE COMPANY)
                   STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                   FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
                                                                                                                  
                                                                                             Deficit
                                                    Common Stock                           Accumulated  
                          Convertible  -------------------------------------  Additional   During the    Compensation
                           Preferred                   Price     Par Value     Paid-In     Development       Stock
                             Stock       Shares     Per Share      Total       Capital        Stage         Options        Total
                         ------------    ------     ---------    ---------     -------      ----------    ------------     ----- 
<S>                     <C>             <C>         <C>          <C>           <C>          <C>           <C>          <C>
Balance at May 31, 
 1989(*)                $ 1,059       11,068,083     $  --       $221,362  $43,226,837   $(35,535,052)   $(1,487,629)  $ 6,426,577

Common stock issued upon 
 exercise of employee 
 incentive stock options    --             8,300     $1.25            166       10,209         --              --           10,375
Common stock issued 
 upon exercise
 of warrants                --           200,000       .50          4,000       96,000         --              --          100,000
Common stock issued 
 upon conversion
 of preferred stock        (962)         192,328        --          3,847       (2,885)        --              --             --    
Common stock issued in 
 lieu of accumulated 
 dividends on preferred
 stock                      --           257,100      2.03          5,142      516,610       (521,752)         --             --    
Common stock issued 
 for the purchase
 of Unimark                 --           280,000      1.33          5,600      365,400         --              --          371,000

Common stock returned 
 from escrow                --            (1,884)       --            (38)          38         --              --             --    
Common stock issued in 
 private offering           --         1,150,000      1.00         23,000    1,127,000         --              --        1,150,000  
Common stock issued in 
 payment of debt            --           189,874      2.36          3,797      444,287         --              --          448,084
Common stock issued 
 in connection with
 a loan to the  Company     --           10,000       1.00            200        9,800         --              --           10,000

Amortization of deferred 
 compensation--
 stock options              --             --           --             --         --           --            801,995       801,995
Net loss for 
 the year                   --             --           --             --         --       (7,581,322)         --       (7,581,322)
                        --------    -----------                  --------  -----------   ------------    ------------  -----------
Balance at May 31, 
 1990 (*)               $     97     13,353,801                  $267,076  $45,793,296   $(43,638,126)   $  (685,634)  $ 1,736,709
                        --------     ----------                  --------  -----------   ------------     -----------  -----------
<FN>
(*) Not covered by Auditor's Report.
</TABLE>
                            See notes to financial statements.

                                        F-13
<PAGE>


                                   FINGERMATRIX, INC.
                           (A DEVELOPMENT STAGE COMPANY)
                    STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                    FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996


<TABLE>
<CAPTION>
                                                                                                                  
                                                                                             Deficit
                                                    Common Stock                           Accumulated     Deferred 
                          Convertible  -------------------------------------  Additional   During the    Compensation
                           Preferred                   Price     Par Value     Paid-In     Development       Stock
                             Stock       Shares     Per Share      Total       Capital        Stage         Options        Total
                         ------------    ------     ---------    ---------     -------      ----------    ------------     ----- 
<S>                     <C>             <C>         <C>          <C>           <C>          <C>           <C>          <C>
Balance at 
 May 31, 1990 (*)       $97           13,353,801     $  --       $267,076   $45,793,296  $(43,638,126)   $(685,634)    $ 1,736,709

Common stock issued upon 
 exercise of employee
 incentive stock options    --             6,816     $1.25            136         8,384         --           --              8,520
Common stock issued 
 upon conversion of 
 preferred stock        (1)                  300        --              6            (5)        --           --              --   
Common stock issued
 upon conversion of 
 preferred stock           --          1,000,000     1.00          20,000       980,000         --           --          1,000,000
Common stock issued in 
 private offering          --            700,000     .50 to 1.00   14,000       386,000         --           --            400,000
Common stock issued in 
 payment of debt           --            100,525     1.22           2,010       120,307         --           --            122,317
Amortization of deferred 
 compensation--
 stock options             --               --          --           --           --            --          685,634        685,634

Net loss for the year      --               --                       --           --        (3,463,900)      --         (3,463,900)
                        -----         ----------                 --------    -----------  ------------    ---------    -----------
Balance at 
 May 31, 1991 (*)       $96           15,161,442                 $303,228    $47,287,982  $(47,102,026)   $  --        $   489,280
                        -----         ----------                 --------    -----------  ------------    ---------    -----------
<FN>
(*)  Not covered by Auditor's Report.

</TABLE>
                          See notes to financial statements.
                                         F-14
<PAGE>
                                  FINGERMATRIX, INC.
                           (A DEVELOPMENT STAGE COMPANY)
               STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
              FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
                                                                                                                  
                                                                                             Deficit
                                                    Common Stock                           Accumulated     Deferred 
                          Convertible  -------------------------------------  Additional   During the    Compensation
                           Preferred                   Price     Par Value     Paid-In     Development       Stock
                             Stock       Shares     Per Share      Total       Capital        Stage         Options        Total
                         ------------    ------     ---------    ---------     -------      ----------    ------------     ----- 
<S>                     <C>             <C>         <C>          <C>           <C>          <C>           <C>          <C>
Balance at 
 May 31, 1991 (*)       $    96       15,161,442     $  --       $303,228   $47,287,982  $(47,102,026)  $    --        $   489,280

Common stock issued upon 
 exercise of employee
 incentive stock options    --             5,000       1.25           100         6,150        --            --              6,250
Common stock issued upon
 conversion of 
 preferred stock           (299)         149,450        --          2,989        (2,690)       --            --               --
Preferred stock issued 
 in public offering (net 
 of registration costs)   3,165             --          --            --      2,683,356        --            --         2,686,521
Preferred stock issued 
 in private offering        794             --          --            --        793,206        --            --           794,000
Common stock issued in 
 private offering           --         1,022,870       50 to 1.25  20,459       900,412        --            --           920,871
Common stock issued in 
 payment of debt            --            24,475       1.75           489        42,342        --            --            42,831
Preferred cash 
 dividends paid             --              --          --            --       (233,940)       --            --          (233,940)
Issuance of stock 
 options for 
 2,344,000 shares           --              --          --            --      3,513,000        --         (3,513,000)       -- 
Amortization of deferred 
 compensation--
 stock options              --              --          --            --        --             --            190,000      190,000

Net loss for the year       --              --                        --        --         (3,334,190)       --        (3,334,190)
                         ------       ----------                 --------   -----------  ------------    -----------  -----------
Balance at 
 May 31, 1992 (*)        $3,756       16,363,237                 $327,265   $54,989,818    $(50,436,216)   $(3,323,000) $ 1,561,623
                         ------       ----------                 --------   -----------    ------------    -----------  -----------
<FN>
(*)  Not covered by Auditors' Report.
</TABLE>
  
                              See notes to financial statements.

                                        F-15

<PAGE>
                                  FINGERMATRIX, INC.
                           (A DEVELOPMENT STAGE COMPANY)
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                  FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
                                                                                                                  
                                                                                             Deficit
                                                    Common Stock                           Accumulated     Deferred 
                          Convertible  -------------------------------------  Additional   During the    Compensation
                           Preferred                   Price     Par Value     Paid-In     Development       Stock
                             Stock       Shares     Per Share      Total       Capital        Stage         Options        Total
                         ------------    ------     ---------    ---------     -------      ----------   ------------      ----- 
<S>                     <C>             <C>         <C>          <C>           <C>          <C>           <C>          <C>          
Balance at 
 May 31, 1992 (*)      $ 3,756        16,363,237     $  --       $327,265    $54,989,818  $(50,436,216)  $(3,323,000)  $ 1,561,623

Common stock issued
 upon conversion of
 preferred stock          (191)           95,530        --          1,910         (1,719)        --            --            --    

Common stock issued 
 in private offering       --             95,500       1.00         1,910         93,590         --            --           95,500

Common stock issued 
 to employees in lieu
 of bonuses                --            257,000        .44         5,140        107,940         --            --          113,080

Amortization of deferred
 compensation--stock
 options                   --              --           --            --            --          --          649,176        649,176

Deferred compensation
 stock options voided      --              --           --            --        (455,842)       --          455,842          --    

Net loss for the year      --              --                         --                    (3,671,988)       --        (3,671,988)
                        --------      ----------                 --------    -----------  ------------   -----------   -----------
Balance at 
 May 31, 1993         $  3,565        16,811,267                 $336,225    $54,733,787  $(54,108,204)  $(2,217,982)  $(1,252,609)
                        --------      ----------                 --------    -----------  ------------   -----------   -----------

<FN>
(*)  Not covered by Auditors' Report.
</TABLE>
                              See notes to financial statements.
                                            F-16                     

<PAGE>
  
                                     FINGERMATRIX, INC.
                                (A DEVELOPMENT STAGE COMPANY)
                     STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                     FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996



<TABLE>
<CAPTION>
                                                                                                                  
                                                                                             Deficit
                                                    Common Stock                           Accumulated     Deferred 
                          Convertible  -------------------------------------  Additional   During the    Compensation
                           Preferred                   Price     Par Value     Paid-In     Development       Stock
                             Stock       Shares     Per Share      Total       Capital        Stage         Options        Total
                         ------------    ------     ---------    ---------     -------      ----------   ------------      ----- 
<S>                     <C>             <C>         <C>          <C>           <C>          <C>           <C>          <C>          
Balance at 
 May 31, 1993         $ 3,565         16,811,267     $  --      $336,225     $54,733,787  $(54,108,204)  $(2,217,982)  $(1,252,609)

Amortization of deferred
 compensation stock
 options                 --               --            --          --             --            --          198,600       198,600

Net loss for the four
 months ended 
 September 30, 1993      --               --            --          --             --            --         (903,462)     (903,462)
                      -------         ----------               ---------     -----------  ------------   -----------   -----------
Balance, 
 September 30, 1993     3,565         16,811,267                 336,225      54,733,787   (55,011,666)   (2,019,382)   (1,957,471)

Amortization of 
 deferred compensation 
 stock options           --               --                        --             --            --          595,800       595,800

Net loss for the year    --               --                        --             --       (2,604,658)        --       (2,604,658)
                      -------         ----------               ---------     -----------  ------------   -----------   -----------
Balance at 
 September 30, 1994   $ 3,565         16,811,267               $ 336,225     $54,733,787  $(57,616,324)  $(1,423,582)  $(3,966,329)
                      -------         ----------               ---------     -----------  ------------   -----------   -----------

</TABLE>

                      See notes to financial statements.

                                      F-17
<PAGE>

                                FINGERMATRIX, INC.
                          (A DEVELOPMENT STAGE COMPANY)
               STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
               FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
                                                                                                                  
                                                                                             Deficit
                                                    Common Stock                           Accumulated     Deferred 
                          Convertible  -------------------------------------  Additional   During the    Compensation
                           Preferred                   Price     Par Value     Paid-In     Development       Stock
                             Stock       Shares     Per Share      Total       Capital        Stage         Options        Total
                         ------------    ------     ---------    ---------     -------      ----------   ------------      ----- 
<S>                     <C>             <C>         <C>          <C>           <C>          <C>           <C>          <C>      
Balance at 
 September 30, 1994      $ 3,565      16,811,267     $  --      $336,225     $54,733,787  $(57,616,324)  $(1,423,582)  $(3,966,329)

Bankruptcy reorganization
 transactions:
  Cancellation of 
  old shares              (3,565)    (16,811,267)       --      (336,225)        339,790        --             --           --   
 Issuance of new shares to
   holders of old shares and
   unsecured pre-petition
   creditors                 --        1,472,738        --        14,727         (14,727)       --             --           --   
  Shares issued as additional
   consideration for settle-
   ment of post-petition
   financing (Note 2)        --          150,000        --         1,500          (1,500)       --             --           --   
  Shares issued in exchange 
   for convertible 
   note (Note 5)             --          250,000       1.00        2,500         247,500        --             --          250,000
  Cancellation of deferred
   compensation stock 
   options (Note 10i)        --             --          --         --         (1,423,582)       --         1,423,582        --   
  Shares issued in connection
   with settlement of 
   litigation (Note 10f)     --          78,098       4.62           781         359,667        --             --          360,448
  Shares issued to new 
   shareholders in exchange 
   for cash investment 
   (Note 7)                  --         300,000       1.60         3,000         477,463        --             --          480,463
Other transactions:
 Stock warrants exercised 
  (Note 8)                  --          694,568     various        6,946         703,765        --             --          710,711
 Shares issued pursuant 
  to a private placement 
  (Note 10e)                --        1,000,000      1.00         10,000         990,000        --             --        1,000,000
Net income for the year     --            --                         --                          8,699         --            8,699
                       --------       ---------                ---------     -----------  ------------        ------   -----------
Balance at 
 September 30, 1995    $   --         3,945,404                $  39,454     $56,412,163  $(57,607,625)       $ --     $(1,156,008)
                       --------       ---------                ---------     -----------  ------------        ------   -----------
</TABLE>                                  
                          See notes to financial statements.

                                        F-18
<PAGE>


                                    FINGERMATRIX, INC.
                              (A DEVELOPMENT STAGE COMPANY)
                    STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 
                      FROM INCEPTION (MAY, 1976) TO SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
                                                                                                           
                                                                                                         Deficit
                                                        Common Stock                                   Accumulated  
                                           ---------------------------------------    Additional        During the
                                                         Price          Par Value       Paid-In         Development      
                                             Shares     Per Share         Total         Capital           Stage            Total
                                             ------     ---------       ---------       -------         -----------        ----- 
<S>                                         <C>         <C>             <C>            <C>              <C>            <C>
Balance at September 30, 1995               3,945,404      --           $ 39,454       $56,412,163      $(57,607,625)  $(1,156,008)
                                            ----------                  --------       -----------      ------------   -----------
Issuance of shares to holders            
 of old preferred shares                      142,856      --              1,429            (1,429)           --            --  
  
Shares issued as reimbursement
 for professional fees incurred
 by Stockholders' Alliance
 (Note 10h)                                    62,032      1.75              620           107,936            --           108,556
                                                                                                
Shares issued in exchange for
 convertible note (Notes 5 and 7)             250,000      1.00            2,500           247,500            --           250,000
                                                                                                
Shares issued in lieu of
 employee bonuses                             143,787     $2.25 to         1,438           324,404            --           325,842 
                                                            $2.00 

Stock warrants exercised (Note 8)           3,162,071     $.01 to         31,621         2,867,301            --         2,898,922
                                                           $2.00 

Shares issued pursuant to a 
 private placement (Note 10e)                 500,000     $1.00            5,000           495,000            --           500,000
                                                                                           
Net loss for the year                           --                           --               --        (2,597,937)     (2,597,937)
                                            ----------                   --------       -----------    ------------    -----------
Balance at September 30, 1996                8,206,150                   $ 82,062       $60,452,875    $(60,205,562)   $   329,375
                                            ----------                   --------       -----------    ------------    -----------
</TABLE>

                               See notes to financial statements.
                                                                   
                                             F-19

<PAGE>

                                       FINGERMATRIX, INC.
                                 (A DEVELOPMENT STAGE COMPANY)

                                   STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                    From June 1,
                                                                                                      1988 to   
                                                          Years ended September 30,                 September 30,
                                        ---------------------------------------------------        --------------
                                          1996               1995                 1994                  1996 (*)
                                          ----               ----                 ----                  -------  
<S>                                   <C>               <C>                  <C>                   <C>
Cash flows from operating
 activities:
  Loss before extraordinary credit    $(2,597,937)       $(1,772,429)         $(2,604,658)           $(31,934,769)         
  Extraordinary credit                      --             1,781,128               --                   1,781,128
                                      -----------         ----------          -----------             -----------
Net income (loss)                      (2,597,937)             8,699           (2,604,658)            (30,153,641)
                                      -----------         ----------          -----------             -----------
Adjustments to reconcile net income
 (loss) to net cash used in
 operating activities:
  Extraordinary credit--gain
   on debt restructuring                    --             (1,781,128)             --                  (1,781,128)      
  Depreciation and amortization            45,104              20,811             31,265                1,201,186
  Amortization of deferred compensation
   stock options                            --                  --               595,800                3,923,202
  Write-off of certain patents              --                  --                 --                     235,570
  Allowance for doubtful accounts           --                  --                 --                      70,354
  Write-off of property and equipment       --                  --                 --                      21,991
  Gain on sale of property and equipment    --                  --                 --                        (500)
  Loss from Unimark Credit System, Inc.     --                  --                 --                     470,374
  Settlement of liabilities in 
   exchange for common stock              131,773               --                 --                     296,921

Changes in assets and liabilities:
 Decrease in accounts receivable            --                  --                 --                      17,429
 Decrease in interest receivable            --                  --                 --                     364,055
 (Increase) decrease in loans receivable
  from employees                            --                  --                  (994)                   8,459
 (Increase) decrease in inventory         (78,870)              --                 --                   1,506,033
 (Increase) decrease in prepaid
  expenses and other current assets       (27,362)           (14,461)              6,030                   76,946
 (Increase) decrease in deposits             (800)             1,900             (14,705)                 (13,605)
 (Decrease) increase in 
  accounts payable                        (33,674)           (14,147)            569,931                1,808,899
 (Decrease) increase in accrued 
  accrued expenses                       (548,593)           541,117             436,560                  892,510
                                       ----------          ----------           ---------             -----------
Total adjustments                        (512,422)        (1,245,908)          1,623,887                9,098,696
                                       ----------          ----------           ---------              -----------
Net cash used in operating 
 activities                           (3,110,359)         (1,237,209)           (980,771)             (21,054,945)
                                      ----------          ----------           ---------              -----------
<FN>
(*)  Not covered by Auditors' Report.
</TABLE>

 
                            See notes to financial statements.
 
                                           F-20
<PAGE>



                                      FINGERMATRIX, INC.
                                 (A DEVELOPMENT STAGE COMPANY)

                                     STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                        From June 1,
                                                                                                          1988 to   
                                                            Years ended September 30,                   September 30,
                                             ---------------------------------------------------        --------------
                                               1996               1995                 1994                 1996 (*)
                                               ----               ----                 ----                 -------  
<S>                                        <C>               <C>                  <C>                   <C>

Cash flows from investing activities:
  Expenditures for property and equipment   $(193,383)         $(15,185)           $   --               $  (334,241)
  Expenditures for patents                    (17,148)             --                  --                  (203,661)
  Proceeds from sale of property 
   and equipment                                 --                --                  --                     3,500
  Payment for covenant not to compete            --                --                  --                  (100,000)
  Investment in Unimark Credit System,Inc.       --                --                  --                  (111,333)
                                           -----------       ----------            ---------            -----------
Net cash used in investing activities        (210,531)          (15,185)               --                  (745,735)
                                           -----------       ----------            ---------            -----------
Cash flows from financing activities:
 Payment from (to) restricted cash account     31,825           (31,825)               --                      --    
 Payments to creditors as part of
  debt restructuring                         (663,823)         (446,124)               --                (1,109,947)
 Proceeds from notes payable                     --             575,954              991,046              2,760,811
 Proceeds from shares issued, pursuant
  to private placements                       500,000         1,480,463                --                 5,453,914
 Proceeds from exercise of stock
  warrants and options                      2,790,297           710,711                --                 3,626,154
 Payments under capitalized leases               --                --                  --                   (50,109)
 Payment of dividends                            --                --                  --                  (233,940)
 Proceeds from public offering                   --                --                  --                 2,686,521
 Payments from employee                          --              17,225                --                    27,225
                                           -----------       ----------            ---------            -----------
Net cash flows provided by financing
 activities                                 2,658,299         2,306,404              991,046             13,160,629
                                           -----------       ----------            ---------            -----------
Net increase (decrease) in cash and
 cash equivalents                             (662,591)       1,054,010               10,275             (8,640,052)
Cash and cash equivalents at beginning
 of period                                   1,067,577           13,567                3,292              9,045,038
                                           -----------       ----------            ---------            -----------
Cash and cash equivalents at 
 end of period                              $  404,986       $1,067,577            $  13,567            $   404,986
                                           -----------       ----------            ---------            -----------
                                           -----------       ----------            ---------            -----------
Supplemental disclosures of cash
 flow information:
  Cash paid during the period for:
   Interest                                $    73,071       $   35,691            $     204           $   116,780
                                           -----------       ----------            ---------           -----------
                                           -----------       ----------            ---------           -----------
<FN>
Reference is made to Notes 2, 5, 7, 8, 10e and 10f 
relating to non-monetary issuances of common stock.

(*)  Not covered by Auditors' Report.

</TABLE>
 
                             See notes to financial statements.

                                             F-21
<PAGE>

                               FINGERMATRIX, INC.
                         (A DEVELOPMENT STAGE COMPANY)

            CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION


   
                                                               From inception 
                                                               (May 1976) to  
                                                               May 31, 1988 (*)
Use of funds:
 Operations:                                                    
 Net loss                                                        $29,530,169
 Items not consuming working capital:
   Depreciation and amortization                                  (1,267,675)
   Amortization of deferred compensation-stock options              (885,586)
   Common stock and warrants issued under settlement of law suit    (425,000)
   Write-off of certain fixed assets                                (365,440)
   Write-off of certain patents                                     (220,238)
   Stock appreciation rights                                        (924,301)
                                                                 -----------
Working capital consumed by operations                            25,441,929

Expenditures for patent applications                                 570,805
Acquisition of fixed assets                                        1,547,222
Deferred compensation - stock options                              3,175,212
Reclassification of test equipment from inventory to fixed assets    633,319
Increase in deferred charges                                         209,187
Common stock issued in connection with acquisition of fixed assets    81,276
Common stock issued in connection with acquisition of patents         25,115
Long-term debt converted into common stock                           444,500
Payments and current maturities of long-term debt                  1,506,173
Preferred dividends paid                                             224,747
Loans receivable from employees                                       80,897
                                                                 -----------
Total funds consumed                                              33,940,382
                                                                 -----------
Sources of funds:
 Collections of loans receivable from employees                       80,897
 Decrease in deferred charges                                        100,418
 Increase in long-term debt                                        1,950,672
 Issuances of common stock                                        32,695,141
 Issuances of preferred stock                                      5,976,001
 Proceeds from sale of warrants                                       17,000
 Issuance of stock options                                         3,636,562
                                                                 -----------
Total funds provided                                              44,456,691
                                                                 -----------
Net increase in working capital                                   10,516,309
Working capital--inception                                           --     
                                                                 -----------
Working capital, May 31, 1988                                    $10,516,309
                                                                 -----------
                                                                 -----------
(*)  Not covered by Auditors' Report.

                       See notes to financial statements.

                                    F-22
<PAGE>




                               FINGERMATRIX, INC.
                         (A DEVELOPMENT STAGE COMPANY)

            CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION

                                  (Continued)



                                                               From inception
                                                               (May 1976) to 
                                                               May 31, 1988 (*)
                                                              -----------------
Changes in components of working capital:
 Increase in current assets:
  Cash                                                          $ 9,045,038
  Accounts receivable                                                76,203
  Interest receivable                                               364,055
  Loans receivable from employees                                    37,264
  Inventory                                                       1,584,903
  Prepaid expenses and other current assets                         125,163
 (Increase) in current liabilities:
  Accounts payable                                                 (456,779)
  Accrued expenses                                                 (259,538)
                                                                -----------
Net increase in working capital                                 $10,516,309
                                                                -----------
                                                                -----------







(*)  Not covered by Auditors' Report.







                       See notes to financial statements.

                                    F-23
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 



Note 1.  Summary of Significant Accounting Policies

           a.  Organization, history and basis of presentation

                 The Company was incorporated in the State of New York
in May, 1976.  For the period from its inception through September 30,
1996, the Company has been in the development stage and, accordingly,
has directed its efforts and resources to product and prototype
development and production planning of its electronic fingerprint
identification systems.  The Company operated as a debtor in possession
pursuant to Chapter 11 of the Federal Bankruptcy Code until September,
1994, at which date a Trustee was appointed.  On March 31, 1995, a Plan
of Reorganization was confirmed and, accordingly, the Company exited
from protection of the Bankruptcy Court and the Company's Management was
transferred to a Board of Directors.

                 The financial statements have been prepared assuming
that the Company will continue as a going concern which is dependent
upon the successful completion of the Company's development program,
fulfilling of its obligations pursuant to the Plan of Reorganization,
generating sufficient sales to obtain profitable operations and its
ability to obtain additional working capital or financing, if necessary. 
During the three years ended September 30, 1996, the Company had
aggregate operating revenues of $29,000 while incurring losses before
extraordinary credits aggregating $6,850,900 during the same period. 
Additionally, the Company has an accumulated deficit of $60,205,562 as
of September 30, 1996.  The Company's recurring losses from operations
and lack of sufficient working capital raise substantial doubt about the
Company's ability to continue as a going concern (see Note 2).

                 The Company believes that its existing cash and the
proceeds from future anticipated equity contributions from the exercise
of warrants and additional equity commitments made from one investor
(Note 10e) will generate sufficient cash to maintain its operations
through January, 1997.  In order to continue its operations and meet its
reorganization plan obligations, management has taken steps to produce
a prototype of its fingerprint identification systems equipment, which
it intends to market to law enforcement agencies, commercial enterprises
or other agencies and organizations that can utilize these type of
products.   Based upon the reactions received by the potential customers
to date, the Company believes that its scanner and technology will be
well received.  Production commenced in the quarter ended December 31,
1996 on the Single Finger Access Control System.

                                    F-24
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

Note 1.  Summary of Significant Accounting Policies (continued)

           b.  Use of Estimates

                 The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.  Actual
results could differ from those estimates.

           c.  Inventory valuation

                 Inventories are valued at the lower of cost (first-in,
first-out) or market.  See Note 3.

           d.  Property and equipment

                 Depreciation is computed on the straight-line method
over the estimated useful lives of the assets, which is generally five
years.  Leasehold improvements are amortized on the straight-line basis
over the shorter of their estimated useful lives or the remaining lease
term.  Any gain or loss realized on disposition is recorded in
operations at the time of the disposal.  Expenditures for maintenance,
repairs, renewal and betterments are reviewed by management and only
those expenditures representing improvements to property and equipment
are capitalized (see Note 1f).

           e.  Research and development

                 The Company accounts for software development costs in
accordance with Statement of Financial Accounting Standards No. 86
"Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed".  Accordingly, certain software development costs
incurred will be capitalized after technological feasibility has been
demonstrated.  Technological feasibility is determined when planning,
designing, coding and testing have been completed according to design
specifications.  Commencing with product introduction, such capitalized
amounts will be amortized on a product-by-product basis at the greater
of the amount computed using (a) the ratio of current revenues for a
product to the total of current and anticipated future revenues or (b)
the straight-line method over the remaining estimated economic life of
the product.  Amortization of capitalized software costs will be charged
to cost of product revenues and cost of services revenues.  As testing
of the Company's products has not been completed, no software
development costs have been capitalized from inception through September
30, 1996.  Research and development expenditures are charged to research
and development in the period incurred.

                                    F-25
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

Note 1.  Summary of Significant Accounting Policies (continued)

           f.  Patents and intangible assets

                 The cost of obtaining patents is amortized on the
straight-line method over 17 years.  Patent application costs are
deferred until a patent is received or the application is abandoned. 
During the year ended September 30, 1996, patent application costs
aggregated $17,148.  Costs incurred to maintain patents in good standing
are expensed as incurred.  Amortization of patent costs was $13,219,
$15,815 and $15,815 for the years ended September 30, 1996, 1995 and
1994, respectively.

                 In fiscal 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". 
Accordingly, the Company evaluates asset recoverability at each balance
sheet date or when an event occurs that may impair recoverability of the
asset.  The Company determines the recoverability of the carrying amount
of each intangible asset by reviewing the following factors:  the
undiscounted value of expected operating cash flows in relation to its
net capital investment, the estimated useful or contractual life of the
intangible asset, the contract or product supporting the intangible
asset, and in the case of purchased technology and capitalized software
development costs, the Company will periodically review the
recoverability of the assets value by evaluating its products with
respect to technological advances, competitive products and the needs of
its customers.  During fiscal 1996, the Company did not incur any long-
lived asset impairment losses.

           g.  Revenue recognition

                 The Company recognizes revenues from customers upon
delivery and installation, subject to acceptance by the customer, of its
systems.  Service contract revenues are recognized as earned, pursuant
to the terms of the contract.

           h.  Earnings (loss) per common share

                 Earnings (loss) per common share is computed using the
income (loss) for the year adjusted for preferred dividends divided by
the weighted average number of common shares outstanding during the
respective periods.  Retroactive effect has been given for all periods
shown for the reverse .07 for 1 stock split effected April, 1995
concurrent with the bankruptcy plan confirmation.  Common stock
equivalents, convertible notes and convertible preferred stock
outstanding, were not included in the computation, since the effect of
their inclusion would be anti-dilutive or immaterial.

                                    F-26
<PAGE>
                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

Note 1.  Summary of Significant Accounting Policies (continued)

           i.  Cash equivalents and restricted cash

                 Cash and cash equivalents generally consist of cash and
money market instruments.  These securities have original maturity dates
not exceeding three months.  Such investments are stated at cost which
approximates fair value and are considered cash equivalents for purposes
of reporting cash flows. 

                 Cash that has been segregated for settlement of pending
bankruptcy claims, which is under the control of a court-appointed
trustee, is deemed restricted cash and is not included in cash
equivalents.

           j.  Income taxes

                 Deferred income taxes are provided, if appropriate, to
reflect the tax effect of differences between the financial statement
and income tax basis of assets and liabilities.  These differences
result from the utilization of net operating losses.  See Note 8.

           k.  Concentration of credit risk

                 Financial instruments which potentially subject the
Company to concentrations of credit risk are cash and cash equivalents. 
The Company maintains its cash in highly rated financial institutions. 
As of September 30, 1996, the Company had bank deposits exceeding
Federally insured limits by approximately $305,000.

           l.  Accounting for stock-based compensation

                 In October 1995, SFAS No. 123, "Accounting for Stock-
Based Compensation", was issued.  SFAS No. 123 establishes a fair value
method of accounting for stock-based compensation plans either through
recognition or disclosure.  The Company intends to adopt the disclosure
provisions of the Statement and, therefore, does not anticipate that
SFAS No. 123 will have a material impact on its financial position,
results of operations or cash flows.

           m.  Fair value of financial instruments

                 The carrying amounts of financial instruments,
including cash and short-term debt, approximated fair value as of
September 30, 1996 and 1995.  The carrying value of long-term debt,
including the current portion, approximated fair value as of September
30, 1996 and 1995, based upon the borrowing rates currently available to
the Company for bank loans with similar terms and maturities.

                                    F-27

<PAGE>
                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

Note 2.  Bankruptcy Reorganization

           On September 15, 1993, the former Chief Executive Officer of
the Company caused a voluntary petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code to be filed on behalf of the Company in
the Bankruptcy Court.  As of that date, liabilities of the Company
aggregated approximately $2,168,500, which exceeded the Company's assets
of $252,000 by $1,916,500.  The Company operated as a debtor under
Chapter 11 of the United States Bankruptcy Code until September, 1994,
at which date a Trustee was appointed.  On March 31, 1995, a Plan of
Reorganization ("the Plan") was confirmed.  In the interim, the Chief
Executive Officer was replaced and new management installed.

           The Plan established different classes of creditors or equity
interests and specified the property, if any, that was to be distributed
to each class.  As more fully detailed below, the Plan provides for
distribution to the creditors of cash, Fingermatrix New Common Stock, A-
Warrants, B-Warrants, and C-Warrants, and other consideration.  See
Notes 7 and 8 for further discussion of stock and warrant issuances.

           The Company restructured $2,920,890 of liabilities by the
payment of $447,150 on the distribution date (April 19, 1995), a
commitment to pay $332,166 in the future, and the issuance of common
stock and warrants valued at $360,448 in lieu of a cash payment (Note
10f), resulting in an extraordinary gain of $1,781,128 during the year
ended September 30, 1995.  This settlement represents a payment of
approximately 27 cents for every dollar of pre-petition debt.  During
the term of the bankruptcy, the Company incurred $714,092 of bankruptcy 
administrative costs.  These costs, primarily professional fees for
attorneys and accountants, were expensed during the two years ended
September 30, 1995.  Through September 30, 1996, all Plan required
payments had been made by the Company.

                                    F-28
<PAGE>

                                           FINGERMATRIX, INC.
                                      (A DEVELOPMENT STAGE COMPANY)
                                      NOTES TO FINANCIAL STATEMENTS
                                   SEPTEMBER 30, 1996, 1995 AND 1994 


Note 2.  Bankruptcy Reorganization (continued)

           The following is a summary of the cash, common stock and warrant
distributions scheduled to be made under the Plan as modified by the Board of
Directors and approved by the Shareholders:
<TABLE>
<CAPTION>
                                                                                                         Cash on        Deferred
                          New Common Shares    A-Warrants   B-Warrants   C-Warrants   Other Warrants   Distribution       Cash
     Recipient            Number (A)    %         Number       Number       Number       and Options      Date          Payments
----------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>          <C>     <C>           <C>          <C>          <C>              <C>           <C>
Old Shareholders          1,500,000    50%     2,500,000     1,250,000        -0-           -0-            -0-             -0-

New Shareholders            825,000    27.5    1,375,000       687,500        -0-           -0-            -0-             -0-

SIS Capital Corp            150,000     5        250,000       125,000        -0-           -0-         $250,000       $817,000

Unsecured Creditors         300,000    10        500,000       250,000        -0-           -0-       $96,520/$.05   $351,662/$.20
                                                                                                      per $1.00 of   per $1.00 of
                                                                                                      allowed claim  allowed claim
ESOP (B)                    225,000     7.5      375,000       187,000        -0-        350,000           -0-             -0-
                                                                 (C)        

Gordon Molesworth, Daniel 
 Storr and Orvall Riessen    -0-       -0-      500,000        250,000      300,000         -0-            -0-             -0-

Michael Schiller             -0-       -0-      100,000         50,000        -0-        200,000           -0-             -0-
                                                                                         (Note 8)
----------------------------------------------------------------------------------------------------------------------------------
        TOTAL:           3,000,000    100%    5,725,000      2,862,500      300,000
----------------------------------------------------------------------------------------------------------------------------------  
<FN>
(A)  Actual number of shares distributed varies from the above chart; 
     see Statement of Shareholders' Equity (Deficit).
(B)  Modified so that stock warrants were issued in lieu of shares.
(C)  Deleted.  See Note 8(b) for modifications.
</TABLE>

                                                                F-29   
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

Note 3.  Inventories

           As of September 30, 1996, inventories consisted of raw
material components purchased in the 1996 fiscal year, to be utilized in
the production of the Company's fingerprint identification systems.

           As of May 31, 1992, the Company's financial statements
reflected inventory aggregating $502,582.  However, the Company's
limited sales led management to re-evaluate its inventory and a
determination was made that new prototypes were required and the
Company's existing inventory had no market value.  Accordingly, all
inventory was written off and no inventory was reflected in the
accompanying financial statements for 1995 and 1994.

Note 4.  Accrued Expenses

           Details of accrued expenses as of September 30, 1996 and 1995
are as follows:
                                               1996           1995
                                               ----           ----
      Accrued salaries                      $ 22,968        $302,625
      Bankruptcy administration costs          --            595,794
      Patent professional fees and costs      32,689            --   
      Other                                   70,802          79,258
                                            --------        --------
                                            $126,459        $977,677     
                                            --------        --------
                                            --------        --------

Note 5.  Note Payable

              As of the balance sheet dates, note payable is comprised
of the following:

                                                  September 30,
                                                  -------------  
                                               1996          1995
                                               ----          ----
Convertible note payable--Tampa 
 Firefighters' and Police Officers' 
 Pension Fund; post-petition financing; 
 note bears interest at prime, plus
 4% per annum (12.75% at September 30,
 1995), convertible into 250,000 shares 
 of common stock; maturity May 30, 1996 (a)  $   --         $250,000
                                             --------       --------
                                             --------       --------

(a)      On May 23, 1996, the note was converted by the note holder into
                  250,000 shares of common stock.
 
                                    F-30
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 



Note 6.  Long-term Debt

           As of September 30, 1996 and 1995, long-term debt is
comprised of the following:

Note payable--SIS Capital Corp. ("SIS)
 post- petition financing; note in 
 the original amount of $1,067,000 
 was collateralized by a first lien 
 upon all Company assets and bears 
 interest at prime, plus 2% (10.25% 
 and 10.75% at September 30, 1996
 and 1995, respectively); note 
 is payable in three $200,000 
 semi-annual installments, commencing 
 October 19, 1995; the principal 
 balance and all accrued interest 
 is payable April 19, 1997 
 (as of September 30, 1996 and 1995, 
 related accrued interest 
 aggregated $15,552 and
 $35,744, respectively)(a)                       $417,000     $  817,000

Pre-petition payables due in three 
 semi-annual payments, commencing 
 October 19, 1995, without interest
 (final payment made October 19, 1996):
  Unrelated creditors                              41,990        176,006
  Related parties (see Note 10a)                   45,849        175,656
                                                 --------     ----------
                                                  504,839      1,168,662       
Less current portion                              504,839        628,003
                                                 --------     ----------

                                                 $   -        $  540,659
                                                 --------     ----------
                                                 --------     ----------

(a)  On June 1, 1996, SIS agreed to waive and discharge its first      
     priority security interest and lien on the Company's assets.

                                    F-31
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

Note 7.  Preferred and Common Stock

           Effective with the bankruptcy reorganization consummated on
March 31, 1995, the Company's entire preferred and common stock
structure was changed.  As of that date, all issued and outstanding
convertible preferred $.01 par value shares and common $.02 par value
shares were canceled and new common stock with $.01 par value was
issued. 

           In conjunction with the reorganization, the Company arranged
for new stockholders to invest $480,463 in exchange for 300,000 new
common shares.  Said proceeds were received in April, 1995.  The Plan of
Reorganization had allotted, 825,000 shares for issuance to said new
stockholders, which would have represented an ownership of 271/2% in the
Company.  See chart in Note 2.  These shareholders were also issued
500,000 A-Warrants and 250,000 B-Warrants.

           In October, 1994, $250,000 was received from another
investor.  The proceeds represented a convertible note payable with
interest at prime, plus 4% (11.75%).  In April, 1995, the note was
converted into 250,000 shares of common stock.  Accrued interest was
forgiven upon conversion and was included in the gain on debt
restructuring.

           The Company has 1,000,000 shares of preferred stock ($.01 par
value) authorized, however, none are issued or outstanding.  All prior
classes of preferred had been canceled and exchanged for New Common
Stock under the Plan.  The Preferred Stock may be issued in one or more
series by the Board of Directors without further shareholder action and
shall contain such terms and designations as the Board of Directors may
fix.

Note 8.  Stock Warrants and Options

           a.  In addition to the common shares issued as part of the
revision of the capital structure of the Company discussed in Note 7
above, the Company issued three classes of common stock warrants, Series
A, B and C.  The number of warrants expected to be issued is detailed in
the chart in Note 2.   Pursuant to the terms of the reorganization plan,
all previously issued warrants that were not fully exercised, exchanged
and evidenced by stock certificates were canceled.  Class A warrants
expired January 16, 1996, except for 500,000 warrants issued to three
individuals who were instrumental in securing financing for the Company.

               In conjunction with the overall settlement of claims
between the Company and the former Chief Executive Officer, the Company
issued an additional 200,000 common stock warrants ("additional
warrants") that were exercisable at $.01 per share and which were
exercised in September, 1996.

                                    F-32

<PAGE>
                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 


Note 8.  Stock Warrants and Options (continued)

               As of September 30, 1996, the number of warrants
exercisable is detailed in the chart below:

                               Exercise
                  Number of    price per     Expiration         Total
     Class         warrants      share          date            Amount
     -----        ---------    ---------     ----------         ------
B Warrants        1,245,681      $2.00    January 14, 1997    2,491,362
C Warrants          100,000      $ .01    April 17, 2000          1,000

              Class B warrants entitle the holder thereof to purchase
for $2.00 one share of common stock in exchange for one warrant. 

              Class C and additional Warrants entitle the holder thereof
to purchase for $.01 one share of common stock in exchange for one
warrant.

              Class A warrants entitled the holder thereof to purchase
for $1.00 one share of common stock in exchange for one warrant. 
Exercising party also received one-half of one B Warrant.  

           b.  On July 21, 1995, the Company adopted and the
Stockholders subsequently approved, an Employee Stock Option Plan
("ESOP") that covers employees of the Company and an Outside Directors
Stock Option Plan ("DSOP").  The Company has reserved 850,000 shares of
common stock for issuance to key employees and/or directors under these
plans.  Changes in the shares authorized, granted and available under
the Plans are as follows:   
                                                              Number
                                                                of
                                                              Shares
                                                              ------
Authorized July 21, 1995 (1)                                  850,000
Granted                                                      (578,500)
Exercised                                                        -- 
                                                              -------
Available, September 30, 1995                                 271,500

Granted                                                       (34,000)
Terminated                                                     42,500
Exercised                                                        --  
                                                              -------
Available, September 30, 1996                                 280,000
                                                              -------
                                                              -------
(1)  Date of adoption of Plan.

                                    F-33
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

Note 8.  Stock Warrants and Options (continued)

               Option exercise prices pursuant to the ESOP and DSOP
shall not be less than 85% and 100%, respectively, of the fair market
value of the common stock at the time of the Grant.  During the years 
ended September 30, 1996 and 1995, options were granted at prices
ranging from $1.75 to $2.375 per share.  Exercise periods are for ten
years (5 years for certain incentive stock options), but terminate at
a stipulated period of time after an employees' death or termination
of employment for causes other than disability or retirement.  No
options have been exercised since inception of the plans.  The options
become exercisable in such installments, which need not be equal, and
at such times as designated by the Compensation Committee.

Note 9.  Income Taxes

           The Company, as of September 30, 1996, has available
approximately $47,762,000 of net operating loss carryforwards to reduce
future Federal and state income taxes. In addition, the Company had
available investment tax credits of approximately $15,100, expiring 1996
through 2001, and research tax credits of approximately $585,000 which
began to expire in the fiscal year ended May 31, 1993.  Since there is
no guarantee that the related deferred tax asset will be realized by
reduction of taxes payable on taxable income during the carryforward
period, a valuation allowance in the amounts of $19,012,000 and
$18,667,000, respectively, has been computed to offset in its entirety
the deferred tax asset attributable to the net operating loss and tax
credits.

           The net operating loss carryforwards expire as follows:

                 Year                           NOL Amount
                 ----                          -------------
                 1997                           $ 2,549,215
                 1998                             3,878,063
                 1999                             3,181,148
                 2000                             3,290,778
                 2001                             4,047,945
                 2002                             5,383,607
                 2003                             5,162,539
                 2004                             5,615,608
                 2005                             2,207,073
                 2006                             2,792,000
                 2007                             3,671,988
                 2008                               903,462
                 2009                             2,604,658
                 2010                             2,473,840
                                                -----------
                                                $47,761,924
                                                -----------
                                                -----------

                                    F-34
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 


Note 9.  Income Taxes (continued)

           Under Section 382 of the Internal Revenue Code of 1986, the
use of the Company's net operating loss carryforwards and various
business tax credits may be limited after the occurrence of an ownership
change, as defined.  An ownership change is a series of transactions
resulting in an increase of more than 50 percentage points in the
percentage of ownership interest in stockholders who, before or after
such ownership change, own, directly, or indirectly, 5% or more of the
stock of such corporation.

Note 10.  Commitments and Contingencies

           a.  The Company leases its office and factory space pursuant
to a non-cancelable operating lease which expires in November, 1998. 
The terms of the lease require the Company to pay for its own
electricity, in addition to the basic annual rental which increases from
$47,061 to $54,479 over the term of the lease. 

               The future minimum annual rental commitments at September
30, 1996 on long-term leases is as follows:

                           1997              $51,885
                           1998               54,479
                           1999                6,810

               Rental expense for each of the periods was as follows:

      Year ended September 30, 1994              $471,280
      Year ended September 30, 1995                64,751
      Year ended September 30, 1996                73,019

               During the pendency of the bankruptcy  reorganization,
the former President and his family made claims for, among other things,
back rent, diminution of value of their building and unpaid real estate
taxes.  The Trustee reached an accord with said individuals that
aggregated $907,000, which was included in the class of general
unsecured creditors.  A substantial portion of this amount was
classified as rent expense in the 1994 financial statements.

                                    F-35
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

Note 10.  Commitments and Contingencies (continued)

           b.  The Company has an employment agreement Thomas T.
Harding, who is serving as President, providing for an annual salary of
$140,000, which agreement expires in April, 1997.  The agreement is
automatically renewed unless either the Company or the employee gives 30
days written notice terminating the contract. 

           c.  Effective January 1, 1990, the Company established a
401(K) defined contribution and trust plan which covers substantially
all officers and employees upon completion of six months employment. 
Officers and employees may contribute from 1% to 15% of their
compensation.  The Company may contribute to the fund at the discretion
of management.  During the three years ended September 30, 1996, the
Company did not make a contribution.  The Company has elected to pay the
plan administrative expenses, which were nominal, for this period.

           d.  At September 30, 1996, 2,195,681 shares of the Company's
common stock were reserved for issuance in connection with the exercise
of warrants, grants to employees, and the employee and director stock
option plan (see Note 2 and Note 7).        

           e.  On August 30, 1995, the Company executed a stock purchase
agreement with an offshore corporation that provided for said investor
to purchase 2,000,000 shares of common stock at $1.00 per share for an
aggregate $2,000,000 cash investment.  Through September 30, 1995 and
1996, the Company had received $1,000,000 and $1,500,000, respectively,
towards this purchase.  By December 2, 1996, the unpaid balance of
$500,000 was received in full.

           f.  On October 5, 1995, the Company settled a disputed
$395,000 claim, with a former customer by issuing securities as
discussed below with an estimated value of $360,448.  The customer had
been seeking a refund of monies previously paid to the Company for
sales.  However, in lieu of cash, the settlement required the Company to
issue 53,098 shares of common stock, 88,143 Class A warrants, and
related 44,072 Class B warrants.  Additionally, the customer received
50,000 additional Class A warrants and the Company gave a $25,000 credit
towards the exercise of these additional Class A warrants.  The gain on
debt restructuring in the accompanying statement of operations for the
year ended September 30, 1995 has been charged $360,448 to reflect the
cost to the Company of this settlement.

                                    F-36
<PAGE>

                              FINGERMATRIX, INC.
                        (A DEVELOPMENT STAGE COMPANY)

                        NOTES TO FINANCIAL STATEMENTS

                      SEPTEMBER 30, 1996, 1995 AND 1994 

Note 10. Commitments and Contingencies (continued)

           g.  To correct an error in the Plan, on October 24, 1995, the
Company approved the distribution of new common stock and warrants to
holders of the Series B convertible preferred stock and certain present
and former employees who were not fully covered by the original
distribution made on April 19, 1995.  The series B preferred shares were
erroneously treated as if they were old common stock for purposes of the
exchange into new common stock, when as a matter of right, each said
share was convertible into five shares of new common.  The additional
shares and warrants aggregated 180,826 and 301,256, respectively.

           h.  During the pendency of the bankruptcy reorganization, a
Stockholders' Alliance was formed by a group of common stock owners. 
Said Alliance incurred certain legal and professional fees in connection
with financing and other company related matters.  To reimburse the
Alliance for said expenses, the Board of Directors approved the issuance
of 62,032 shares to the individuals who comprised the Alliance.

           i.  In 1992, the Company issued 2,344,000 stock options to
three key employees at below market price.  The difference between the
market price and the exercise price of the options granted aggregated
$3,513,000 and was charged to deferred compensation - stock options and
additional paid-in-capital was credited.  In subsequent periods, the
options were terminated due to the departure of the employees.  At that
time, the unamortized portion was written off and additional paid in
capital was charged.  For the year ended September 30, 1995, said charge
amounted to $1,423,582.

                                    F-37