LUND, Sweden, Feb. 14, 2002 (PRIMEZONE) -- Precise Biometrics AB:
-- Sales in 2001 totaled MSEK 14.1 (5.2). The net profit for the
year amounted to MSEK -67.5 (-43.4). Sales for the fourth quarter
were MSEK 5.6 (1.2). The net profit for the fourth quarter was
MSEK -18.5 (-14.5).
-- At the end of the year, the company had MSEK 38.7 in liquid
assets. Subsequent to the end of the period, a new share issue
was completed. The issue was targeted at Swedish institutional
investors and valued at MSEK 30.5 before issue costs.
-- Due to the favorable market conditions, the company chose to
increase sales activities, which resulted in a rise in costs.
-- New customers acquired by Precise Biometrics include NexWatch, a
Honeywell subsidiary, the U.S. Department of Defense, other U.S.
federal agencies, the Dutch Ministry of Justice and the Banque de
Luxembourg.
-- Partnerships have been established with companies including
NexWatch, ActivCard and Utimaco Safeware.
-- During 2001, Siemens Trusted Networks selected the Precise
Match-on-Card(TM) for fingerprint authentication on smart cards.
-- A number of new products have been launched, including the
physical access control system, Precise BioAccess(TM), the
Precise 100 BioKeyboard and Precise 100 MC, the new fingerprint
reader for IT security. In addition, 2001 saw the introduction of
Precise BioMatch(TM), the software for biometric matching on smart
cards.
Commented on the past year by Christer Bergman, CEO: "Developments over the past year show that Precise Biometrics is on the right track. A succession of major orders during the second half of the year helped us to cement our position as a global market leader in the field of biometric security solutions. It was pleasing to see sales increase, from MSEK 3.5 in the third quarter, to MSEK 5.6 in the fourth quarter. The new share issue completed after the end of the period provides us with the opportunity to finance our impending breakthrough in the market.
The increasing demand for security worldwide has triggered an appreciable rise in interest in the biometric security solutions that Precise Biometrics offers, particularly as regards the Precise Match-on-Card(TM) which features unique technology for fingerprint matching on smart cards. Our solutions are accommodating, cost-effective and scalable while simultaneously allowing users to maintain their personal integrity.
Increased initiatives aimed at winning new accounts in a buoyant market naturally result in higher costs. We remain committed to allocating primary emphasis to controlling costs and acquiring new customers. However, it is only logical to push through initiatives when market conditions are favorable. This approach has already produced positive results in the form of major customers and rising sales. I am convinced that with the support generated by the new share issue carried out at the start of 2002, we have excellent conditions for making even greater and more rapid progress on the market."
The Market
Demand is growing for security solutions involving biometrics. This trend has been confirmed not only through the flow of incoming orders that Precise Biometrics is receiving but also by a number of independent analyses. To increase security and to add new functions, today's normal ID cards, credit cards and cards for physical access control are being phased out and replaced with chip-based smart cards. A universal standard for biometric solutions involving smart cards will thus become a central issue, as this is a good way to increase security and the number of functions available. Precise Biometrics' Precise Match-on-Card technology may well become this universal standard.
The market is clearly showing increased interest in biometric solutions that can be used for both physical access control and IT security. Precise Biometrics is already in a position to supply solutions of this kind.
The terrible events of September 11, 2001, sharpened the focus on security issues and have thus sparked heightened interest in biometric security solutions.
Four factors in particular are crucial to satisfying market demands for biometric solutions. Security systems must assure personal integrity, and the solutions must be accommodating, cost-effective and scalable.
The Business
During the past year, partnership agreements were signed with companies including ActivCard and Utimaco Safeware. During Q4, partnership agreements were signed with NexWatch, a subsidiary of Honeywell, and other customers.
In 2001, Precise Biometrics also restructured its organization to match market requirements even better. The intention behind these efforts was to increase the emphasis on customers and to accommodate the current trend in the market, by which IT security solutions and physical access control are becoming increasingly intertwined. The new organization comprises three product areas: IT Security, Physical Access and Embedded Solutions, as well as the business units for U.S. Government, Nordic Key Accounts, IT Security Partners, Security Industry, Mobile Security and Smart Cards.
Product area, IT Security:
During the fourth quarter:
-- An order was received from the Dutch Ministry of Justice for 1,000
fingerprint readers. This order also includes software licenses
for approximately 10,000 fingerprint readers. In the long term,
the order could generate orders for that number of fingerprint
readers.
-- A new fingerprint reader for PC, the Precise 100 MC, was
introduced. The product is an optimized version of the functions
for Match-On-Card.
During the year as a whole:
-- There has been considerable interest in complete solutions from
the area of IT security, i.e. joining forces with partners to
supply the precise solution required by the customer. The
partnerships with Utimaco and ActivCard are two successful
examples of this. In 2001, together with these partners, we
produced customer-specific solutions for clients including the
U.S. Department of Defense and a number of European banks.
-- 350 fingerprint readers were delivered to GWK, the Dutch banking
and tourist service company.
-- Banque de Luxembourg purchased 600 fingerprint readers for its
internal computer environment.
-- We also introduced a new keyboard, the Precise 100 BioKeyboard.
The advantage of this product is that the fingerprint reader is
integrated in the keyboard.
Product area, Physical Access:
During the fourth quarter:
-- A partnership agreement was concluded between Precise Biometrics
and NexWatch, a subsidiary of Honeywell, which is one of the
leading players in the security sector. An initial order valued
at approximately MSEK 3 has been placed for the fingerprint
reader for physical access control, Precise BioAccess. The
agreement involves Precise Biometrics and NexWatch entering into
a partnership agreement that gives NexWatch the right to sell and
distribute Precise Biometrics products together with products and
systems sold by different Honeywell companies throughout
the world.
-- Precise Biometrics launched a fingerprint reader for physical
access control for the U.S. Department of Defense. Precise
BioAccess SC is the first-and, at present, the only-fingerprint
reader in the world for physical access control that supports the
Common Access Card, which is the U.S. Department of Defense's
security standard for smart cards. With the introduction of this
product, Precise Biometrics can offer the U.S. Department of
Defense a complete solution for secure fingerprint authentication.
To underline the strong links between Precise BioAccess SC and
Match-On-Card, the product will be renamed Precise BioAccess MC.
Product area, Embedded Solutions:
During the fourth quarter:
-- Two Precise BioMatch C development systems for Match-on-Card were
delivered to the smart card manufacturer Siemens.
The integration of Precise BioMatch C into smart cards means that Precise Biometrics has succeeded in further strengthening its foothold in the fields of security solutions and electronic ID cards, where smart cards are used for biometric storage and matching. Precise Biometrics technology is used to replace PIN codes for the smart cards.
During the year as a whole:
-- A partnership was initiated with Siemens Trusted Network.
Over the course of the year, this business area produced the first ever Java-based solution for biometric identification on a smart card. This was carried out in collaboration with ActivCard.
Activities in the United States:
During the fourth quarter:
-- A decisive breakthrough was made when the company secured
contracts with various federal agencies and the U.S. Department
of Defense worth a total of MSEK 1.4. These contracts took the
form of a follow-on order for a federal agency with a value of
MSEK 0.7 along with a new order for the Common Access Card
project, which involves issuing new ID cards to 4.3 million users
within the Department of Defense. Through this order, Precise
Biometrics is well placed to capture a large market share in the
biometric segment of the Common Access Card project.
During the year as a whole:
-- A number of significant deals have been closed with our strategic
partners in this important market. Following the events of
September 11, security has become a higher priority in many ways
in the United States. Interest in security in connection with air
traffic has increased, and Precise Biometrics is one of the most
important players in this field. This section of the market is
showing increasing interest in our products
-- In particular, Precise Biometrics has noted appreciable interest
from federal agencies. This has already produced results in the
form of enquiries from a large number of customers, and a number
of smaller contracts have been agreed with important national
organizations, along with key projects with major growth
potential. Greater attention will be paid to this customer
segment in the future via the new organization in which the U.S.
Government business unit will play an important part.
-- The U.S. market accounted for almost 30 percent of sales by
Precise Biometrics.
-- The organization in the United States has been appreciably
reinforced.
Patents
During the fourth quarter, the company was granted yet another patent in Sweden. The patent is for an invention concerning the use of a small fingerprint sensor. This technology is expected to be important as regards the authentication of fingerprints in mobile units.
Another invention, which concerns the establishment of fingerprint images for efficient fingerprint matching in PCs, will not be protected in the United States, as the company has decided not to apply for a patent there. The reasons for this are that this patent is no longer considered to be important, and that no one else can apply for such a patent here.
Precise Biometrics now holds three patents, two of which were granted in 2001. In addition, four new patent applications were submitted in 2001. These related to two new inventions. Precise Biometrics now has 27 patent applications pending, referring to 13 different inventions.
Precise Biometrics has taken out patent insurance for 2002. This means a considerable reduction in the company's economic risk should the company become involved in a patent dispute.
Important events after the end of the period covered by this report
A new share issue targeted at Swedish institutional investors and valued at MSEK 30.5 million was completed in January 2002.
In February, a distribution agreement was signed with Securitas AS in Norway, which is a subsidiary of Securitas, the leading security company in the world. A small initial order for Precise Biometrics fingerprint reader for physical access control, Precise BioAccess, was placed in connection with the signing of the agreement.
Future Prospects
The market for the company's products will continue to develop positively. Precise Biometrics' sales are expected to continue to increase rapidly.
Profit and Position
The net loss was MSEK -67.5 million (-43.4). The company's total costs for the fourth quarter amounted to MSEK 21.9. Sales for the year increased to MSEK 14.1 (5.2), of which the fourth quarter accounted for MSEK 5.6 (1.2). Consolidated shareholders' equity totaled MSEK 91.3. The change in shareholders' equity during the year reflects the losses for the period as well as the payment of premiums on the establishment of an option program.
Financing and Liquidity
At the end of the period covered by this report, the Group's liquid assets amounted to MSEK 38.7. After the period ended, the Board decided to implement a new share issue targeted at Swedish institutional investors and valued at MSEK 30.5 before issue costs. This issue has now been completed and was registered on January 29, 2002.
Investments
During the period, the Group acquired intellectual property rights from Veridicom Inc. for MSEK 8.7. MSEK 3.0 (1.6) was invested in fixed assets, primarily equipment and computers. Expenses for research and development work amounting to MSEK 14.9 (15.9) have been capitalized. In addition, computing fees amounting MSEK 0.7 (0) have been capitalized.
Capitalized expenses for research and development were amortized according to plan in the amount of MSEK 7.5 (5.6) for the period. Patents and capitalized computing fees were also amortized according to plan and totaled MSEK 0.3 (0) and MSEK 0.1 million (0) for the period.
Shares and Investor Relations
The company's shares have been listed on the O-list of the Stockholm Stock Exchange since October 3, 2000. At the end of the period, there were 2,586 shareholders in the company.
At December 31, 2001, there were 3,526,700 outstanding shares. At the same time, there were 290,000 outstanding warrants, which corresponds to a maximum potential dilution of 7.6 percent. During the past year, the share price has traded in the interval SEK 22.60-206.00.
Following the new share issue in January 2002, 3,876,700 shares are outstanding.
Personnel
At December 31, 2001, the Group employed 66 people, of whom 53 are men. The company continues to recruit qualified personnel within all areas and offers employees the opportunity to participate in an option program as part of its strategy to ensure the supply of key expertise.
The Parent Company
The description of the Group's activities and development, as well as those concerning investments and changes in liquidity and financing, largely coincide with those of the parent company.
Accounting Principles
This interim report has been drawn up in accordance with the recommendation of the Swedish Financial Accounting Standards Council (RR 20) concerning interim reports. The accounting principles applied follow the requirements of the Swedish Annual Accounts Act and recommendations and statements issued by the Swedish Financial Accounting Standards Council. The accounting principles applied are unchanged compared to those used for the annual report published last year. The company's interpretation of regulation RR9, Income Taxes, means that the question of capitalization of deferred tax claims for tax-loss carry-forwards will not be tested before the company accounts show one year of profit.
At December 31, 2001, accumulated tax-loss carry-forwards totaled MSEK 69.3, excluding the loss for 2001 of MSEK 67.5.
The full report including tables can be downloaded from the enclosed link: http://reports.huginonline.com/848702/99523.pdf
Precise Biometrics is an innovative security company that supplies world-leading systems for authentication using fingerprints. The solutions supplied by the company replace keys, PIN codes and passwords. The company's products are cost effective and provide security and comfort combined with top-class protection of personal integrity. The range of products includes systems for acess control to computers and networks and for building into mobile and terminals, such as mobile phones and portable computers. The company headquarters are in Lund, Sweden. The company also has offices in Stockholm and a U.S. subsidiary in Washington, D.C. Precise Biometrics is listed on the O-list of the Stockholm Stock Exchange (symbol: PREC A). For additional information, visit www.precisebiometrics.com