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Since passwords are no longer
secure enough to positively authenticate individuals for access to critical information BIO-Key Internationals biometric technology is
more and more attracting the attention of major corporations and law enforcement agencies
BIO-Key International, Inc.
3349 Highway 138
Bldg. D, Suite A,
Wall, NJ 07719
CEO and Director
Walter Banks, Publisher
June 16, 2005
Michael DePasquale- Chief Executive Officer/Director
Mr. DePasquale brings more than 20 years of successful executive and sales and marketing
experience to BIO-key. Most recently, he was President and CEO of Prism eSolutions a
company specializing in professional consulting services and online solutions for
ISO-9001/14000 certification for customers in manufacturing, healthcare and government
markets. Mr. DePasquale has also served as Group Vice President for WRC Media, Vice
President of Sales and Marketing with McGraw-Hill; and as Director of Marketing and as
Sales Group Manager with Digital Equipment Corporation.
BIO-key International, Inc., develops and delivers advanced identification solutions and
information services to both the private sector and government, including law enforcement
departments, and public safety agencies. BIO-keys biometric finger identification
technology accurately identifies and authenticates users in a variety of enterprise
applications. Today, over 2,500 police, fire and emergency services departments in North
America depend on BIO-key solutions, making BIO-key the leading supplier of mobile and
wireless solutions for public safety worldwide
CEOCFO: Mr. DePasquale,
will you tell us how long you have been with the company and any changes that have
Mr. DePasquale: I assumed the responsibility as CEO of
BIO-key in January of 2003, so I have been on-board just over two years. Back in
2003, BIO-key was a development stage company focused solely on a biometric technology.
The company had not yet formally introduced the technology to the market. They had built a
number of relationships with large strategic partners like Oracle and Intel, but had not
delivered the technology to the market and had no proof points that the technology would
perform as expected. Our goal was to move the company from a development stage entity to a
runtime run-rate going business. In a matter of six to nine months into my tenure, we were
able to do that. We made a commitment to begin to generate revenue for the company in our
3rd Quarter of 2003 and continue to grow revenue each quarter thereafter
CEOCFO: Can you break
down your different product areas and their applicable markets?
Mr. DePasquale: Today BIO-key through two major
acquisitions made in 2004, is the largest provider of mobile data solutions for the law
enforcement market in North America and the largest provider of fire records management
solutions on the globe. Some of the largest cities in North America utilize our solutions,
for example New York, Los Angeles, Calgary, Toronto, LA, and San Francisco. With that, we
are also a leading provider of patented finger identification technologies, particularly
what we call one too many finger matching where we can identify individuals in
a large population without any other identifier but simply a single scan of their finger.
We have matured this technology over the last ten years. We have also co-developed along
with Oracle, the indexing software, to build large databases and identify individuals in
those large databases in very short periods of time i.e. under five seconds for a
population of one million prints. That is our market position today. We sell and market
our technologies to every industry sector in our economy, such as banking, healthcare,
finance, government applications through many of the large systems integrators. We have
partnerships with Northrop Grumman, Lockheed Martin and Hewlett-Packard that deliver fully
integrated and complete systems for public safety agencies and other departments of the
CEOCFO: Do you have the
resources to manage the two different areas of your business?
Mr. DePasquale: There is a strong synergy between our
two product offerings; our public safety offerings and biometrics. The reason we went so
aggressively after the two acquisitions we made last year was that we saw a tremendous
opportunity to provide public safety agencies the ability to not only secure their data
and information with biometrics, but to also identify individuals in the field on a
real-time basis. There are strong synergies between our biometric solutions set and our
public safety solutions and we have a host of sales resources that focus again on law
enforcement agencies and on the fire and EMS markets. The other vertical, which is what I
believe to be the most opportunistic side of our business, is the commercial biometrics
marketplace and we have a separate sales group that handles that segment. They focus on
system integrators, partners, application providers, which sell and market solutions for
healthcare, banking and finance, education and data provisioning. That is a separate
vertical for us in terms of marketing, but there are very strong synergies between our
biometric technology and our public safety offerings
CEOCFO: Do you have one
sales team or two separate sales teams?
Mr. DePasquale: We have a public safety sales team and
we have a commercial marketing team so we have two separate sales teams.
CEOCFO: Is this
worldwide or North America?
Mr. DePasquale: We market our biometric technology
globally. Most of our public safety business is North America.
CEOCFO: Will you explain
what the potential is for biometrics?
Mr. DePasquale: We are in two highly potential markets
because we address two of the most pressing issues that are facing our country today.
First, there is homeland security, our public safety solutions allow first responders to
share and aggregate information and communicate across the country. One good example of
this is a contract and a program we have with the National Sheriffs Association through
the Pegasus Research Foundation. This is where they built a secure data network to allow
sheriffs agencies and departments around the country to share critical information on
homeland security issues. It is secured by Bio-keys biometrics. An individual cannot
add or remove information off the network unless they are authorized to do so. This is a
perfect example of how using biometrics to secure data and information is so critical to
homeland security. The second most pressing issue facing our country is identity theft and
fraud. This is where our biometrics especially on the commercial side fits very well.
Identity theft and fraud is a $300 billion dollar global issue. Over the last few months,
you have read and heard about the data breaches with companies like ChoicePoint who
happens to be a partner of ours, Lexus Nexus and Bank of America. Passwords are no longer
secure enough to positively authenticate individuals for access to critical information.
As long as the issue of identity theft and fraud continue to plague our nation, we are
going to continue to move from a password based authentication model to some form of
biometrics, and that is going to happen very quickly over the next two years.
CEOCFO: So every
corporation that has a password-oriented authentication, is a potential client of yours?
Mr. DePasquale: Absolutely! We are focused on the
commercial side in healthcare and finance and banking as well as Civil ID applications
such as population registration and credentialing. If you read The Wall Street Journal or
New York Times or watch television, you will see that IBM is running ads with the laptop
and notebook computers that have integrated finger-scanning devices in them. Microsoft is
marketing a keyboard and a mouse with an integrated finger reader in it. They have
announced recently that they are no longer investing large sums of money in password
authentication development. We are starting to see drivers and some of the largest
corporations in technology, evolving to the use of biometrics. We are also seeing some
very pressing issues that are facing large corporations, particularly the data provision,
that say that passwords are just not secure enough today. In order to have a full and
complete audit trail, and to know who accessed information at any one point in time, it is
going to require some physical characteristic of their body. I can take your
password and access your systems and applications. No one would ever know if it was you or
I who breached the system. With our finger biometric solution you must place your finger
on the scanner which provides for a full and complete audit trail of who accessed that
CEOCFO: Is this product
affordable for most corporations that you are trying to deal with?
Mr. DePasquale: That is another driver that we have
seen take a dramatic change in the past twelve months. The hardware providers are getting
tremendous economies of scale now and they are reducing the size of the sensors and
increasing the performance. The price performance curve is starting to accelerate. We are
seeing a dramatic decrease in the price of the hardware; that is going to accelerate the
business. The advantage that BIO-key has is that we are device-independent. We are the
only company in the industry today that can enroll and identify individuals on multiple
devices. It really does not make a difference if you purchase a scanner from AuthenTech,
UPEK or one from a company called Crossmatch. You can enroll on one and identify on
another so that is a unique sustainable advantage for our company. If you talk about
affordability, the price of our solution depends on the magnitude of the deployment and so
depending upon the number of enrollees, it can start in the $30.00 range and go all the
way to the $3.00 range if we are talking about enrollments in the millions. There is
definitely a very strong affordability factor in the technology today and that is going to
continue to evolve and only get better.
CEOCFO: You save clients
money by not having to use cards!
Mr. DePasquale: Not having to use cards and not having
to reset passwords and manage their authentication processes on an hourly or daily basis.
This technology can reduce the cost of management and support of authentication models
within corporations or government agencies.
CEOCFO: How much is lost
by banks every year based on breach of information?
Mr. DePasquale: The Gartner Group says it was a $300 billion-dollar global
issue in 2003. I have not seen the 2004 numbers yet, but the problem is not going to go
away. Just over the past few months, you have heard about the issues, these things have
likely been going on for a long time and it is only now that it is becoming visible to the
public. Protecting your identity and your transactions on the internet, in real-time in
supermarkets and department stores is going to be a big issue. The credit card industry is
turning sideways over the coming year; right now, if you were going to steal my credit
card, go out and have lunch, given that I did not report it stolen, you are more then
likely going to get approval and authentication on the card and you are going to have a
nice lunch or dinner. There will be payment made to the establishment because they have an
approval code. I am going to be responsible only for $50.00 of the total because that is
the limit on my liability, and the credit card processor in the middle is going to pay the
difference. As we approach the end of the year, the processors are changing the model.
Unless the establishment gets a two-factor identification, meaning that they take your
credit card and then they ask you for proof of identity, if the establishment does not do
that and the transaction goes bad, the individual whos card was stolen is
responsible for $50.00, but the establishment will pay for the fraudulent transaction and
the processor will not. We are starting to see a dramatic change in authentication and
identification requirements and finger biometrics fit magnificently well.
CEOCFO: Will you tell us
what separates you from your competitors?
Mr. DePasquale: What separates us from the competition
is clearly the technology that we bring to market. It is the ability to identify
individuals in large populations with a single scan of their finger in a five-second
response time. Secondly, device independence and the fact that we are not tied to any one
hardware vendor or any one platform. We can provide companies and government agencies with
investment protection; if they deploy our technology, it is the most accurate biometric
system that exists in the world today. It is scalable and platform and device independent.
That is a strong set of competitive advantages. On the public safety side, we are the
largest provider of mobile data solutions in law enforcement; we have over forty-seven
state interfaces built to access data in forty-seven states. We have over forty interfaces
built to the major CAD and record-management companies like Lockheed Martin and Northrop
Grumman, so we can interface with virtually any of those systems, providing a sustainable
competitive advantage and a huge footprint advantage. On the fire records management side,
we are the largest provider on the globe. We have the most sophisticated solutions both
for a client server environment as well as the Web
CEOCFO: Will you tell us
about your financial position?
Mr. DePasquale: We just filed our first quarter 10-Q
about a week-and-a-half ago. The company at this point is continuing to develop and grow
our revenues on a quarter-by-quarter basis. We provided guidance to generate 30%
sequential growth in revenue in our second quarter of this year and are also on track to
become profitable and to become cash flow positive in the second half of this FY.
CEOCFO: Is there float
out there for potential investors and do you spend much time pursuing investors?
Mr. DePasquale: There is plenty of stock out in the
market. We have just about 43 million shares outstanding and we have reasonable volume on
a daily basis and average about 300 thousand shares a day. If investors are interested in
our company, or interested in this space and our leadership position, they should consider
us. In terms of investor relations, we have mostly internal resources focused on
that today; I spend a considerable amount of time with institutional investors. We
continue to drive our relationships in that manner. It is mostly through presentations,
events and engagements of which our team is involved.
CEOCFO: In closing, what
would you like to say to potential investors?
Mr. DePasquale: I would say that we at BIO-key are
addressing two very critical issues that are facing our nation, our society and the world
at this point. We have technology, solutions and services to address those issues.
Clearly, the market in biometrics is at an inflection point and I believe that we are
going to see that within a five-year period that there will be no money passing hands, no
transactions from a financial perspective or even on the healthcare front, that happen
without some form of biometrics. Finger biometrics are about 70% of the market, they are
the least invasive and today with BIO-keys technology and algorithms, they are accurate to
within one and 200 million, which makes us the most accurate biometric on the planet
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