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Lund, April 27, 2006
Inte
rim R
eport
Precise Biometrics AB (publ) (registered no. 556545-6596) Interim report for January – March 2006
• The group’s net sales for the first quarter amounted to SEK 21.0 million (14.8).
• The result for the first quarter was SEK ‐1.8 million (‐8.5). • Earnings per share for the first quarter amounted to SEK ‐0.03 (‐0.14). • Liquid assets at the end of the first quarter amounted to SEK 42.2 million
(26.7). • Together with Smart Unicorn Group the company has entered into a joint
venture in China, which means that Precise Biometrics’ own 30 percent of the company Smart Unicorn Solutions.
• The company has received a second order from the Thai authorities to
supply licenses for the remaining national ID cards, which will be enabled with Precise Match‐on‐Card™ technology.
• One of the companyʹs partners has been contracted by the authorities in a
small country in the Middle East for a deployment of national ID cards. The cards will be equipped with Precise Match‐on‐Card™ technology.
• The company launched the website www.Match‐on‐Card.com, and at the
same time launched the fingerprint reader Precise 100 XS.
For further information, please contact: Christer Bergman, President and CEO, Precise Biometrics AB Tel +46-(0)-730 35 67 26 or +1 703 405 8255 E-mail
[email protected] Precise Biometrics AB (publ.) is an innovative security company that supplies world-leading systems for fingerprint and smart card-based authentication. The company's solutions replace keys, PIN codes and passwords and enhance the integrity of ID cards and passports. With its proprietary Precise Match-on-Card™ technology, the company is a market leader within smart ID cards. Through its subsidiary Fyrplus Teknik, Precise Biometrics can deliver complete biometrics solutions on the Scandinavian market based, for example, on fingerprint, iris and facial recognition. The product line includes systems for access control to buildings, logon verification for computers and networks and for integration into ID cards and passports. The group headquarters are in Lund, Sweden. It also has subsidiaries in London and Washington, DC. The subsidiary Fyrplus Teknik is headquartered in Karlstad and has regional offices in Linköping while the subsidiary Loqware is based in Gothenburg. Precise Biometrics is listed on the O-list of the Stockholm Stock Exchange (symbol: PREC A). For further information, please visit http://www.precisebiometrics.com/
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Lund, April 27, 2006
The President’s comments on the Interim Report
2006 has already seen several positive events.
The establishment and follow‐up of a joint venture in China together with Smart Unicorn Group opens an important sales channel for Precise Biometrics and the subsidiary Loqware Sweden. This establishment gives us access to a completely new and very large market, which is also important because it creates the opportunity to achieve a strong market position before an expected biometric expansion. Initially this cooperation has resulted in an order for approximately SEK 7.8 million for sales of licenses.
The cooperation with Smart Unicorn Group means that our technology will be integrated in the mobile services and solutions that are already marketed today, and which will also be further developed. There is a great demand for mobile phone security and the development of new mobile services, and in combination with biometrics this will be possible. For example, biometrics will make possible secure payment transactions via mobile phones and mobile terminals. With the completion of this agreement we now have a 30% holding in Smart Unicorn Solutions. Customers include several of China’s largest telecom operators and mobile phone manufactures.
In February, Precise Biometrics launched a logon application for Microsoft Windows XP® with Precise Match‐on‐Card™ technology in order to meet market demands on increasingly cost efficient and customer adjusted biometric solutions. This application was launched as “Open Source”. This means that the source code can be downloaded, at no cost, used and further developed. Therefore applications can be adjusted to the needs of the customer. As another step in our strategy to make it easier for companies, organizations and authorities to replace passwords with a cost efficient biometric solution, the markets most cost efficient fingerprint reader, Precise 100 XS, was also launched.
At the same time as we reported the launch of the open source code we also presented a new website – www.Match‐on‐Card.com. The objective of the website is to further develop and increase awareness of the ʺMatch‐on‐Cardʺ concept and to create a forum where information is available on applications, partners and customers.
During the first months of the year, Precise Biometrics’ biometric solutions for national ID cards have resulted in new successful achievements on the market. One of our large smart card partners has been contracted by the authorities in a small country in the Middle East for a complete roll‐out of national ID cards. The cards will be equipped with Precise Match‐on‐Card™ technology.
Towards the very end of the quarter we also received a follow‐up order from the Thai authorities concerning biometrics for national ID cards. We estimate that sales during a three‐year period for the Thai national ID program will be around SEK 20 million. The order in the quarter covers licenses for Precise Match‐on‐Card™, but in addition to this it is expected to be licenses for fingerprint readers, maintenance services and sales of hardware.
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Lund, April 27, 2006
Sales and result
First quarter 2006 Sales in the first quarter amounted to SEK 21.0 million (14.8), which means a growth of 42%. The gross margin has significantly improved and amounted to 63% in comparison with 28% during the same period in the previous year. The main reason for this is that the proportion of license sales has strongly increased during the first quarter of the year. The Group’s net loss for the first quarter amounted to SEK ‐1.8 million (‐8.5). Operating costs excluding costs for products sold amounted to SEK 14.9 million (12.6), including depreciation of SEK 1.5 million (2.0) and capitalization of costs for development work of SEK 0.4 million (1.8).
A capital gain of SEK 2.3 million has had a positive effect on operating result. The capital gain is connected to the sales of Chinese patents at the formation of a joint venture in China and is reported on the account “Result from participations in associated companies”.
Earnings per share (average number of shares) for the first quarter amounted to SEK ‐0.03 (‐0.14). At the end of the first quarter of the year the company’s order book contained orders for approximately SEK 1.0 million.
Financing and liquidity
Equity amounted as of March 31, 2006 to SEK 110.4 million (59.6) and equity/share to SEK 1.51 (0.98).
Cash flows from current operations during the quarter amounted to SEK –1.6 million (‐10.8). Liquid assets as of March 31, 2006 amounted to SEK 42.2 million (26.7).
Market and sales
Americas Sales in the first quarter of 2006 were weak but ended very strong for the American market. The business area received a follow‐up order for the Department of State for hardware and licenses. Additionally, the efforts in education and channel development in the Federal and commercial markets are showing great promise for the remainder of 2006. Precise Biometrics is involved in new agency pilots related to HSPD‐12 and PIV (Personal Identity Verification) cards.
Sales for the business area in the first quarter amounted to SEK 1.6 million (6.2) and operating loss amounted to SEK –1.3 million (0.5).
EMEA Except deliveries of the order backlog that Precise Biometrics received from one of Israel’s largest banks during the last quarter 2005, the company received during the first quarter 2006, an important deal in Italy for the recently released fingerprint‐ and smart card reader, Precise 250 MC. This order will be delivered principally during the second quarter 2006.
Moreover, EMEA has ongoing pilot projects, with major European system integrators, mainly in the area of IT‐security.
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Lund, April 27, 2006
Sales for the business area in the first quarter amounted to SEK 3.3 million (3.2), and operating loss amounted to SEK –1.3 million (0.0).
The National ID Card Group The follow‐up order from the Thai authorities, received at the very end of the first quarter for biometrics for national ID cards, is expected to produce sales during a three‐year period of around SEK 20 million. The Thailand project in its entirety means that Precise Biometrics, together with Smart Card Systems International Co, Ltd (SSI), will be delivering biometrics for the national ID card for all of Thailand’s 64 million citizens. In addition to the predicted sales, the Thailand order is of very great importance for Precise Biometrics and the National ID Card Group as a reference project.
The success of the Thailand project means the National ID Card Group has the opportunity to very actively conduct further marketing with the argument that Precise Biometrics’ technology Precise Match‐on‐Card™ is stable, ready for full‐scale roll‐out, and also offers superior performance. An additional successful achievement on the market for the National ID Card Group is that a partner has been contracted by the authorities in a small country in the Middle East for a complete deployment of national ID cards. These cards will also be equipped with Precise Match‐on‐Card™ technology.
Sales for the business area in the first quarter amounted to SEK 4.5 million (0.2) and operating profit amounted to SEK 3.5 million (‐0.6). ICAO Systems The business area has together with Fyrplus Teknik participated in different projects, including extensive tendering concerning infrastructures for electronic travel to several different countries. The product Mobilis has also been delivered to end customers.
Sales for the business area in the first quarter amounted to SEK 0.2 million (0) and operating profit amounted to SEK –0.6 million (‐0.6). Fyrplus A multi‐year agreement has been signed with AstraZeneca concerning maintenance and support for software developed by Fyrplus. The system will be fully built out during the first six months this year. The system uses iris recognition biometry for the logon of users and to electronically sign documents in the production of pharmaceuticals. Together with Gunnebo Competence Centre, Entrance Control the company demonstrated a verification station for automated border controls at a trade show in Paris. Biometric information is stored on the electronic passport and verified in relation to the person standing in the gate. The biometric part of the verification station has been developed by Fyrplus.
Sales for the business area in the first quarter amounted to SEK 4.4 million (4.9) and operating profit amounted to SEK 0.1 million (0.4).
Loqware The joint venture that Precise Biometrics has entered into in China with Smart Unicorn Group means that an important sales channel has been opened onto the Chinese market for the subsidiary Loqware Sweden as well. The establishment means that Precise Biometrics owns 30 percent of Smart Unicorn Solutions. Initially this cooperation has resulted in a great order for LoqFlash™ licenses. LoqFlash™ is a USB memory with an integrated fingerprint reader.
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Lund, April 27, 2006
Sales for the business area in the first quarter amounted to SEK 7.8 million and operating profit amounted to SEK 6.5 million.
Future prospects and market trends
Many analysts consider the market for national ID cards and passports with biometrics as being on the verge of a breakthrough, which means that Precise Biometrics has a positive position of the market potential in these areas. Nevertheless, difficulties remain in terms of predicting timing and evaluating projects governed by political decisions. The national ID card projects demonstrate the importance of a broad global market presence and well‐established partner relations. Precise Biometrics’ partner strategy has been of great importance for the success in Thailand, but also for the order from a country in the Middle East that is now going to introduce national ID cards with biometrics. The fact that Precise Match‐on‐Card™ has implemented a full‐scale roll‐out has earned the company a world‐leading position, which is even more valuable when many countries, just like Thailand, not only request but to an increasing extent demand matching on smart cards.
The follow‐up order from the Thai authorities received at the very end of the first quarter shows that the national ID card projects incorporate significant potential for additional sales in the form of licenses, hardware and maintenance services. These types of projects throughout the world have a very high priority in Precise Biometrics’ marketing and sales efforts. In addition to the market for national ID cards, we observe a trend towards the increased application of biometrics in IT security and physical access systems. In the USA a large number of authorities will begin issuing ID cards with biometrics towards the end of 2006 to enhance security and to reinforce safety around sensitive buildings and workplaces. Other markets and customer segments around the world are also experiencing positive developments, which gives every reason to believe there will be a favourable expansion of sales for Precise Biometrics’ solutions and products for enhanced IT security and physical access systems.
The joint venture that has been established in partnership with Smart Unicorn Group means that China is yet another extremely promising market for the company. At the present time solutions for secure mobile communications and biometric solutions are the main focal points. Our assessment is that this cooperation will generate further sales in 2006.
Organization and staff
Precise Biometrics’ organization consists of the parent company Precise Biometrics AB, with its headquarters in Lund, Sweden, and the subsidiaries Precise Biometrics, Inc. in Washington DC, USA, Precise Biometrics UK, Ltd., in London, Precise Biometrics Services AB, Fyrplus Teknik AB with offices in Karlstad and Linköping, and Loqware Sweden AB with an office in Gothenburg. As of March 31, 2006 the group had 67 (58) employees, 57 in Sweden, 8 in the USA, and the remaining 2 in the UK. Of these employees, 51 (46) are men and 16 (12) are women.
Investments in tangible fixed assets
In the first quarter the Group has invested SEK 0.2 million (0.2) in tangible fixed assets.
Capitalization and depreciation of development work
During the first quarter costs for development work have been capitalized to an amount of SEK 0.4 million (1.8). Depreciation of capitalized costs for development work amounted in the first quarter to SEK 1.2 million (1.5).
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Lund, April 27, 2006
Patents
During the first quarter three Chinese patents and one Chinese application for a patent has been transferred to the associated company in China, which has led to a capital gain for the Group.
Precise Biometrics has a total of 23 approved patents, of which 14 are in Sweden. The company also currently has 37 applications pending for patents based on 16 inventions.
Shares
The company’s shares have been listed on the O‐list on the Stockholm Stock Exchange since October 3, 2000.
The total number of registered shares at the end of the quarter was 72,915,450. During this period the average turnover per day was SEK 1,910 thousand and the list price ranged from SEK 6.10 to 7.45.
The five main shareholders as of March 31, 2006
Name Percentage of share capital and votes
Eden Capital Ltd 8.3 %
Odin fonder 5.5 %
Storebrand fonder 4.9 %
Fjärde AP‐fonden 4.7 %
Banco fonder 3.5 %
Source: SIS Ägarservice
Parent company
Parent company sales for the first quarter amounted to SEK 9.2 million (8.4). The operating loss for the parent company in the first quarter amounted to SEK ‐3.9 million (‐6.6).
At the end of the first quarter 31 persons were employed in the parent company. Liquid assets at the end of the first quarter amounted to SEK 39.0 million (16.3). The parent company had no debts to credit institutions at the end of the first quarter. Investments in tangible fixed assets have been made to an amount of SEK 0.1 million (0.2). Costs for development work have been capitalized to an amount of SEK 0.3 million (1.8).
Future report dates
Interim report January ‐ June July 20, 2006
Interim report January ‐ September October 19, 2006
Year‐end report January ‐ December February 8, 2007
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Lund, April 27, 2006
Accounting principles
This interim report has been prepared in accordance with IAS 34, Interim reporting.
For information on the applied accounting principles please refer to the Annual Report for 2005. The amendment to IAS 21, “Effects of changed currencies of exchange – Expanded net investments in foreign subsidiaries” are applied from January 1, 2006. That leads to that certain internally generated exchange differences on receivables and liabilities are brought directly up against own capital, and do not effect the income statement. Previous periods have been recalculated, which has meant that the result has been corrected, but equity has remained unchanged.
In all other aspects the accounting principles remain unchanged in comparison with those applied in 2005.
The Report has not been the object of review by Precise Biometrics’ authorized accountants.
Lund, April 27, 2006 Christer Bergman, President and CEO, Precise Biometrics AB (publ)
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Lund, April 27, 2006
Income statement, Group
(Figures in thousands SEK) Q1 Q1 Full year
2006 2005 2005
Net sales 1) 20,968 14,759 45,053
Cost of goods sold 2) -7,755 -10,620 -28,907
Gross profit/loss 13,213 4,139 16,146
Selling expenses 3) -10,168 -7,636 -32,733
Administrative expenses 4) -3,192 -2,120 -10,081
R&D costs -3,648 -3,832 -17,617
Other operating income and changes in value -143 1,033 3,860
Result from participations in associated companies 2,273 - -
-14,878 -12,555 -56,571
Operating profit/loss -1,665 -8,416 -40,425
Financial costs -154 -60 -371
Profit/loss after financial items -1,819 -8,476 -40,796
Tax -3 -1 -238
Profit/loss for the period -1,822 -8,477 -41,034
Results per share, SEK -0.03 -0.14 -0.63
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Lund, April 27, 2006
Balance Sheet, Group
(Figures in thousands SEK) 3/31/2006 3/31/2005 12/31/2006
Assets Intangible fixed assets 24,532 23,372 25,556
Tangible fixed assets 2,239 1,936 2,312
Financial fixed assets 151 - 151
Participations in associated companies 33,722 - -
Fixed assets held for sale - - 8,752
Inventories 8,550 5,014 8,588
Accounts receivable - trade 22,149 15,329 17,988
Other current receivables 3,936 4,282 3,128
Cash and bank balances 42,182 26,659 59,230
Total assets 137,461 76,592 125,705
Equity and liabilities Equity 110,442 59,601 104,404
Long-term liabilities - 844 -
Current liabilities 27,019 16,147 21,301
Total equity and liabilities 137,461 76,592 125,705
Pledged assets 9,115 6,715 9,115
Contingent liabilities - - -
Cash Flow Statement, Group (Figures in thousands SEK) Q1 Q1 Full year
2006 2005 2005
Cash flow from operating activities
before changes in working capital -2,286 -5,957 -27,530
Cash flow from changes in working capital 715 -4,871 -6,993
Cash flow from operating activities -1,571 -10,828 -34,523
Cash flow from investing activities -15,448 -8,189 -21,267
Cash flow from financing activities -29 844 70,188
Cash flow for the period -17,048 -18,173 14,398
Liquid funds at the beginning of the period 59,230 44,832 44,832
Liquid funds at the end of the period 42,182 26,659 59,230
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Lund, April 27, 2006
Key Figures, Group
2006-03-31 2005-03-31 2005-12-31
Working capital (thousands SEK) 49 798 35 137 70 781
Liquid ratio 253% 287% 429%
Equity/assets ratio 80% 78% 83%
Return on average equity - - neg
Capital employed (thousands SEK) 112 811 60 445 106 801
Return on capital employed - - neg
Profit/loss after net financial items per share (SEK) -0,03 -0,11 -0,55
EBITDA (thousands SEK) -193 -4 824 -27 062
Equity per share (SEK) 1,51 0,98 1,45
Number of shares 72 915 450 60 915 450 71 790 450
Number of employees at the end of the period 67 58 69
Average number of employees during the period 68 59 65
Definitions - Key Figures Working capital: Current assets less current liabilities Liquid ratio: Current assets less inventories divided by current liabilities Equity/assets ratio: Equity as of the balance sheet date divided by total assets as of the balance sheet date
Return on equity: Profit/loss for the period after tax divided by average equity Capital employed: Balance sheet total minus non-interest-bearing liabilities and provisions The average capital employed has been calculated as initial plus outgoing capital employed divided by two
Return on capital employed: Profit/loss after financial items plus financial expenses divided by the
average capital employed Profit/loss per share: Profit/loss after financial items divided by the average number of shares. The options are
not included in the calculation since the subscription price is higher than the market rate at th 31st of March 2006.
EBITDA: Profit/loss before net financial items, depreciations, write-downs and tax Equity per share: Equity at the end of the period divided by the number of shares at the end of the period
Number of shares: The shares are included in the ongoing new share issue as of March 31, 2006 Quarterly return ratios are not reported
Changes in Equity, Group (Figures in thousands SEK) Q1 Q1 Full year
2006 2005 2005
Initial Equity 104 404 67 769 67 769
New share issue 1) 7 819 76 537
Options 262
Translation difference 41 309 870
Profit/loss for the period -1 822 -8 477 -41 034
Equity at the end of the period 110 442 59 601 104 404
1) Directed share issue of 1,125,000 shares at a value of SEK 6.95 per share.
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Lund, April 27, 2006
Turnover and Profitability by Business Area Q1 2006 (Figures in thousands SEK) Americas EMEA 2) NID 3) ICAO 4)
2006 2005 2006 2005 2006 2005 2006 2005
Net sales 1 575 6 220 3 342 3 230 4 460 189 228 0
Expenses 1) -2 909 -5 704 -4 628 -3 271 -986 -748 -836 -576
Operating profit/loss -1 334 516 -1 286 -41 3 474 -559 -608 -576
Fyrplus Loqware Others
2006 2005 2006 2005 2006 2005 Net sales 4 436 4 890 7 800 0 -873 230 Expenses 1) -4 345 -4 458 -1 341 0 672 -468 Operating profit/loss 91 432 6 459 0 -201 -238 1) The above expenses include Cost of Goods Sold as well as operation expenses for each business area/unit 2) Europe, Middle East and Africa (not including Fyrplus) 3) National ID Card Group 4) International Civil Aviation Organization 5) In Others the Group's elimination of internal sales is included
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Lund, April 27, 2006
Further to the publication of this Interim Report, shareholders and journalists are invited to participate in the following information sessions to be held today: Telephone conference in English
• The conference commences at 13.00 (CET). • To participate, please call +46‐(0)‐8 672 81 51. • Enter password: Precise Biometrics.
An operator will record your name and provide access to the conference. He or she will also give you information about how to pose questions.
Telephone conference in Swedish
• The conference commences at 14.00 (CET). • To participate, please call +46‐(0)‐8 672 81 50. • Enter password: Precise Biometrics.
An operator will record your name and provide access to the conference. He or she will also give you information about how to pose questions.
From Precise Biometrics
• Christer Bergman, Group President and CEO. • Niklas Andersson, CFO • Ann‐Sofi Höijenstam, Corporate Communications Manager
There is also a PowerPoint presentation available for download from our website, www.precisebiometrics.com.
For further information, please contact: Christer Bergman, President and CEO, Precise Biometrics AB Telephone +46-(0)-730 35 67 26 or +1 (703) 405-8255 E-mail [email protected]
Precise Biometrics AB (headquarters) Scheelevägen 19 C SE-223 70 Lund, SWEDEN Tel: +44-(0)-46 31 11 00 Fax: +44-(0)-46 31 11 01 E-mail: [email protected]
Precise Biometrics AB (publ.) is an innovative security company that supplies world-leading systems forfingerprint and smart card-based authentication. The company’s solutions replace keys, PIN codes andpasswords and enhance the integrity of ID cards and passports. With its proprietary Precise Match-on-Card™ technology, the company is a market leader within smart ID cards. Through its subsidiary FyrplusTeknik, Precise Biometrics can deliver complete biometrics solutions on the Scandinavian market based, forexample on fingerprint, iris and facial recognition. The product line includes systems for access control tobuildings, computers and networks and for integration into ID cards and passports. The group headquartersare in Lund, Sweden. It also has subsidiaries in London and Washington, DC. The subsidiary Fyrplus Teknikis based in Karlstad and has regional offices in Linköping and the subsidiary Loqware is based inGothenburg. Precise Biometrics is listed on the O-list of the Stockholm Stock Exchange (symbol: PREC A).For more information, please visit http://www.precisebiometrics.com/
