Q2 2020 BIO-Key International Inc Earnings Call

[music].

Smell second quarter 2020 conference call.

During the presentation, all participants will be in listen only mode.

The speakers remarks, he will be invited to participate any question and answer session. As a reminder, ladies and gentlemen. This conference call is being recorded today Friday August 14, 2020, I would now like turn the conference over to Scott Lincoln Bio Keys, Vice President of marketing. Please begin sir.

Thank you joining us this morning.

With me today, our bio keys, chairman and CEO.

Paul School.

Of course since you know, our chief revenue officer, and she she will chief financial Officer.

To remind you every these conference calls but.

May contain forward looking statements that are subject to certain risks and uncertainties that may cause actual results could differ materially from those projected on the basis of these statements.

The words estimate project.

And expect anticipate believe plan may well will and similar expressions generally identify forward looking statements.

Such forward looking statements are made based on management's beliefs as well as assumptions made and information currently available to management pursuant to the Safe Harbor provisions of the she private Securities Litigation Reform Act of 1995.

For a complete description of these and other risk factors that may affect the future performance of bio key international she risk factors and the company's annual report on form 10-K, and its other filings with the us usage.

Listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date meet the company also undertakes no obligation to disclose any revisions to these forward looking statements to reflect events or circumstances. After the date made.

At this time I'd like to turn the call over to Mike Dipasquale.

Thank you Scott in and good morning, everyone. Thank you for joining the call today.

While we have all been dealing with the effects of Corona virus.

And the over the past several months I do want to thank my colleagues it by Oaky, and our new subsidiary pistol Star and our partners and customers for their continued support.

And dedication during this very challenging time.

While our Q2 results were substantially impacted by business shutdowns related to Corona virus, we've been able to take significant steps in advancing our strategic vision for the company during the second quarter and to date in Q3.

These initiatives include the execution in closing of our acquisition of personal star.

The developer of the portal guard multifactor identity and access management solution.

Right after the close of the second quarter.

Additionally, we have successfully recapitalized, our company by raising $24 million in gross proceeds from a public offering of common stock and equivalents plus warrants.

This funding has put bio kiani very sound financial footing for the first time in many years importantly, it allows us to focus our full attention on growth initiatives. While also removing the risk to our company from possible business disruptions due to coal good or other economic or political impacts.

On our customer our customers are prospects.

After repaying short term note financings funding our fiscal star acquisition and addressing other working capital needs biotech now sits with the cash position of approximately $18 million.

This financial strength allows us to make prudent investments in our business such as building out our bio key Africa subsidiary and enhancing our sales and marketing efforts around our expanded solution suite.

While also providing a very clear and strong financial footing to support our company for many years.

It will also help us demonstrate our long term viability to larger customers, who want to be assured that we will be around to serve their needs as they utilize our mission critical solutions.

We do recognize this is required meaningful dilution of our existing shareholders. However, after in during several substantial previous challenges it'd be clay became clear to the board and management that we had no choice, but to pursue the opportunity we had identified to put by key on sound financial footing.

To ensure that we're able to endure current business delays and be well position to execute on our contract backlog of almost $75 million.

And to fully tapped the future sales potential of our expanded base of solutions talent and customer relationships and the market increasingly press the find effective and efficient solutions to their authentication and beta and network security needs.

Despite the impact of Cobot night team on the near term visibility for our business and that of our customers.

We believe the long term sales outlook for our solutions in North America Africa Asia and around the World has never been more promising and the opportunities being reflected in our rapidly growing base of channel Alliance partners.

I'll, let see see review our Q2, two results, which is anticipated we're clearly curtailed by the idea of cobot 19 store.

And customer procurement activity ground to nearly a standstill for a couple of months. Fortunately, we are starting to see things beginning to open up and remain very optimistic regarding a substantial rebounded business over the balance of the year.

Our enthusiasm is rooted in two main areas one being the benefit of our portal Guard acquisition, which closed on the first day of our third quarter the quarter. We're in now.

As you've seen through our marketing announcements, we have seen very strong demand for their solutions over the past few months with particular strength in their core market of higher education.

As well as the range of other verticals, including financial services and state local government.

With portal guard, we're now able to offer a broader base of solutions that provide us relevance with a much larger base of customers, while we benefit from their engineering product development and sales and marketing personnel that expands our capabilities and customer reach.

We also see substantial cross selling opportunities between our two companies.

As we are able to bring enhanced biometric multi factor authentication solutions to their existing customers and we could offer there more robust multifactor identity and access management and single sign on capabilities to existing and prospective bio key customers.

It really is a win win combination that is off to a strong start and she'd become an increasingly important contributor to our future results.

Secondly, we expect to commence work during the second half on two very large initial contracts totaling $75 million.

In software consulting services in hardware revenue over the expected duration of 24 months.

The contracts or with a major telecommunications provider in Nigeria, and with a division of the Nigerian government.

As you might imagine the cobot 19 shutdown of business in the country as well as social distancing practices are delaying efforts to initiate these contracts.

As of today, we now expect these contracts to be launch in the second half of this year, possibly by the under the third quarter, but into the Fourq.

And Fred will touch on our staffing efforts to prepare for this work to begin.

And we'll learn more about the scope of timing on these deals over the coming weeks and we'll certainly update investors as things solidified.

Longer term. We believe these projects are just the beginning of a very substantial opportunity the team with local partners to deliver biometric security solutions for large scale I'd authentication needs in areas like mobile communications and payments immigration and border security at for social wealth.

Grams, many of which are attracting external funding from the from entities such as the World Bank.

Finally, with respect to our financial outlook for the current fiscal year.

Im understanding we reluctant to provide any sort of guidance and frankly, there remained too many variables regarding timing schedules and the path to a more normal business interactions to provide a reliable outlook.

However, I can say that we've taken steps to improve our bottom line performance at the same time, we have positioned by oki for growth via pistol star and our large contract backlog.

We also remain actively engaged in business development efforts in the Us Asia and Africa.

Let me now turn the call over to Fred course, and Tino to review a few specific developments in our business Fred.

Thank you Mike.

I want to reiterate that Q2 was a challenging sales quota for the reasons, Mike mentioned, many perspective sales dialogues with postponed.

And may represent opportunities for later in the year and its 2021.

We have made progress in several areas for example, our channel Alliance program now includes 40 partners.

Including 10 projects with the total revenue potential of through engine $50000 into pipeline today.

The Cat program is important for positioning bio key to participate in a broader base of opportunities and we continue to build out African team, where we see opportunity beyond the two large initial contracts that were previously announced.

We also saw progress in the area of providing election security with the announcement that bio Keith biometric solution was selected to secure access to voter registration data statewide across 36 counties of a west coast state.

The significance here is that it was out for statewide engagement, we continue to build out our footprint in this area, including seen the expansion of existing uses in eight Florida counties and it's just some other geographies as well.

We also believe that the pill the pistol star acquisition and its portal got platform as a game changer for us not only does it provide another software solution to our portfolio, but the addition of portal guards team and client base expands our addressable market in several key verticals, especially in higher education.

And.

We see significant synergies in the form of cross selling opportunities of complementary offerings between existing portal guard and biopsy customers such as selling biometrics portal got customers and additional Emma face solutions to bio key customers.

Going to two we did a major outreach campaign to our existing installed base and prospects impart is and we will continue to keep in close contact with these existing and potential customers.

Although it's still too early to declare the all clear.

We are beginning to see a fair share promising movement enough sales path.

We've had several new portal got announcements in recent weeks, including with multiple University clients and aerospace defense client the municipality of door, North Carolina, and a credit card processor and we hope to build on this momentum as things continue to open up in general economic activity.

With that path to both Cc for the financial review Thank you.

Thank you Fred.

Keith Q2, 20 revenues declined to 307000 versus 728000 in Q2 19, mainly due to lower hardware revenue.

Recent hardware was due to 375000 reduction in shipments a fingerprint readers due to smaller deployments and the 2020 compared to our 2019, our exit of the retail lock business and the effects of Coven 19.

For the six month period ended June Thirtyth revenues declined to 830000 from 1.280 million. During the first half of 2019 also primarily due to lower hardware sales, which were down 80% due to the exit ever lost business and smaller new customer deployments and the effect.

I've covered 19.

Gross margin improved 50% to 52% in Q2 20 versus 7% in Q2 19, reflecting a decrease in software license expense largely due to the change in noncash amortization methods of software right.

Due to 20 operating expenses increased to 1.5 million from 1.4 million with the increase primarily attributable to a onetime noncash warrant expense of approximately 95000 as payment for professional services and personally restructuring charges for operations in China.

Biopsies Q2 results reflect the benefit of a 341000.

All or payment for the Paycheck protection program funding offset by 542000 of net interest expense for amortization costs associated with the company's funding effort.

Compared to net interest expense of 115000 in Q2 19 related to convertible note.

Okay reported a net loss to stockholders.

1.6 million or eight cents per se or in Q2, 20, compared to 1.4 million or 10 cents per share in Q2 19.

First six months 2020, bio he reported and that lots available to shareholder of 5.1 million for 28 cents per share versus 3.2 million or 23 cents per share in 2019.

Subsequent to the cause of the second quarter biopsy completed the sale of common stock and equivalent plus square.

The gross proceeds of 24.8 million.

Given the effect of the payment of the offering expenses retirement of 4.2 million and convertible note in the payment of approximately half million and then how favorable bio kids approximately 18 million in cash with the half million of debt related to the acquisition of pistol star.

Because I don't view I'd like to now turn the call back to the operator for the into faster question operator.

Thank you we will now begin the question and answer assassin you ask a question you May pop Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before passing the keys to withdraw your question. Please press Star then queue. At this time, we will pass momentarily to assemble there.

After.

The first question today comes from Jack Sandra Maxim Group. Please go ahead.

Hey, good morning, guys. Congrats on the a pistol star acquisition in the recent capital rates.

Just a couple of questions from me.

So so Michael for first question is on the pistols our acquisition.

And your view just on the integration process, so far and any comments around expected financial contributions going forward.

The press release highlighted that portal guard multifactor solutions have been deployed recently by multiple educational institutions other enterprises and I see a ton of press releases and show that that business is really moving along quite well just wondering if you can provide any color there.

Yes. Thank you Jack good question for sure the integration of the two companies is going very very well.

We are I would say nearly fully integrated at this point administratively from a technology perspective.

And from a sales and marketing perspective, as well Fred and his team are training up and are now really in the go to market phase with the combined solution.

For sure there's a lot of activity, especially in higher Ed No surprise as you know higher Ed has been moving to online courses for many many years, obviously, there's been a steep acceleration as colleges now may many of them may continue to be off campus and on.

In line only as we evolve through the end of this year. So we're seeing a lot of demand and a lot of potential an opportunity also in the enterprise side and financial services and state local government as you've seen some of our announcements.

We have a robust pipeline of opportunities there as well. So we see this is Fred mentioned in his comments as a game changer for the company because we now have a full and complete authentication solution that can support biometrics and other factors like tokens carts keys passwords pins.

In the likes.

We can also support mobile biometric authentication.

And we also have single sign on and provisioning should provide our customers a full and complete solution. So as we.

Expand the visibility of the portal guard offering Oh, we are we're very bullish on the potential to grow that business significantly.

The coming quarters and in the coming years.

Got it that's very helpful and I appreciate the color. There I'm also wondering if you can talk a bit more specifically on the cross selling opportunity that.

Total guard and pistol star as a whole presents maybe any comments on on timeline of expectations as to why do you think you actually might see some noticeable revenue contribution as it relates to cross selling initiatives and if you've already begun discussions with customers, but in terms of revenue Gen.

Duration from that do you expect to see that in the near term or the mid term any comments there.

Yes. So so there are and I'll, let Fred put a little more color on it but for sure. There are hundreds of portal guard customers that are using more traditional authentication options and so many of them may be interested in the biometric option right. So that's the first cross selling opportunity and there are hundreds of occur.

Accounts that we can we can reach out to on the biometric side, we have a number of customers. Some very large ones. In fact, the large telecommunications company as well that has their own solution that may be interested in a commercial solution like we provide with portal guard so bad in of itself breezy.

Since you know a cross selling opportunity on the on the bio Keysight. So this is going to happen you know short term I think Fred and I'll turn it over to you you mentioned that you've already done outreach campaigns and programs to reach the base, but any other comments.

Yeah. So from the bio keep perspective, there's certainly it's a lot of added functionality that political platform offers and so we've we've gone back to some of our customers and are beginning to come a major campaign on both sides actually to introduce each other and so that's happening we have some that are in the cycles at UBS.

Budgeting for next year, it, especially in some banking accounts, where the added capabilities are going to be very helpful. And out we are extending that campaign to the portal customers as well for additional biometrically. So we're excited about the cross selling some short term, mostly mid term won't come as people put things in place things.

And budget for additional expenses that may or may not have been accounted for.

At the outset at here so we're excited about though.

Okay great.

And Fred I appreciate your input as well and then I guess my next question is is just on the remainder of 2020 on your outlook I understand the environment still uncertain challenging that isn't there's little visibility, but in in harrelson I, providing explicit guidance, but if you if we just.

Uhhuh, the to Africa contracts, and and any cross selling opportunities from from pistol.

Are there any comments you can provide at least maybe directionally from from a revenue stance for Q3 in Q4 like do you think revenue will uptick going forward from from the Q2 result, or just anything you can provide maybe from a directional sense to help.

Investors and myself I think about the the for near term revenues.

Well I think one thing that we can say for sure is that the second quarter was.

I'll call it the dredges the dredge right just because of all the shutdowns and.

Our pipeline almost Kane.

Our pipeline of prospect opportunities almost came to a screeching halt which is understandable as everybody shifted.

The beginning of April from working.

In offices to working remotely so for sure or do we feel comfortable that there'll be an uptick in business and the third and fourth quarter. Yeah for sure. We feel we feel comfortable with that drop in the pistol star.

Revenue right, which.

On a run rate basis last year 2019, as you know we've disclosed was about 1.6 or so million dollars on an annual basis. So you know from that perspective, if you would exclude.

The African contracts and look at the bio keep base business, we certainly do see an uptick in the second half versus sure.

Okay Fantastic. That's that's helpful to now and I appreciate the color there and then you know I I do want to touch upon obviously, the the to Africa contracts I know you provide a lot of.

Commentary in your prepared remarks, and a little bit in the press release.

But oh, I guess, what I want to folk I know, there's there's limited knowledge or things you can say about the deployment timeline, but as far as a the press release, where you highlighted that things are beginning to reopen over there in Africa and you've been engaged with both customers from the two contracts and planning of these projects.

Can you provide just any any additional color regarding you know your recent activities and discussion there or what that really entails what would have you been doing with these parties are associated with these contracts as you as you prepare for the upcoming monks.

Okay. So so let's start with the with the state of affairs on the ground. So both of our contracts one which is.

In partnership with a company called chance is for ultimately the and user is a large telecom company, so that that contract or think about.

Shutdown people not being able to move around.

Part and parcel of our programs is enrolling individuals right first thing you do was enrolled and get them in the system and then beyond that you can utilize that enrollment for authentication or access control for different applications. In venues. So you know people have to be able to move around to begin with in order to go into.

Enroll so that has been what I call, what I would call to choke point at this stage.

We are moving forward.

As aggressively as we can in fact this just this week we brought on our managing director in in Africa is now a full time bio key employee.

So he is now onboard and we will begin to build out our office and infrastructure and support resource mechanisms and systems. There on the ground and I'm really in a way I'm glad that we didnt rush into things immediately.

When we first close these contracts because we fundamentally would have been shut down for for nearly four so months anyway. So we're diligently you know looking at and reviewing the startup process and making sure that we don't put.

The cash before revenue and so that that's important for us. So that's part and parcel of the process. So in context of you know what happens here to going forward well it it really depends on the the state of affairs. There as I described as people move around and we're starting to see.

That no country, including our own can afford to stay close forever.

And in the third world in particular, there far more sensitive to shutdown than we are here in the U.S. I mean, you can look at our.

Despite.

The number of people we've had out of work here the economy still at least as the markets relate to the economy. It has been relatively strong.

In countries like Nigeria in Kenya, and other countries around the world.

In the third world in particular, they really struggled because people live hand to mouth. So yeah. We're encouraged that we're going to get going.

For us to say, it's going to be Monday morning, or it's going to be you know October 1st our until we get it.

All those processes in place and so we can see free flow of of movement in the country, it's very difficult to predict so we're going to keep everybody up to date and informed and as soon as we can report.

Anything that's material, we will certainly do that.

Understood that that's helpful and yes, I mean, this is incredible opportunity to your catalyst as well so I I look forward to hearing more updates as we move along and time Thats. It for me I appreciate the time and congrats on the recent raise and hope a hope the momentum continues.

Thank you.

Thank you Jack.

Next question today is from Dan Thomas Oh retail Investor. Please go ahead.

Okay.

Oh, what do you expect would be your breakeven number.

Going forward or at least for the third and fourth quarter.

You know Dan we have.

Our breakeven as the by metric company prior to pistol star.

Was in the seven to 8 million dollar range on an annualized basis right in that range.

Pistol stars you know is an accretive was an accretive acquisition.

So it was profitable out of the gate and into the company.

So.

You know again it it's we're not providing guidance in the context of revenues. So it's it's very difficult for me to kind of spout out that number but look at our expenses.

Our bio key expenses.

Run in the $1.2 million to $1.4 million range, depending upon.

And a lot of business administrative right. We've done a lot of work on the capital raise side.

Financings with the notes and so forth. So you know spent quite a bit of money in the Gionee area.

But I would I would say again this will start did a million and a half.

Revenue and it was profitable.

So.

Breakeven is probably going to be in the.

You know in this in the same area in the same area.

And that includes pistol SAR.

Yeah, I think so so if I could just speak so you'll see in the queue. Later on we that that's the expenses there and put the run rate for the expenses.

Up around 680.

Per per month.

But as Mike said, a pistol star is one that is always covering their expenses. So we're not worried about.

Any additional last into the business there.

Hey to pay for their own.

You mean like around 2.7, but that that isn't just.

But that includes any a noncash expenses or succeed.

Yes. It does include some noncash expenses, but it does not include all of the you know if we say the fluctuations for the consequence old Matt you know if the high rate goes up because huh.

But it should be covered.

Yeah, I take a look at the numbers and they come out I guess.

It is the plan to move back into your New Jersey offices.

We're in we're in our New Jersey offices, we are essential business, we've been in the central business and so we've had people coming and going the majority of our folks are working outside the office, but we do go in in particular, we ship.

Fingerprint scanners hardware readers and.

So where we're in and out of the office and we've been in and out of the office since really since the beginning.

And similar in nature to our Minnesota office, They really Minnesota is not big close down at all because we have hundreds of test systems that are really need to be touched I'm not necessarily daily, but but certainly on a weekly basis, and so mira and her team the development team have been.

In the office through the majority of this time, a cc who move into the new Bedford, New Hampshire office.

They're also wide open and operating the fully so we're.

We're we're functional for sure whether its remote or in office there, we've not really missed a beat.

Okay.

Are you utilizing the a pistol Saar founder.

At this point or.

Just trying to get model for how much is being spent there.

He is engaged with us we have a consulting agreement that is a flexible and variable so depending upon the time that he spends with us in the business.

We pay.

But again, that's that's something that though is in place it's a one year agreement.

But it is again variable so it depends how much time, he spends with us and supporting us, but really good good guy great creative individualized until he built the great business.

And so certainly we're taking advantage of or the opportunity to to work with him in the in this at least early in the in the transition.

I mean, so he's been working 20 hours a week 10 hours a week and it kind of average number in that range in that range and in the 20 hours a week range, yes, but certainly not been full time that that obviously why sold the business you wanted to retire so he's not working fulltime.

Okay.

I haven't noticed any indication of biometric sales and part of I really so far can I assume that.

That no client is actually early adopted.

Technology yet.

No I think you'll see more a bad in the near term.

Certainly we Havent reported any as you know in the third quarter, where in the third quarter here, we closed on the business in the at the end to the second quarter. So a number of the announcements that you've seen our you know even related prior to the close of the acquisition. So you'll see more of that as we evolve forward.

Okay.

On that line I'm, losing the press releases I understand that Theres no revenue data, but.

There is no data as to when the revenue.

Well there was recognized number of licenses this means users et cetera.

In respect to start seeing some additional information in the releases, we get a feel for.

At least when the racking when the revenue is recognized or will be yes. So so everything that you've seen announced it was closed and the revenue flows when the deal is closed we sell subscriptions and and kind of a hybrid model of a subscription port pistol stars and portal.

Artist sold to a quota hybrid subscription model and so are the revenue was taken especially for the first year has taken upfront.

You're not going to see for sure you're not going to see any dynamic in the context of.

Revenue to users because we're not going to telegraph our price in what is a very competitive market. One of the big advantages that we have is the level of functionality that we provide and the model the way we sell our solution, especially in higher Ed and we're not going to telegraph that too.

To the market for sure.

Hi Center.

Or you, let me switch to China here are you able to access the your inventory or any cash assets in China now and are you still planning on manufacturing your readers there.

That's a great question. The answer is yes to all us so yes, we've had access to.

China was closed down for for about.

From a manufacturing perspective about 60 to 90 days, but we had adequate inventory in place. So we didn't Miss a beat with regard to our fingerprint sensor sales, yes, we have some new.

Products that we're going to be introducing so yes, we're going to continue to design developer and manufacturer there.

And we also now have a whole new opportunity that's presenting itself in Asia.

Kelvin won by managing director there is very enthused about the border guards solution and so we're going to begin to we're already in process, but begin to a range our partner network in throughout Asia. So in Korea, Japan.

And also in.

In in Hong Kong.

Taiwan syrup, so throughout the whole grader Asian area, we expect that we're going to be selling.

This will start portal guard there as well.

Got it that's good.

I know what about 30% of the volume each day.

In the stock is shorted.

Which explains the great degree volumes, we've been saying.

As you can you say if the warrants have been getting exercised at all or will be or in that process at all.

Yes so.

I can't comment on the shorting, that's 30% because I don't.

I don't see that and I don't first of all I don't I'm not sure sure if it's accurate or not but.

In the context of warrants, we have had warrants exercised over.

Over the past couple of weeks. So the answer is yes.

Can you give an estimate as to how many are I I are lucky her I can't I really can't.

All right if you don't mind I'd like to switch to Africa here.

I got a question on I notice that into press releases you named two different managing directors and I think Mr was he was the first one that he was apparently replace to can you give us reason why that happened or.

Actually they're they're working together, but Sunday, who is our current and named and isn't employee of bio key.

Is the person who is responsible for.

The largest segment of the contracts that we acquired there and has the connections and the experience and expertise we believe to build out the organization Steve.

Very senior person more sales oriented.

Ben.

You know than than necessarily business oriented like today. So.

We'll actively involved but for sure but today is our man and you'll see a year actually much more from him.

In the coming weeks and months.

Okay.

What would you consider a fully staffed African office when these contracts going.

I I, there's only one way to answer that and it depends on the revenue flow and our support requirements and needs for sure that's going to determine the resource pool, there and I would assume and by the way. The you know our initial.

[music].

Bulk head in Africa is in Nigeria, but we have opportunities across Africa in other countries like gone in Kenya in fact, working very large potential opportunity there now so.

We may need resource in different places across Africa, right, just because travel is.

Not as easy as a as it may seem and it's even gotten harder, but all that will be determined based on the revenue flow as the contract club.

That makes sense a are you waiting our you definitely not going to hire anybody until revenue start are you going to try and build out some degree upfront.

It's going to be I would say a majority of this is going to happen when the revenue flows and Oh, we have a one of our board members. Many aliyah is also the CEO T.I., which is our main strategic partner on these contracts.

And so he's a very astute businessman Cornell graduate JP Morgan.

Background, good financial background, and so he and I are pretty well in sync about having the money.

Meaning the investment.

Flow pretty closely with the revenues, so I think thats going to be our model.

Okay.

I'm honored that on the telecom contract I think there's four major telecoms in Nigeria one is.

Hi, Jerry and own to my understanding.

What are the chances that a non Nigerian own telecoms will get onboard with.

This program and what are the market factors that might drive ins too so.

Well, we're not we're not dealing with a Nigerian all country own mobile so their commercial companies. So I don't.

I don't know anything about the night, Jerry and old company.

I see.

Oh, well what about what are the factors that might drive some of the other telecoms too.

Move to.

Thank you suffer I guess competition right you know, it's it's all about competition. So if we're providing some strategic advantage for that telecom that the others feel they need or require I assume bell consider it and get onboard and we are talking to a number.

Okay.

A chance a well channels just be acting as an additional enrollment capacity or will they be doing certificate or other validation functions and ecommerce traction structure and use it utilizing biometric identification or.

Im just trying to get a feel for.

Oh, what the project really involves and yeah and getting it could be all of the above if you go to their website, you'll see that they're in multiple businesses in the identity and and identity and access management is just one thread there in payments and other areas. So the answer to that question is all the above.

Thank you for your questions. The next question comes from Jack I called it a private investor. Please go ahead.

Good morning, Thank you for the presentation.

Just had a really.

Related questions. The first is.

Can you talk little bit about when you when you think of authentication to think about fingerprint and given the current environment right now around Kogut.

Obviously this compares with touching thing so can you maybe relieve some of our concerns related to that.

Secondly.

I.

Has is there a direction towards looking at national elections and.

Opportunities there to kind of engage at that level the national level in relation to the elections and what does that look like is it fingerprinting is that software with what does that tangibly look like that type of engagement. Thank you.

Great to two good questions. So let me answer the the first one about fingerprint about the concern of using or touching touching anything including the door or anything that you have to touch right in a public venue. So the majority of our fingerprint sale.

Sales, especially as it relates to enterprise or even consumer where for example, you can buy our fingerprint scanners on Amazon or jet Dotcom, Walmart Dot Com del Dotcom are those our personal devices. So they plug into the U.S. be port on your computer and you are using them to access that.

Device and whatever information is behind it. So there are no sanitary issues in that context, although you could you can have multiple people enroll fundamentally their personal devices and as our people are working from home.

Corporations enterprises want to know that the individuals behind those devices are really who it should be and so again their personal devices no concern at all about the sanitary conditions in that regard the issue with fingerprint or that sanitary scenario in a kiosk venue or for example.

Aware at the airport if you're in the goes system right Global entry when you come in you have to put your finger prints down on the afore for two scanner to validate yourself, obviously, those scanners need to be disinfected and white down and so they have glass flattened.

So there's no issue with that that's going to be part and parcel of any process, it's going to be the same thing in the context of opening doors.

Everything that you touch where ever you touch for example, getting into an over Oh or a lift that's just part and parcel of our lives.

But the majority in bulk of our sales are really our personal devices.

The second question is elections, so as you know red describe that we won our first state wide.

Election.

Management solution.

For a west coast state, So that's really important and material for us Dwight ever think we'll see a national scenario like that I doubt. It because elections are very are very local count the state based managed process.

And so keep in mind that were not they're not using our technology to vote individuals are not using it to vote on they're using our technology for the workers to manage access to that information right because they want to know who access as a boat a role when they access abode a role to it.

Sure the validity of the election.

But do I think we'll see a national scenario like that I doubt it.

And I doubt that we would ever see in our country a buyer metric driven.

Election system, I think it's just too political and quite frankly, it's too fragmented for you know a decision like that other countries in particular in the third world have adopted that technology, because they can force. It on individuals it would be very difficult in our country to do that.

That makes sense. Thank you so much the last question. They had is what percentage How's your business.

[noise] separated by percentage what percentage is focused on say higher education versus the state.

Local elections versus.

Kind of corporate work do you have like a breakdown of that for a percentage standpoint.

I you know I certainly don't off the top of my head as we're now just beginning to integrate the businesses but.

A fair portion of a portal guard pistol stars business.

As is been described and announced and is available in the financials that we published isn't in higher Ed. So I would say you know a fair portion if not 60 plus percent is in higher education.

So you know that could give you kind of a perspective of the balances is really enterprise and that cuts across you know financial services.

Retail some local government, which you know local government isn't necessarily considered enterprise, but they are using at the same way enterprises are right City Durham that we announced the is using the portal guard solution similar in nature to the way any company would use it for secure access to information.

So that that's about the best breakdown that I could give you right now.

Great. Thank you so much appreciate it.

You're welcome.

Your next question comes from Richard Arnold a private Investor. Please go ahead.

Yes. My question has to do with the Theres. Some time in the future a 24 month period, when 75 million in sales from Africa is going to accrue to the company.

Are there any estimates for the profit margins there.

Having won the Nigerian Lotto about 10 times.

How reliable are these contracts and why are we backing up the truck to buy stock. If indeed this is going to be about five times per here that 8 million breakeven that you mentioned before.

Yes. So so those are great questions. So, let's take them one of the time or so.

The the context of timeframe 24 months, that's our estimate right now we had originally thought it might even be a quicker and sooner a until kobin hit and so things have really as we described before I'm not going to repeat peak myself or or bore you with that but things have slowed and so it's.

On to take its going to take time, and we don't have an exact timeframe because we just start now seeing people move around the country to be able to get enrolled.

So I think Thats number one number two I think contracts in the third world are always discounted and their discounted because of you know again reliability or these are valid contracts are viable contracts.

I mentioned before we have a aboard member who is very closely connected actually was born in Nigeria.

So we have credibility, we do have the connections in the resources to be able to fulfill that and we do expect these contracts to be profitable and between the mix of hardware and software will ultimately determine the the gross margin and then the net the net profit but.

These are going to be profitable contracts for sure.

Last quarter I noticed there were some insider buying but you about $10000, which seems very meager for the promise that we see in this huge amount of sales from a company presently doing less than 2 million to jump over this a couple of years, sometimes oh.

Oh and the virus lets us.

Something on the order of.

30 or $40 million here.

Oh it was that a statement our question well that's a question why isn't for more insider buying it from all sides are going a couple yeah. So so I had just so you know I had about a two day window to buy stock because we.

Unfortunately.

The way, we announced our earnings.

We are blacked out two weeks before the end of any quarter until the third day. After we announced our earnings. So it was a very short window and I personally board I mean, again insiders I don't speak for the rest of.

The board or any of our management team, it's up to them to decide or determine if they want to buy I felt I'm personally. It's it's a great investment and you know I may ultimately by more stock, but that's a personal decision and again, it's based on the window. So for example, I can't buy.

Go out by stock today I have to wait a two.

Two more days before I can do that and then insiders and any closely related parties.

I have to stop buying two weeks before the end of the quarter, which means the window is between now and approximately.

September 15th.

Yeah. So do you not regard and doesn't the company regard. These contracts is kind of Oh tremendous windfall if it happens.

Absolutely we do.

Okay, and that's why we talk about them the way, we do and yes, we believe that to be the case, but again, we also are.

Cautious.

Given the conditions I mean, we were expecting to be.

Rolling and generating revenue at this point.

Based on those announcements in March when.

Everything kind of hit Naperville, It just really slowed.

Literally slowed everything down an it slowed our U.S. business down so no no difference here or there at this point, but obviously in the U.S. So we.

We have a more stable venue and so it's more predictable.

Okay. Lastly, just to comment I appreciate the fact that that $18 million you know him.

Not going to be spent in Africa, and thus are equivalent revenues coming back. Thank you very much for the call.

You're welcome.

Your next question comes from Cats, and then tell a private investor. Please go ahead.

Hello, Good morning.

Good morning, Jeff.

Mike one of the things that I think investors look at.

Is.

You know with the previous big contracts, we had like China, what I believe was like a $10 million deal.

And then we had to write that off I think people are looking this is.

Too good to be true, but with the pass contracts that have kind of fizzled out you know you had mentioned that.

A lot of these are international contracts and backed by the high and math is that the case with these deals here in Africa.

Yes, so some of some of the funding and financing for these contracts come true come through the World Bank in the IMF and the.

One contract that we have been particularly the larger one which is the 45 million dollar contract.

It is a contract with nellix its with the ministry of labor to create.

1 million new jobs in Nigeria, and that is heavily funded by external resources and partially funded by the government.

So the answer that question is yes, they they are but again when you're in the condition that we're in right now it's more about mobility and having people move around so that we can get started obviously once that happens you know you'll begin to see some stability and end user.

See growth and development in each of these contracts.

Then you know given that do you see.

You know delays you know delays you know given the climate would cove. It is inevitable, but do you think is a real risk of these contracts fizzling out like the China, China deal did you pretty confident going forward with the bat backing of the I am math that you know whether it has.

Happens today tomorrow at three months from now that these contracts are definitely going to be.

Fulfilled.

Well I think two things number one.

The <unk>.

In particular in Nigeria their economy is driven.

Mainly by oil right. There oil is their largest export 80% of the federal budget is based on on oil.

And the.

The rest of the world recognizes that it is the largest.

Accumulated country in Africa.

Lagoas the city is expected to be the largest city in the world over.

Over the next 20 years. So the there's a recognition that in order to look people up there has to be commercial enterprise opportunities for jobs, not just government opportunities right. So to some degree you know I feel that this is so important.

Not just too.

The Nigerian.

Government the Nigerian population, it's important to the world and if you look around or read around investment in Nigeria, you'll see that the Chinese are investing.

Billions and billions in Nigeria, right now, helping build infrastructure in the likes so that they can tap into what would be.

<unk> resource overtime, there is oil there now, but the other resource the fact of the population.

And the growth potential when opportunity right in everything in all kinds of consumer goods in the likes so I do believe that this is real and I do believe that this is critically important.

If if the country is going to move.

Okay, and ultimately be self sustaining.

And this project in particular happens to be.

A I'll call. It a pet project of two Hari who is the current president who is in this last term and only has a couple of years ago to now given you know what you had said in the path.

Yes, still the company's still expects to get money upfront before you guys really go to work on these contracts you know given you know like the China deal I mean, you're expecting money upfront as you said before correct.

Well I said it again I think three times today, you know the revenue is going to for the cash is going to flow in the revenue flows right. So.

That's the way, we're going to do business. That's the way we do business in Africa. That's the way we have done business in Africa.

And so that's the expectation.

Thank you for your question. Then next question is a follow up front in Canada, our retail Investor. Please go ahead.

So.

So.

During release says that.

Bio key will be supplying.

1 million college graduates worth at the contractors for 1 million College graduates.

And can we assume that.

You're going to be supplying like a million readers to these guys.

Yes, so so be it the answer that question is we're gonna be supplying.

Equipment.

And there are different configurations of equipment as well as a software services support training. We have partners that are going to provide the infrastructure around that but the answer is yes.

Okay. So my question would be up purchase the reader shouldn't be.

Necessarily impacted by Cove it.

I would we expect could I expect or can we expect a purchase.

Maybe prior to the company opening or the country opening up.

Fully I don't I guess I don't understand how it wouldn't be impacted by cobot no. One can enroll know when could use these things if they're not able to move around I think that's the challenge. So the goal here is due goal here is to have a you know a population a million individuals that are equipped with.

Resources to be able to go out and to enroll and to develop an ecosystem eight a. biometric or a highly.

Valid.

Identity management ecosystem in various verticals, so in retail banking healthcare and insurance and the like so.

That's the challenge right the challenges nobody's moving around and you.

Until that happens is just not going to start so that's what starting to happen and that's a good thing and I as I mentioned I think the revenue will slow as individuals come on board and that was always planned to be a scaled scenario.

With volume ramping overtime, that's the point.

Okay, but wouldn't they have to I mean can you just pop if they give you an order for 1 million readers don't you need to don't you need some lead times like few months to build those things or well yeah. Dan I. Just described it it's not going to be 1 million in one day, it's it's going to come over time, it's going to ramp so you know for sure.

We have access to.

The resource to be able to deliver and you know it it's not unreasonable that we can deliver that kind of equipment in a 24 month period.

Thank you at this time, but Q any session has now ended I would like to turn the call back can make the basketball for any closing remarks.

Thank you and once again I want to thank everyone for participating in today's call. A please note that we will be participating in the LD micro 500 virtual conference on September 1st I will be presenting at four pm.

Eastern time.

We look forward to updating you on our next quarterly call and as always we'll continue to provide interim news updates via press release as things evolve. Thank you everyone.

The conference has now concluded thank you very beginning today's presentation.

Connect.

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