BIO-key International, Inc.

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Bio-key International's 2019 and first quarter 2020 conference call. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, you will be invited to participate in a question and answer session. As a reminder, ladies and gentlemen, this conference is being recorded today, Friday, May 15, 2020. I would now like to turn the conference over to Scott Mankin, BioKeys Vice President of Marketing. Please begin, sir.

Thank you for joining us today. With me this morning are BioKeys Chairman and CEO, Mike DePasquale, Fred Corsentino, our Chief Revenue Officer, and CeCe Welch, Chief Financial Officer. I'd like to remind everyone that today's conference call and webcast may contain forward-looking statements that are subject to certain risks and uncertainties that may cause actual results to differ materially from those projected on the basis of these statements. The words estimate, project, intend, expect, anticipate, believe, plan, may, or 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's provision of the Private Securities Litigation Reform Act For a complete description of these and other risk factors that may affect the future performance of Bio-key International, see Risk Factors in the company's annual report on Form 10-K and its other filings with the SEC. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The company also undertakes no obligation to disclose any revision 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 DePasquale. Mike?

Thank you, Scott, and good morning, everyone. Thank you for joining the call today. These are unprecedented times, and for the first time since joining BioKey, I'm hosting this call from my home. Before I start, I believe it's appropriate to pay homage to all of the first responders, doctors, and nurses that have been working the front lines in supporting those impacted with coronavirus. We owe them a debt of gratitude for all they have done over the past six weeks. And if you live in the greater New York area, you will know what I'm speaking to. I also want to thank all of my Bio-key teammates for remaining incredibly productive through the sudden change and our work environment. Today, we reported results for fiscal 2019 as well as the first quarter of fiscal 2020. Our 2019 results were delayed due to the impact of travel and work restrictions on the timely completion of our year-end audit and the filing of our 10-K. For similar reasons, we have requested a filing extension for our first quarter 10-Q. Rather than delay our Q1 reporting, we have provided preliminary Q1 results with our full-year 2009 audited results so that we are able to discuss them on our call time. Our Form 10-K has been filed with the SEC and finalized results for the first quarter will be filed on Form 10-Q on or before the end of the month. As you can see from our results, fiscal 2019 was both challenging and deeply disappointing relative to our expectations going into the year as we anticipated revenues and cash flows from a significant software license that did not materialize as expected. While other business development initiatives progressed, but we did not yield meaningful revenue contributions. Our revenue shortfall created liquidity challenges for the company, which we were able to address with short-term convertible note financing as well as $1.5 million in proceeds from the exercise of warrants at $1.50 per share. But rather than dwell further on the difficulties we managed the business through over the past year, I think it would be more constructive to focus my remarks on how Bio-key has emerged in 2020. I'm reminded of saying what doesn't kill you makes you stronger. Well, there are certainly some truth to it, as Bio-key has emerged from the challenges of last year with a refined focus and without question The most promising outlook in our history. Our enthusiasm is rooted in two very large initial contracts we secured earlier this year for a total of $75 million in software consulting services and hardware systems that we expect to deliver over the next 24 months for two customers in Africa. Recall we first discussed our intentions to pursue opportunities in Africa during our third quarter call and now, a little over six months later, we've been successful in unlocking enormous opportunities and future potential. Our success in Africa has been the direct result of our Channel Partner Program, which was designed to establish relationships with value-added resellers that have established customer relationships, region-specific market knowledge, and capabilities that can play an instrumental role in bringing BioKey into the small and large enterprise and governmental opportunities. We've long felt that Africa represents a very attractive region of opportunity given its large size and population and how well biometric solutions are suited to solving some of the continent's most pressing security and fraud prevention challenges. We've had some success in the region in the past, such as our deployment with South Africa's Capitec Bank, but had generally found it difficult to advance our business development efforts there. In the latter part of last year, we decided to invest in building a stronger footprint in Africa, and we opened our Bio-key Africa subsidiary to provide an in-country presence, led by highly respected IT executives, including Steve Awazi and Tunde Jeje. Africa, like virtually every other market, is relationship-driven, and those who are known and trusted in a field are able to accomplish so much more than those who are new to the scene. Through Steve and Tunde, we were introduced to the Technology Transfer Institute of Africa, a well-connected incubator of technology services and projects, and a facilitator in bringing foreign technology expertise to bear in the African markets. We're very fortunate to sign TTI as our first African channel alliance partner. Since then, the team along with TTI and growing base of relationships have proven very effective at identifying opportunities and bringing Bio-key into the procurement discussions at a high level and efforts that have been instrumental in our early success. Landing the two large contracts in Nigeria that we referenced in our press release. Longer term, we believe these projects are just the beginning of a very substantial opportunity to team with local partners to deliver biometric security solutions for large-scale ID and authentication needs in areas like mobile communications and payments, immigration and border security, and for social welfare programs, many of which are attracting external funding from entities such as the World Bank. and though our opportunities in Africa currently dwarf those in the U.S. and elsewhere, we were extremely bullish regarding pent-up demand for enhanced multi-factor authentication and security solutions that are needed to manage the distributed workplace created virtually overnight in response to the coronavirus pandemic. Though the pandemic is causing a temporary pause in a great deal of enterprise and government activity, As we progress to more normal business conditions, we fully expect increased interest in our solutions as Enterprise works to put in place a more secure infrastructure for those who are now working outside the protection of the Enterprise network and its security. Fortunately, designated as an essential service given our work in healthcare, defense, law enforcement, and the government, BioKey continued to operate at full staffing over the past two months, though most of our team have worked remotely. As a result, we have remained in contact with our partners, customers, and prospects and have continued to provide excellent service and support. Through these dialogues, we are hearing a similar and encouraging refrain, namely the desire to extend biometrics and other multi-factor solutions to help secure substantially expanded remote workforces. Through these dialogues, it has become very clear the extent to which enterprises are thinking and have been altered by the coronavirus pandemic and the substantially increased importance and priority being given to identity solutions that can help companies address the demands of a distributed workforce and client base. So to better position BioKey to compete for and win coming opportunities, We're intently focused on rounding out our suite of multi-factor authentication solutions so that we can become a one-stop shop for customers, no matter their choice of authentication methods. While our core expertise and value remains in biometric solutions, a close second in our ability to securely manage remote authentication is in the cloud. Though it would be premature to say more about our plans, I did want to underscore this is a major strategic and technology priority for Bio-key in the US and around the globe, and I hope to have more to say about this in future periods. Finally, with respect to our financial outlook for the current fiscal year, I'm understandably reluctant to provide any sort of guidance. and frankly, there remain too many variables regarding timing, schedules and the path to more normal business interactions to provide a reliable outlook. However, what I can reiterate is that we've taken steps to improve our bottom line performance at the same time we've positioned Bio-key to execute on the two very large contracts. We're very confident that work will commence on these contracts likely in our third quarter, perhaps before. and we've made it clear that we require significant advanced deposits prior to moving forward. Given the project's scale and timeliness of approximately two years, we believe Bio-key is well positioned to achieve substantial growth and likely profitability for the full year 2020. We also remain actively engaged in business developments here in the U.S., in Asia and in other markets, in addition to several countries in Africa. While we fully expect progress to be muted by the coronavirus situation, we're optimistic that our efforts can yield meaningful opportunities in a world that has been forced to invest in protecting their businesses and remote workers against the increased threats of a far more distributed workforce. Given their scale and expected duration, the two African projects alone positioned BioKey for substantial revenue growth and, as I mentioned, likely profitability for the full year 2020. And we're confident that they will also allow us to pursue other large-scale opportunities across Africa, outside of just Nigeria, and on a global basis. We look forward to providing more visibility into the timing and expected impact of our Africa business as final planning is completed and the projects are underway. Let me now turn the call over to Fred Corcentino to review a few specific developments in our business. Fred?