First-quarter interim report, January-March 2001, Fingerprint Cards AB (publ)

First-quarter interim report, January-March 2001, Fingerprint Cards AB (publ) New technology that was demonstrated to the market: * Extremely small swipe sensor * System-on-Card * Verification module for handheld computers * The Volvo Personal Communicator remote control Fingerprint technology in the new computer security system of the Swedish Defense Forces. (For details please refer to "Significant events after the end of the accounting period".) General remarks on operations The Company is developing a technology for scanning and matching fingertip patterns for determination of individuals' identity, which replaces PIN codes and passwords in security applications. The technical solutions developed are licensed to companies in the fields of mobile telephony, data security, building access control and card-based solutions for e-commerce and other electronic transactions. Market During the first quarter the company demonstrated its technology at a number of international trade fairs. The first "System-on-Card, where the entire finger verification system with its sensor, processor and algorithm is integrated into a smart card, was demonstrated in collaboration with Biometric Associates, at the London-based trade fair "Optimising Wireless E-Commerce" in January and later at the "London Smart Card" trade fair. In March, the CeBIT electronics trade fair was the venue for the premiere demonstration of the company's latest technical sensor innovation, an extremely small swipe sensor that scans the finger pattern as a finger is drawn across a small sensor surface that is 11 mm wide and 2.5 mm long. The fact that it is so compact and thus less expensive to manufacture should open up further marketing opportunities for volume applications where component price is crucial. In the field of physical access control, a recently developed algorithm was demonstrated that allows doors to be opened using cardless systems. Another item on show at CeBIT was an advanced application project in which company technology has being incorporated into a Handspringtm handheld computer. The first results of the collaboration with Volvo, in the form of a biometric remote control, the "Volvo Personal Communicator", were demonstrated by Volvo at the Detroit Motor Show. The company marketing organisation is now fully staffed in accordance with the plan adopted last year. Its greater international market presence has yielded immediate results in the form of new interesting contacts in the USA as well as Europe and Asia. The interest in biometrics and primarily finger verification is growing throughout the world, as the security problems of many systems are acute and biometrics is the only known alternative to PIN codes. However, this technology is still awaiting its market breakthrough and no known biometrics companies are yet in the black. Technical status Company technology is constantly evolving and the technicians' organisation has now been enhanced with production technology expertise. This will provide the company with a stronger position in its efforts to develop cost-effective solutions with regard to the packaging and production of the sensors. The first functioning swipe sensor prototype was supplied during the period and the initial test runs show that the system functions in accordance with its specifications. Great efforts have been devoted to algorithm development in order to handle the swiping movements of the fingers across the swipe sensor, one of the results of which has been a further patent application. In addition, considerable progress has been made with regard to the development of the surface layer of the sensors. Work on developing the next generation of ASIC processors is progressing according to plan, and the emphasis lies on minimising power consumption and cost. A new application project in physical access control, was initiated during the period and a further number of projects are proceeding according to plan, including the collaboration with Ericsson. The "System-on-Card" project with Biometric Associates Inc. has achieved positive results by thinning the sensor chip in order to meet the requirements for thinness and flexibility that apply to standard smart cards. Turnover and earnings Turnover totalled MSEK 0.1 (0.4). The consolidated net loss was MSEK - 7.1 (-4.1). All development costs have been written off. This poorer result, compared with that for the first quarter of the preceding year, is a consequence of the company's considerably more offensive commitment to both technological development and marketing. Financial position Operations are essentially financed by both an MSEK 55.5 issue of new shares, floated in the spring of 1998 and a preferential rights issue and a directed new issue, respectively, for MSEK 149 net, which were floated in April 2000. The consolidated equity/assets ratio was 96% (89%) and the consolidated available liquid assts including current investments as at March 31, 2001, amounted to MSEK 144.6 (MSEK 21.5). Other current receivables amounted to MSEK 5.6 (0.7). Consolidated operating capital amounted to MSEK 143.6 (19.0). Fixed assets, investments and depreciation During the first three months of the year, MSEK 0.1 (0.1) was invested in equipment. Previous development costs set up us an asset and patent rights are depreciated according to plan by 15% annually, equivalent to the expected economic life. Equipment is depreciated at 20% annually and PCs by 30% annually. Personnel At the end of the period, the number of employees totalled sixteen (seven). The project organisation includes a total of some ten persons. Accounting principles This interim report has been drawn up on the basis of recommendation RR20 of the Swedish Financial Accounting Standards Council regarding interim reporting. The interim report has been drawn up on the basis of the same accounting principles and calculating methods as in the 2000 Annual Accounts with the exception of the application of recommendation (RR9) of the Council on income taxes. RR9 is applied for the first time in this report, for which reason comparable figures have been adjusted. In recording a deferred tax liability attributable to a loss allowance, a calculation has been performed based on an estimate of the deficits for tax purposes accumulated at each date and subject to a tax rate of 28%. The application of this recommendation means that the deferred tax receivable for the company as at March 31, 2001, amounts to MSEK 15.2, which has been recorded in the balance sheet as a financial asset. Significant events after the end of the accounting period The company demonstrated its technology at a trade fair in Las Vegas, Card Technology Security Technology 2001, which ran from May 14 to May 17. The Swedish Defense Materiel Administration (FMV) has appointed Comex Electronics AB as the principal supplier for the development of a new advanced computer security system, capable of being used throughout the defense forces' organization. Biometrics is to be used for user identity verification and Fingerprint Cards has been chosen as the supplier of the finger verification technology. A leading international smart-card producer is also participating as a sub-contractor and a prototype system is to be developed under the guidance of Comex Electronics, after which FMV will consider the issue of a series delivery. Fingerprint Cards and Comex Electronics have signed a license agreement. (Please refer to today's press release). Other financial reporting dates Half-yearly interim report January-July 2001, August 28, 2001 Third-quarter interim report January-September, October 23, 2001 Press release on unaudited figures for 2001, February 2002 Göteborg, May 22, 2001 Fingerprint Cards AB (publ) The Board The interim report has been summarily examined by the company auditors. For further details, please contact: President & CEO Lennart Carlson or CFO Bengt Alberts tel: +46 31-60 78 20, fax. +46 31 -13 73 85 Fingerprint Cards AB, Box 2412, SE 403 16 Göteborg, Sweden. www.fingerprint.se investrel@fingerprint.se ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/22/20010522BIT00800/bit0001.doc Full Report http://www.bit.se/bitonline/2001/05/22/20010522BIT00800/bit0001.pdf Full Report