Third Quarter Report, January - September 2000

Third Quarter Report, January - September 2000, Fingerprint Cards AB (publ) 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 electronic transactions. Commercial status and market During the reporting period another license agreement has been reached, now with Loqware Technologies. Their product is an electronic lock, which together with the finger verification technology of the Company, secures computer hard disks. A deciding factor for Loqware's choice of technology was the requirement that user authentication must take place without any use of the PC. This ensures the highest level of security. The financial section of the agreement contains a fixed fee to be paid in instalments, as well as a royalty fee based on Lockware's future sales volumes. Based on forecasts given by the licensee, indicating 400 000 units per year, following an introductory period of about a year, the potential for Fingerprint Cards during this four year agreement is about MSEK 300 in royalty payments. The strong expansion of Internet e-commerce and emerging m-commerce over mobile phones, further the interest in biometrics. A reliable and secure method of user identification will be crucial to the trust in these systems. The key to the biometrics market lies in its combined use with smart cards and mobile phone products. Technical status Significant improvements have accrued in the continued development of the systems components: sensors, algorithms and processors. The technical resources, markedly strengthened during this period, yield positive results in the development work. This may be exemplified by the progress on surface protection of sensors to be used in particularly demanding applications. Detailed design of the small, low-cost line-sensor and associated algorithms, intended for very price and size sensitive products, has likewise progressed well. Fingerprint's two-chip solution is now being integrated in systems based on smart cards. The sensor is placed on the reader, while the decision identifying the authorized person is taken inside the card that also holds the biometric signature. This design is generally applicable to systems involving smart cards as carrier of information, including PKI-systems; this design is also applicable in SIM-cards for mobile phones. Turnover and earnings Turnover totalled MSEK 1.5 (1.1). The consolidated net loss was MSEK 12,9 (12.0). All development costs have been written off. Financial position The consolidated equity-assets ratio was 97,0%. Consolidated available liquid assets including current investments as of September 30, 2000, amounted to MSEK 162.9. Other current receivables amounted to MSEK 2.1. Consolidated operating capital amounted to MSEK 159,6. Fixed assets, investments and depreciation During the first nine months of the year, MSEK 0.9 was invested in equipment. Development costs of MSEK 9.2 set up us an asset. Patent rights for MSEK 5.9 were depreciated according to plan by 15% annually, equivalent to the expected economic life. Equipment is depreciated at 20% annually and personnel computers by 30% annually. Personnel Another two individuals were employed, one assistant accountant and one th graduate engineer. The total number of employees as of September 30 is then 14. The project organisation includes a total of some 25 persons. Significant events after the end of the accounting period A Memorandum of Understanding was signed with NASDAQ-listed Litronic, Inc., Irvine, California. The two companies jointly develop an e-commerce system including PKI security and based on the Microsoft smart card platform. It is anticipated that this e-commerce product will become the first biometrically secured to fulfil the highest US security level according to Level 3 of FIPS 140-1 (Federal Information Protection Standard). Litronic is a mayor provider of electronic security systems for US federal agencies including defence agencies. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/10/24/20001024BIT00500/bit0001.doc The full report http://www.bit.se/bitonline/2000/10/24/20001024BIT00500/bit0002.pdf The full report

About Us

Fingerprint Cards AB (FPC) develops produces and markets biometric technology, which, through analysis and matching of an individual’s unique fingerprint, verifies the person’s identity. The technology consists of biometric sensors, processors, algorithms and modules that can be used separately or combined. The competitive advantages offered by FPC’s technology include unique image quality, extreme robustness, low power consumption and complete biometric systems. With these advantages and the ability to achieve extremely low manufacturing costs, the technology can be implemented in volume products, such as smart cards and mobile telephones, which impose extremely rigorous demands on these characteristics. FPC’s technology can also be used in such areas as IT, Internet security and access control.