Bioscrypt Reports Financial Results for the Third Quarter Ended September 30, 2006

Toronto, ON -- August 3, 2006

 

Bioscrypt Reports Financial Results for the Third Quarter Ended September 30, 2006

Bioscrypt Delivers 13 Percent Revenue Growth Year-to-Date

Toronto , ON (November 2, 2006) - Bioscrypt Inc. (TSX: BYT), a leading provider of identity verification technology, today announced its financial results for the third quarter of 2006.

Bioscrypt revenue for the nine months ended September 30, 2006 of US$12.6 million increased by 13% from the US$11.1 million reported during the same period of the previous year. EBITDA loss for the nine months ended September 30, 2006 of US$2.9 million is consistent with the same period of the previous year.

Net loss for the nine months ended September 30, 2006 was US$4.5 million or US$0.08 per share, compared to US$4.2 million or US$0.07 per share reported during the same period of the previous year.

“The revenue shortfall we experienced in Q3 has not detracted from our belief in the future of biometrics and in particular our VeriSoft offering,” said Robert Williams, president and CEO of Bioscrypt Inc. “We are confident that our software solution that supports multiple authentication technologies including biometrics will be in demand from organizations that are looking to consolidate their physical and logical identity infrastructure.”

Bioscrypt’s third quarter revenue of US$3.8 million narrowed by 8% from the US$4.1 million reported during the same period of the previous year. Product gross margin for the combined Veri-Series and MV Series products for the quarter was 40.9%, compared to 44.2% reported in the prior quarter and consistent with the 40.0% for the same quarter in 2005. The decrease in product margins is primarily a result of an increased provision for inventory obsolescence for the discontinued MV-Lite product line. Overall gross margins were 42.1%, approximately 3 percentage points narrower than the year ago period due to the decrease in license revenue.

Robert Williams added, “Activities such as the completion of testing by the National Institute of Standards and Technology to establish the interoperability of fingerprint algorithms, the United States Government’s General Services Administration (“GSA”) qualification of fingerprint algorithms and fingerprint capture devices for use in government programs and the definition of programs that will incorporate these technologies are benchmark events not only for Bioscrypt, but the biometrics industry as a whole. These activities serve as evidence that the market for biometric technology has made great strides in establishing standards in 2006 and support our firm conviction that increased procurement of biometric technology.”

Bioscrypt reported an earnings before interest, tax, foreign exchange, depreciation and amortization (“EBITDA”)1 loss of US$1.3 million or $0.02 per share in the third quarter, compared to an EBITDA loss of US$0.5 million or US$0.01 per share for the same period in 2005.

The third quarter net loss was US$1.8 million or US$0.03 per share versus a net loss of US$1.0 million in 2005, or US$0.02 cents per share.

Revenue for the quarter is the result of unit sales of approximately 12,380, which is in line with the third quarter a year ago. Continued strong product sales in North America were offset by a significant shortfall in Europe, Middle East and Africa (EMEA). Sales of the MV Series units represented approximately 68% of total shipments valued at US$1.6 million, while sales of Veri-Series™ products represented approximately 32% valued at US$2.1 million. Licensing of software made up the remaining US$0.1 million.

“Our third quarter results, while disappointing, appear to be consistent with the experience of other companies in our industry with continued delays in the adoption of identity verification technologies,” said Bruce MacInnis , CFO of Bioscrypt. “Management continues to balance the opposing objectives of preserving our cash while investing strategically in products and solutions that our customers will require in the future, with a goal of seeing this investment pay off in terms of sustainable long-term revenue growth in the coming quarters .”

Q3 Corporate Highlights

The third quarter represented a period of significant advancement of the Bioscrypt offerings specifically addressing US government initiatives. Of note, Homeland Security Presidential Directive 12 (HSPD-12) mandates the establishment of a standard for identification of federal employees and contractors. A common identification credential will be created to access both physical and logical assets. Bioscrypt believes it can generate revenue from three sources in relation to this program. One, to license the GSA qualified algorithm for use on the card. Two, licensing of the Personal Identity Verification (PIV) version VeriSoft Access Manager for logical access control. Three, is the sale of finished readers, with the new single fingerprint capture device, for physical access control. In advance of procurement activities Bioscrypt achieved the following in Q3:

  • GSA qualification of the Bioscrypt fingerprint biometric algorithms for use in the Federal Information Processing Standard 201 (FIPS 201) PIV Program. With the GSA listing, Bioscrypt’s fingerprint algorithms are now qualified to be used to create the ANSI 378 templates required for PIV card issuance and for cardholder verification.
  • Development of VeriSoft Access Manager™ functionality to support biometric logical access control for US Government’s PIVProgram. The new release of VeriSoft software allows federal government employees to log-on to their computer using PIV Card fingerprint biometric templates, as mandated by the US government
  • Bioscrypt Selected the UPEK Fingerprint Sensor for FIPS 201 Compliant Physical Access Control Reader. The UPEK sensor is the first and only silicon fingerprint sensor certified by and listed on the GSA Approved Products List for use in the FIPS 201 and PIV programs.

Q3 New Client Announcements

New clients disclosed in the quarter include:

  • Cherry Electrical Products, a global leader in the design, development, and manufacture of computer keyboards, selected Bioscrypt's VeriSoft Access Manager for its G83-14200/14300 range of FingerTIP ID biometric USB keyboards
  • ImageWare chose Bioscrypt’s GSA Qualified ANSI 378 algorithm for integration with its Biometric Engine, providing Bioscrypt an opportunity for its technology to be used for credential issuance.

Conference Call

The Corporation will be hosting an earnings report conference call today at 8:00 a.m. Eastern Standard Time. The call can be accessed by phone by dialing 1-877-407-8035 or at www.vcall.com/IC/CEPage.asp?ID=109981.

If you are unable to attend the original call, you may subsequently listen to the playback at 1-877-660-6853, account number 286, conference number 216628, for one week after the call or by going to www.vcall.com/IC/CEPage.asp?ID=109981.

1 - EBITDA is defined as operating revenues less operating expenses and therefore reflects earnings before interest, foreign exchange, taxes, depreciation and amortization. Bioscrypt uses EBITDA, amongst other measures, to assess the operating performance of its on-going business, and applies the use of such measure consistently from quarter to quarter. The term EBITDA does not have a standardized meaning prescribed by Canadian generally accepted accounting principles and therefore may not be comparable to similarly titled measures presented by other companies. EBITDA should not be construed as the equivalent of net cash flows from operating activities.


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About Bioscrypt Inc.

Bioscrypt Inc. is a leader in identity verification technologies, providing solutions for converged physical and logical access, enabling unified authentication from Door to Desktop®. Bioscrypt's offerings simplify the task of implementing secure access to facilities, equipment and IT networks. The company develops and sells biometric embedded solutions, access control readers and identity and access management software to protect the physical and network assets of international government agencies and leading organizations in the financial services, healthcare, and manufacturing sectors. More information is available at www.bioscrypt.com .

Forward-looking (safe harbour) statement

Statements made in this news release that relate to future plans, events or performances are forward-looking statements. Any statement containing words such as "believes", "plans", "expects" or "intends" and other statements which are not historical facts contained in this release are forward-looking, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements.

Door to Desktop is a registered trademark and Bioscrypt Inc., Bioscrypt, Veri-Series and MV Series are trademarks of Bioscrypt Inc. All other trademarks or registered trademarks referenced herein are properties of their respective owners.

For more information, contact:

Bruce MacInnis, CFO
Bioscrypt Inc.
905-940-7752