Biokey International Inc (BKYI)

[SeanBoy]

Here's what MD said about Q4/14. Now those of us with selective memories need not suffer a "Brian Williams" and inadvertently “conflate” what was said with what actually happens.

Thank you Ceci. Now we should discuss our future including Q4 2014 guidance. Last quarter we reiterated our view that our pipeline opportunities are often large and hard to predict. Given our Q3 results, I think we should reiterate this once again. The opportunities typically pursue can often exceed several $100,000 in value. The timing of the recognition of such orders can materially impact quarterly results, both negatively as well as positively. Therefore we continue to recommend evaluating our progress over a longer period of time.

This trend will continue for some time but we'll smooth this out over time. It will smooth primarily as we increase the number of sales channels, penetrate them more deeply and grow such that individual orders become relatively small compared to our overall size. As noted, we started the quarter with a total sales pipeline of roughly $30 million and our pipeline currently stands at just under $30 million. For clarity, the opportunity pipeline as the total value of deals that we could win within the next 12 months. Opportunity pipeline is not backlog or bookings. We expect third quarter revenue to be between $1 million and $1.7 million. This range reflects the more conservative approach to guidance and budgeting that does include any one single potential large order or contract that may be awarded prior to the end of the year.

We ended Q4 (I think it should be Q3) with solid bookings expected to ship during Q4; therefore we have high confidence in the low end of that guidance range. We expect gross margin to remain at around 85%. We further expect to generate operating profit with incremental revenue about $1.5 million. Our headcount remains at about 20 employees plus a number of contract developers. We anticipate adding more resources incrementally in both sales and R&D through the course of next year as our business grows.

As you can see at this point, despite some volatility, our business appears to be ramping. Year-to-date our sales have grown 84% over 2013 and we are tracking towards a record 2014. We're very encouraged and expect this trend to continue. We believe we are prepared for substantial growth that we hope may have begun in 2014 and will continue well into the future.

I'd like to personally thank our very patient shareholders and friends. And now I expect you all have questions for us. So operator let`s start the Q&A.