Weekly Update January 27, 2007
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Bioscrypt (BYT $0.87)
www.bioscrypt.com
www.a4vision.com
We featured BYT on January 8th at $0.60 and watched the stock hit $1.05 last week on news of an acquisition that will paint an entirely new face on this company - a 3D face to be exact. Bioscrypt has entered into an agreement to acquire A4Vision, Inc., a leading provider of advanced identification systems using innovative three-dimensional facial imaging and recognition technology. Bioscrypt will add this technology to its portfolio of biometric access control products. In theory, we could now see Bioscrypt in 2007/2008 as one of the global leaders in biometric access control. A multi billion dollar market that includes large corporations, airport security, governments, financial institutions, border control & immigration. This is an industry that the investment community has all but ignored for the past couple years but we're speculating that will change over the next 12 to 18 months. With this latest acquisition, Bioscrypt becomes one of the most promising smallcap/microcap companies in the biometric security industry.
MOTOROLA, ELLISON, AND LOGITECH BECOME SHAREHOLDERS
This acquisition of A4Vision is also very important because as a private company, it's investors include huge names like Motorola, Tako Ventures (owned by Larry Ellison - billionaire CEO of Oracle), Logitech (the leading computer peripherals manufacturer), NTT Leasing (financial subsidiary of Japan’s NTT Group), and Singapore Technologies (a leading technology- based multinational conglomerate). This group, will become key shareholders of BYT and will eventually help attract a much larger audience from U.S. and overseas investors.
CYCLING THROUGH OLD SHAREHOLDERS
On this news, the stock saw very strong buying but ran into considerable resistance near a dollar. A lot of old shareholders have been disappointed with the slow progress of biometrics and are "throwing the baby out with the bath water". Once the stock cycles through these old shareholders we will be facing a much stronger shareholder base.
In early May/06 the stock had a strong run from $0.95 to $1.30 but then spent seven months on a downward slope, bottoming in December. Those shareholders have had little liquidity until now and many are only looking backward instead of the strong potential going forward. This obviously prevented the stock from holding the break through $1 and short term it appears will continue to cause elements of resistance.
This stock spent 2004 and 2005 trading in the $1.20 to $3.60 range and after peaking mid 2004, has been gradually moving down as the biometrics industry as a whole, has not taken off as everyone expected. However, as we mentioned several weeks ago, I really believe that cycle is over and 2007 and 2008 could see a significant turnaround. Many existing (old) shareholders of BYT will only look back at the frustrations of buying higher and will sell when good liquidity presents itself. This creates resistance along the way, but the fundamentals are dramatically improving at the same time.
Right now it looks like we need to cycle through these disgruntled shareholders who may be missing the forest for the trees. Bioscrypt's bulletproof biometric technology combined now with one of the most advanced 3D facial recognition technologies in the world, should provide some excellent exposure to the technology and security sector.
MARKET STATISTICS / TERRORISM HEDGE
In a publication dated January 2007, the International Biometrics Group projected that the facial recognition market will represent more than US$1.4 billion or 19 percent of the US$7.4 billion total Non-AFIS market in 2012. Fingerprint matching is predicted to be 25 percent or a US$1.85 billion market in 2012 for a combined market size of more than US$3 billion in five years time.
Frost & Sullivan, an independent market analyst firm, stated in a July 2006 study that the compounded annual growth rate for facial biometric technology will be 27.5 percent and that one of the two primary markets by application for face recognition technology is physical access control/time and attendance. Bioscrypt intends to use its existing sales channel, an indirect partnership model that was instrumental in the company being recognized by Frost & Sullivan as the 2005 Application Market Penetration Leader for the world non-AFIS fingerprint physical access control/time and attendance market, to sell the 3D facial technology to this considerable market.
Combined with threats of global terrorism and various security threats at airports, government agencies, financial institutions, shipping ports, border crossings, and you have significant opportunity for growth.
OUR HEDGE AGAINST NORTH AMERICAN TERRORISM
From a terrorism and homeland security perspective, I believe we now have tremendous exposure to this sector with BYT and GLOI (another company we're following with our premium subscribers). Should American policies lead to increased threats of terrorism (and they likely will), we would run the risk of a collapse in stock prices. However, two specific sectors would benefit dramatically (and immediately), gold and technology and services provided by companies like BYT and GLOI. This provides us with a hedge against any such terrorist attacks (or even their threat in North America).
We'll just need patience. So far it has resulted in short term gains of approx. 50% but with this acquisition, we're looking at an entirely new company. Much the same way old shareholders who lost money should be looking forward instead of back, we may need to do the same thing and overlook the gains made to date.
Below is a good example of how strong the A4vision technology is. This is an excerpt from a post to the Stockhouse bullboard last week and really demonstrates the strength of their technology. The 3D technology of A4's is so accurate, people only need to glance in the direction of the camera and it will process the data in a fraction of a second and compare it to the database.
Pictet is one of the largest private banks in Switzerland:
www.pictet.com
Ingersoll Rand and A4Vision Provide the Future of Access Control for Banks
Oct 10, 2006 - Stuttgart/Geneva, October 10, 2006. As the main contractor, Swiss Interflex AG, a business of the Ingersoll Rand Security Technologies sector, is implementing a biometrics project in Geneva that is one-of-a-kind in the world. Interflex has delivered what Pictet & Cie Banquiers, one of the renowned Swiss banks, wanted most – the installation of an access control system that operates completely without ID cards, keys or PIN technology to enable secure access for about 1,500 employees to the bank’s new building. Eliminating the risk of tokens and keys being lost, stolen or misused, Pictet & Cie Banquiers’ system uses only biometric verification methods in a project that combines components supplied by unique specialists. At present, sub-contractors are installing 3D face and iris recognition systems as well as so-called speed gates at the new building.
A4Vision’s 80 biometric 3D face recognition readers have been applied to physical access and time and attendance recording. A4Vision’s advanced 3D facial recognition system directs structured, invisible light onto a subject’s face to create a facial grid of 40,000 measurable data points. The system performs multiple facial scans and comparisons against a database of stored images and corresponding data, performing accurate identification at sub-second speeds, from which authorized persons are confirmed for access. A4Vision’s 3D facial readers secure entrance areas of the bank in combination with other security components of the installation.
Note:
The acquisition will be completed through the merger of A4 with Bioscrypt’s wholly owned US subsidiary, with the merged company to continue as Bioscrypt, Inc. Pursuant to the merger, certain noteholders and stockholders of A4 will receive an aggregate of up to 9.0 million Bioscrypt common shares and warrants to purchase up to an additional 4.6 million Bioscrypt common shares.
Concurrent with the completion of the merger, institutional investors associated with A4 have agreed to invest between US$6 million and US$8 million. This new group will own, on a fully diluted basis, up to approximately 32% of the pro forma company.
For further due diligence, please visit www.bioscrypt.com and www.a4vision.com
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