The Trading Floor

[Arctec]

Weekly Update April 1, 2007

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Bioscrypt (BYT.T $0.87)
www.bioscrypt.com

Industry: Biometrics & 3D Facial Imaging for Physical & Logical Access Control, Time and Attendance, and Civil ID. Sectors include Transportation. Government, Banking and Healthcare / Revenue for 2006: $17 million

Shareholders include: 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 own approx. 32% of Bioscrypt.


World's first 3D face recognition camera for PC's
Bioscrypt is one of the techs we're following as a play on the security and biometrics industry in 2007. On March 28th they announced an industry first that could lead to tremendous growth opportunities in 07/08 and at this stage, the potential has not been recognized by investors.

BYT has developed the world's first 3D face recognition camera for use in authenticating individuals accessing a computer. The VisionAccess 3D DeskCam performs both verification and identification operations through a split second scan of 40,000 identification points. The camera accommodates varying poses of the head, as well as a wide range of lighting conditions, to provide a convenient, non-contact method of authentication with a high level of accuracy that is already being used in their commercial applications such as banks, airports, etc. It will meet a significant demand for hands free and secure authentication solutions that does not require users to remember passwords, tokens or cards to log on to their computer.

The 3D DeskCam can be setup quickly and easily through a USB port and is scheduled to be released in the second half of 2007 with a target price of US$350. This price could be reduced to around US$200 if produced in larger volumes.

Size of the Market

This is an entirely new security application for both business and personal use so the size of the market is tough to estimate. If however it takes off, we could see explosive growth for Bioscrypt when you consider the size of the personal computer (PC) market.

The number of PC shipments worldwide is projected to touch 300 million units in 2009, while the value of shipments will be $250 billion (2006 was estimated at 255 million new machines). This does not account for significant growth potential in emerging countries like India and China.

If volumes enable them to drop the price to US$200 and they can even secure 500,000 users worldwide annually, revenue jumps to $100 million. At 1/2 this the numbers are still impressive but if they can land alliances with major computer manufacturers and if the product becomes acceptable mainstream (both for corporate, small business or home use), then the growth potential becomes dramatic - particularly when you consider their 2006 revenue was $17.6 million.

New PC shipments strictly for business application are in the range of 70 million annually and this new authentication technology could prove very popular amongst this segment.

What is interesting is that the camera can also be used as a webcam and recently Logitech became a shareholder of Bioscrypt when BYT acquired industry leader A4Vision. Logitech dominates the global market for webcams so it will be quite interesting to see how this plays out over the next 12 to 18 months as Bioscrypt should have the security side of this market locked up.



About VisionAccess 3D
The webcam looking device looks for identification points to verify authenticity, and is capable of not only accounting for facial hair but even distinguishing between identical twins. The technology works with a glance and within a fraction of a second to allow access to applications, networks, websites, etc. It uses the same technology as Bioscrypt (and A4Visison their recent acquisition) have already proven with commercial applications at banks & airports.

Registering users with the Bioscrypt system means first casting a 40,000-point infrared mesh grid over the user's face in order to take measurements. The grid captures the shape of your face rather than taking a digital photo. These measurements are then stored as data either on the computer or in a more centralized network directory. Encryption protects the data while it's in transit (on a corporations network for example) or at rest. The infrared sensor works either in darkness or regular office light.

VisionAccess has one very important advantage over most laptop security. "You can't leave home without your face," says Grant Evans, former A4Vision CEO and president and member of Bioscrypt's board of directors.

Bioscrypt is also partnering with 3VR, a maker of searchable digital video surveillance systems, to integrate VisionAccess 3D Face Readers and the VisionAccess 3D DeskCam with 3VR's technology. The goal of this union is to help companies identify suspicious people or activity in real time either at a facility's entrance using the 3D Face Reader or at a closer proximity using the 3D DeskCam.

Bioscrypt's 3D facial recognition works with 3VR to perform multiple facial scans and comparisons against a database of stored images and corresponding data. If a person identified was previously placed on a watch list, the system will initiate an alert.

Conclusion

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 is already one of the global leaders when it comes to fingerprint biometrics and security applications. This new technology and what is likely in the pipeline, should open up tremendous growth opportunities for the company. The scenario we are looking for with microcap speculations.




Danny Deadlock
Microcap.com

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