Here it is...looks like he really did his homework.
The Doppler Report Has Initiated Investment Coverage of
Security Biometrics, Inc. (“SBTI” on Pink Sheets)
Security Biometrics Inc. (“SBTI” on OTC Pink Sheets) was specifically created to manage intellectual property, as well as develop, market under license and distribute dynamic biometric technologies for the security applications of banking and financial transactions.
Among the technologies that SBTI ( www.sigbio.com ) is developing is Gesture Recognition Technology (GRT), a dynamic, biometric system that interprets hand gestures and signatures using sophisticated proprietary software algorithms on patented low-cost “touch pads.” GRT is deemed superior to all other existing pen input and signature recognition technologies.
Biometrics offers optimal security for credit and debit card purchases because it reflects physical characteristics that are unique to each person. Dynamic, biometric GRT security systems take into account both the shapes of someone’s signature as well as the pressure applied and the order, timing and speed of stroke - these gestures are inherent, automatic and impossible for a thief to copy. In contrast, traditional PIN numbers and passwords do not provide the same level of security, as they are frequently written down or can very often be guessed.
GROWING LEVELS OF CREDIT CARD FRAUD COULD ADVERSELY IMPACT THE ECONOMY
Credit and debit cards are the backbone payment system for the North American economy. However, few people realize just how much credit card and bankcard fraud takes place each year.
According to “Credit Card Issuers Guide 2001 Edition” (Credit Card News July 15, 2000), there is over US$24 billion in bank charge-offs and another US$1+ billion in credit card fraud in the United States each year, based on transaction volumes of about US$1.4 trillion for Visa, MasterCard & American Express. In Canada, there is over C$225 million in credit card fraud and thefts based on C$406 billion in transactions.
This may not seem like much, but banks and credit card companies exist on relatively small margins. These firms are notoriously tight-lipped when it comes to admitting and reporting fraud levels and associated losses, which we believe are quite likely much greater than the information released to the general public. Losses can only be covered by charging cardholders higher annual fees, boosting interest rates, or figuring out how to drastically reduce fraud and charge-offs.
With the number of individuals making purchases with credit and debit cards continuing to rise, and the dollar volumes increasing as well, there is a need for better technology to ensure that transactions are done without fraud. Banks and credit card companies realize that they need something to replace the increasingly obsolete and vulnerable security systems now in use (PIN numbers and passwords).
SBTI IS DEVELOPING NEW BIOMETRIC SECURITY TECHNOLOGY & PRODUCTS
FOR THE MULTI-TRILLION DOLLAR BANKING / FINANCIAL TRANSACTION MARKETS
SBTI is positioning itself as a key provider of biometric security interfaces that will offer a wide array of “end-to-end” solutions targeted to the specific multi-trillion dollar banking and financial transaction markets. Readers are encouraged to review company particulars and press releases by visiting Security Biometrics’ web site ( www.sigbio.com )
SBTI will focus on three market segments where the Company intends to be first to market with biometric security products: banking and financial transaction software; biometric-enabled, gesture-recognition integrated ATM’s; and, biometric-enabled, GRT-integrated, point-of-sale (POS) systems.
Security Biometrics business plan and strategy is based upon the results of a comprehensive market study prepared by Benchmark Research Inc., an independent research firm ( www.go2benchmark.com ). The report, entitled "Comprehensive Assessment of the Biometrics and Financial Transaction Markets", assessed the application of biometric security identifiers in different financial transaction markets. Much of the industry data and market opportunities are presented in SBTI’s 10-K Report dated June 30, 2000 which can be accessed through the EDGAR database at www.FreeEdgar.com
The Benchmark Research report established that SBTI’s target markets are both extremely large and multifaceted. Considering that the proprietary biometric technology that SBTI is seeking to develop and commercialize is applicable to authentication issues common to all financial transactions (banking, credit card, debit cards, Internet purchases and transactions, e-commerce, e-retailers), then one can start to imaging the potential revenues that such products could generate.
PRESENTLY, THERE IS NO SINGLE BIOMETRIC SECURITY STANDARD…
Currently, no single technology or product has emerged as the “standard” biometric security solution that can be applied to the banking and financial transaction markets.
Security Biometrics business model is designed to accelerate the development of a global standard for secure transactions within the banking and financial transactions markets utilizing dynamic biometric systems. SBTI believes that Dynamic Gesture Recognition Technology, as patented by DSI Datotech, will be the leading solution.
Since 1996, DSI Datotech ( www.dato.com ) has been working on developing a proprietary input system for computers and electronic devices based on Gesture Recognition Technology, which is a unique method of human to machine communication that interprets hand gestures performed with any combination of fingers on a proprietary touch pad ( www.dato.com/gestures.html ). Sensors in the touchpad track the position and force of multiple finger contacts and process this information to interpret hand gestures from the user.
DSI’s innovative new GRT technology is solidly rooted in several patents and products (see www.dato.com/productsov.html ). Over the last five years, DSI has established a solid record of achieving "firsts" in the Gesture Recognition Technology field.
Security Biometrics has optioned the Exclusive Worldwide Rights to DSI Datotech’s GRT technology, and is aggressively working on getting at least one of the world’s largest banks / financial institutions to agree to sub-license this new authentication technology. If SBTI can conclusively demonstrate that its technology provides consumers and banks / credit card companies absolute assurance that the parties are who they claim to be, then Security Biometrics could gain a significant share of this market.
We believe that this situation presents Security Biometrics with an excellent opportunity to develop a comprehensive global standard that it would hold the exclusive worldwide license to.
Additionally, SBTI is also actively pursuing strategic alliances and acquisitions with other companies that own or are developing intellectual property related to biometric security solutions. This is a key area for investors to monitor, because SBTI is, to the best of our knowledge, the only firm in its industry presently executing such a strategy.
THE DATOTECH OPTION AGREEMENT….
On October 3rd, Security Biometrics and DSI Datotech, Inc. (CDNX: DSI) jointly announced the signing of an US$8 million Option Agreement to develop Gesture Recognition Technology (GRT) products specifically directed to the banking and financial transactions markets, and for SBTI to acquire the exclusive the Worldwide Master License for such products.
An initial payment of US$ 320,000 has been made by SBTI and Security Biometrics must pay DSI an additional US$3 million, at which point DSI will begin development of a commercial-prototype gesture recognition based technology system that will demonstrate beyond any reasonable doubt its potential for biometric security applications utilizing a PC-system based multi-touch gesture recognition.
DSI has committed to make this commercial GRT prototype available to SBTI within 12 months of receipt of the US$3 million payment. DSI’s GRT technology has been developed and patented – what remains to be done is scale-up the technology for commercial development.
The signing of the Option Agreement was a critical milestone for Security Biometrics, and the association with DSI has greatly strengthened SBTI’s credentials in the industry.
A lot of this has to do with the reputation of SBTI’s partner in the deal.
DSI has put together a management team with a reputation for delivering products and services on time. For example, DSI recently announced ( dato.com ) the appointment of Robert M. Egery as Director, President and Chief Operating Officer of DSI Datotech. Mr. Egery brings over 20 years of experience in the high technology sector to DSI. His previous positions include senior management postings at Honeywell/AlliedSignal (Vice-President Marketing & Contracts), Lockheed Martin (Vice-President Business Development) and most recently at Bombardier Aerospace where he was responsible for the company's Customer Training Business.
Lastly, DSI Datotech was prominently featured in an article on the Biometrics industry that appeared in the December 6th issue of the Financial Times ( globalarchive.ft.com )
REVENUES FOR THE FIRST TWO YEARS WILL COME FROM SUB-LICENSE AGREEMENTS
Utilizing its Option to Acquire the Worldwide Rights to DSI Datotech’s GRT technology, SBTI is presently marketing sub-licenses to “blue chip” companies active in the various financial sectors affected by transaction securities issues (banks, credit card companies, etc.). SBTI has identified and is actively pursuing eight different market segments with excellent sub-licensing potential.
A key corporate milestone for SBTI will be management's ability to attract the interest of one or more world-class financial or banking institutions, and contractually bind them with sub-license option agreements. Such an agreement would provide "critical mass" and demonstrate that the technology optioned from DSI is commercially viable.
SBTI advises us that such discussions are well-advanced with a major international banking group.
Security Biometrics’ November 2000 Business Plan indicates that each sub-license agreement would generate revenues on the order of a minimum of US$5 million per license (the Company’s revenue stream would begin once the first sub-license agreement is signed).
Over the next five years, Security Biometrics pro forma financial model assumes that the company would sign up, at a minimum, 46 international banks / financial institutions under sub-license agreements. In terms of profitability, SBTI anticipates breaking even in the third quarter following completion of the first sub-license agreement.
In parallel, over the short term SBTI expects to develop multiple revenue streams based on the commercialization of Gesture Recognition Technology, with cost-savings and transaction-based revenues (beginning in 2003 and 2004, respectively) eventually becoming the dominant source of income to the Company.
Although the initial emphasis is on the banking / financial services sectors, there are many more areas where SBTI’s Gesture Recognition Technology might be applied.
For example, once the biometric capabilities of Gesture Recognition Technology are fully developed, we would expect the major credit card companies (Visa, MasterCard, American Express, Diners Club and Discover) to sign on. In this case, SBTI would participate in profit-sharing generated from reductions in worldwide transaction losses associated with credit card and ATM fraud.
Here, Security Biometrics’ strategy would be to charge a very small percentage of the value of every credit card or bankcard transactions where its GRT biometric security system is employed. The scope of the market is huge (about US$1.4 trillion in Visa, American Express and MasterCard transactions in the United States), and this has enormous implications for SBTI should they be successful in commercializing their GRT products on a global scale.
It also seems logical to expect that the world’s major consumer banks (particularly those with large numbers of credit cards, ATM machines and debit cards) would also enter into sub-licensing deals with Security Biometrics.
SBTI HAS A STELLAR MANAGEMENT TEAM & ADVISORY BOARD
Over the last few months, Security Biometrics has put in place a management team with demonstrated expertise in banking and financial transactions, IP management, business development of software- and hardware-based technologies, and commercialization of such products.
Every member of SBTI’s Board of Directors and the Advisory Board has strong credentials (the recent appointee’s biographies can be viewed at sigbio.com ). More importantly, the Board members are taking an active role in the company to ensure that Security Biometrics successfully executes its business plan.
To illustrate, SBTI recently appointed The Honourable W. David Angus, Q.C. to the Board of Directors ( biz.yahoo.com ).
Since being elected to the Senate of Canada in 1993, Senator Angus has been a member of the Standing Senate Committee on "Banking, Trade and Commerce" and a member of the Standing Senate Committee on "Transport and Communications". The Senator’s vast experience in the Senate banking, trade & commerce committee dealings (especially in regards to the regulation of financial institutions), together with his knowledge if international insurance and banking industry, are of great strategic value to SBTI. Senator Angus has also practiced law with the law firm of Stikeman Elliott since 1963 where he is a senior partner and head of the Shipping and Insurance Department.
Another recent appointee, Kenneth P. Barr, also serves as President and CEO of Combined Telecom Inc. (CTI), a Canadian company offering Internet and data networking, wireless services and fully managed, scalable telecom solutions. CTI is a wholly-owned subsidiary of Tricaster Capital Corporation, a North American merchant bank specializing in telecommunications and e-business opportunities. Prior to that, Mr. Barr served as President - Business Communications Systems, for Lucent Technologies (Canada) for six years.
Allan S. Gibbins - President and C.E.O. of Hubbell Canada Inc., a subsidiary of NYSE-listed Hubbell Incorporated. Mr. Gibbins (formerly with ITT and Dupont) brings executive sales, marketing and distribution experience from a company that manufactures electrical products for industrial, commercial, residential and utility markets.
Notable members of SBTI’s Advisory Board include:
R. Craig Barton – the President of Barton Insurance Brokers, the largest insurance brokerage company in British Columbia. Mr. Barton’s company is part of TSE-listed Hub International Ltd., one of the largest and most-diversified financial services and insurance distributors in North America.
George Davis - a Barrister and Solicitor, specializing in lender liability litigation, asset protection and corporate reorganization in the United States and Canada, who’s clients include some of the largest domestic and international banks, as well as the Government of Canada.
SECURITY BIOMETRICS SHARE STRUCTURE & RECENT TRADING RANGE
Total Issued & Outstanding: 50,757,675 common shares
Public Float: Est’d @ 8 million
52-week Trading Range: US$1.19 by US$6.13
Last Trade (December 6, 2000): US$6.13
Investors should note that one of the terms of the US$8 million GRT Option Agreement signed on October 3rd between SBTI and DSI Datotech granted DSI a perpetual, non-dilutive, 20% common share interest in SBTI. Any such shares that might be issued to DSI upon exercise of the Option Agreement are not included in the 50.76 million common shares currently outstanding.
Security Biometrics is a fully-reporting company with the SEC. Corporate filings (including the 10-k Report for the year ending June 30, 2000) can be accessed through www.FreeEdgar.com.
SBTI management has stated that the Company intends to file for a NASDAQ Small Cap market listing within 60 days. The Company reports that it qualifies in all areas except for the number of registered shareholders (400); a program designed to broaden the shareholder base is now underway.
SBTI is presently working towards completing a US$5 million equity financing to fund GRT prototype work by DSI Datotech pursuant to the terms of the August 2000 Option Agreement. The company also reports that it is in advanced negotiations regarding a GRT sub-licensing agreement with a major international bank. |
