here it is...
LK&Z is pleased to initiate coverage of Security Biometrics Inc.(SBTI:OTCBB) (www.sigbio.com ) The company has solidly positioned itself as a key provider of biometric security interfaces offering a wide array of "end to end" solutions targeted specifically to the multi trillion dollar banking and financial transaction market. For risk investors this represents an early entry opportunity to participate in an exceptional growth company with very high leverage potential. SBTI's Option to DIS Datotech's (DSI.CDNX) licensed technology is destined to revolutionize the authentication issues facing financial institutions and e-commerce transaction providers worldwide. SBTI's management, members of the Board of Directors and Advisory Board, have the experience and motivation to execute the exciting business plan
Management reports that sublicense discussions with one of the world's largest financial institutions have advanced well beyond the first phase.
The Exclusive Worldwide Master License Option agreement
On October 3rd 2000 SBTI and DSI Datotech (www.dato.com ) jointly announced the signing of an US$ 8 Million Option agreement to develop Gesture Recognition Technology Products (GRT) specifically directed to the Banking and Financial Transactions market and for SBTI to acquire the exclusive the Worldwide Master license for such Products. The initial payment of US$ 320'000 has been made by SBTI and the Option agreement details a further payment schedule which is based on DSI Datotech delivering within a certain timeframe GRT prototypes, demonstrating "beyond any reasonable doubt" multi touch gesture recognition and individual gesture patterns utilizing a PC system. SBTI is under no obligation to exercise the Option Agreement. The signing of the Option agreement puts SBTI on the leading edge of the security and authentication providers in the world. DSI's technology is solidly rooted in a multitude of patents. DSI shows a solid record of achieving "firsts" in Gesture Recognition Technology field.
The market
In anticipation of the agreement, SBTI commissioned a Market Research Report from Benchmark Research Inc. of Vancouver, (www.go2benchmark.com ) to assess the application of biometrics identifiers in different financial transaction markets. This detailed report, entitled "Comprehensive Assessment of the Biometrics and Financial Transaction Markets", is rooted in the a ground braking Industry report "Overview of the Biometrics Markets" authored by Benchmark earlier this year. At LK&Z we reviewed the full report and we have satisfied ourselves that the SBTI target markets are both extremely large and multifaceted. Considering that this proprietary technology is directed and 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 revenue / profit scope of SBTI.
The Business and Revenue model
SBTI, as the holder of the Option to acquire the Worldwide Master license, is in the business of marketing sub-licenses to blue chip companies in the various financial sectors affected by transaction securities issues, i.e. Banks, Credit card companies etc. At this early stage, the company is only a few months in existence, the key to success lays in management's ability to attract the interest of a world-class financial institution and contractually bind it with a sub-license Option agreement. Such an agreement would provide "critical mass" and serve as an indication that the optioned technology is both needed and commercially viable. As indicated such discussions are already in full swing and are expected to lead to a letter of intent shortly. The desired contractual agreement with such a partner would anticipate an equity stake in SBTI and a transaction fee based revenue stream. At present SBTI has identified approx. eight different market segments with similar sub-licensing potential. After thorough discussions with management, we are impressed by the significant personal relationship investment management has in potential sub-license prospects. It is with this in mind that we believe the Business model is solid and it's near term goal achievable.
Risks
Given the short operational history and the prospective risk of the technology involved, investors must accept significant risks in the near term. Until SBTI has signed its first sub-license client, uncertainty over technological validity and market acceptance will prevail. However, such risk is not uncommon in early start up situations, and is at the very heart of an explosive leverage play.
The Company
Security Biometrics Inc. is a Vancouver, BC, Canada, based company registered in Nevada, USA. The company trades at the OTC:NQB Pink Sheet under the symbol SBTI. Common shares issued and outstanding is 5.7 Million, 52 Million fully diluted with 42 Million shares being restricted (144 paper and pooled) from trading, leaving an actual float of 8.75 Million. There are approx. 48 shareholders. Since its transaction in August 2000 (acquisition of a shell "Great Bear Investments" GBIV:OTC and subsequent 4:1 roll forward split) shares have been trading in the US$ 5 to $ 6 range and low volumes. Readers are encouraged to review company particulars and press releases by visiting the web site of DSI Datotech dato.com and SBTI sigbio.com
Management
Mr. George Gould, Acting President began his career in the Financial Services Industry in 1961. In 1973 he entered the Banking business and held several senior management positions for the next 27 years with the Canadian unit of HSBC, one of the world's largest Financial Services Institutions. Mr Gould is currently the President of GT Financing and Insurance Specialists Ltd.
Board of Directors
The Honourable W. David Angus, Q.C. has practiced law with the law firm of Stikeman Elliott since 1963. He was appointed Queens Counsel in December 1984. He is a senior partner and head of the Shipping and Insurance Department in the Montreal office. Senator Angus was summoned to the Senate of Canada in 1993. Senator Angus is a member of the Standing Senate Committee on "Banking, Trade and Commerce" and a member of the Standing Senate Committee on "Transport and Communications". Senator Angus is a Member of the Montreal, Quebec and Canadian Bar Associations. He is Honourary Life Member of the Canadian Maritime Law Association, of which he was the President from 1989 to 1992. Senator Angus also serves as a Governor of the International Maritime Law Institute, Malta. He is an Associate Member and Past Chairman of the Association of Average Adjusters of Canada. He is also an Associate Member of the U.K., and U.S. Associations of Average Adjusters and of the Canadian Board of Marine Underwriters. Senator Angus participates actively in community affairs. To name only a few: He is President of St. Andrew's Presbyterian Homes Foundation; he is immediate Past Chairman of the Montreal General Hospital and is now a member of the Board of the McGill University Health Centre; and he remains on the Board of Directors of the Montreal General Hospital Corporation and Foundation. Senator Angus serves on the Board of Directors of Air Canada, AON Reed Stenhouse Inc, Eastern Canada Towing Limited, Eastern Canadian Tug Owners Association, Madeg Holdings Inc, Nymox Pharmaceutical Corporation (non-executive Chairman) Systech Retail Systems Inc, AutoSkill International Inc. and 3DVisit.com Inc. (non-executive Chairman).
Mr. Allan Gibbins, was appointed President and C.E.O. of Hubbell Canada Inc., a subsidiary of Hubbell Incorporated (HUB-A, HUB-B:NYSE) with a market cap of US$1.7 Billion, in 1993. Hubbell Canada manufacturers premium electrical products for industrial, commercial, residential and utility markets with sales exceeding $100 Million annually representing multi-divisional product lines sold through electrical distribution, warehouse, retail and com-data channels as well as to provincially owned utilities. Educated at Concordia University in Montreal, Canada (B.Sc. Chemistry with Honours), Mr. Gibbins is an active member of the Canadian Manufacturer Association, the Toronto Board of Trade and Presidents of Entrepreneurial Organization. He serves as a Board member of the Canadian Electro Federation and as a Board member of the Ontario Electrical League.
Mr. Kenneth P. Barr, Mr. Ken Barr was recently appointed President and CEO of Combined Telecom Inc. (CTI). CTI is a Canadian facilities-based, national competitive local exchange carrier offering local network access, Internet and data networking, enhanced messaging, 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, Ken Barr was the Chief Operating Officer of Cygnal Technologies, a leading provider of communications services across Canada. Mr. Barr also served as President - Business Communications Systems, for Lucent Technologies, Canada for six years. At that time, he was also the Executive Vice-President and Chief Operating Officer of the Canadian holding company for Lucent Technologies Canada. Mr. Ken Barr also served as Vice President of TTS and as Nortel's Director of Marketing. Mr. Ken Barr also serves on the Advisory Board of DSI Datotech Systems Inc. of Vancouver, BC., a firm dedicated to the development of a proprietary input system for computers and electronic devices based on Gesture Recognition Technology (GRT). This innovative new technology interprets hand gestures performed on an intelligent touch pad, and is seen by industry visionaries as a necessary step in improving the human-machine interface
Advisory Board
Mr George W. Lenson was an officer with the Royal Canadian Mounted Police for 25 years, and recently retired as an inspector. He brings to the advisory board extensive experience in the field of forensic identification and biometric applications. He is an expert in photography, physical and footware evidence, and pioneered fingerprint detection using the 7,8 Benzo-flavone process. Mr Lensen was responsible for all of the Crime Stopper and Crime Prevention Programs in the Province of British Columbia. He holds a Masters of Business Administration in International Management and is currently the President of Smart Tips Solutions, and Chief Executive Officer of TRS International.
Mr. R. Craig Barton is President, CEO, and COO of Barton Insurance Brokers Ltd. He began his career in the firm in 1973. After he became President in 1986, he developed the firm into the largest insurance brokerage company in British Columbia, with over 50 locations throughout the province. In 1999, the Barton Insurance Brokers joined Hub International Ltd, a publicly traded company on the Toronto Stock Exchange. Hub International has rapidly grown to be one of the largest and most diverse insurance and financial services distributors in North America. Mr Barton is currently a Vice-President and Director of Hub International Ltd.
Mr. George Davis, is a Barrister and Solicitor, specializing in lender liability litigation, asset protection through living estate planning, and corporate reorganization in Canada and the USA. He has been in the legal profession since 1971, and has been a Single Practitioner at George Davis & Company Law Corporation since 1989. Mr. Davis' clients include some of the largest domestic and international banks, and the Government of Canada. He is also a consultant of bankruptcy law and Examiner of Trustees in Bankruptcy.
The Opportunity
Introducing and implementing a revolutionary idea into the notoriously slow to react banking sector is no small feat for a small company. However, the explosion of personal and E-Commerce financial transactions by electronic means has created immediate and urgent requirements for an unequivocal authentication protocol of all the transaction parties involved. Without it this "electronic revolution" will stall and curb the future profit potential of financial transaction providers (Banks, Credit card companies etc.). Are Retina, Finger and Palm scans going to win the battle for authentication supremacy? We don't think so, as they are intrusive and attached with a "criminal" stigma. We know that a simple Pin Number combinations and signatures are just no longer sufficient in the electronic age of Internet purchases and transactions. We agree with SBTI's assessment that Dynamic Gesture Recognition Technology, as patented by DSI Datotech, will be in the solution forefront. We believe that the market driver for acquiring a technology like SBTI's GRT, by a financial institution is only in a minor way driven by the prevention of fraud. It has much more to do with world supremacy in authentication technology, giving any consumer and transaction provider the absolute assurance that the parties are who they claim to be. Any Bank and Credit card company that can claim and demonstrate this will gain significant market share.
LK&Z Opinion
At this early stage SBTI represents a high risk / high rewards opportunity. In anticipation of a sub license agreement being signed with a significant Banking Institution the shares are at present fully valued. Investors are encouraged to remain alert to sub license announcements at which time the stock has the potential to surge well beyond its range of trading. At this time we recommend accumulation of the stock. |
