BIO-key International, Inc. (BKYI) Q2 2017 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the BIO-key International’s Second Quarter 2017 Conference Call. During the presentation, all participants will be in listen-only mode. After the speakers' remarks, you will be invited to participate in a question-and-answer session. As a reminder, ladies and gentlemen, this conference is being recorded today, August 15, 2017. [Operator Instructions] I would now like to turn the conference over to today's host, Scott Mahnken, BIO-key's Vice President of Marketing. You may begin, sir.

Good morning and thank you for joining us on today's call. With me this morning are Mike DePasquale, BIO-key's Chairman and Chief Executive Officer; and Ceci Welch, BIO-key's Chief Financial Officer. I'd like to remind everyone that today's conference call and webcast may contain forward-looking statements that are subject to certain risks and uncertainties that may cause actual results to differ materially from those projected on the basis of these statements. The words estimate, projects, intends, expects, believes, and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are made based on management's beliefs as well as assumptions made by and information currently available to management, pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. For a complete description of these and other risk factors that may affect the future performance of BIO-key International, see Risk Factors in the company's Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The company also undertakes no obligation to disclose any revision to these forward-looking statements to reflect events or circumstances after the date made. At this time, I'd like to turn the call over to Mike DePasquale. Mike?

Thank you, Scott. Good morning everyone and thank you for joining us today. We're encouraged by the progress of our financial and operational performance in Q2 that builds upon our solid start to 2017. Our total revenues grew by 113% to $900,000 not including a $600,000 professional services contract for a Fortune 500 telecommunications company that's deploying our biometric software to support their endpoint security implementation. We expect to fulfill that order over the next two quarters. Regarding Q2, our improved performance reflects the rising demand for secure biometric technology, as more organizations and individuals are realizing that fingerprint authentication is indeed the fastest most secured and most convenient option among various authentication modes. Rapid digitization is leading to increased cyber security incidence, which is why we continue to pursue a range of larger corporate and enterprise software opportunities. Primarily within highly regulated industries like healthcare, government financial services where they are protectively seeking robust solutions to protect and prevent unauthorized access to their sensitive data. I'll now walk you through a few noteworthy software and hardware deployment contracts that we announced recently that we believe indicate future revenue opportunity for BIO-key and emerging market trends. One such significant contract is with a global financial institution that selected our biometric ID solutions to secure their Windows 10 devices across 189 countries. The financial institution had recently upgraded all of its devices to Windows 10 operating system on a global basis. And they were seeking a secure biometric authentication solution that would be compatible with their newly upgraded solution. To support this, BIO-key provided an initial 5000 SideTouch compact fingerprint readers that been qualified and tested by Microsoft to support the biometrics signing capabilities of Windows Hello. Moving forward, this customer can integrate BIO-key's ID Director for Windows, which is a multi-factor single sign-on authentication software solution enabling secure authentication to a Windows domain application or website from any devices across the enterprise. This contract is a significant gain for BIO-key in many respects as it increases our global prominence and list of client references across the financial services sector where we are actively seeking opportunities to expand our footprint. One critical factor that gives BIO-key an edge over the competition is our ability to meet rigorous government compliance requirements. Government contractors and sub-contractors are constantly seeking solutions that will ensure they are in full compliance with the guideline set by the authorities. BIO-key's core VST algorithm earn top level accuracy scores from this after demonstrating top performance in key metrics amongst other commercially available fingerprint biometric products. As a result of this, we signed a global firearms manufacturer and Department of Defense government contractor that was required to meet the National Institute of Standards and Technology multi-factor compliance guidelines that impact all government contractors and subcontractors with an implementation deadline of December 31, 2017. BIO-key biometric authentication solutions met all of the requirements and were selected to deliver a secure, convenient and compliant biometric authentication solution to enable access to workstations and kiosks within their manufacturing facilities. Internationally, our software ID Director and SideSwipe Finger Scanners were selected by an Australian government agency to enable fingerprint authentication for their agency representatives countrywide. This contract marked our first client in Australia and it was facilitated by our new distribution partner Aquion a leading Australian IT products and services provider. BIO-key partnered with Aquion to establish a local channel to markets its biometric software and hardware solutions to enterprise customers and security resellers in Australia. And we look further to further our opportunity -- revenue opportunities in the Australian market. Asia-Pacific represents a strong market for BIO-key as well, and in particular for our line of hardware fingerprint readers. Our Hong Kong subsidiary continues to expand our presence in the region serving their growing demand for secure identification and authentication solutions. The introduction of TouchLock, our finger biometric and Bluetooth enabled padlocks open this up to an additional consumer market as well. We started distribution of TouchLock in the Asia-Pacific market in June and the sales momentum has been gaining significant traction. It is through the Hong Kong sales team that we successfully procured $158,000 worth of orders, initial orders I should say for TouchLock to distribution customers in Japan and in China and other parts of Asia. Additionally, the Hong Kong sales team open dialogs with some of the largest bicycle manufactures in both countries about bundling BIO-key's biometric locks with the purchase of their bicycles. We also signed a contract with the SmarTone a leading wireless telephone services provider in Hong Kong and Macau to support our sales and marketing reach in this large and dynamic market. The contract is part of a broader strategic sales and distribution partnership to offer TouchLock, padlocks to its online store and it's over 30 retail outlets. Additionally, we partnered with a leading Asian airline that will be distributing TouchLock, padlocks, which it will feature as an incentive item in its customer loyalty reward programs that includes 8 million members. The airline will also feature touch locks in an electronic direct mail promotion to its customers slated for this month. In Japan, we supplied DDS Inc., a leading Japanese security systems integrator with an initial 30,000 unit order of our SideSwipe fingerprint scanners to enable fingerprint biometric authentication of its custom applications. DDS which develops and delivers information security products to support the diverse online requirements of enterprise customers throughout Asia is the main system integrator for NTT, Nippon Telephone and Telegraph Group, Japan's largest telecom governmental organization and corporate customer. Having DDS as a major BIO-key OEM customer in Japan is a great strike for BIO-key and we look forward to working closely with them for now and future revenue opportunities. In general, hardware solution sales continue to be a bright spot in our second quarter performance as we achieved solid sales increases for our SideSwipe, SideTouch and EcoID sales. Asia-Pacific represents one of the world's largest markets for physical security and we are pleased to see the spike in demand for our enterprise and consumer hardware solutions and we expect this area to be an important contributor to second half results. Overall, we feel confident that our subsidiary and the strategic partnerships we forge with leading national distributors will significantly expand our presence in the region. Domestically, we continue to manage and oversee expansion of our strategic distribution channel partners, including with Microsoft and Amazon to ensure that we are getting the best visibility and prominence from our distribution partners. We are currently in dialog with a leading television shopping network that reaches nearly 100 million households to develop BIO-key product based programming. And we are also engaged in preliminary discussions with a number of big box and specialty retailers regarding stocking our latest line of biometric locks. We believe this broad visibility will present both an excellent sales opportunity as well as a powerful platform to build business and consumer awareness and understanding of the benefits and value of our solutions. Looking ahead, we feel optimistic about BIO-key's future revenue prospects for both our hardware and our software line of products. The combination of comprehensive software and hardware offerings, with exposure to multiple biometric end-markets and a broad customer base of OEMs and system integrators should deliver additional revenue on multiple branch. Also in May, we were awarded a new patent for the utilization of biometric data. The patent method enables BIO-key and its licensees to leverage existing small area sensors to capture substantially more fingerprint service area leading to a higher degree of accuracy when performing a match. As you know, better accuracy leads to superior end user experiences and for the first time provides a means for higher security fingerprint authentications scenarios using small area sensors. BIO-key’s innovation will allow device manufacturers, application creators, enterprises and most importantly end users to place more trust in the security of a smaller fingerprint sensor. Finally, we are excited to have successfully up listed to the NASDAQ. Beyond providing a more visible, accessible and liquid market for our common stock, we believe the visibility and credibility provided by a NASDAQ listing should also provide substantial sales and marketing support by raising the visibility of our solutions and brand before perspective customers and partners on a global basis. BIO-key also secured a 36 month, $5 million common stock purchase agreement from an accredited institutional investor, we at our discretion are able to sell up to a total of $5 million of common stock at a floor price of $3.60 per share provided certain conditions to meet include even company stock trading in excess of $3.83 per share. In summary, where we cannot predict with certainty, the outlook on a near-term quarterly basis, we remain highly confident that we have the right technology and focus to expand the growth of our hardware and software offerings. As a result of our strong first half performance and our confidence in the remainder of the year, we are maintaining our full year guidance within the range of $6 million to $12 million. With those updates, I would like to invite Ceci to review our Q2 2017 financial performance. Ceci?

Thank you, Mike. Our Q2 ‘17 total revenue increased by 113% to $886,881 compared to $415,814 in Q2 of 2016. The increase in revenue was due to an expanded customer base for our hardware products. The first half of 2017 sales improved to $2.4 million from $846,000 in the prior period. As mentioned previously this revenue does not reflect a $600,000 professional service contract we signed during the quarter, which will be realized upon delivery beginning in the second half of this year. Q2 hardware sales increased to $345,000 or 281% as a result of increase in new and existing customer deployments of our fingerprint readers. Additionally, during the second quarter we shipped our first order of new line of biometric locks in the amount of $158,000. License revenue also increased $55,000 or 76%, while service revenues declined by $86,000 or 39% due to non-renewal of two maintenance contract. Gross margin decreased to 10% in the second quarter 2017 from 67.2% in the second quarter of ‘16 due to higher cost of sales associated with increased hardware revenue, as well as $388,000 of non-cash amortization related to Finger Q license, a portfolio, mobile and online payment security software technology. If we remove the non-cash amortization, our gross margin would have been 54%. Q2 ‘17 operating expenses increased to $1.8 million from $1.6 million due to an increase of approximately $322 [ph] in SG&A expenses, primarily related to our Hong Kong subsidiary commitment fees and commission offset by a decline of $117,000 in research, development and engineering cost. BIO-key’s Q2 net loss was $1.7 million or $0.30 per share after the preferred dividends as compared to $1.4 million or $0.29 per share after preferred dividend in Q2 of ‘16. The slightly higher loss is primarily due to the suppression in gross margin as discussed by Mike. For the six months period ended June 30, 2017, BIO-key's net loss was $3.1 million or $0.56 per share after preferred dividends versus $2.5 million or $0.53 per share after preferred dividends of the first half of 2016. Per share results in Q2 of '17 and Q2 '16 are based on weighted average of 6.4 million and 5.5 million basic shares outstanding respectively, reflecting the impact of the company's 1 for 12 reverse split effective December 2016. In summary, while we cannot predict the uncertainty of the outlook for the near-term quarterly basis, we remain confident that we have the right technology to focus to expand the growth of our hardware and software offerings. As a result of our strong first half performance we are confident in the remainder of the year, and we are maintaining our full year guidance in the range of $6 million to $12 million. With those updates -- as Mike alluded BIO-key is reiterating the full year revenue guidance of $6 million to $12 million with our estimate ranging of gross margin of 53% to 70% depending on the mix of hardware and software sales. Our liquidity and other resources at June 30, 2017, total cash and cash equivalents receivables was approximately $1.8 million as compared to $2.6 million at December 31, 2016. On May 3, 2017 we raised $1 million through the sale of common stock price at $3.60 per share and a private placement with an existing investor and member of our Board. In the near-term, BIO-key expects to receive payment of approximately $450,000 pursuant to a long-term receivable. While the receivable has written down to reflect delays in the payment. BIO-key continues to believe the receivable will prove to be fully recoverable, and we therefore do not expect any further right downs. And now operator, let's start with questions and answers session.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Brian Kinstlinger of Maxim Group. Please go ahead.

Hi, good morning guys.

Hi, good morning, Brian.

So the first question I have, you highlighted a handful of nice orders. I'm curious was there a material contribution of revenue from these customers in 2Q or is it a second half event? And then specifically the 30,000 systems delivered, they are going to be delivered to DDS, is that a 3Q event or what quarter do you anticipate that happening?

Okay. So all of the orders that I went through generated revenue for us in the second quarter. So a number of them were initial orders. So starting our relationship, but they all generated revenue in the second quarter. The DDS shipment took place both between the first and second quarter. So they have 30,000 units in their inventory that they are selling now to their customers they'll likely reorder as we get to the end of the year. But all of that product was delivered in the first half.

Okay. And then you mentioned the initial orders for TouchLock. Do you expect to see a material ramp in the second half of the year, maybe third quarter or fourth quarter or is this more 2018 event when you hit reasonable scale there?

No, we actually expect significant ramp in the second half, and some of that including the third quarter and obviously into the fourth quarter. If you go to our website today, just last evening we posted up a new video that a promotional video that we are utilizing. Now as I indicated in my remarks, with our distribution and ultimately our retail platform customers. So this is a product set that we expect to generate a substantial revenue with in the second half.

Great. And in fact I saw the statement and you may have mentioned in your remarks too about the national TV shopping network. I'm just curious are there additional plans you have building brand awareness which seems to be critical to the success of substantial growth in the coming year. So maybe you can comment on that?

Absolutely. In fact, Scott Mahnken our VP of Marketing is sitting next to me and he is smiling because we just came out of a Board Meeting last week prior to our NASDAQ event and that is a very hot topic for us including all types of digital marketing, social marketing, including perhaps agency marketing to raise our brand awareness. We think that the television shopping network opportunity really gets us to a different level. And bundling our finger print scanner products with the sale of PCs, laptops, notebooks, tablet computers, is really a big opportunity and they are as enthused about it as we are. So that will take place in the September timeframe, so our initial televised broadcast will be in September. So we will keep everybody posted on that obviously as it emerges.

Great. And then the professional services contract with the telecom customer has that contract already started and it will be more heavily weighted in one quarter or the other in the second half of the year.

It actually started the 1st of July or the 4th of July, I should say the 5th of July and that will generate revenue equally across the two quarters. So yes that is more important than $600,000 in revenue for us is that this customer is a very large subscription software customer for us. And now they are putting support and development space in BIO-key, we are becoming their development arm to integrate our biometric technology across all of their applications in their - company wide. So this is just kind of an extension, as you know when you see our maintenance revenue kind of declining, as you sell subscriptions, remember they don’t include maintenance, right, it’s all bundled, the customers is in essence renting or subscribing to your software, so they pay one fee. So this is really important for us because we believe that most of the customers we’re doing business with can use help, professional services help, to get them more quickly integrated as they acquire our software. So that’s why that contract is material for us.

Got you. And then finally can you talk about the large pilots, how long do you expect the average pilot to last and what are the obstacles left in some of the more advanced pilots, is it still working through the pilot, is it budgeting, maybe take us through that sales process. Thanks.

And Brian it’s all over the math. It really depends on the customer, some of the larger ones it's interesting, they’ll start small and then they will ramp up. The one large one that we have done with the telecom customer, we are working with them for eight years and we have done business across that time, but they get to a certain point, they have a compelling business reason and then they move forward. Here is what I am seeing and I think you could probably validate this just by your own -- it just with what you read and see in the media. There is a lot of pressure right now at the senior levels in companies to protect against cyber security and inactivity meaning doing nothing puts the company at tremendous risks. So any company that deals with consumer information has huge exposure, if they don’t take the steps to secure their infrastructure and that’s not only from external attack, but it’s also from internal attack and when I say attack, I mean internal malfeasance. So that’s what I am seeing right now, I am seeing a heightened awareness and a deeper concern that something has to be done and it needs to be cost effective, it needs to be straight forward and it needs to be supported across the infrastructure. The fact that we have got that in a Microsoft support and we are really closely partnered with them, gives us a really good competitive advantage and that’s how we won the international bank deal, which got us a 5,000 unit order quite quickly in fact that deal probably went start to finish in 90 days.

Okay, thanks so much.

You’re welcome.

The next question comes from [Frank Wolfley] [ph], a Retail Investor. Please go ahead.

Hey, Mike. Touch upon the TouchLock, do you guys anticipate being on Amazon any time soon for that. And then also do you have a timeframe for when you may get it into the U.S., I think you talked about the big box stores. And then, just a quick second question, you did mentioned a lot of large deals that have closed, the global financial institution, the Australian deal, the firearms deal and decent amount of the revenues already been taken, but it just seem like with -- for Q2 maybe there should be a little more revenue given the apparent size of some of these deals. So I was wondering if you can touch upon that as well. Thanks.

Okay, so let me start with the beginning on TouchLock. We are in the process of sampling and meeting with the distribution in retail channels to get the product into the consumer venue certainly in the next few months. So, we are production ready meaning that we are now producing a volume product, so it is going to be available and you will see it available in the next 30 to 60 days in different channels and venues. Whether we put the products up on Amazon as we do today with our finger scanners or not, we’ve not made the final decision, it really depends on the pickup from the other retail channels. So for example if it’s readily available in the retail venue like and I am always making examples here Wall-Mart or Kmart or Best Buy or Staples and other may make sense for us to have end users fulfill through those channels and not directly through Amazon. Or we may move to other side of Amazon, which is a stocking distribution arrangement. And so we are considering all of those things right now, but the idea and the goal here is to get these products in volume, out in a significant way in front of consumers in the next couple of months. So I hope that answers the question.

Yes, thanks for that. And also can you touch upon some of large deals and there seems like even more revenue than the size…

Yes, I will touch on that now. So, again on the first question, I hope I satisfied your requirements. The second piece…

Oh, you did. Thanks.

Yes, the second piece, for sure those are importing contracts because they’re approved and Barbara Rivera who is our COO was not on the call because she had committed business travel that really couldn’t be changed. And so, she would have gone into and likely discussed our new sales model. These new wins were really important for us because they came, they were -- the leads we generated very quickly and they closed reasonably quickly. They started, some of them were small some of them were medium size deals, so the representative of what I think we can do more in fact may be by factors three or four as we move forward, we did get again a large order that we couldn’t fulfill because it’s a professional services order that we have to deliver over time and recognize revenue over time. But quite frankly I think our first half was good, it was strong, we’d love it to be stronger, we always want to do more. But I am not really disappointed at where we are at the stage. More importantly I am encouraged by our pipeline and the number of deals we have in the pipeline and the size they are all over the math, some are very, very large, some are reasonably middle size in medium companies some are small. But aggregated all together and we are confident in achieving our guidance objective of $6 million to $12 million.

Alright, thank you.

[Operator Instructions] The next question comes from Dan Kemhis [ph], a Retail Investor. Please go ahead.

Hi. I am little confused about your emergence, assuming your hardware sales continue in these rangers, how do we align 10% margins. Well I guess let me put it this way, if -- did you need about $2.6 million to break even in this quarter, is that how I am reading the financials to came out?

So, I am going to let Ceci get into any detail if she would so desire, but what you see is especially in the second quarter we had a number of non-cash items that rolled in and to some degree crowded our gross margin results. And so that’s I think the primary scenario, we are highly confident that we will be within our guidance range. In fact, I think we revised the guidance range in the first quarter to make sure that we included the amortization expense that we begin to write down at the beginning of the year. So we're pretty confident in our gross margin range between 53% and 70% and that really depends on the mix of hardware and software sales. So in a quarter where you have license revenue in the million plus range, obviously those gross margins are going to be significantly higher. So you got to really look at this on a blended basis and on a mix basis and not just kind of a snapshot. And especially again in the second quarter because we had those extraneous items. But if you have any other or Ceci I don't know if you have anything to add in that regard, but that's the best answer I can give at this point.

Well I mean on the first quarter, I remember we went over this. And I think what we were told was that the amortization was included in the 53% to 70% margin. That was my understanding I mean and so what I don't get is how we're down at 10% unless the margins on the hardware are pretty low. So I guess that's the basic question. And still it looks like is it true that you would need about $2.6 million to breakeven for the quarter I guess, is that correct assumption?

So, Dan this is Ceci, just let me clarify just for the first half of this year we've had over $1.5 million of non-cash expenses that have flowed through there and cost to good sold it’s been close to $730,000 of the amortization cost. And per quarter at $390,000 at the total if we had removed that we've been 54% now just a small order of software license revenue to bring that up would have made that 54%. So it's again as we keep saying it's totally the mix that is dating what we do when those big license orders when they come in make a big difference also the shift of hardware et cetera and the total volume obviously too.

Okay, let me look at this. I mean I guess like what you're saying, but I think what you're saying is that -- what I'm worried is that before we get started the pricing on the hardware is already sort of commodity priced. But how many units did you sell -- how many units we're delivered I guess or paid for out of the 30,000 in this quarter can you just tell me in that?

First of all I think I said twice that in particular DDS was just one customer that took 30,000 units over the course of the first half. So it was the first of the second quarter I did say that. The 5,000 units for the banking customer were shipped in the second quarter, and of course we have thousands of units that get shipped across our other channels including Amazon and other distribution means you can buy our products on dell.com, jet.com, walmart.com and we fulfill those orders through DNH our distribution partner. The margins on our hardware products are very good, they have not changed they have not gotten worse. I think what you're seeing is the reality of non-cash expenses and write downs also being taken into consideration. And so yes, we did certainly adjust our margins to take into consideration the amortization expense in the first quarter same in the second quarter. But I think again, you're going to have to look at this. Our revenue wasn't exactly stellar in the second quarter total revenue $900,000 of total revenue had been let's say even in the $1.5 million assuming we had been able to turn that $600,000 order would have been look at a whole different dynamic here. So I think it's the only way to look at it. Today just you can't micro -- we just don't have enough history and we don't have enough -- we've not had in my opinion enough revenue to really determine a predictable fixed margin that will be sustainable overtime, we’re just not there yet.

The next question comes from Mathew Chambers [ph], Private Investor. Please go ahead.

Hi, Mike. A question about your online sales growth with Amazon and that sort of thing, I guess in first quarter you mentioned that it was going very, very well month-to--month, week-to-week even, has that smoothed out or you already have any -- what's it looking right now?

I would say, the business is still strong, it’s episodal it’s interesting, one day you will get a few unit sold, this is finger scanners, we are not selling our other products on Amazon. So you will get a few units sold and then the next day it will be 25 or 30. So it goes up and down on Amazon. In the context of distribution, which supports the other online e-tailers [ph] I just mentioned, dell.com, wallmart.com, jet.com B&H Photo. That business is also going quite well and very strong, our business has grown year-over-year, we began selling the finger scanners in August of 2016 and our business again when you look at it on a daily snapshot basis or otherwise is up about anywhere from 100% to 200%. So the business is definitely growing. And we are looking at other channels, as I mentioned the home shopping, television type channel which we think will also ramp volume and create additional visibility for us. But we also have additional new products that we’ll be launching into that channel, which I think will make it more exciting and they will include not only new hardware products, but also some of these software items as well.

Okay, that’s all I’ve got. Thanks so much.

And we have a follow up from Brian Kinstlinger of Maxim Group. Please go ahead.

Great, thanks. I just want to make sure, I understand and I think I do just so you can clarify that for the year you expect gross margin to be 53% to 70% in a given quarter and that the cost of software license is relatively fixed, doesn’t cost you a lot more to have incremental software license. And so as revenue scale the margin will scale significantly, is that right?

That is accurate.

That’s all. Thank you.

You’re welcome.

[Operator Instructions]. And we have a follow up from Dan Chamis [ph], Retail Investor. Please go ahead.

Hey much of -- you mentioned that you’re going to be getting the $450,000 or part of the receivable. When do you expect to get that, is that third quarter, fourth quarter?

Third quarter.

Okay. And I think you guys mentioned that you actually paid the preferreds this quarter, is that true?

No, I believe Ceci said, we accrued the dividends.

Okay. I have a technical question, IDEX announced refined matching algorithm for smart cards, do you expect them to provide an enrollment capability as well, is there an opportunity for BIO-key there?

That’s a great question. There is an opportunity. The interesting thing, they have a -- we haven’t seen it yet, but we will shortly a really, really good from what we hear embedded algorithm, low power runs in a very small space that again would accommodate on a card. So all good, they’ve develop that, that’s not an area of investment that we wanted to make, we don’t want to sell an algorithm for an $0.125 or $0.25 of the penny. But keep in mind that self-enrolment for a credit card may not necessarily be very effective from a security perspective. So, mass enrollment might need for example that you go to the branch or you go to some central location to enroll in a master system and then your template is downloaded to that particular card. So, there is certainly is opportunity for BIO-key there. And as you know we have a very strong partnership with IDEX we buy their fingerprint sensors they’re embedded in our finger scanners not all of them, but some of them. And also we're using them in our locks today. So, we've a very strong bifurcated relationship.

All right. One more question on Microsoft here. How long would you say before web based biometric capability becomes native to Microsoft's active director I mean any feel for that?

Well, we are selling it pervasively really, it's something that customers demand and want, they don't device only authentication, sole device only authentication i.e. enrolling on every single device with no control is I mean it's okay for certain applications. But most enterprises have again if they deal with consumers or any sensitive information want to be sure that they have a centrally managed identification or authentication schema and that's what we provide. That's the level above the Windows Hello that we're selling to Microsoft customers especially they are upgrading to Windows 10.

This concludes our question-and-answer session. I would like to turn the conference back over to Mike DePasquale for any closing remarks.

Great, thank you everyone. We look forward to updating you on our business progress and outlook on our next call. And we hope to see some of you at the Sidoti Fall Conference in New York City in September. We will put out an announcement with further details regarding the time of our presentation and availability for meetings. Again, thank you, thank you for your interest in BIO-key and for your participation in today's call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.