[LOGO] DBI PRESS RELEASE
Digital Biometrics, Inc.
DBI Contact:
Bob Gallagher, 952-932-0888
FOR IMMEDIATE RELEASE
DIGITAL BIOMETRICS ANNOUNCES SPECIAL SHAREHOLDER MEETING
TO VOTE ON VISIONICS MERGER
COMPANY PROVIDES GUIDANCE FOR FISCAL YEAR 2001
MINNETONKA, MN - DEC. 27, 2000 - Digital Biometrics, Inc. (DBI) (Nasdaq: DBII),
the leader in biometric systems engineering and connectivity, announced today
that its proxy and registration statement on its proposed merger with Visionics
Corporation has been declared effective by the Securities and Exchange
Commission (SEC). Proxy statements will be mailed by January 8, 2001 to all
shareholders of record as of December 29, 2000. The company has called a special
meeting of its shareholders on February 15, 2001 to approve the proposed merger.
John J. Metil, President of Digital Biometrics, commented, "We are delighted
that the SEC registration process is complete and we are now able to ask our
shareholders to approve the merger. This transaction will create a company at
the forefront of the emerging biometrics technology business with
industry-leading product and market breadth, particularly in the commercial
applications of biometrics. We have an outstanding opportunity to build
shareholder value by leveraging Visionics' leadership in facial recognition
technology and commercial market penetration with DBI's strengths in
engineering, manufacturing, integration and infrastructure. We eagerly
anticipate the completion of the merger so that we can move forward together."
Dr. Joseph J. Atick, CEO of Visionics, said, "With the SEC registration behind
us, we now have a clearly defined timeline and significant momentum for a speedy
completion of the merger. We continue to be delighted by the merger and totally
committed to our partnership with DBI. We very much look forward to closing the
transaction at the special meeting in February and to working together as one
merged company to deliver on the significant opportunities ahead and to maximize
shareholder value."
In a separate matter, effective for the first quarter ended December 31, 2000,
DBI indicated it will conform its revenue recognition policy to the Securities
and Exchange Commission (SEC) Staff Accounting Bulletin No. 101 " Revenue
Recognition in Financial Statements" (SAB 101). Historically, the Company has
recognized revenue upon shipment of its products to customers. Under SAB 101,
some revenue recognition must be deferred until installation, customer
acceptance or payment. As previously discussed in the Company's Form 10-K for
the year-ended September 30, 2000, the Company will reflect a cumulative effect
of change in accounting principle of
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$1.4 million or $.09 per share. This one-time non-cash charge effectively defers
previously recognized revenue on approximately $3.9 million of shipments.
On a post-SAB 101 basis, the Company estimates that the first quarter ending
December 31, 2000 will show sales between $6.4 and $6.6 million ($4.3 to $4.5
million on a pre-SAB 101 basis) and a loss, excluding non-recurring charges and
the cumulative effect of SAB 101, of between $.00 and $.02 per share ($.04 to
$.06 on a pre-SAB 101 basis). The Company also noted that it expects record
sales for the full fiscal year.
In commenting about DBI's first quarter, Metil said, "As we have remarked many
times in the past, DBI has historically experienced market volatility from
quarter to quarter. Through our proposed merger, we are taking steps to expand
and diversify our targeted markets to moderate that volatility and facilitate
strong future quarters. We are focusing on strategic investments, which will
broaden our revenue opportunities through expansion of our product offerings,
growth of the developer and partner networks and the addition of new target
markets. We are confident that these steps will lead to strong growth in
revenues and operating earnings in the future."
Robert F. Gallagher, CFO of DBI, elaborated, "We anticipate continued
year-over-year revenue growth for the full year of Fiscal 2001. Assuming the
merger is approved, we expect year-over-year revenue growth between fifteen and
twenty-five percent depending on the timing of orders. From a bottom-line
perspective, Fiscal 2001 will be a year of investing in the opportunities the
merger provides us so that we can ultimately realize the full value for our
shareholders that the merger can give us. We will be investing in areas we are
confident will lead to accelerated growth in the future. While this may impact
us in the short-term, we expect to return to profitability in Fiscal 2002 on
stronger, broader and less volatile revenues."
For the purpose of discussing the special shareholder meeting and providing
additional information regarding anticipated Q1 and fiscal year results, DBI
will be holding a conference call on December 28, 2000 at 8:00 a.m. CST. The
call may be accessed via Webcast on the DBI Web site or by dialing 877-679-9045
in the U.S. or 952-556-2802 internationally. The presentation will be available
for seven days via Webcast on the DBI Web site and dial-in at 800-615-3210 in
the U.S. or 703-326-3020 internationally, using the passcode 4872119.
ABOUT DIGITAL BIOMETRICS
Digital Biometrics (http://www.digitalbiometrics.com) is the leader in biometric
systems engineering and connectivity. The company employs the latest in
biometric identification technology and related management systems to enable
commercial employers and government agencies to check for criminal records among
applicants for employment or permits, and to help law enforcement identify and
track criminals. DBI's offerings include computer-based fingerprinting systems,
photographic systems, multi-media data storage and communications servers, and
the systems integration and software development services required to implement
identification management systems for its customers. The company's newest
system, the IBIS system for remote
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identification, is the only mobile, hand-held system to capture fingerprint and
photo images remotely, returning identification information to the user
wirelessly and in real-time.
Filings with the SEC
Digital Biometrics has filed a Registration Statement on Form S-4 with the SEC,
and the SEC has declared the Registration Statement effective. The Form S-4
contains a proxy statement/prospectus and other documents. The Form S-4 contains
important information about Digital Biometrics, Visionics Corporation, the
transaction and related matters. Investors and stockholders should read it
carefully, together with the other documents filed with the SEC in connection
with the transaction, before they make any decision with respect to the sale or
purchase of DBI shares. A copy of the merger is attached to the proxy
statement/prospectus included in the Form S-4. The Form S-4 and all other
documents filed with the SEC in connection with the transaction are available
free of charge at the SEC's web site at www.sec.gov. In addition, the Form S-4
and all other documents filed with the SEC in connection with the transaction
will be made available to investors free of charge by calling or writing to DBI.
THIS NEWS RELEASE CONTAINS 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 SUCH 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. AMONG THE MOST SIGNIFICANT RISKS AND UNCERTAINTIES WITH
RESPECT TO THE MERGER BETWEEN DIGITAL BIOMETRICS AND VISIONICS ARE OBTAINING
REGULATORY AND SHAREHOLDER APPROVAL, FULFILLING THE CONDITIONS SET FORTH IN THE
DEFINITIVE MERGER AGREEMENT FOR THE CLOSE OF THE ANTICIPATED TRANSACTION, AND
THE TIMING OF THE CLOSING OF THE TRANSACTION.
WITH RESPECT TO DIGITAL BIOMETRICS, ITS BUSINESS RISK FACTORS AS A STAND-ALONE
ENTITY INCLUDE THE ABILITY OF THE COMPANY TO MAINTAIN OPERATING PROFITABILITY;
TO DEVELOP, INTRODUCE AND BUILD REVENUE AND PROFIT STREAMS BASED ON NEW PRODUCTS
AND SERVICES IN EXISTING AND EMERGING MARKETS; TO EXECUTE ON CUSTOMER DELIVERY
AND INSTALLATION SCHEDULES AND TO ADJUST TO CHANGES IN THESE SCHEDULES REQUIRED
BY CUSTOMERS; TO MAINTAIN ADEQUATE LIQUIDITY AND WORKING CAPITAL RESOURCES; AND
TO MANAGE THE CONCENTRATION OF ACCOUNTS RECEIVABLE AND OTHER CREDIT RISKS
ASSOCIATED WITH SELLING PRODUCTS AND SERVICES TO GOVERNMENTAL ENTITIES AND OTHER
LARGE CUSTOMERS.
FOR A MORE COMPLETE DESCRIPTION OF THESE AND OTHER RISK FACTORS THAT MAY AFFECT
THE FUTURE PERFORMANCE OF DIGITAL BIOMETRICS ON A STAND-ALONE BASIS, SEE "RISK
FACTORS" IN THE FORM S-4 AND UNDER ITEM 7 OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000.
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CONFERENCE CALL REMARKS
DECEMBER 28, 2000
[SUE REYNOLDS OPENS CALL AND READS FORWARD LOOKING COMMENTS AND RULE 10-B-5
DISCLAIMERS]
Thank you and welcome.
Before we proceed, we need to go through the Company's safe harbor statement.
The discussions today may contain forward-looking statements within the meaning
of US securities laws. These include statements regarding intent, belief or
current expectations of the Company and its management and are made in reliance
upon the "safe harbor" provisions of the Securities Litigation Reform Act of
1995. Please note that any such forward-looking statements involve a number of
risks and uncertainties that may cause the Company's actual results to differ
materially from the results discussed in the forward-looking statements or which
may be projected on the basis of such forward-looking statements.
Among the most significant of these risks and uncertainties are the ability of
the company to maintain operating profitability; to develop, introduce and build
revenue and profit streams based on new products and services in the existing
and emerging markets; to execute on customer delivery and installation schedules
and to adjust to changes in these schedules required by customers; to maintain
adequate liquidity and working capital resources; and to manage the
concentration of accounts receivable and other credit risks associated with
selling products and services to governmental entities and other large
customers. For a more complete description of these and other risk factors which
may affect the company's future performance, see "Risk Factors" in the Form S-4
and under Item 7 of the company's Annual Report on Form 10-K for the fiscal year
ended September 30, 2000.
Let me now turn the call over to John Metil, DBI's President.
[JOHN METIL'S COMMENTS]
Thank you, Sue.
Welcome to the Digital Biometrics conference call. With us today and speaking
later on the call are Bob Gallagher, DBI's Chief Financial Officer, and Dr.
Joseph Atick, the CEO of Visionics.
We are very pleased to announce today that DBI's S-4 Registration Statement and
proxy on our proposed merger with Visionics was declared effective yesterday by
the SEC. We are all very excited about the merger and are very pleased that the
registration process has gone so quickly. There are no substantive changes from
the preliminary to the final
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proxy. We are now able to begin the process of asking our shareholders to vote
on the merger. All shareholders of record as of December 29, 2000 will be
receiving proxy statements and are entitled to vote. Proxy statements will be
mailed on or before January 8, 2001 to shareholders or, if shares are held in a
brokerage's name then, to the broker for delivery to the shareholder. We
encourage our shareholders to carefully review the proxy and to vote as soon as
you can. Management and the Board of Digital Biometrics strongly support the
merger and recommend that you vote "FOR" the merger proposals.
We have scheduled a special meeting of the shareholders of Digital Biometrics
for February 15, 2001 at 2:00 p.m. at the Lutheran Brotherhood building in
downtown Minneapolis. At this meeting, votes on the merger will be tallied. We
welcome all shareholders to personally attend this meeting. But whether you
attend or not, your vote is very important. Please make sure you participate in
this process of shareholder democracy by voting in person or by proxy through
the phone, Internet or mail voting procedures described in the proxy materials.
In a few weeks, with shareholder approval of the merger, the financial profile
of the merged company will change dramatically. Because we will use
pooling-of-interests accounting, the financial history of the merged company
will no longer look like the familiar DBI financial history.
And now that the SEC has declared our registration statement effective, we are
in a position to offer you some guidance on the anticipated results of DBI's
first quarter, which we are providing on a standalone basis, and for Fiscal
2001, which we are providing on a merged basis. For this discussion, I would
like to turn the mike over to Bob Gallagher, our Chief Financial Officer. After
Bob's remarks, I will return with some comments on the merger, and we will
conclude with a few remarks from Dr. Atick. After Dr. Atick's comments we will
all be happy to answer any questions.
BOB . . .
[BOB GALLAGHER'S COMMENTS]
Thank You John and Happy Holidays to all of you who have joined us today. Before
I go through our estimates, I think its important I give a brief explanation of
the Securities and Exchange Commission Staff Accounting Bulletin 101 entitled,
"Revenue Recognition in Financial Statements". It's commonly referred to as
SAB101. In December 1999, the SEC issued SAB101 because of a divergence of
revenue recognition policies used by various companies. Some companies were
recognizing revenue when it was shipped to an intermediary such as a systems
integrator, some upon installation and many, like DBI, generally upon shipment
and passage of title. The SEC also found divergent practices when contracts had
multiple elements including both products and services and divergence when a
contract allowed for possible returns and/or refunds. SAB101 was the SEC's way
of trying to create a more standardized method of recognizing revenue.
Originally, SAB101 was to be effective last year, but people raised several
issues on implementation and so the SEC delayed its effective date. In October
2000, the SEC
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issued a 25 page "Frequently Asked Question and Answers" Bulletin to help with
the implementation of SAB101. It now has an effective date of not later than the
fourth quarter of fiscal years beginning December 15, 1999. For us this means we
are required to implement it by the fourth quarter of our Fiscal 2001. We have
chosen to implement it in the first quarter so that we could have a consistent
revenue recognition policy throughout the fiscal year. I am sure you will be
hearing more about this from other companies on conference calls in the future.
As required by SAB101, we have deferred revenue on shipments where we are also
installing the equipment into the customer's facility. Since DBI does its own
installation rather than rely on others, SAB101 basically says we should not
separate the delivery and installation process in determining when to recognize
revenue. The effect of SAB101 means we go back to September 30th, determine what
systems we would have deferred the revenue recognition on under SAB101,
essentially defer the recognition as of September 30, and recognize the P&L
impact of this reversal as a one time charge. This impact will be shown as a
single line item on the first quarter financial statements. It will be shown on
the income statement below the traditional net income line labeled as a
"cumulative effect of a change in accounting policy". This will be a onetime
$.09, non-cash charge. From now on, we will recognize all revenue going forward
under SAB101. Since SAB101 is new, in presenting our first quarter guidance, we
have shown it both under our traditional method and under SAB101.
As discussed in the release, on a post-SAB101 basis, the Company estimates that
the first quarter ending December 31, 2000 will show sales between $6.4 and $6.6
million. This would have been $4.3 to $4.5 million on a pre-SAB101 basis.
Excluding non-recurring merger related charges, and the cumulative effect of
SAB101, we expect to have earnings of between $.00 and negative $.02 per share.
This would have been a loss of between $.04 and $.06 per share on a pre-SAB101
basis.
In looking at the full fiscal year, we anticipate continued year-over-year
revenue growth. Assuming the merger is approved, we expect year-over-year
revenue growth between fifteen and twenty-five percent depending on the timing
of orders. We are, and will continue, to experience market volatility from
quarter to quarter. Today, this volatility is inherent in our businesses.
From a bottom-line perspective, Fiscal 2001 will be a year of investing in the
opportunities the merger provides us so that we can ultimately realize the full
value for our shareholders that the merger can give us. We will be investing in
areas we are confident will lead to accelerated growth in the future. These
include:
* Development of a biometric network appliance;
* Expansion of the Visionics partner network;
* Increasing the FaceIt(R) brand recognition;
* Continued development of IBIS; and
* Building a greater international presence.
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While this may impact us in the short-term, we expect to return to profitability
in Fiscal 2002 on stronger, broader, and less volatile revenues. I am excited
about our future.
Now I will turn it back over to John Metil for additional comments.
[JOHN METIL'S COMMENTS]
Thank you, Bob.
I would like to conclude my remarks with a few comments about how enthusiastic
we all are about this merger. We are combining two strong businesses which lead
their markets for facial recognition and forensic fingerprinting. We are
combining two strong management teams and employee groups with complementary
skills and, based on our working relationships in putting this merger together
and planning our future, we think the chemistry between these two groups is
excellent. In this merger, we believe that the whole will be greater than the
sum of the parts. The FaceIt facial recognition engine is already far and away
the leader of its industry and by encapsulating this engine in hardware in a
biometric network appliance we think we can extend our lead. Our IBIS biometric
identification system is leading-edge in its incorporation of wireless
technology, database integration and real-time response, and we think that
looking at the RDT device as a biometric network appliance will only make it
better. Our live-scan business, while volatile from quarter to quarter, leads
its markets in connectivity and satisfaction of customer information
requirements.
From the DBI perspective, this merger greatly expands our presence in commercial
biometrics, the sector of the market which we expect will have the greatest
upside potential. We will have the broadest array of vertical markets addressed
by any biometrics company, with the single best distribution network of partners
and direct sales of any biometrics company. This transaction leverages DBI's
technical and operating skills as well as our business infrastructure into
exciting new products and markets, just as we have sought to do. After an
initial period of investment lasting into Fiscal 2002, we expect this merger to
accelerate our growth, reduce our volatility and improve the predictability of
our combined revenues and earnings.
Let me close with one more observation. Many of you are aware of the provision
in the merger agreement which gives either party the right to walk away if the
DBI stock price averages less than $4.00 for the twenty days prior to the close
of the deal. I would like it clear that neither party wants to walk away. We are
as excited about this merger as we were on the day we announced the deal, and we
look forward to closing it. We believe we have a wonderful opportunity to lead
the biometrics industry and thereby deliver substantial growth in shareholder
value to you. We look forward to doing just that.
Let me now turn the mike over to Dr. Joseph Atick of Visionics for his comments.
[DR. JOSEPH ATICK'S COMMENTS]
Thank you John. Good morning and happy holidays everyone....
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I would like to take this opportunity to express Visionics' excitement about
today's announcement and to register our continued support for the deal.
With the SEC review process behind us, we now have a clearly defined timeline
and significant momentum for a speedy completion of the merger and that is great
news. The sooner we close, the sooner we can operate as a unified company and
the sooner we can begin to deliver on the significant potential that motivated
the merger and brought us together in the first place.
The business fundamentals underlying our merger continue to be sound and well
founded and if anything our conviction in their validity has deepened. We
continue to believe that the merger of Visionics with DBI will enable us to
unleash the full potential of our biometric technology platform into a broad
range of valuable applications that include commercial and consumer ones.
Therefore, it should be no surprise, that Visionics continues to be enthusiastic
and committed to the deal despite the recent drop in the DBI stock price. We
believe the drop in price is part of the overall unfavorable market conditions
right now and is not a reflection of how the investment community views our
merger.
I look forward to shareholders' approval on February 15 and to working with the
superb team brought together by this merger, to realize the full potential of
this business and to maximize shareholder value in my capacity as the CEO of the
merged entity.
Thank you.
[JOHN METIL'S COMMENTS]
Thank you, Joseph. We would be happy at this time to answer any questions.
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