I am pleased to report BIO-key's third consecutive quarter of profitability! You can read more about our Q2 2009 performance in our August 10 press release. With the new fiscal year that started in July for many of our public safety customers as well as the federal stimulus money being deployed, we believe that BIO-key is well positioned for growth and continued profitability into the second half of the year.  

I have three significant developments at BIO-key to share with you.
 
Sale of our Law Enforcement Division
On August 13 BIO-key announced that the company has entered into an Asset Purchase Agreement to sell our Law Enforcement Division to InterAct911 Mobile Systems, Inc for $11 million. You can read more details about this in our August 14 press release.
 
The sale will allow BIO-key to take advantage of the rapidly growing biometric and identity management market by focusing on its biometric solutions. We see enormous potential emerging in the biometrics market. This sale gives us the opportunity to become a leading, growing and profitable biometric company by focusing all our resources and investments in the high-growth, high-margin biometrics market with a net debt-free balance sheet at closing and adequate cash capability to invest in marketing our biometric capabilities.
 
BIO-key was selected as part of the Next Generation FBI AFIS System
On September 10 we announced that the contract recently awarded by Lockheed Martin to provide fingerprint identification technology for the FBI's Next Generation Identification (NGI) system is based on the fusion of BIO-key and MorphoTrak biometric algorithms. This is the most important award the company has ever received and it may be the most important biometric contract ever awarded.  You can read more details about this in our September 10 press release.

The selection of BIO-key technology by the FBI, through their contractors Lockheed Martin and MorphoTrak, validates that BIO-key has some of the industry's most accurate and scalable fingerprint matching technology. Other agencies and commercial customers, looking to take advantage of the research, testing and decision by the FBI, may now reasonably conclude: "If it is good enough for the FBI, it's certainly good enough for our organization." We are thrilled with how well BIO-key is positioned and with the quality of our references as we look to our future biometric business potential.
 
BIO-key has retained a former Senior FBI Official as a Strategic Advisor & Consultant
On September 14 we announced that Tom Bush, who served as an Assistant Director of the FBI, heading the Criminal Justice Information Services (CJIS) Division, is joining BIO-key as a Strategic Advisor and Consultant. Tom will play a major role in supporting BIO-key's initiatives to expand our footprint in both the government and commercial markets. You can read more details about this in our September 14 press release. 

We are excited about these recent achievements and look forward to providing you with further updates on our progress. 
  
 
Sincerely, 
 Mike DePasquale

Mike DePasquale

President & CEO