Good morning, everyone. Thank you for standing by, and welcome to BIO-key International's First Quarter 2024 Conference Call. During management's prepared remarks, all participants will be in a listen-only mode. Afterwards, listeners will be invited to participate in a question-and-answer session. As a reminder, this conference is being recorded today, Tuesday, June 18, 2024. I would now like to turn the call over to Bill Jones, Investor Relations. Please proceed.

Thank you, Betsy, and thank you all for joining this call. Our hosts today are BIO-key's Chairman and CEO, Mike DePasquale, and CFO, Ceci Welsh, as well as Jim Sullivan, Senior VP of Strategy and CLO, who will provide some insights on BIO-Key's new product launch. As a reminder, today's conference call and webcast, as well as answers to investor questions, include forward-looking statements, which are subject to certain risks and uncertainties that can cause actual realized results to differ from those currently expected. Words such as anticipate, believe, estimate, expect, plan, project, or similar words typically express and identify these forward-looking statements. Such statements are made based on management's beliefs and assumptions as of today and using information currently available pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. For a complete description of these and other risks that may affect future performance of the company, please see risk factors in the company's annual report as filed on Form 10-K with the SEC. Listeners are cautioned not to place undue reliance on such forward-looking statements, which speak as of today's date only, BIO-key undertakes no obligation to revise or disclose revisions to forward-looking statements to reflect circumstances or events that occur after today. Now, let me pass the call to Mike to begin. Mike?

Thanks, Bill, and good morning, and thank you all for joining us today. After my remarks, Jim will provide more details around our formal launch of BIO-key's Passkey:YOU authentication solution. Then, Ceci will provide a brief overview of our financial performance, and afterwards, we'll open the call to your questions. First, the audit of our 2023 financial statements was recently completed by our independent public accounting firm, and we filed our 10-K on June 5th, and we recently filed our Q1 10-Q this past Friday. BIO-key is now up-to-date and compliant with all of our regulatory filings. Again, Ceci will review the numbers, but from a high level, we continued our progress in 2023 with revenue up 10% from 2022 to $7.8 million. In Q1, we generated positive operating cash flow as we benefited from the expansion of a biometric client identification system by a long-term financial services customer who continues to expand their use of our biometric solutions. In fact, they're currently looking to potentially upgrade their license from a simple to a more complex client ID-featured solution, which we may have more to say about later this year. They certainly have been a good customer of BIO-key's and have generated significant revenue for us over the past years, as has our Foreign Defense Force customer that had provided several add-on orders to BIO-key in late 2023, and there certainly will be more and the possibility of an expanded use of our solution into other areas within that organization. In Q1, we also reduced our expenses 17% year-over-year, and therefore reduced our operating loss by more than 70% to approximately $500,000 in Q1 '24. We have more work to do, but we believe we are heading in the right direction with our Q1 performance. We look to continue this…

Thank you, Mike. Everyone may have seen the press release from last week where we announced the formal launch of BIO-key's Passkey:YOU authentication solution, which is targeting underserved workplace scenarios that involve roving users who share workstations, preventing phishing by eliminating passwords, and implementing multi-factor authentication, or MFA, as a goal of nearly every enterprise. But mainstream identity platforms are only offering limited authentication options based on one of two priority approaches, either phone apps, which now would include things like phone-based Passkeys, or per-user FIDO hardware tokens like YubiKeys, which sell for a cost of $30 to $80 each. Both phone apps and FIDO tokens are implementations of what we call something-you-have authentication, as opposed to something you know, like passwords, or something you are, like biometrics. Operational challenges arise because something-you-have authentication options don't fit well and aren't well suited for many workplace scenarios, such as manufacturing shop floor, retail, call centers, healthcare, or hospitality, where users are typically roaming among a variety of shared workstations, kiosks, or point-of-sale terminals, or they use handheld devices. These workplaces often prohibit the use of personal phones for safety or distraction reasons and leave an enterprise identity team only a single apparent option for strongly authenticating those large roving workforces. That's to buy them FIDO hardware tokens. But one token per user risks user lockout if they lose their token, so the FIDO alliance is recommending that each user be provisioned with two or three FIDO tokens each. Now, outfitting 5,000 workers with a pair of tokens would mean buying and maintaining 10,000 to 15,000 of these $25 to $70 tokens, so that if we're looking at a manufacturer who has 5,000 workers, they're spending millions of dollars every couple of years in order to be able to provide those tokens…

Thank you, Jim. As Mike referenced, the audit of our 2023 financial statement was recently completed by our independent registered public accounting firm and therefore we filed both the 2023 10-K and our 10-Q for Q1 '24. I'll review the Q1 '24 results which were also in our press release issued yesterday as compared to the restated Q1 2023 results. Q1 '24 revenues were up 19% sequentially to $2.2 million, which was in line with the comparison in Q1 '23. The current year period benefited from the expanded use of our BIO-key biometric client identification system by a long-time financial services customer in South Africa. A large order from them drove 23.6% increase in license fee revenues offset by a decline in recurring and custom services and hardware revenue. Services declined due to the loss of a large service agreement and a large customer order for Sewell Secure Q1 '23 that did not recur. Our gross profit and gross profit margin benefited from the greater proportion of license fee revenues which command a higher margin than services and equipment. As such, our gross profit grew to $1.9 million from $0.9 million in Q1 '23, with our blended gross margin improved to 86% from 40% in Q1 '23, which included a hardware reserve expense. If you exclude the hardware reserve expense in Q1'23, it would have been 62% versus 86% in Q1 '24, with the current year period also benefiting from the revenue mix that included a higher margin license fee revenue. Turning to expenses, we reduced our total operating expense by $231,000, or 17% in Q1 '24 versus Q1 '23. This included SG&A reductions of $149,000 and $83,000 less in research and development and engineering expenses. Expense reductions included sales personnel and marketing show expenses and lower lease expense for…

We will now begin the question-and-answer session. [Operator Instructions]

At this time, we are showing no questions and the Q&A session has ended. I'll ask Mike DePasquale for closing remarks.

Thank you, everyone, for joining our call today. We look forward to updating you on future investor calls. Please reach out to our IR team, whose contact information is listed in our press release with any follow-up questions. We look forward to updating you on our Q2 call, and as always, we'll provide news and updates in the interim by press release. Again, thank you for your time today.

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