PART I [Business](index=5&type=section&id=Item%201.%20Business) BIO-key International specializes in fingerprint biometric technology for enterprise, healthcare, and government, shifting to SaaS and focusing on core operations - The company develops and markets advanced fingerprint biometric identification technologies, focusing on enterprise security, mobile payments, healthcare records, and large-scale government identity projects[19](index=19&type=chunk)[20](index=20&type=chunk) - In 2020, BIO-key secured two major contracts in Africa and Nigeria with its partner TTI, valued at a combined **$75 million**, for large-scale identification projects[23](index=23&type=chunk) - The COVID-19 pandemic has caused the company to shift to a remote business model, extending sales cycles and delaying deployments, particularly in Africa, while also spurring new opportunities for remote security solutions[24](index=24&type=chunk)[82](index=82&type=chunk) - In the second half of 2019, the company modified its software licensing program to a **Software as a Service (SaaS) model** to lower the cost of entry for customers and generate more long-term revenue[31](index=31&type=chunk) - The company decided to **exit the US consumer lock business** (TouchLock line) after CES 2019 to focus on its core biometric business[32](index=32&type=chunk) 2019 Business Model Focus | Area | Detail | | :--- | :--- | | **OEM Customers** | Continue prioritizing agreements with OEM customers like NCR and Omnicell | | **Regulated Industries** | Strong opportunity in Government ID projects, Healthcare, and Financial Services | | **Partner Model** | Launched a new Channel Alliance Partner (CAP) program, adding over 20 new partners | | **Microsoft Partnership** | Remain a Microsoft Partner, with scanners qualified for Windows Hello | | **Hardware** | Hardware products generated **40% of the company's revenue** in 2019 | [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business and financial risks, including a "going concern" warning, market acceptance issues, and potential Nasdaq delisting - The company's independent registered public accounting firm has expressed **substantial doubt about its ability to continue as a going concern** due to a history of losses and limited revenue[98](index=98&type=chunk)[99](index=99&type=chunk) - As of December 31, 2019, the company had an **accumulated deficit of approximately $90 million** and has historically not generated significant revenue[101](index=101&type=chunk) - The COVID-19 outbreak has extended sales cycles, impacted access to overseas inventory, and delayed deployments, particularly in Africa, which could materially adversely affect business operations and financial condition[142](index=142&type=chunk) - The company faces a **risk of delisting from the Nasdaq Capital Market** for failing to maintain the minimum bid price of $1.00 per share, with the compliance period extended to December 4, 2020, due to market impact of COVID-19[160](index=160&type=chunk)[162](index=162&type=chunk) - Approximately **9,300,000 shares** of common stock are reserved for issuance upon exercise or conversion of outstanding options, warrants, and convertible notes, which could result in **substantial dilution** to existing shareholders[156](index=156&type=chunk) - The company has experienced difficulty in enforcing contract rights and collecting receivables in Asia and Africa, resulting in material write-offs, including a **$1.7 million unpaid balance** from a 2015 sale in Africa and a **$0.5 million unpaid balance** from a 2018 sale in Asia[120](index=120&type=chunk)[121](index=121&type=chunk) [Description of Property](index=26&type=section&id=Item%202.%20Description%20of%20Property) The company operates from leased facilities across multiple locations and does not own any real estate - The company **does not own any real estate** and operates from leased facilities in Minnesota (5,544 sq ft), New Jersey (4,517 sq ft), Hong Kong (1,098 sq ft), and China (3,267 sq ft)[172](index=172&type=chunk) [Legal Proceedings](index=26&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any pending legal proceedings - The company is **not currently a party to any pending lawsuits**[173](index=173&type=chunk) [Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - **Not applicable**[174](index=174&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=28&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "BKYI" with 55 stockholders of record, and no cash dividends have ever been paid - The company's common stock is traded on the **Nasdaq Capital Market** under the symbol **"BKYI"**[177](index=177&type=chunk) - As of May 11, 2020, there were **55 stockholders of record**[178](index=178&type=chunk) - The company has **never paid cash dividends** on its common stock and does not intend to in the foreseeable future[179](index=179&type=chunk) [Selected Financial Data](index=28&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable to the company - **Not Applicable**[183](index=183&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company experienced a **44% revenue decrease** and a **$14.6 million net loss** in 2019, facing critical liquidity issues and a "going concern" warning [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Total revenue decreased by **44%** in 2019, leading to a **$193,717 gross loss** and a **$14.6 million net loss**, primarily due to a **$7.0 million impairment charge** Revenue and Cost of Sales Comparison (2019 vs. 2018) | Category | 2019 | 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$2,267,528** | **$4,044,542** | **($1,777,014)** | **-44%** | | Services Revenue | $925,245 | $1,012,576 | ($87,331) | -9% | | License Fees Revenue | $442,649 | $1,739,897 | ($1,297,248) | -75% | | Hardware Revenue | $899,634 | $1,292,069 | ($392,435) | -30% | | **Total Costs** | **$2,461,245** | **$4,164,190** | **($1,702,945)** | **-41%** | - The **75% decrease in license revenue** was primarily due to a large **$1.1 million** international order in Q4 2018 that did not have a comparable transaction in 2019[221](index=221&type=chunk) - **Selling, general and administrative (SG&A) expenses decreased by 6%** to $5,036,820 in 2019, while **Research, development and engineering (R&D) costs also decreased by 6%** to $1,331,667[225](index=225&type=chunk)[226](index=226&type=chunk) - A significant **impairment charge of $6,957,516** was recorded in Q4 2019 related to the write-down of the FingerQ resalable software license rights to zero[227](index=227&type=chunk)[228](index=228&type=chunk) Net Loss Summary (2019 vs. 2018) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | **Operating Loss** | **($13,519,720)** | **($6,868,955)** | | **Net Loss** | **($14,588,700)** | **($6,868,875)** | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is critical, with cash decreasing to **$79,000** and a **$1.85 million net cash outflow** from operations, relying on external financing to meet **$525,000 monthly cash requirements** - **Cash and cash equivalents decreased** from $324,000 at year-end 2018 to **$79,000** at year-end 2019[246](index=246&type=chunk) - The company requires approximately **$525,000 per month** for operations, a level it has been unable to consistently achieve through revenue generation[247](index=247&type=chunk)[317](index=317&type=chunk) - Financing activities in 2019 provided approximately **$2.15 million**, primarily from the issuance of convertible notes[234](index=234&type=chunk) - The company utilizes an **accounts receivable factoring** arrangement, selling a minimum of **$150,000 of receivables per quarter** to assist with working capital[236](index=236&type=chunk) - In April 2020, the company received a **$340,000 loan** under the **Paycheck Protection Program (PPP)** of the CARES Act[244](index=244&type=chunk) [Critical Accounting Policies](index=37&type=section&id=Critical%20Accounting%20Policies) Key accounting policies include ASC 606 revenue recognition, impairment of long-lived assets, expensing R&D, maintaining a full valuation allowance for deferred tax assets, and stock-based compensation - The company adopted **ASC 606 (Revenue Recognition)** on January 1, 2018, recognizing software license and hardware revenue at a point in time, while support, maintenance, and professional services revenue is recognized over time[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) - **Long-lived assets are reviewed for impairment** when events indicate the carrying amount may not be recoverable, which led to a **significant impairment charge** for the FingerQ Resalable License Rights in 2019[265](index=265&type=chunk) - **All research and development costs are expensed** as incurred[266](index=266&type=chunk) - A **full valuation allowance** has been established against **deferred tax assets** due to the company's history of losses and uncertainty of future taxable income[267](index=267&type=chunk) [Financial Statements and Supplementary Data](index=41&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2019 and 2018, including the auditor's "Going Concern" warning due to substantial losses and negative working capital [Report of Independent Registered Public Accounting Firm](index=45&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor's report confirms fair financial statement presentation but includes a "Going Concern" paragraph, citing substantial doubt due to losses and negative working capital - The auditor's report includes a **"Going Concern" paragraph**, raising **substantial doubt** about the company's ability to continue operations due to substantial net losses, negative working capital, and reliance on debt and equity financing[292](index=292&type=chunk) [Consolidated Financial Statements](index=47&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show **$2.5 million in total assets**, **$4.8 million in total liabilities**, a **$2.3 million stockholders' deficit**, and a **$14.6 million net loss** for 2019 Consolidated Balance Sheet Highlights (as of Dec 31, 2019) | Account | Amount | | :--- | :--- | | Cash and cash equivalents | $79,013 | | Total Current Assets | $1,366,291 | | Total Assets | $2,496,698 | | Total Current Liabilities | $4,391,405 | | Total Liabilities | $4,781,871 | | **Total Stockholders' Equity (Deficit)** | **($2,285,173)** | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2019) | Account | Amount | | :--- | :--- | | Total Revenues | $2,267,528 | | Gross Profit (Loss) | ($193,717) | | Operating Loss | ($13,519,720) | | **Net Loss** | **($14,588,700)** | | **Basic and Diluted Loss per Share** | **($1.03)** | [Notes to the Financial Statements](index=53&type=section&id=Notes%20to%20the%20Financial%20Statements) Notes detail accounting policies, confirm the "Going Concern" issue, explain the **$12 million FingerQ software impairment**, and outline convertible debt, warrant changes, and subsequent financing events - The company has an **accumulated deficit of approximately $90 million** as of December 31, 2019, and its ability to continue as a going concern is in **substantial doubt** (Note A)[316](index=316&type=chunk)[319](index=319&type=chunk) - An **impairment charge of $6,957,516** was recorded in Q4 2019, writing down the carrying amount of the **FingerQ resalable software license rights** to zero due to the lack of expected future cash flows (Note G)[386](index=386&type=chunk) - In July 2019, the company issued a **$3,060,000 senior secured convertible note**, which was later amended in 2020, reducing the conversion price to **$0.65 per share** (Note N)[407](index=407&type=chunk)[410](index=410&type=chunk) - A 2018 stock issuance triggered **anti-dilution provisions**, increasing the number of warrants from a 2014 agreement from **996,877 to 2,392,502** and reducing the exercise price from **$3.60 to $1.50**; these warrants expired in November 2019 (Note Q)[436](index=436&type=chunk)[437](index=437&type=chunk) - Subsequent to year-end, the company engaged in **multiple financing activities**, including issuing new convertible notes in January and February 2020, receiving a **$340,000 PPP loan** in April 2020, and issuing another **$2,415,000 convertible note** in May 2020 (Note V)[465](index=465&type=chunk)[466](index=466&type=chunk)[469](index=469&type=chunk)[471](index=471&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=41&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes or disagreements with the company's accountants regarding financial disclosure - **None**[271](index=271&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with no material changes - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2019[272](index=272&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2019[274](index=274&type=chunk) [Other Information](index=42&type=section&id=Item%209B.%20Other%20Information) No other information is reported under this item - **None**[278](index=278&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=42&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2020 Proxy Statement - Information is **incorporated by reference** from the 2020 Proxy Statement[280](index=280&type=chunk) [Executive Compensation](index=42&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2020 Proxy Statement - Information is **incorporated by reference** from the 2020 Proxy Statement[281](index=281&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=42&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and equity compensation plan information is incorporated by reference from the 2020 Proxy Statement - Information is **incorporated by reference** from the 2020 Proxy Statement[282](index=282&type=chunk)[283](index=283&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=42&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2020 Proxy Statement - Information is **incorporated by reference** from the 2020 Proxy Statement[284](index=284&type=chunk) [Principal Accounting Fees and Services](index=42&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2020 Proxy Statement - Information is **incorporated by reference** from the 2020 Proxy Statement[285](index=285&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=42&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits filed as part of the Form 10-K report - This item lists the financial statements and exhibits filed with the report[286](index=286&type=chunk) [Form 10-K Summary](index=42&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided under this item - **None**[287](index=287&type=chunk)[288](index=288&type=chunk)

BIO-key International, Inc. (NASDAQ:BKYI) Q3 2019 Earnings Conference Call November 15, 2019 10:00 AM ET Company Participants Scott Mahnken - Vice President, Marketing Michael DePasquale - Chairman and Chief Executive Officer Frederick Corsentino - Chief Revenue Officer Cecilia Welch - Chief Financial Officer Conference Call Participants Nehal Chokshi - Maxim Group Operator Good morning, ladies and gentlemen. Thank you for standing by. And welcome to BIO-key International's Third Quarter 2019 Conference Cal ...

U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT For the Transition Period from to Commission file number 1-13463 BIO-KEY INTERNATIONAL, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 41-1741861 (State or Other Jurisdiction of Incorporation of Organization) (IRS ...

Nasdaq: BKYI | --- | --- | |----------------------------------|-------| | | | | Biometric Security Solutions for | | | Convenient ID & Authentication | | | | | | | | | | | Safe Harbor Language All statements contained in this presentation other than statements of historical facts are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the "Act"). The words "estimate," "project," "intends," "expects," "anticipates," "believes" and similar expressions are intended ...

Financial Data and Key Metrics Changes - Q2 2019 revenue declined slightly to approximately $728,000, a decrease of 2.7% compared to $748,000 in Q2 2018, primarily due to lower software license fees and service revenues [20] - Software license revenue decreased by 61% to $60,000 in Q2 2019 from $154,000 in Q2 2018, attributed to the transition to a SaaS model [20] - Hardware sales increased by 26% to $436,000 from $345,000 in Q2 2018, driven by a large fingerprint reader order and new customer deployments [21] - Q2 2019 net loss improved to $1.4 million or minus $0.10 per basic share compared to $1.7 million or minus $0.15 per basic share in Q2 2018 [22] Business Line Data and Key Metrics Changes - Service revenues decreased by 7% to $232,000 in Q2 2019 compared to $249,000 in Q2 2018, mainly due to a decline in nonrecurring service revenues for custom projects [20] - The transition to a SaaS model is expected to create more steady and predictable recurring revenue streams, although it reduces upfront revenue opportunities [11][20] Market Data and Key Metrics Changes - The financial services sector is identified as having the greatest sales prospects, driven by compliance and security requirements [15] - There is increasing interest in biometric authentication technologies, particularly from organizations in sensitive environments such as banks and financial services [8] Company Strategy and Development Direction - The company is transitioning to a SaaS model, recognizing most software agreements on a recurring yearly subscription basis, which is expected to enhance revenue predictability [7][11] - BIO-key is exploring small tuck-in acquisitions to expand its technology and product portfolio [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook for 2019 and future years, despite challenges such as delays in software license payments from a Chinese customer due to trade tensions [8][12] - The company revised its 2019 revenue guidance to a range of $6 million to $12 million, depending on the receipt of software license payments [12][13] Other Important Information - The company completed a convertible note financing in July, raising $2.55 million in gross proceeds to support financial needs while awaiting software license payments [12][23] - Gross margin in Q2 2019 was 7%, compared to negative 38% in Q2 2018, primarily due to a higher level of non-cash software license amortization expense in the prior year [21] Q&A Session Summary Question: What would have been the year-over-year trend for recurring service revenue if renewals were not pending? - Management indicated that it would have trended up, as they continued to receive more orders and renewals [25] Question: Can you provide some color on why these renewals are pending? - The pending renewals are attributed to the timing of billing and collecting cash [26] Question: What are the targets for your salesforce in terms of net new ARR per quarter or per rep? - There are no specific targets; the company is working on quarter-based plans for sales reps [30] Question: Can you provide a breakdown of revenue distribution between hardware and software? - Management suggested a potential split of 50:50 to 60:40 between hardware and software, depending on the mix of new and existing accounts [36][37]

U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 or ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT For the Transition Period from to Commission file number 1-13463 BIO-KEY INTERNATIONAL, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 41-1741861 (State or Other Jurisdiction of Incorporation of Organization) (IRS Emplo ...

BIO-key International, Inc. (NASDAQ:BKYI) Q1 2019 Earnings Conference Call May 16, 2019 10:00 AM ET Company Participants Scott Mahnken - Vice President, Marketing Mike DePasquale - Chairman and Chief Executive Officer Ceci Welch - Chief Financial Officer Fred Corsentino - Chief Revenue Officer Conference Call Participants Nehal Chokshi - Maxim group Operator Good morning, ladies and gentlemen. Thank you for standing by. Welcome to BIO-key International's First Quarter 2019 Conference Call. During the presen ...

U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT For the Transition Period from to Commission file number 1-13463 BIO-KEY INTERNATIONAL, INC. (Exact Name of registrant as specified in its charter) DELAWARE 41-1741861 (State or Other Jurisdiction of Incorporation of Organization) (IRS Employe ...

BIO-key International, Inc. (NASDAQ:BKYI) Q4 2018 Earnings Conference Call April 2, 2019 10:00 AM ET Company Participants Scott Mahnken - Vice President, Marketing Mike DePasquale - Chairman and Chief Executive Officer Fred Corsentino - Chief Revenue Officer Ceci Welch - Chief Financial Officer Conference Call Participants Josh Goltry - Maxim Group Richard Pew - Richard Pew Investment Counsel Operator Good morning, ladies and gentlemen. Thank you for standing by. Welcome to BIO-key International's Fourth Qu ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) BIO-key develops and markets advanced fingerprint biometric identification technologies, software, and hardware for diverse markets - The company develops and markets advanced fingerprint biometric identification technologies, along with related hardware and software solutions, targeting commercial, government, and consumer markets[14](index=14&type=chunk)[15](index=15&type=chunk) - Key software products include the ID Director™ suite for single sign-on integration, the Vector Segment Technology™ (VST) SDK for developers, and the WEB-key® platform for secure cloud-based authentication[30](index=30&type=chunk)[34](index=34&type=chunk)[41](index=41&type=chunk) - The company markets a range of hardware products, including USB finger scanners (SideSwipe™, EcoID™, SideTouch™) compatible with Microsoft Windows Hello, and biometric-enabled locks (TouchLock™)[16](index=16&type=chunk)[21](index=21&type=chunk)[38](index=38&type=chunk) - BIO-key holds numerous U.S. patents for its core technologies, including VST™, a biometric authentication security framework, and image processing methods, with expiration dates ranging from 2022 to 2035[45](index=45&type=chunk)[46](index=46&type=chunk)[55](index=55&type=chunk) Research and Development Expenses | Year | R&D Expense ($) | | :--- | :--- | | 2018 | $1,415,401 | | 2017 | $1,659,875 | [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include going concern doubt, financing needs, limited market acceptance, and intense competition - The company's independent registered public accounting firm has expressed substantial doubt about its ability to continue as a going concern due to a history of losses and limited revenue[86](index=86&type=chunk)[87](index=87&type=chunk) - As of December 31, 2018, the company had an accumulated deficit of approximately **$75.1 million** and requires about **$537,000 per month** for operations, a level it has not consistently achieved through revenue[89](index=89&type=chunk)[119](index=119&type=chunk) - The market for biometric technology has limited acceptance, and the company's success depends on its adoption over traditional security methods like passwords and tokens[91](index=91&type=chunk)[92](index=92&type=chunk) - The company faces intense competition from established biometric companies and providers of traditional access control, many of whom have substantially greater financial and marketing resources[102](index=102&type=chunk)[103](index=103&type=chunk) - A substantial number of outstanding securities (approximately **5.6 million shares** reserved for options and warrants) could be converted into common stock, leading to significant dilution for existing shareholders[128](index=128&type=chunk)[129](index=129&type=chunk) - The company's common stock may be delisted from Nasdaq if it fails to meet the minimum closing bid price requirement of **$1.00 per share**, which could negatively impact liquidity and access to capital[134](index=134&type=chunk)[135](index=135&type=chunk) [Properties](index=21&type=section&id=Item%202.%20Properties) The company leases all its operational facilities across the U.S., Hong Kong, and China - The company leases all its operational facilities, with locations in the U.S. (Minnesota and New Jersey) and internationally (Hong Kong and China)[145](index=145&type=chunk) [Legal Proceedings](index=21&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any pending litigation - The company is not currently involved in any pending litigation[146](index=146&type=chunk) [Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business operations - Not applicable[147](index=147&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=22&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock trades on Nasdaq; the company has 140 stockholders and does not pay cash dividends - Common stock trades on the Nasdaq Capital Market under the symbol "BKYI"[150](index=150&type=chunk) - As of March 27, 2019, there were 140 stockholders of record[151](index=151&type=chunk) - The company has not paid and does not intend to pay cash dividends in the foreseeable future[152](index=152&type=chunk) [Selected Financial Data](index=22&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable as the company qualifies as a smaller reporting company - Not Applicable[155](index=155&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue decreased 36% to $4.0 million in 2018, widening operating loss and raising significant liquidity concerns Results of Operations (2018 vs. 2017) | Financial Metric | 2018 ($) | 2017 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $4,044,542 | $6,302,984 | -36% | | Gross Profit (Loss) | ($119,648) | $3,060,833 | N/A | | Operating Loss | ($6,868,955) | ($4,275,365) | 61% | | Net Loss | ($6,868,875) | ($4,275,338) | 61% | - Revenue from license fees decreased by **46%** to **$1.7 million** in 2018, mainly because a large 2017 order was not repeated at the same scale in 2018[183](index=183&type=chunk) - Hardware sales decreased by **32%** to **$1.3 million** in 2018 due to fewer large customer deployments and lower retail sales of fingerprint readers and biometric locks[184](index=184&type=chunk) - The company requires approximately **$537,000 per month** for operations. With 2018 revenue of **~$4.0 million**, it fell short of covering its monthly requirements, necessitating additional financing[200](index=200&type=chunk) - The company adopted the new revenue recognition standard, ASC 606, on January 1, 2018, using the modified retrospective method. This resulted in capitalizing certain sales commission costs[206](index=206&type=chunk)[216](index=216&type=chunk) [Financial Statements and Supplementary Data](index=32&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited financials show recurring losses, a 'going concern' warning, declining assets, and widening net loss - The Report of Independent Registered Public Accounting Firm contains a 'Going Concern' paragraph, citing substantial net losses, an accumulated deficit, and dependency on financing as factors that raise substantial doubt about the company's ability to continue as a going concern[239](index=239&type=chunk) Consolidated Balance Sheet Data (as of Dec 31) | Metric | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $323,943 | $288,721 | | Total current assets | $4,229,297 | $7,014,033 | | Total Assets | $11,692,332 | $16,078,822 | | Total current liabilities | $1,226,110 | $2,325,527 | | Total Stockholders' Equity | $10,466,222 | $13,753,295 | Consolidated Statement of Operations Data (for year ended Dec 31) | Metric | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | Total revenues | $4,044,542 | $6,302,984 | | Gross Profit (Loss) | ($119,648) | $3,060,833 | | Operating loss | ($6,868,955) | ($4,275,365) | | Net loss | ($6,868,875) | ($4,275,338) | | Basic and Diluted Loss per Share | ($0.73) | ($0.76) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=33&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with accountants on accounting and financial disclosure were reported - None reported[223](index=223&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal financial reporting controls were effective as of December 31, 2018 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2018[224](index=224&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2018[226](index=226&type=chunk) - As a smaller reporting company, the annual report does not include an attestation report from its registered public accounting firm regarding internal control over financial reporting[227](index=227&type=chunk) [Other Information](index=33&type=section&id=Item%209B.%20Other%20Information) No other information to report for this period - None[229](index=229&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=33&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 Proxy - Information is incorporated by reference from the 2019 Proxy Statement[230](index=230&type=chunk) [Executive Compensation](index=34&type=section&id=Item%2011.%20Executive%20Compensation) Executive and director compensation information is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the 2019 Proxy Statement[231](index=231&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=34&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and equity compensation plan information is incorporated by reference from the 2019 Proxy Statement - Information regarding security ownership and equity compensation plans is incorporated by reference from the 2019 Proxy Statement[231](index=231&type=chunk)[232](index=232&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=34&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Related party transactions and director independence information is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the 2019 Proxy Statement[233](index=233&type=chunk) [Principal Accountant Fees and Services](index=34&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Principal accountant fees and services information is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the 2019 Proxy Statement[234](index=234&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=34&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and provides an index to all exhibits filed with the Form 10-K - This section lists the financial statements and provides an index to all exhibits filed with the Form 10-K[235](index=235&type=chunk)[412](index=412&type=chunk) [Form 10-K Summary](index=34&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided in this section of the Form 10-K - None[235](index=235&type=chunk)