Core Insights - BIO-key International, Inc. has partnered with California's Education Technology Joint Powers Authority (Ed Tech JPA) to provide its PortalGuard identity management solution, which offers secure multi-factor authentication without the need for phones or tokens [1][5][6] Group 1: Partnership and Product Offering - The partnership allows Ed Tech JPA's 195 member schools, serving over 2.6 million students, to access BIO-key's PortalGuard platform, which is now an approved identity management solution following a rigorous review process [1][2][5] - PortalGuard provides a comprehensive identity provider (IdP) and multi-factor authentication solution, enabling seamless login experiences across multiple applications while protecting sensitive educational data [5][6] Group 2: Competitive Advantages - PortalGuard's phone-less and tokenless authentication options are particularly relevant given California's regulatory environment, including the Phone-Free Schools Act, which limits smartphone use in schools [4][5] - The solution offers up to seventeen authentication methods, including privacy-compliant biometrics and challenge-response options, enhancing security while providing flexible login choices [5][6] Group 3: Industry Context - The Ed Tech JPA centralizes software procurement for member institutions, ensuring compliance with data privacy laws and facilitating access to high-quality digital products [2][3] - BIO-key has a long-standing track record in providing enterprise-grade IAM solutions tailored to the unique needs of educational institutions, having previously partnered with California Community Colleges [6][8]

Core Insights - BIO-key International, Inc. has been awarded a contract by the State of Wyoming Department of Education to implement its PortalGuard IDaaS platform for up to 20,000 staff members, enhancing security and user experience through Multi-Factor Authentication (MFA) and Single Sign-On (SSO) [1][2] Group 1: Contract and Implementation - The Wyoming Department of Education sought a comprehensive Identity and Access Management (IAM) solution to manage multiple account credentials and reduce IT support costs, particularly for password resets [2] - The PortalGuard deployment will improve the phish-resistance and resiliency of their systems against cyberattacks through advanced MFA options [2] Group 2: Features and Benefits - PortalGuard's SSO feature allows users to access multiple applications with one set of strong credentials, streamlining user access [3] - The strong MFA provided by PortalGuard adds an extra layer of protection against phishing and unauthorized access [3] - The customizable Account Dashboard offers users a centralized interface for managing authentication preferences, while the Application Launchpad provides one-click access to WDE digital resources and applications [3] - The customizable Administrator Dashboard enhances IT teams' control, visibility, and reporting of user access patterns [3] Group 3: Expected Outcomes - The implementation of PortalGuard IDaaS is expected to improve overall security posture, provide a superior user experience, streamline access procedures, and reduce IT support calls and password reset requests, leading to lower operational costs [4] - BIO-key's President expressed confidence that PortalGuard IDaaS will deliver significant value to the WDE, as it has for numerous governmental, educational, and commercial entities [5]

Core Insights - BIO-key International, Inc. has announced the migration of three additional customers to its PortalGuard IDaaS platform, increasing its user base to over 4 million since the platform's launch in November 2020 [1][2] Group 1: Customer Adoption and Growth - The new customers include Northeast Iowa Community College, Eastern University, and the University of Guam, collectively serving over 30,000 users [1] - Over 50 organizations have adopted BIO-key's cloud-based solution, demonstrating significant market acceptance and growth [1] Group 2: Benefits of PortalGuard IDaaS - Migrating to PortalGuard IDaaS allows organizations to adopt best IT practices, streamline operations, and improve uptime while enhancing resource access efficiency [2] - The platform reduces total cost of ownership and strengthens protection against cyberattacks, enabling organizations to manage end-user access collaboratively [2][3] Group 3: Industry Trends and Security - The increasing threat of security breaches and stricter IT standards are driving organizations to adopt cloud-based solutions for better protection of applications and data [3] - PortalGuard IDaaS supports Zero Trust security frameworks, which are essential for maintaining a strong security posture [3] Group 4: Market Positioning - BIO-key's President highlighted the shift from on-premises technology to flexible, scalable, and cost-effective cloud solutions, emphasizing the agility and cost savings offered by PortalGuard IDaaS [4] - The cloud solution provides opportunities for organizations to transform benefits into competitive advantages while reducing reputational risks [4] Group 5: Company Overview - BIO-key is focused on revolutionizing authentication and cybersecurity with its IAM software, securing access for over 40 million users [5] - The company offers a variety of authentication options, including phoneless, tokenless, and passwordless solutions, through its cloud-hosted or on-premise PortalGuard IAM solution [5]

Project Overview - The National Bank of Egypt (NBE) is deploying BIO-key's PortalGuard identity and access management platform and an Identity Governance solution in partnership with Raya Information Technology [8] - This project aims to enhance operational security and efficiency for NBE's 30,000 employees by implementing Single Sign-On (SSO) and Multi-Factor Authentication (MFA) [3][8] - The collaboration between BIO-key and Raya Information Technology ensures a comprehensive and future-proof security framework [9] Technology and Implementation - BIO-key's PortalGuard technology provides secure, multi-level authentication managed through a unified solution, simplifying workflows for employees and agents [2] - Raya Information Technology is managing the deployment, coordinating all technology vendor resources to ensure a smooth implementation process [1] - The SSO solution eliminates the need for 14 separate logins, streamlining access and boosting security compliance with industry standards [3] Strategic Impact - The project lays the groundwork for delivering secure and seamless authentication for millions of B2B and B2C customers in the near future [2] - BIO-key's PortalGuard CIAM approach aims to reduce fraud and mitigate cybersecurity scams by integrating with a Security Operations Center (SOC) equipped with advanced risk analysis tools [11] - This initiative highlights the growing need for advanced identity solutions in the Middle East and Africa, meeting the demands of prestigious institutions like NBE [11] Company Profiles - BIO-key International, Inc provides biometric-centric, multi-factor identity and access management (IAM) solutions, securing access for over forty million users globally [4] - The National Bank of Egypt (NBE) is Egypt's largest bank with 665 branches, offices, and banking units, serving nearly 20 million customers [5] - Raya Information Technology is a leading provider of integrated security solutions in the Middle East, specializing in cybersecurity, physical security, and identity management [13]

Core Insights - BIO-key International, Inc. will present at the Microcap Conference on January 29 & 30, 2025, in Atlantic City, New Jersey, with CEO Mike DePasquale scheduled to speak [1] - The company reported a revenue increase of 18% in Q3 2024, reaching $2.1 million, primarily driven by higher software license revenue from long-term customers [1] - BIO-key is pursuing strategic collaborations, including a recent agreement with Fiber Food Systems, Inc. to enhance global food security and produce plant-based proteins [1] Company Developments - A planned partnership with Guinn Partners aims to demonstrate how biometric security can improve safety and functionality in robotics and drones [2] - The Microcap Conference provides a platform for companies to showcase their value propositions through presentations and networking opportunities [2] - BIO-key's IAM solutions secure access for over 40 million users, offering phoneless, tokenless, and passwordless authentication options [2]

Financial Data and Key Metrics Changes - BIO-key reported a revenue increase of 18% year-over-year to $2.1 million in Q3 2024, up from $1.8 million in Q3 2023 and $1.1 million in Q2 2024 [5][24] - High-margin license revenue rose 52% to $1.4 million in Q3 2024, indicating significant improvement [6] - The net loss improved to $0.7 million or $0.39 per share in Q3 2024, compared to a loss of $1.8 million or $3.22 per share in Q3 2023 [29] Business Line Data and Key Metrics Changes - The increase in revenue was driven by higher software license fees and hardware revenue as several long-term customers expanded their BIO-key deployments [24] - The company exited its Swivel Secure services agreement in Europe, which was a low-margin business, expected to benefit gross margins moving forward [26][49] Market Data and Key Metrics Changes - The province of British Columbia is adding 10,000 users to their existing deployment of BIO-key's WEB-key software, enhancing secure biometric access [12] - The defense ministry has expanded its deployment to over 33,000 users, indicating a growing market presence [11] Company Strategy and Development Direction - BIO-key is focused on driving revenue growth and progressing towards profitability and positive cash flow [20] - The company plans to leverage its core expertise and products to create shareholder value, with a growing base of high-margin annual recurring revenues [17][18] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the adoption and expansion of their solutions among larger customer accounts, indicating a positive trend [33] - The company expects Q4 revenue to meet or exceed Q3 levels, primarily driven by license revenue [37][38] Other Important Information - The cash position improved with approximately $1.9 million in gross proceeds from a warrant inducement agreement [21] - The company has a current asset position of approximately $4.6 million, including $1.8 million in cash and cash equivalents [30] Q&A Session Summary Question: What contributed to the revenue increase in Q3? - Management noted that Q3 is typically a softer quarter, but strong business from existing customers contributed to the positive results [33] Question: Did the $500,000 order from the defense ministry get recognized in Q3? - Yes, the entire order was recognized in Q3 [34] Question: What is the expected revenue from the large financial services customer? - A portion of the $910,000 order will be recognized in Q4, with the balance in Q1 2025 [35] Question: What is the outlook for operating expenses? - The current operating expenses of approximately $2.3 million are considered a good baseline moving forward [39][40] Question: When can formal guidance be expected? - Management indicated that formal guidance may be introduced in 2025 as visibility into subscription revenue increases [42] Question: What is the recurring revenue from the defense ministry? - The defense ministry is not a subscription customer, but they typically spend between $1 million to $1.5 million annually [45] Question: What is the status of accounts receivable? - The majority of accounts receivable has been collected, with most expected to be collected in Q4 [63]

Revenue Growth - Q3'24 revenues increased 18% to $2.1M from $1.8M in Q3'23, driven by a $0.5M rise in license revenue due to expanded software deployments [2]. - License revenue rose by 52% to $1.4M in Q3'24, while hardware sales increased by 56% to $436,000, as long-term customers expanded their deployments [8]. - Total revenues for the three months ended September 30, 2024, were $2,144,804, a 18% increase from $1,817,108 in the same period last year [17]. - License fees revenue increased significantly to $1,441,011, up 52% from $950,015 year-over-year [17]. - Hardware revenue rose to $436,422, representing a 56% increase compared to $279,200 in the prior year [17]. Profitability and Loss - Gross profit improved to $1.7M with a gross margin of 78.3% in Q3'24, compared to $0.3M and 18.7% in Q3'23, attributed to higher-margin license revenue and lower deployment costs [2][9]. - Q3'24 net loss narrowed to $0.7M, or $0.39 per share, from a net loss of $1.8M, or $3.22 per share, in Q3'23, reflecting improved revenue and stable operating expenses [11]. - Operating loss improved to $(580,405) from $(1,965,558) year-over-year, indicating a reduction in losses [17]. - Net loss for the three months was $(738,959), compared to $(1,837,824) in the same period last year, reflecting a 60% improvement [17]. - Net loss for the nine months ended September 30, 2024, was $2,916,195, compared to a net loss of $6,149,024 for the same period in 2023, indicating a significant improvement [20]. Operating Expenses and Cash Flow - Operating expenses were reduced by $46,000 in Q3'24 compared to Q3'23, despite an increase in research and development expenses due to new product development [10]. - Cash position improved to $1.8M at the end of Q3'24, up from $0.5M at year-end 2023, following a $1.9M capital raise through warrant inducement [8][13]. - Cash used in operating activities for the nine months ended September 30, 2024, was $2,399,508, compared to $2,261,922 in the prior year, reflecting an increase in cash outflow [20]. - Total cash and cash equivalents at the end of the period increased to $1,801,137 from $307,086 at the end of the previous period, showing a net increase of $1,289,737 [20]. - The company experienced a decrease in accounts payable, which was $248,640 compared to $488,417 in the prior year, indicating improved cash management [20]. Future Outlook and Developments - The company expects full-year 2024 revenues to meet or exceed $7.75M achieved in 2023, while pursuing opportunities to lower overhead costs [7]. - BIO-key secured a $910k order to upgrade a financial services customer to its enhanced biometric technology after Q3'24 [3]. - British Columbia added 10,000 users to its BIO-key biometric solution deployment for sign-on and physical access control [3]. - The company plans to publish a detailed whitepaper on a large-scale biometric technology deployment, highlighting its unique benefits for enterprises [6]. Balance Sheet and Financial Position - Total assets grew to $6,399,703, up from $4,517,035 at the end of the previous year [19]. - Total liabilities increased to $6,266,661 from $3,453,470, primarily due to an increase in accounts payable and note payable [19]. - Deferred revenue increased significantly to $517,246 from $128,253, indicating growth in future revenue recognition [20]. - Proceeds from Note Payable amounted to $2,000,000, contributing positively to financing activities [20]. - Capital expenditures for the nine months ended September 30, 2024, were $23,047, with no capital expenditures reported in the same period of the previous year [20]. - The company reported a reserve for inventory of $(98,875), a notable change from a reserve of $2,500,000 in the prior year [20]. - Share and warrant-based compensation for employees and consultants was $162,614, slightly down from $163,584 in the previous year [20]. - The effect of exchange rate changes resulted in an increase of $51,878 in cash and cash equivalents [20].

Table of Contents 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, 2024 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 O ...

BIO-key International, Inc. (NASDAQ:BKYI) Q2 2024 Earnings Conference Call August 15, 2024 10:00 AM ET Company Participants Bill Jones - Investor Relations Mike DePasquale - Chairman and Chief Executive Officer Cecilia Welch - Chief Financial Officer Conference Call Participants Jack Vander Aarde - Maxim Group Operator Good morning, everyone. Thank you for standing by and welcome to the BIO-key International First Quarter 2024 Conference Call. During management's prepared remarks, all participants will be i ...

Revenue Performance - Q2'24 revenues decreased to $1.1M from $1.9M in Q2'23, primarily due to a delay in recognizing approximately $450,000 in software license fees and lower project-related services revenue of approximately $200,000[2]. - The company reported a total of $3.3M in revenues for the first six months of 2024, down from $4.1M in the same period of 2023[7]. - Total revenues for the three months ended June 30, 2024, were $1,141,286, a decrease of 40.9% compared to $1,928,929 for the same period in 2023[13]. Profitability and Loss - Gross profit improved to $0.9M with a 77.0% gross margin in Q2'24, compared to $0.3M and a 16.7% gross margin in Q2'23, mainly due to the impact of a $1M hardware reserve in Q2'23[2][8]. - Q2'24 net loss was reduced to $1.7M, or $1.00 per share, from a net loss of $2.6M, or $4.71 per share, in Q2'23[9]. - Operating loss for the three months ended June 30, 2024, was $(1,654,086), an improvement from $(2,378,527) in the same period last year[13]. - The company reported a net loss of $(1,666,950) for the three months ended June 30, 2024, compared to $(2,622,878) for the same period in 2023[13]. - Net loss for the six months ended June 30, 2024, was $2,177,236, an improvement from a net loss of $4,311,200 for the same period in 2023, representing a 49.5% reduction in losses[15]. Cash Flow and Operating Activities - Cash used in operating activities improved by 48% to $1.1M in the first six months of 2024, compared to $2.1M in the same period of 2023[2]. - Cash used in operating activities decreased to $1,123,533 for the six months ended June 30, 2024, compared to $2,095,192 in the prior year, indicating a 46.5% improvement[15]. - Cash and cash equivalents increased to $1,260,351 as of June 30, 2024, compared to $511,400 at December 31, 2023[14]. - Cash and cash equivalents at the end of the period increased to $1,260,351, up from $565,513 at the end of June 30, 2023, reflecting a 123.5% increase[15]. Assets and Liabilities - Current assets as of June 30, 2024, were approximately $3.0M, including $1.3M in cash and cash equivalents, compared to $2.6M at the end of 2023[10]. - Total current assets rose to $3,014,529 as of June 30, 2024, up from $2,622,157 at December 31, 2023[14]. - Total liabilities increased to $5,855,288 as of June 30, 2024, compared to $3,453,470 at December 31, 2023[14]. - The company’s accumulated deficit increased to $(127,184,445) as of June 30, 2024, from $(125,007,210) at December 31, 2023[14]. - Total stockholders' equity was $(1,056,292) as of June 30, 2024, compared to $1,063,565 at December 31, 2023[14]. Cost Management and Expenses - Operating expenses were trimmed by $0.2M in Q2'24 compared to Q2'23, reflecting ongoing cost management initiatives[2][8]. - The company recorded a depreciation expense of $46,069 for the six months ended June 30, 2024, compared to $26,637 in the same period last year, representing a 73.1% increase[15]. - The company incurred capital expenditures of $1,869, a new investment compared to no capital expenditures in the same period last year[15]. Business Development and Strategy - BIO-key introduced Passkey:YOU, a biometric FIDO Passkey Authentication Solution, aimed at enhancing security in identity management[3][6]. - BIO-key is focused on building a base of high-margin annually recurring revenues (ARRs) to support future growth[7]. - The company remains optimistic about the growth potential of its new solutions amid increasing regulatory standards for cybersecurity[6]. Deferred Revenue and Inventory Management - Deferred revenue increased significantly to $414,878 from $174,437 year-over-year, indicating a 137.5% growth[15]. - Inventory changes showed a cash inflow of $12,558, contrasting with a cash outflow of $50,271 in the previous year, indicating improved inventory management[15]. Financing Activities - Proceeds from Note Payable amounted to $2,000,000, contributing positively to financing activities[15]. - The effect of exchange rate changes resulted in a cash outflow of $38,055, compared to a cash inflow of $67,490 in the prior year, highlighting currency volatility impacts[15]. - The company reported a significant increase in accounts payable, which rose to $258,384 from $726,657, indicating changes in payment terms or supplier relationships[15].