On April 23, 2024, BIO-key engaged Bush & Associates CPA as its independent registered public accounting firm. About BIO-key International, Inc. (www.BIO-key.com) BIO-key is revolutionizing authentication and cybersecurity with biometric-centric, multi-factor identity and access management (IAM) software securing access for over forty million users. BIO-key allows customers to choose the right authentication factors for diverse use cases, including phoneless, tokenless, and passwordless biometric options. I ...

TICINO, Switzerland and HOLMDEL, N.J., April 09, 2024 (GLOBE NEWSWIRE) -- BIO-key® International, Inc.® (NASDAQ:BKYI), an innovative provider of workforce and customer Identity and Access Management (IAM) featuring passwordless, phoneless and token-less Identity-Bound Biometric (IBB) authentication solutions, today announced that Switzerland's Canton of Ticino (Ticino) has partnered with Asecus AG to implement BIO-key's AuthControl Sentry login solution. In a significant enhancement to its digital security, ...

BIO-key International, Inc. (NASDAQ:BKYI) Q4 2023 Earnings Conference Call April 2, 2024 10:00 AM ET Company Participants Bill Jones - IR Mike DePasquale - Chairman and CEO Ceci Welch - CFO Conference Call Participants Jack Vander Aarde - Maxim Group Operator Good morning, everyone. Thank you for standing by, and welcome to BIO-key International's Fourth Quarter 2023 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today Tuesday, April 2, 2024. Now I would like to tu ...

HOLMDEL, N.J., April 01, 2024 (GLOBE NEWSWIRE) -- BIO-key® International, Inc. (NASDAQ:BKYI), an innovative provider of workforce and customer Identity and Access Management (IAM) solutions featuring passwordless, phoneless and token-less Identity-Bound Biometric (IBB) authentication, announced preliminary results for its fourth quarter (Q4'23) and year ended December 31, 2023 (2023). The independent audit of BIO-key's 2023 financial statements has not yet been completed and, therefore, the figures included ...

DUBAI, United Arab Emirates and HOLMDEL, N.J., March 12, 2024 (GLOBE NEWSWIRE) -- Humanity International Investments (HII) and BIO-key® International, Inc. (NASDAQ:BKYI), announce significant milestones in HII's innovative Humanity Protocol initiative. Over 40,000 NFTs have been claimed to date, showcasing the project making remarkable strides in digital identity and blockchain technology integration. Humanity International Investments, under the Chairmanship of His Highness, Sheikh Marwan bin Mohamed bin R ...

MADRID, Spain and HOLMDEL, N.J., Jan. 22, 2024 (GLOBE NEWSWIRE) -- BIO-key® International, Inc. (NASDAQ:BKYI), an innovative provider of workforce and customer Identity and Access Management (IAM) featuring passwordless, phoneless and token-less Identity-Bound Biometric (IBB) authentication solutions, today announced that Spain's Grupo Tragsa (the Tragsa Group) has partnered with Factum España to implement BIO-key's AuthControl Sentry solution. AuthControl Sentry, renowned for its comprehensive authenticati ...

HOLMDEL, N.J. and OELDE, Germany, Jan. 17, 2024 (GLOBE NEWSWIRE) -- BIO-key® International, Inc. (NASDAQ:BKYI), an innovative provider of workforce and customer Identity and Access Management (IAM) solutions featuring Identity-Bound Biometric (IBB) authentication solutions, today announced that Haver & Boecker, a global leader in processing and packaging technology for bulk materials, has implemented Multifactor Authentication (MFA) and Single Sign-On (SSO) technology for its digital platforms via P&W Netzw ...

FORM 10-Q For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT Commission file number 1-13463 DELAWARE 41-1741861 (State or Other Jurisdiction of Incorporation of Organization) (IRS Employer Identification Number) (Address of Principal Executive Offices) Securities registered pursuance to Section 12(b) of the Act: Common Stock, par value $0.0001 per share BKYI Nasdaq Capital Market Indicate by check mark whether the registrant has submitted e ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents unaudited condensed consolidated financial statements and notes for periods ended June 30, 2023, and December 31, 2022 [Item 1—Financial Statements](index=4&type=section&id=Item%201%E2%80%94Financial%20Statements) Provides unaudited condensed consolidated financial statements and comprehensive notes for periods ended June 30, 2023, and December 31, 2022 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Details the company's financial position, including assets, liabilities, and equity, as of June 30, 2023, and December 31, 2022 Table: Condensed Consolidated Balance Sheets ($) | Metric | June 30, 2023 (Unaudited) | December 31, 2022 | |:---|:---|:---| | Cash and cash equivalents | $565,513 | $2,635,522 | | Accounts receivable, net | $3,178,785 | $1,522,784 | | Inventory | $4,384,098 | $4,434,369 | | Total current assets | $8,531,330 | $8,984,881 | | Total assets | $10,583,245 | $11,344,255 | | Total current liabilities | $6,276,088 | $5,455,688 | | Convertible note payable | $2,498,780 | $2,596,203 | | Total liabilities | $6,738,154 | $6,042,699 | | Total stockholders' equity | $3,845,091 | $5,301,556 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Outlines revenues, expenses, and net loss for the three and six months ended June 30, 2023, and 2022 Table: Condensed Consolidated Statements of Operations and Comprehensive Loss ($) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Total revenues | $1,928,929 | $1,947,115 | $5,012,696 | $3,888,286 | | Gross profit | $1,322,818 | $1,223,162 | $3,586,311 | $2,826,892 | | Operating loss | $(1,178,527) | $(1,567,494) | $(1,536,926) | $(2,567,028) | | Net loss | $(1,422,878) | $(1,718,957) | $(1,711,200) | $(2,718,360) | | Basic and Diluted Loss per Common Share | $(0.16) | $(0.21) | $(0.19) | $(0.34) | | Weighted Average Common Shares Outstanding (Basic and diluted) | 9,021,426 | 8,098,020 | 9,008,631 | 7,992,102 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Summarizes changes in stockholders' equity, including common stock and accumulated deficit, from January 1 to June 30, 2023 Table: Condensed Consolidated Statements of Stockholders' Equity ($) | Metric | January 1, 2023 | June 30, 2023 | |:---|:---|:---|\ | Common Shares | 9,190,504 | 9,262,853 | | Common Stock Amount | $919 | $926 | | Additional Paid-in Capital | $122,028,612 | $122,191,310 | | Accumulated Other Comprehensive Income (Loss) | $(242,602) | $(150,572) | | Accumulated Deficit | $(116,485,373) | $(118,196,573) | | Total Stockholders' Equity | $5,301,556 | $3,845,091 | - Issuance of common stock for directors' fees: **$12,002** (Q1 2023), **$16,002** (Q2 2023)[107](index=107&type=chunk) - Net loss for Q1 2023 was **$(288,322)** and for Q2 2023 was **$(1,422,878)**[107](index=107&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Reports cash flows from operating, investing, and financing activities for the six months ended June 30, 2023, and 2022 Table: Condensed Consolidated Statements of Cash Flows ($) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|\ | Net cash used for operating activities | $(2,095,192) | $(2,287,446) | | Net cash used for investing activities | $0 | $(559,466) | | Net cash used for financing activities | $(42,307) | $39,125 | | Effect of exchange rate changes | $67,490 | $(53,217) | | NET DECREASE IN CASH AND CASH EQUIVALENTS | $(2,070,009) | $(2,861,004) | | CASH AND CASH EQUIVALENTS, END OF PERIOD | $565,513 | $4,893,042 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of accounting policies, financial instruments, and other disclosures supporting financial statements [Nature of Business and Basis of Presentation](index=10&type=section&id=1.%20NATURE%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) BIO-key develops biometric and IAM solutions, with unaudited GAAP financial statements using U.S. dollar as functional currency - BIO-key develops and markets proprietary fingerprint identification biometric technology and software solutions for identity access management (IAM) to commercial, government, and education customers[87](index=87&type=chunk) - The accompanying unaudited interim consolidated financial statements are prepared in conformity with GAAP and include all necessary recurring adjustments[88](index=88&type=chunk)[112](index=112&type=chunk) - The Company's functional currency is the U.S. dollar; assets and liabilities are translated at current exchange rates, and revenues/expenses at average rates, with translation adjustments included in accumulated other comprehensive income (loss)[113](index=113&type=chunk) [Going Concern](index=11&type=section&id=2.%20GOING%20CONCERN) Substantial net losses and negative cash flows raise going concern doubts, dependent on increased revenue and continuous financing - The Company has suffered substantial net losses and negative cash flows from operations in recent years, dependent on debt and equity financing, raising substantial doubt about its ability to continue as a going concern[17](index=17&type=chunk) - As of the report date, the Company does not have enough cash for twelve months of operations[116](index=116&type=chunk) - The Company is looking into other markets and opportunities to sell or return inventory purchased for delayed projects in Nigeria to generate additional cash[116](index=116&type=chunk) [Revenue from Contracts with Customers](index=11&type=section&id=3.%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) Revenue disaggregated by type and geography; total revenues increased 29% YoY for H1 2023, driven by 42% license fee growth Table: Revenue from Contracts with Customers ($) | Revenue Type | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Services | $620,465 | $435,106 | $1,152,987 | $830,910 | | License fees | $1,235,771 | $1,162,148 | $3,714,327 | $2,622,331 | | Hardware | $72,693 | $349,861 | $145,382 | $435,045 | | **Total Revenues** | **$1,928,929** | **$1,947,115** | **$5,012,696** | **$3,888,286** | - For the three months ended June 30, 2023, total revenues decreased by **1%** YoY, with service revenue increasing **43%** and hardware revenue decreasing **79%**[181](index=181&type=chunk) - For the six months ended June 30, 2023, total revenues increased by **29%** YoY, with license revenue increasing **42%** and hardware revenue decreasing **67%**[189](index=189&type=chunk)[216](index=216&type=chunk) [Accounts Receivable](index=12&type=section&id=4.%20ACCOUNTS%20RECEIVABLE) Accounts receivable are net of an allowance for credit losses, which increased from **$573,785** to **$623,785** by June 30, 2023 Table: Accounts Receivable ($) | Metric | June 30, 2023 | December 31, 2022 | |:---|:---|:---|\ | Accounts receivable | $3,802,570 | $2,096,569 | | Allowance for credit losses | $(623,785) | $(573,785) | | Accounts receivable, net | $3,178,785 | $1,522,784 | - Management determines the allowance for credit losses by regularly evaluating individual customer receivables and considering financial condition, credit history, economic conditions, and other relevant factors[119](index=119&type=chunk) - The adoption of ASU 2016-13 (expected credit loss model) did not have a material effect on the consolidated financial statements[15](index=15&type=chunk) [Share Based Compensation](index=13&type=section&id=5.%20SHARE%20BASED%20COMPENSATION) Share-based compensation totaled **$148,771** for H1 2023, a decrease from prior year, recognized in SG&A and R&D Table: Share Based Compensation ($) | Expense Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Selling, general and administrative | $59,966 | $66,152 | $115,419 | $158,578 | | Research, development and engineering | $17,430 | $17,547 | $33,352 | $34,818 | | **Total Share Based Compensation** | **$77,396** | **$83,699** | **$148,771** | **$193,396** | [Inventory](index=13&type=section&id=6.%20INVENTORY) Inventory is valued at lower of cost or realizable value, with a **$400,000** reserve for slow-moving Nigeria project inventory - Inventory is stated at the lower of cost (FIFO basis) or realizable value, with reserves for obsolescence, excess quantities, slow-moving goods, and other impairment[22](index=22&type=chunk) - A **$400,000** reserve on inventory is due to slow-moving inventory purchased for projects in Nigeria, with the Company exploring other markets or return options[22](index=22&type=chunk) Table: Inventory Components ($) | Inventory Component | June 30, 2023 | December 31, 2022 | |:---|:---|:---|\ | Finished goods | $4,714,372 | $4,764,643 | | Fabricated assemblies | $69,726 | $69,726 | | Reserve on finished goods | $(400,000) | $(400,000) | | **Total inventory** | **$4,384,098** | **$4,434,369** | [Commitments and Contingencies](index=13&type=section&id=7.%20COMMITMENTS%20AND%20CONTINGENCIES) Exclusive distribution agreement with Swivel Secure Limited until 2027, with no pending lawsuits as of June 30, 2023 - Swivel Secure has an exclusive distribution agreement with Swivel Secure Limited (SSL) for EMEA (excluding UK/Ireland) products, with an initial term ending January 31, 2027[96](index=96&type=chunk)[48](index=48&type=chunk) - The exclusive distribution rights are contingent on Swivel Secure meeting minimum annual order levels; failure to do so results in non-exclusive distributorship[146](index=146&type=chunk) - As of June 30, 2023, the Company was not a party to any pending lawsuits[122](index=122&type=chunk) [Leases](index=15&type=section&id=8.%20LEASES) Leases office space with 2023/2024 termination dates; new one-year New Jersey lease signed for September 1, 2023 start - The Company leases office space in New Jersey, Minnesota, New Hampshire, Madrid, and Hong Kong, with termination dates in 2023 and 2024[25](index=25&type=chunk) - A new one-year lease for New Jersey office space was signed on August 11, 2023, starting September 1, 2023[25](index=25&type=chunk) Table: Lease Costs and Metrics ($) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---|\ | Total lease cost | $48,543 | $55,942 | $111,682 | $111,161 | | Operating right-of-use assets (June 30, 2023) | | | $84,610 | | | Operating lease liabilities, current portion (June 30, 2023) | | | $77,379 | | | Weighted average remaining lease term (in years) – operating leases | | | 0.93 | | | Weighted average discount rate – operating leases | | | 5.50% | | [Convertible Note Payable](index=15&type=section&id=9.%20CONVERTIBLE%20NOTE%20PAYABLE) A **$2.2 million** senior secured promissory note, due December 22, 2023, accrues 10-12% interest and is secured by Company assets - On December 22, 2022, the Company issued a **$2,200,000** principal amount senior secured promissory note, with proceeds used for general working capital[125](index=125&type=chunk) - The due date of the note was extended to December 22, 2023, with interest accruing at **10%** per annum for the first six months and **12%** per annum for months seven through twelve, payable monthly[51](index=51&type=chunk)[225](index=225&type=chunk) - The note is secured by a lien on substantially all of the Company's assets and properties and can be prepaid without penalty[51](index=51&type=chunk)[225](index=225&type=chunk) - In connection with the note, the Company issued **700,000** commitment shares (**$1.00**/share) and a warrant to purchase **200,000** shares (**$3.00**/share exercise price, 5-year term)[150](index=150&type=chunk) [Stockholders' Equity](index=17&type=section&id=11.%20STOCKHOLDERS'%20EQUITY) Details changes in stockholders' equity, including common stock issuances for directors' fees and employee plans, and restricted stock - On March 8, 2022, **269,060** shares of common stock were issued at **$2.23** per share for the Swivel Secure stock purchase agreement, totaling **$600,004**[54](index=54&type=chunk) - During the six months ended June 30, 2023, **38,538** shares of common stock were issued to directors in lieu of fees, valued at **$28,004**[57](index=57&type=chunk) - During the six months ended June 30, 2023, **40,000** shares of restricted common stock were issued to employees and directors, with a fair value of **$31,200**, vesting over three years[130](index=130&type=chunk) - Restricted stock compensation for the six months ended June 30, 2023, was **$113,837**[32](index=32&type=chunk) - No warrants were issued during the three and six-month periods ended June 30, 2023 and 2022[155](index=155&type=chunk) [Fair Values of Financial Instruments](index=19&type=section&id=12.%20FAIR%20VALUES%20OF%20FINANCIAL%20INSTRUMENTS) Short-term financial instruments approximate fair value, categorized into a three-tier hierarchy based on input observability - Cash and cash equivalents, accounts receivable, due from factor, accounts payable, and accrued liabilities are carried at or approximate fair value due to their short-term nature[133](index=133&type=chunk) - The carrying value of the government loan payable approximates fair value as its interest rate approximates market rates[133](index=133&type=chunk) - GAAP establishes a three-tier fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs, direct or indirect), and Level 3 (significant unobservable inputs)[34](index=34&type=chunk)[156](index=156&type=chunk) [Fair Value Measurement of Convertible Note Payable](index=19&type=section&id=13.%20FAIR%20VALUE%20MEASUREMENT%20OF%20CONVERTIBLE%20NOTE%20PAYABLE) Convertible note measured at fair value using a Level 3 model, decreasing to **$2,498,780** at June 30, 2023 - The Company elected the fair value measurement option for the convertible note due to embedded derivatives, recording it at fair value upon issuance and remeasuring at each reporting date[28](index=28&type=chunk) Table: Convertible Note at Fair Value ($) | Metric | June 30, 2023 | December 31, 2022 | |:---|:---|:---|\ | Convertible note at fair value | $2,498,780 | $2,596,203 | - Fair value of the convertible note is estimated using a probability-weighted discounted cash flow model with assumptions including a face amount of **$2,200,000**, nominal interest rate of **12%** (at June 30, 2023), default interest rate of **18%**, and a **50%** likelihood of default at the extended maturity date[35](index=35&type=chunk)[135](index=135&type=chunk)[158](index=158&type=chunk) Table: Change in Fair Value of Convertible Note ($) | Period | Change in Fair Value | |:---|:---|\ | Beginning balance (Dec 31, 2022) | $2,596,203 | | Change for three months ended March 31, 2023 | $(141,991) | | Balance at March 31, 2023 | $2,454,212 | | Change for three months ended June 30, 2023 | $44,568 | | Ending balance at June 30, 2023 | $2,498,780 | [Major Customers and Accounts Receivable](index=20&type=section&id=14.%20MAJOR%20CUSTOMERS%20AND%20ACCOUNTS%20RECEIVABLE) Significant customer concentration: three customers 63% of AR, one customer 12% of revenue for Q2 2023 - Three customers accounted for **63%** of current accounts receivable at June 30, 2023, while at December 31, 2022, one customer accounted for **35%** of current accounts receivable[60](index=60&type=chunk) - For the three months ended June 30, 2023 and 2022, one customer accounted for **12%** of revenue; for the six months ended June 30, 2023, two customers accounted for **30%** of revenue, and for 2022, one customer accounted for **14%** of revenue[135](index=135&type=chunk) [Income Taxes](index=20&type=section&id=15.%20INCOME%20TAXES) Income tax provision for H1 2023 was **$143,000**, with a full valuation allowance against net deferred tax assets - The provision for income taxes for the six months ended June 30, 2023, amounted to **$143,000**, comprising **$156,000** in current income taxes and a **$13,000** deferred tax benefit[37](index=37&type=chunk)[195](index=195&type=chunk) - The deferred tax liability relates to intangible assets from the acquisition of Swivel Secure[37](index=37&type=chunk) - The Company provides a full valuation allowance against its net deferred tax assets, believing it is more likely than not that they will not be realized[61](index=61&type=chunk) [Subsequent Events](index=20&type=section&id=16.%20SUBSEQUENT%20EVENTS) Subsequent events include common stock issuances to directors and employees, and cancellations of restricted stock due to departures - On August 10, 2023, the Company issued **13,236** shares of common stock to directors for meeting fees and **12,500** shares of restricted stock (three-year vesting) to two new employees, all at **$0.68** per share[162](index=162&type=chunk) - On July 19 and 20, 2023, **20,000** and **13,333** shares of restricted common stock, respectively, were cancelled due to employees leaving before vesting[62](index=62&type=chunk) [Item 2—Management's Discussion and Analysis of Financial Conditions and Results of Operations](index=22&type=section&id=Item%202%E2%80%94Management's%20Discussion%20and%20Analysis%20of%20Financial%20Conditions%20and%20Results%20of%20Operations) Analyzes BIO-key's business, strategy, financial performance, liquidity, and capital resources for periods ended June 30, 2023 [Overview](index=22&type=section&id=Overview) BIO-key is a leading IAM platform provider, offering secure MFA solutions like PortalGuard and WEB-key with biometrics for diverse customers - BIO-key is a leading IAM platform provider enabling secure work-from-anywhere for enterprise, education, and government customers using secure multi-factor authentication (MFA)[164](index=164&type=chunk) - Key products include PortalGuard® and PortalGuard Identity-as-a-Service (IDaaS) enterprise IAM, WEB-key® biometric civil and large-scale ID infrastructure, MobileAuth® mobile phone authentication application, and high-quality, low-cost accessory fingerprint scanner and FIDO-compliant hardware[164](index=164&type=chunk) - The PortalGuard platform goes beyond traditional MFA by allowing roving users to biometrically authenticate without phones or tokens, eliminating unauthorized account delegation, and detecting duplicate users[40](index=40&type=chunk)[65](index=65&type=chunk) [Strategic Outlook](index=23&type=section&id=Strategic%20Outlook) Plans IAM market expansion through diverse authentication, strategic acquisitions, and growth in regulated industries via enhanced marketing - The Company plans to have a more significant role in the IAM market by offering a suite of authentication options that complement its biometric solutions, allowing customers to customize their approach[43](index=43&type=chunk) - Growth strategies include pursuing strategic acquisitions in the IAM space to enter new market verticals or create synergies with existing operations[166](index=166&type=chunk) - Primary sales strategies focus on increased marketing efforts into the IAM market, dedicated pursuit of large-scale identification projects globally, and growing its channel alliance program[177](index=177&type=chunk) - The Company expects to grow its business within government services and highly-regulated industries (financial services, higher education, healthcare) due to heightened security and privacy requirements[176](index=176&type=chunk) [Critical Accounting Policies and Estimates](index=23&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Refers to Form 10-K for critical accounting policies; no material changes from previously disclosed estimates - There have been no material changes to the Company's critical accounting policies and estimates from those disclosed in its most recent Annual Report on Form 10-K[167](index=167&type=chunk) - For detailed information regarding recent accounting pronouncements, refer to the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this report[168](index=168&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Analyzes the Company's financial performance, including revenues, costs, and net loss, for Q2 and H1 2023 compared to prior periods [Three Months Ended June 30, 2023 as Compared to June 30, 2022](index=24&type=section&id=THREE%20MONTHS%20ENDED%20JUNE%2030%2C%202023%20AS%20COMPARED%20TO%20JUNE%2030%2C%202022) Q2 2023 total revenues decreased **1%** to **$1.93 million**, with service revenue up **43%** and hardware down **79%**, R&D costs down **29%** Table: Three Months Ended June 30, 2023 vs 2022 ($) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\ | Service Revenue | $620,465 | $435,106 | $185,359 | 43% | | License Revenue | $1,235,771 | $1,162,148 | $73,623 | 6% | | Hardware Revenue | $72,693 | $349,861 | $(277,168) | -79% | | **Total Revenue** | **$1,928,929** | **$1,947,115** | **$(18,186)** | **-1%** | | Cost of Service | $360,156 | $180,677 | $179,479 | 99% | | Cost of License | $198,147 | $358,136 | $(159,989) | -45% | | Cost of Hardware | $47,808 | $185,140 | $(137,332) | -74% | | **Total COGS** | **$606,111** | **$723,953** | **$(117,842)** | **-16%** | | Selling, general and administrative | $1,943,164 | $2,006,573 | $(63,409) | -3% | | Research, development and engineering | $558,181 | $784,083 | $(225,902) | -29% | | Net loss | $(1,422,878) | $(1,718,957) | $296,079 | -17% | | Basic and Diluted Loss per Common Share | $(0.16) | $(0.21) | $0.05 | -24% | - Non-recurring custom services revenue increased **179%** due to additional new customer customizations and upgrades[181](index=181&type=chunk) - The decrease in hardware sales was largely due to the absence of large deployments in 2023, compared to significant orders in 2022[182](index=182&type=chunk) - R&D costs decreased primarily due to reductions in personnel costs and outside services related to the completed MobileAuth application development[172](index=172&type=chunk) - Other income (expense) for Q2 2023 included interest expense of **$56,806** on the secured note and government loan, and a change in fair value of **$(44,568)** on the convertible note[173](index=173&type=chunk)[186](index=186&type=chunk) [Six Months Ended June 30, 2023 as Compared to June 30, 2022](index=26&type=section&id=SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202023%20AS%20COMPARED%20TO%20JUNE%2030%2C%202022) H1 2023 total revenues increased **29%** to **$5.01 million**, driven by **42%** license revenue growth, hardware sales down **67%**, R&D costs down **21%** Table: Six Months Ended June 30, 2023 vs 2022 ($) | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\ | Service Revenue | $1,152,987 | $830,910 | $322,077 | 39% | | License Revenue | $3,714,327 | $2,622,331 | $1,091,996 | 42% | | Hardware Revenue | $145,382 | $435,045 | $(289,663) | -67% | | **Total Revenue** | **$5,012,696** | **$3,888,286** | **$1,124,410** | **29%** | | Cost of Service | $514,957 | $391,590 | $123,367 | 32% | | Cost of License | $819,028 | $431,366 | $387,662 | 90% | | Cost of Hardware | $92,400 | $238,438 | $(146,038) | -61% | | **Total COGS** | **$1,426,385** | **$1,061,394** | **$364,991** | **34%** | | Selling, general and administrative | $3,874,896 | $3,804,571 | $70,325 | 2% | | Research, development and engineering | $1,248,341 | $1,589,349 | $(341,008) | -21% | | Net loss | $(1,711,200) | $(2,718,360) | $1,007,160 | -37% | | Basic and Diluted Loss per Common Share | $(0.19) | $(0.34) | $0.15 | -44% | - Non-recurring custom services increased **188%** in the first six months of 2023, largely due to additional service revenue from Swivel Secure customers[189](index=189&type=chunk) - License fees increased due to increased revenue and third-party software for Swivel Secure licenses[191](index=191&type=chunk) - Other income (expense) for H1 2023 included a loss on foreign currency of **$15,000**, a change in fair value of **$97,423** on the convertible note, and interest expense of **$113,724**[194](index=194&type=chunk)[220](index=220&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Cash decreased to **$565,513** by June 30, 2023; Company relies on debt/equity to meet **$763,000** monthly operational needs Table: Liquidity Metrics ($) | Metric | June 30, 2023 | December 31, 2022 | |:---|:---|:---|\ | Cash and cash equivalents | $565,513 | $2,635,522 | | Working capital | $2,411,000 | N/A | - Net cash used for operating activities during the six months ended June 30, 2023, was **$2,095,192**, primarily due to negative cash flows from changes in accounts receivable, due from factor, and accrued liabilities[84](index=84&type=chunk)[223](index=223&type=chunk) - The Company's capital needs have been principally met through proceeds from the sale of equity and debt securities[199](index=199&type=chunk) - The **$2.2 million** principal amount secured note is due on December 22, 2023, and the Company expects to need additional financing to repay this note and support operations[228](index=228&type=chunk) - The Company uses an accounts receivable factoring arrangement, extended to October 31, 2023, to assist with general working capital requirements[234](index=234&type=chunk) - The Company requires approximately **$763,000** per month to conduct operations, which it has been unable to consistently achieve through revenue generation[235](index=235&type=chunk) - The Company has approximately **$3.8 million** of inventory purchased for projects in Nigeria and is exploring other markets or return options to generate additional cash[235](index=235&type=chunk) [Item 4—Controls and Procedures](index=32&type=section&id=Item%204%E2%80%94Controls%20and%20Procedures) Addresses effectiveness of disclosure controls and internal control over financial reporting, including identified material weaknesses [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) CEO and CFO deemed disclosure controls ineffective as of June 30, 2023, due to material weaknesses in income tax provision and foreign subsidiary tax filings - The CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2023[208](index=208&type=chunk) - A material weakness was identified relating to the effectiveness of management's review and controls over the income tax provision in financial footnotes[208](index=208&type=chunk) - A lack of control over foreign subsidiaries with respect to the timely filing of required tax returns was also identified[208](index=208&type=chunk) [Changes in Internal Control Over Financial Reporting](index=33&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting for Q2 2023; new controls and consultant engaged to remediate weaknesses - There have been no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2023[209](index=209&type=chunk) - The Company intends to implement new controls designed to remediate the material weaknesses and has engaged a consultant to review income tax transactions and assist with financial statement preparation[237](index=237&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) Includes exhibits filed as part of the Quarterly Report on Form 10-Q and the required signatures from the Company's executive officers [Item 6—Exhibits](index=34&type=section&id=Item%206%E2%80%94Exhibits) Lists exhibits filed with Form 10-Q, including a waiver and amendment to a securities purchase agreement, CEO/CFO certificates, and XBRL data - Exhibits include Waiver and Amendment No. 1 to Securities Purchase Agreement, Certificates of CEO and CFO required under Rule 13a-15(f) and 18 U.S.C. Section 1350, and Inline XBRL Instance, Taxonomy Extension Schema, Calculation, Definition, Labels, and Presentation files[231](index=231&type=chunk) [Signatures](index=35&type=section&id=Signatures) Report signed by Michael W. DePasquale (CEO) and Cecilia C. Welch (CFO) on behalf of BIO-Key International, Inc. on August 18, 2023 - The report is signed by Michael W. DePasquale, Chief Executive Officer, and Cecilia C. Welch, Chief Financial Officer, on August 18, 2023[211](index=211&type=chunk)[233](index=233&type=chunk)

BIO-key International, Inc. (NASDAQ:BKYI) Q2 2023 Earnings Conference Call August 15, 2023 10:00 AM ET Company Participants Bill Jones – Investor Relations Mike DePasquale – Chairman and Chief Executive Officer Ceci Welch – Chief Financial Officer Conference Call Participants Jack Vander Aarde – Maxim Group Operator Good morning, everyone. Thank you for standing by, and welcome to BIO-key International Second Quarter 2023 Conference Call. During management’s prepared remarks all participants will be in list ...