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BIO-key(BKYI) - 2021 Q1 - Quarterly Report
2021-05-16 16:00
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, 2021 ☐ 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(BKYI) - 2021 Q1 - Earnings Call Transcript
2021-05-14 16:37
BIO-key International, Inc. (NASDAQ:BKYI) Q1 2021 Earnings Conference Call May 14, 2021 10:00 AM ET Company Participants Kimberly Johnson - VP, Product Marketing Michael W. DePasquale - Chairman and CEO Fred Corsentino - CRO Cecilia Welch - CFO Conference Call Participants Jack Vander Aarde - Maxim Group Unidentified Analyst - Private Investor Operator Good morning, ladies and gentlemen. Thank you for standing by and welcome to BIO-key International’s First Quarter 2021 Conference Call. During management’s ...
BIO-key(BKYI) - 2020 Q4 - Annual Report
2021-03-28 16:00
Part I [Business](index=6&type=section&id=Item%201.%20Business) BIO-key International, Inc. is an Identity and Access Management (IAM) platform provider, offering secure, passwordless access solutions - BIO-key is an Identity and Access Management (IAM) platform provider specializing in secure, passwordless access solutions for enterprise, education, and government customers[15](index=15&type=chunk) - On June 30, 2020, the company acquired PistolStar, Inc. for **$2.5 million**, adding the PortalGuard line of software and services to its portfolio[25](index=25&type=chunk) - The company's core products include PortalGuard® (enterprise IAM), WEB-key® (large-scale biometric ID), and accessory hardware like fingerprint scanners[15](index=15&type=chunk) - The business model focuses on organic growth and strategic acquisitions, with a sales strategy that includes direct sales, a Channel Alliance Partner (CAP) program, and OEM agreements[51](index=51&type=chunk)[53](index=53&type=chunk)[46](index=46&type=chunk) | Category | 2020 | 2019 | | :--- | :--- | :--- | | **Research & Development Expenses** | $1,396,436 | $1,331,667 | [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks, including substantial operating losses and the need for wider market acceptance of its biometric technology - The company has a history of significant operating losses, with an accumulated deficit of approximately **$99 million** as of December 31, 2020[99](index=99&type=chunk) - The COVID-19 pandemic poses a significant risk, having already extended sales cycles, delayed deployments, and created uncertainty that could materially affect business operations and financial condition[137](index=137&type=chunk)[139](index=139&type=chunk) - There are risks associated with integrating the newly acquired PistolStar, including potential difficulties in managing the business, retaining customers and employees, and realizing expected synergies[149](index=149&type=chunk)[150](index=150&type=chunk) - A substantial number of outstanding options and warrants (approximately **4,917,000 shares** reserved) could lead to significant dilution for existing stockholders upon exercise[160](index=160&type=chunk) - The company faces risks in international operations, including currency fluctuations and difficulties in enforcing contract rights and collecting receivables, particularly in Asia and Africa[114](index=114&type=chunk)[117](index=117&type=chunk) [Description of Property](index=26&type=section&id=Item%202.%20Description%20of%20Property) The company leases all its properties, with key operational sites in New Jersey, Minnesota, New Hampshire, Hong Kong, and China - The company leases all its properties, with key locations in Wall, NJ (corporate HQ); Eagan, MN and Bedford, NH (R&D); Tsuen Wan, Hong Kong (warehouse/sales); and Jiangmen, China (hardware R&D/manufacturing)[174](index=174&type=chunk) [Legal Proceedings](index=28&type=section&id=Item%203.%20Legal%20Proceedings) As of the report date, BIO-key International, Inc. is not a party to any pending lawsuits - As of the report date, the company is not a party to any pending lawsuits[177](index=177&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[178](index=178&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=29&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 112 stockholders of record and no plans for cash dividends - Common stock is traded on the Nasdaq Capital Market under the symbol **'BKYI'**[181](index=181&type=chunk) - As of March 26, 2021, there were **112 stockholders of record**[182](index=182&type=chunk) - The company has never paid cash dividends and does not intend to in the foreseeable future[183](index=183&type=chunk) [Selected Financial Data](index=29&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable as the company is a smaller reporting company - Not Applicable[186](index=186&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, total revenue grew 25% to $2.84 million, driven by service and license fees, with liquidity improved by a July 2020 public offering | Metric | 2020 | 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $2,836,782 | $2,267,528 | $569,254 | 25% | | Service Revenue | $1,432,228 | $925,245 | $506,983 | 55% | | License Fees | $962,038 | $442,649 | $519,389 | 117% | | Hardware Revenue | $442,516 | $899,634 | ($457,118) | -51% | | **Gross Profit (Loss)** | $2,041,956 | ($193,717) | - | - | | **Operating Loss** | ($5,203,167) | ($13,519,720) | - | - | | **Net Loss** | ($9,673,987) | ($14,588,700) | - | - | - The increase in service and license revenue was largely due to the acquisition of PistolStar in the second half of 2020[209](index=209&type=chunk)[210](index=210&type=chunk) - The company secured two large contracts in Africa valued at a combined **$75 million**, with the first purchase order received in Q4 2020, expected to ship in H1 2021 upon prepayment[198](index=198&type=chunk) - A July 2020 underwritten public offering resulted in net proceeds of approximately **$22.7 million**, significantly improving the company's liquidity, with cash and cash equivalents increasing from **$79,013** at year-end 2019 to **$16,993,096** at year-end 2020[239](index=239&type=chunk)[241](index=241&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable as the company is a smaller reporting company - Not Applicable[249](index=249&type=chunk) [Financial Statements and Supplementary Data](index=41&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2020 and 2019, including the independent auditor's report and detailed notes - The independent auditor's report identified two critical audit matters: Revenue Recognition due to significant judgment in contracts with multiple performance obligations, and the PistolStar, Inc. Acquisition due to judgment in determining the fair value of acquired intangible assets[344](index=344&type=chunk)[348](index=348&type=chunk) | Balance Sheet Item | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | $22,520,572 | $2,496,698 | | Cash and cash equivalents | $16,993,096 | $79,013 | | Goodwill | $1,262,526 | $0 | | **Total Liabilities** | $2,185,453 | $4,781,871 | | **Total Stockholders' Equity (Deficit)** | $20,335,119 | ($2,285,173) | | Cash Flow Item | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net cash used for operating activities | ($4,950,108) | ($1,850,347) | | Net cash used for investing activities | ($2,229,821) | ($543,310) | | Net cash provided by financing activities | $24,094,012 | $2,148,727 | [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) No changes or disagreements occurred with the company's accountants regarding accounting principles or financial disclosure - None[250](index=250&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, 2020 - Management concluded that as of December 31, 2020, the company's disclosure controls and procedures were effective[251](index=251&type=chunk) - Management concluded that the internal control over financial reporting was effective as of December 31, 2020[253](index=253&type=chunk) [Other Information](index=41&type=section&id=Item%209B.%20Other%20Information) There was no other information to report in this section - None[256](index=256&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=42&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's directors, executive officers, and Board committee composition, including the audit committee financial expert - The report lists key executive officers: Michael W. DePasquale (Chairman & CEO), Cecilia Welch (CFO), Mira K. LaCous (CTO), and James Sullivan (Chief Legal Officer)[259](index=259&type=chunk) - The Audit Committee is comprised of independent directors Robert J. Michel (Chair), Pieter Knook, and Emmanuel Alia; Mr. Michel is qualified as an 'audit committee financial expert'[273](index=273&type=chunk) - The company has adopted a Code of Ethics for its principal executive and financial officers to promote honest and ethical conduct and compliance[277](index=277&type=chunk) [Executive Compensation](index=46&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation includes base salary, performance bonuses, and equity awards, detailing CEO, CTO, employment agreements, and non-employee director fees | Name | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Michael W. DePasquale, CEO | 2020 | 275,000 | 50,000 | 21,450 | 348,669 | | Mira K. LaCous, CTO | 2020 | 213,000 | - | 21,450 | 236,943 | | James Sullivan, CLO | 2020 | 150,000 | 35,000 | 21,450 | 343,688 | - In 2020, due to extraordinary efforts during the pandemic and the PistolStar acquisition, CEO DePasquale and CLO Sullivan received cash bonuses of **$50,000** and **$35,000**, respectively[290](index=290&type=chunk) - Non-employee directors are compensated with fees per meeting attended, which are primarily paid through the issuance of common stock[310](index=310&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=51&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details security ownership by major beneficial owners, directors, and officers, and securities authorized under equity compensation plans | Name of Beneficial Owner | Percentage of Class | | :--- | :--- | | Wong Kwok Fong (Kelvin) | 7.4% | | Lind Global Micro Fund, LP | 9.6% | | All officers and directors as a group (10 persons) | 9.6% | | Plan Category | Securities to be issued upon exercise (a) | Weighted-average exercise price (b) | Securities remaining for future issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 94,183 | $10.73 | 36,086 | | Equity compensation plans not approved by security holders | 133,091 | $22.48 | — | | **Total** | **227,274** | **$17.61** | **36,086** | [Certain Relationships and Related Transactions, and Director Independence](index=54&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company discloses related party transactions, including advances from a director and CEO, a sales incentive agreement, and independent director determinations - The company received non-interest-bearing advances from director Wong Kwok Fong (**$217,360**) and CEO Michael DePasquale (**$114,000**), which were fully repaid during fiscal year 2020[322](index=322&type=chunk)[323](index=323&type=chunk) - A sales incentive agreement exists with Technology Transfer Institute (TTI), whose CEO at the time of the agreement was director Manny Alia[324](index=324&type=chunk) - The Board has determined that directors Robert Michel, Pieter Knook, Emmanuel Alia, Thomas Bush, III, and Thomas Gilley are independent[326](index=326&type=chunk) [Principal Accountant Fees and Services](index=56&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees billed by the principal accountant, RMSBG, for 2020 and 2019, categorized into Audit, Audit-Related, and Tax Fees, all pre-approved by the Audit Committee | Fee Category | 2020 | 2019 | | :--- | :--- | :--- | | Audit Fees | $124,200 | $104,743 | | Audit-Related Fees | $76,925 | $7,204 | | Tax Fees | $16,000 | $18,500 | | **Total Fees** | **$217,125** | **$130,447** | - All audit and non-audit services provided by the independent auditor were pre-approved by the Audit Committee[331](index=331&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=56&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Form 10-K report, including financial statements, corporate governance, and executive certifications - This section provides an index of all exhibits filed with the 10-K, including corporate governance documents, material contracts, and executive certifications[335](index=335&type=chunk)[535](index=535&type=chunk) [Form 10-K Summary](index=58&type=section&id=Item%2016.%20Form%2010-K%20Summary) There is no Form 10-K summary provided in this report - None[337](index=337&type=chunk)
BIO-key(BKYI) - 2020 Q4 - Earnings Call Transcript
2021-03-25 18:44
Financial Data and Key Metrics Changes - Q4 2020 revenues doubled to $1.1 million from $535,000 in Q4 2019, primarily due to PortalGuard's contribution [27][38] - Full year 2020 revenues increased 25% to $2.8 million from $2.3 million in 2019, largely driven by the PortalGuard acquisition [27][38] - Gross margin improved to 71% in Q4 and 72% for the full year, compared to negative levels in prior years [38] - Q4 operating loss improved 34% to $1.4 million from a loss of $2.2 million in Q4 2019 [39] - Net loss to stockholders was $1.4 million or $0.18 per share in Q4 2020, compared to a net loss of $9.5 million or $5.29 per share in Q4 2019 [40] Business Line Data and Key Metrics Changes - The acquisition of PortalGuard significantly enhanced the company's security, ID, and authentication solutions, contributing to second-half performance [9][10] - The company launched PortalGuard IDaaS in Q4 2020, which has been well received in the market [14] - The company is focusing on expanding its sales and marketing initiatives for its biometric and identity management solutions [12][30] Market Data and Key Metrics Changes - The company anticipates revenues of $8 million to $12 million for 2021, representing over 250% growth compared to fiscal 2020 [28] - The company sees significant upside potential from its African business, particularly in Nigeria [45][88] - The company is developing interest in its solutions across North America, Africa, and Asia [27] Company Strategy and Development Direction - The company is ramping up its sales and marketing initiatives to engage with a growing list of customer prospects [12] - The focus is on a software-as-a-service model for PortalGuard to align with the trend towards cloud-based IT infrastructure [30] - The company is expanding its Channel Alliance Partner Program to enhance market reach and support [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a strong financial position and a growing pipeline of opportunities [25][27] - The company believes that hybrid work models are here to stay, creating significant IT security challenges that it is well-positioned to address [15][36] - Management noted that the pandemic has accelerated the demand for identity and access management solutions [10][16] Other Important Information - The company has established a presence in large projects in Africa and is pursuing additional opportunities [21] - The company has a strong balance sheet with over $19 million in current assets, including approximately $17 million in cash [42] Q&A Session Summary Question: Can you provide more color on the revenue guidance for 2021? - Management indicated that the guidance of $8 million to $12 million is conservative, with significant upside potential from the African business [44][46] Question: What are the expected growth rates for the core BIO-key business versus PortalGuard? - Management expects both businesses to grow together, with significant growth anticipated in the PortalGuard platform [48][49] Question: What is the confidence level for recognizing the $500,000 revenue from Africa contracts in Q1? - Management expressed high confidence in recognizing the revenue [54] Question: Can you quantify the backlog or pipeline? - Management stated that the backlog is growing, with significant opportunities in both Africa and the core business [60][61] Question: What is the status of the telecom deal in Africa? - Management confirmed that both contracts are moving forward [70] Question: What is the expected breakeven revenue number going forward? - Management indicated that the breakeven number is now estimated to be around $2 million to $2.2 million [75] Question: What is the expected revenue from the African contracts over the next two years? - Management confirmed the expectation of $75 million over the two-year period, with a gradual ramp-up [88]
BIO-key(BKYI) - 2020 Q3 - Quarterly Report
2020-11-16 22:05
UNITED STATES 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, 2020 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 Organizati ...
BIO-key(BKYI) - 2020 Q2 - Quarterly Report
2020-08-14 20:51
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 June 30, 2020 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 Organi ...
BIO-key(BKYI) - 2020 Q1 - Quarterly Report
2020-06-08 21:30
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, 2020 ☐ 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 ...
BIO-key(BKYI) - 2019 Q4 - Annual Report
2020-05-14 21:20
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(BKYI) - 2019 Q3 - Earnings Call Transcript
2019-11-15 17:31
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 ...
BIO-key(BKYI) - 2019 Q3 - Quarterly Report
2019-11-14 22:16
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 ...