BIO-key(BKYI) - 2025 Q2 - Quarterly Report

Part I: Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements for Q2 2025 and 2024, showing increased revenue, reduced net loss, and improved cash and equity from financing activities Condensed Consolidated Balance Sheets | Financial Metric | June 30, 2025 (Unaudited) ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | Assets | | | | Total Current Assets | $4,035,230 | $1,886,958 | | Total Assets | $10,516,551 | $8,615,560 | | Liabilities & Equity | | | | Total Current Liabilities | $3,531,910 | $4,553,536 | | Total Liabilities | $3,664,374 | $4,843,529 | | Total Stockholders' Equity | $6,852,177 | $3,772,031 | Condensed Consolidated Statements of Operations | Metric (Q2) | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Total Revenues | $1,696,907 | $1,141,286 | | Gross Profit | $1,232,727 | $879,014 | | Operating Loss | $(1,083,850) | $(1,654,086) | | Net Loss | $(1,167,396) | $(1,666,950) | | Basic and Diluted Loss per Share | $(0.20) | $(1.00) | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,715,324) | $(1,123,533) | | Net cash used in investing activities | $(6,048) | $(1,869) | | Net cash provided in financing activities | $3,493,505 | $1,912,408 | | Net Increase in Cash | $1,837,741 | $748,951 | Notes to Condensed Consolidated Financial Statements These notes provide critical context, including a 'Going Concern' warning, disaggregated revenue showing strong EMESA hardware sales, significant customer concentration, and details on financing activities - The company's history of significant losses, negative cash flow from operations, and dependence on obtaining additional financing raises substantial doubt about its ability to continue as a going concern[29][30] - In Q2 2025, revenue from the EMESA region (Europe, Middle East, South America) grew significantly to $969,437 from $235,987 in Q2 2024, primarily driven by hardware sales[31] - The company has significant customer concentration, with two customers accounting for 47% of Q2 2025 revenue and 49% of current accounts receivable at June 30, 2025[68] - In January 2025, the company raised approximately $3.8 million in gross proceeds through a warrant exercise agreement with an institutional investor[64] Management's Discussion and Analysis (MD&A) Management discusses Q2 2025 performance, highlighting a 49% revenue increase driven by hardware sales, narrowed operating loss, and reiterates the 'going concern' risk due to ongoing financing needs - The company's strategic outlook focuses on expanding its role in the Identity Access Management (IAM) market, particularly within government, financial services, higher education, and healthcare[82][83] - The company requires approximately $812,000 per month for operations and expects to need additional financing within the next twelve months unless it can generate sufficient positive cash flow[117] Results of Operations This section details Q2 2025 results, showing a 49% revenue increase driven by hardware sales, and a smaller operating loss due to decreased expenses Revenue (Q2 2025 vs Q2 2024) | Revenue (Q2 2025 vs Q2 2024) | $ Change ($) | % Change | | :--- | :--- | :--- | | Service | $38,427 | 14% | | License | $31,862 | 4% | | Hardware | $485,332 | 581% | | Total Revenue | $555,621 | 49% | - Selling, general and administrative (SG&A) expenses for Q2 2025 decreased by 13% to $1.68M from $1.94M in Q2 2024, due to reductions in administration, sales personnel costs, and professional services fees[95] Revenue (H1 2025 vs H1 2024) | Revenue (H1 2025 vs H1 2024) | $ Change ($) | % Change | | :--- | :--- | :--- | | Service | $97,904 | 20% | | License | $(819,814) | -30% | | Hardware | $703,487 | 696% | | Total Revenue | $(18,423) | -1% | Liquidity and Capital Resources Liquidity improved due to warrant exercises, but ongoing operational cash burn and insufficient resources necessitate additional financing for the next twelve months - Net cash provided by financing activities was $3.5M for the six months ended June 30, 2025, primarily from $3.8M in proceeds from the exercise of warrants[109] - The company has approximately $3.1 million of fully reserved inventory purchased for delayed projects in Nigeria and is exploring other markets to sell the product and generate cash[117] - The company's long-term viability depends on the successful commercialization of its technologies and its ability to obtain adequate financing, as current resources are insufficient to fund operations for the next twelve months[118] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, BIO-key is not required to provide disclosures regarding market risk - The company is not required to provide information regarding market risk as it qualifies as a smaller reporting company[119] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[120] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[121] Part II: Other Information Legal Proceedings As of the report date, the company is not a party to any pending lawsuits - The company is not currently a party to any pending lawsuits[123] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company issued common stock in two transactions to an accredited investor, exchanging shares for $400,000 in promissory notes - On May 30, 2025, the company issued 259,403 shares of common stock in exchange for a $200,000 promissory note[125] - On June 9, 2025, the company issued 239,034 shares of common stock in exchange for a $200,000 promissory note[126] Other Items (1A, 3, 4, 5, 6) This section confirms that as a smaller reporting company, Risk Factors are not required, and reports no defaults on senior securities or changes in Rule 10b5-1 trading plans - As a smaller reporting company, BIO-key is not required to provide Risk Factors in its 10-Q[124] - The company reports no defaults upon senior securities[127]