BKYI BIO key International Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 16, 2015

 

BIO-key International, Inc. (Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation)	1-13463 (Commission File Number)	41-1741861 (I.R.S. Employer Identification No.)
3349 Highway 138, Building A, Suite E Wall, NJ 07719 (Address of principal executive offices)
(732) 359-1100 (Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):   ☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)   ☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)   ☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))   ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02.     Results of Operations and Financial Condition.

 

On November 16, 2015, BIO-key International, Inc. (the “Company”) issued a press release announcing its financial results for its third quarter of 2015. A copy of the press release issued by the Company on November 16, 2015 is attached as Exhibit 99.

 

                The information, including the exhibit attached hereto, in this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise expressly stated in such filing.

  

Item 9.01.     Financial Statements, Pro Forma Financial Information and Exhibit.

 

(d)     Exhibits

 

99.1     Press Release, dated November 16, 2015, issued by the Company.

 

 

   

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	BIO-KEY INTERNATIONAL, INC.
Date: November 16, 2015
	By:	/s/ Cecilia C. Welch
		Cecilia C. Welch
		Chief Financial Officer

 

 

 

EXHIBIT INDEX

 

Exhibit No.	Description
99.1	Press Release, dated November 16, 2015, issued by the Company.

 

Exhibit 99.1

 

NEWS RELEASE

 

BIO-key Reviews Q3 Results and

 

Funding and Technology License Agreements

  

Highlights Immediate Benefits of its Recent Funding & Strategic Agreements

 

Wall, NJ, November 16, 2015 – BIO-key International, Inc. (OTCQB: BKYI), a leading fingerprint biometric identification software and technology provider, today reported results for its third quarter ended September 30, 2015. The Company will host a conference call today at 10:00 a.m. EDT (details below) to review its results and it recent agreements that expand its technology base, product capabilities, global reach and provide a strong financial footing to fund future growth.

 

Recent Highlights:

 

●	Reported Q3 and 9 month revenues of $670,000 and $3,591,000, respectively, nearly in-line with the lower end of the revenue guidance range.

●	Raised $7.5M in net new capital via private placement of convertible preferred securities convertible into common stock at $0.30 per share.

●	Secured commercial license to a portfolio of mobile and online payment software technologies from strategic partner and investor China Goldjoy Group Limited (CGG) (Hong Kong: 1282).

●	Shipped mobile biometric security solution for a new global payment customer

●	Launched Asian sales, business development, and sourcing presence, opening offices in Hong Kong and the Peoples Republic of China (PRC).

●	Partnered with Microsoft for its “Ignite your business with Windows 10 and Office 2016” series of events in 12 cities

 

Michael DePasquale, Chairman and CEO of BIO-key commented, “While the bulk of our recent efforts have been focused on negotiating and completing transformational technology licensing and funding transactions that have closed in recent weeks, BIO-key achieved Q3 revenue performance that was just shy of the low end of our Q3 revenue guidance. Importantly, we believe we have fundamentally reshaped BIO-key and its future growth potential through a significant cash infusion combined with a technology license agreement with an existing partner and leading provider of biometric and mobile payment processing technologies.

 

“These strategic agreements are already delivering tangible benefits to our company in terms of both sales opportunities and completed sales. During Q4, we have booked orders and completed an initial product shipment to a global payment company for a new mobile security application. At the same time, BIO-key is now able to pursue sales and marketing initiatives, such as our multi-city marketing partnership with Microsoft and the opening of BIO-key sales and sourcing offices in Hong Kong and in the PRC, which substantially expand the scope of our business reach.

 

While we continue to expect variability in our quarterly operating results due to the size and shipment timing of orders in our pipeline, we are now even more bullish on BIO-key’s near- and long- term prospects, and remain comfortable in achieving full year 2015 results within our guidance range.”

 

 

  

Q3 Results

 

Total revenue for Q3’15 decreased to $669,846 compared to a strong 2014 performance of $1,283,847 based on the shipment of a few large non-recurring license orders in Q3’14. Q3’15 license and other fee revenue decreased to $419,655 compared to $787,720 in Q3’14 and service revenues decreased to $250,191 in Q3’15 from $496,127 in Q3’14. The non-recurring custom services decreased due to a customer project that was completed at year-end 2014.

 

Q3’15 gross margin was 44% as compared to 81% in Q3’14, principally due to the decrease in higher margin license sales and higher volume hardware sales. Q3’15 operating expenses rose 5% to $1,382,566 from $1,314,513 in Q3’14, reflecting increases in both SG&A and R&D expenses related to the expanding scope of the business, costs related to the strategic transactions, and R&D efforts focused on product refresh updates and new product offerings, along with a reclassification of roughly $100,000 of Q3’14 service related R&D expenses to Cost of Goods Sold.  

 

BIO-key reported Q3’15 net loss of ($1,079,584), or ($0.02) per basic share, compared to a net loss of ($51,526), or ($0.00) per basic share, in Q3’14. BIO-key had a weighted average number of basic shares outstanding of 66,038,941 and 58,026,262 in Q3’15 and Q3’14, respectively. Share and per-share figures have been adjusted to reflect a February, 2015 2-for-1 reverse split.

 

Liquidity and Capital Resources

Net cash used for operations during Q3’15 was ($973,836) compared to ($1,696,817) in Q3’14. As of September 30, 2015, BIO-key reported current assets and working capital of $2,425,956 and ($604,256), respectively. Reflecting the impact of the convertible preferred placements and strategic license agreement, as of 11/12/2015 current assets and working capital were approximately $12,800,000 and $11,400,000, respectively.

2015 Financial Guidance

The Company’s Fourth Quarter 2015 Opportunity Pipeline, representing the aggregate total of all deal opportunities that could book as revenue during the quarter, is comprised of 43 deals valued at approximately $10 million. The Company’s opportunity pipeline for the next twelve months (the aggregate total of all deal opportunities that could book as revenue over the next twelve months ending September 30, 2016) consists of 127 opportunities valued at $30 million, as compared to $25.0 million at December 31, 2014 and $25.0 million at June 30, 2015. Given the variability in the timing and size of potential contracts within the Company’s sales opportunity pipeline, BIO-key’s quarterly financial performance will likely vary significantly from quarter to quarter.

 

BIO-key has tightened its full year 2015 revenue guidance range to $5 million to $6 million, compared to revenue of $4.0 million in 2014. BIO-key expects Q4 revenue to range between $1.4 million and $2.2 million, versus $1.5 million in Q4 ’14.

 

Gross margin is expected between 75% and 80% for the Fiscal Fourth Quarter and full year 2015 period. Reflecting additional dividend expense, BIO-key has revised its cash breakeven level to annual revenues of roughly $6.9 million.

Conference Call and Webcast Replay

 

Date/Time:	Monday, November 16, 2015 at 10:00 a.m. EDT
Dial-In number:	877-418-5460 or 412-717-9594, ask for BIO-key call
Webcast Replay:	Available shortly after call at www.bio-key.com/events
Call Replay:	877-344-7529 U.S., 855-669-9568 Canada, 412-317-0088 Intl.
	Access code: 10070824

      

 

  

About BIO-key

BIO-key International, Inc. develops and delivers advanced fingerprint biometric identification solutions to commercial and government enterprises, integrators, and application developers. BIO-key’s award winning, high performance, scalable, cost-effective and easy-to-deploy biometric finger identification technology accurately identifies and authenticates users of wireless and enterprise applications. Our solutions are used in local embedded OEM products as well as some of the world’s largest identification deployments to improve security, guarantee identity, and reduce identity theft.  BIO-key’s technology is offered directly or by market leading partners around the world. (http://www.bio-key.com)

 

BIO-key Safe Harbor Statement

Certain statements contained in this press release and in other public statements by the Company and Company officers include or may contain certain forward-looking statements. All statements other than statements of historical facts contained in this press release, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “will,” “may,” “future,” “plan,” “intend” and “expect” and similar expressions generally identify forward-looking statements. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Although we believe that our plans, intentions and expectations reflected in the forward-looking statements are reasonable, we cannot be sure that they will be achieved. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: our history of losses and limited revenue; our ability to raise additional capital; our ability to protect our intellectual property; changes in business conditions; changes in our sales strategy and product development plans; changes in the marketplace; continued services of our executive management team; security breaches; competition between us and other companies in the biometric technology industry; market acceptance of biometric products generally and our products under development; delays in the development of products and statements of assumption underlying any of the foregoing, as well as other factors set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Except as required by law, we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

Investor & Media Contacts:
Jay Meier, VP Corporate Development	David Collins, Tanya Kamatu
BIO-key Intl, Inc.	Catalyst Global
651-789-6116	212-924-9800
Jay.meier@bio-key.com	bkyi@catalyst-ir.com

 

 

   

FINANCIAL INFORMATION.

 

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

  

		September 30, 2015				December 31, 2014
		(Unaudited)
ASSETS
Cash and cash equivalents		$	72,232			$	843,632
Accounts receivable, net of allowance for doubtful accounts of $20,526 at September 30, 2015 and December 31, 2014			2,165,416				625,341
Due from factor			-				76,657
Inventory			150,720				11,825
Prepaid expenses and other			37,588				236,429
Total current assets			2,425,956				1,793,884
Equipment and leasehold improvements, net			73,538				103,509
Deposits and other assets			8,712				8,712
Intangible assets—less accumulated amortization			151,140				161,344
Total non-current assets			233,390				273,565
TOTAL ASSETS		$	2,659,346			$	2,067,449
LIABILITIES
Accounts payable		$	1,307,984			$	347,311
Accrued liabilities			432,793				488,617
Due to factor			533,422				-
Notes payable			270,000				-
Deferred revenue			392,815				429,233
Warrant liabilities			93,198				43,227
Total current liabilities			3,030,212				1,308,388
TOTAL LIABILITIES			3,030,212				1,308,388
Commitments and contingencies
STOCKHOLDERS’ (DEFICIT) EQUITY:
Common stock — authorized, 170,000,000 shares; $.0001 par value issued and outstanding; 66,073,482 at September 30, 2015, and 66,001,260 as of December 31, 2014			6,607				6,600
Additional paid-in capital			57,627,210				57,506,605
Accumulated deficit			(58,004,683	)			(56,754,144	)
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY			(370,866	)			759,061
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY		$	2,659,346			$	2,067,449

  

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

 

   

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

  

		Three months ended September 30,								Nine months ended September 30,
		2015				2014				2015				2014
Revenues
Services		$	250,191			$	496,127			$	755,813			$	1,027,069
License fees and other			419,655				787,720				2,835,662				2,027,089
			669,846				1,283,847				3,591,475				3,054,158
Costs and other expenses
Cost of services			30,283				144,224				154,251				296,504
Cost of license fees and other			344,557				99,730				505,339				225,925
			374,840				243,954				659,590				522,429
Gross Profit			295,006				1,039,893				2,931,885				2,531,729
Operating Expenses
Selling, general and administrative			1,013,778				989,521				3,034,318				2,741,665
Research, development and engineering			368,788				324,992				1,169,427				1,282,536
			1,382,566				1,314,513				4,203,745				4,024,201
Operating loss			(1,087,560	)			(274,620	)			(1,271,860	)			(1,492,472	)
Other income (expense)
Interest income			1				2				5				5
Interest expense			(20,000	)			-				(20,000	)			-
Gain on derivative liabilities			27,975				223,892				42,228				117,153
Income taxes			-				(800	)			(912	)			(1,712	)
Total other income (expense)			7,976				223,094				21,321				115,446
Net loss		$	(1,079,584	)		$	(51,526	)		$	(1,250,539	)		$	(1,377,026	)
Basic and Diluted Loss per Common Share		$	(0.02	)		$	(0.00	)		$	(0.02	)		$	(0.02	)
Weighted Average Shares Outstanding:
Basic and Diluted			66,038,941				58,026,262				66,013,958				57,989,165

  

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

 

    

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

   

		Nine Months Ended September 30,
		2015				2014
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss		$	(1,250,539	)		$	(1,377,026	)
Adjustments to reconcile net loss to cash used for operating activities:
Depreciation			32,049				29,905
Amortization
Intangible assets			10,204				10,205
Gain on derivative liabilities			(42,228	)			(117,153	)
Amortization on note payable discount			20,000				-
Share-based compensation			258,297				170,282
Other			-				6
Change in assets and liabilities:
Accounts receivable			(1,540,075	)			(347,549	)
Due from factor			76,657				(19,259	)
Due to factor			533,422				-
Inventory			(138,895	)			(2,649	)
Prepaid expenses and other			198,841				(7,104	)
Accounts payable			960,673				(83,634	)
Accrued liabilities			(55,824	)			144,216
Deferred revenue			(36,418	)			(97,057	)
Net cash used for operating activities			(973,836	)			(1,696,817	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(2,078	)			(9,353	)
Net cash used for investing activities			(2,078	)			(9,353	)
CASH FLOW FROM FINANCING ACTIVITIES:
Repurchase of outstanding warrants			-				(150,000	)
Stock issued to directors			13,000				-
Proceeds from issuance of Note Payable			250,000				-
Costs to issue common stock			(58,486	)			-
Net cash provided by (used for) financing activities			204,514				(150,000	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(771,400	)			(1,856,170	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			843,632				2,023,349
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	72,232			$	167,179