BIO-key International, Inc. (Nasdaq: BKYI), an innovative provider
of biometric authentication and security solutions, today reported
results for its second quarter (Q2'19) ended June 30, 2019 and will
host a conference call tomorrow at 10:00 a.m. EDT (details below)
to review its results and outlook.
Recent Highlights:
- NY Regional Bank and Maryland Credit Union Selected BIO-key ID
Director Biometric Authentication
- Foreign Defense Ministry Expanded its Biometric Solutions
Deployment with a $300K Order, Increasing Total Project Revenue to
Nearly $1M Since January 2018
- BIO-key Q2’19 revenue of $728K declined slightly vs Q2’18
revenue of $748K but increased vs Q1’19 revenue of $552K
- Q2’19 performance impacted by continued delays in the receipt
of anticipated software license payments, now totaling $1.65M in
Q2’19 and $2.75M in the first half of 2019.
BIO-key CEO Michael DePasquale commented, “Our second quarter
results reflect progress engaging with foreign government
institutions and companies operating in highly regulated industries
such as financial services. These areas represent the fastest
growing verticals for our solutions.
“Our new sales and marketing initiatives are generating an
increasing level of requests for demonstrations and proofs of
concept from customers looking to incorporate the security and
convenience of biometrics into their existing workflow. These
initiatives include a range of enhancements to our website and
sales & marketing collateral intended to better target and
illustrate BIO-key’s value-add for key verticals. During the second
quarter, we advanced several new customer dialogues which provide
promise for revenue in the second half of 2019.
“Unfortunately, our results continue to be negatively impacted
by ongoing delays in anticipated cash payments from a large
contract we closed with a Chinese customer in Q4 2018. To support
BIO-key through this period, we have taken steps to provide
sufficient working capital for our operations, including completing
a convertible debt financing early in Q3’19.”
2019 Financial GuidanceReflecting its current
outlook for the balance of 2019, including ongoing uncertainty
regarding the timing of monthly software license payments from a $5
million order with a Chinese customer, which includes two annual
extensions for an additional $7 million, BIO-key has revised its
full-year 2019 revenue guidance to a range of $6.0M to $12.0M.
The upper end of the range assumes the receipt of all
software license payments contractually due in 2019, totaling
$6.0M, and the bottom end of the range excludes all such
payments.
Within this guidance range, BIO-key expects to deliver
significant top and bottom line improvements for full year 2019,
and would expect to achieve positive cash flow and net income on
full year revenues of $8M and above. BIO-key will revise this
guidance as warranted when it reports its Q3 results.
Q2 2019 Results
Q2'19 revenue declined 2.7% to $728,383 versus 748,141 in Q2’18,
due principally to lower license fees and services revenues related
to delays in timing of large orders.
Service revenues decreased 7% to $231,993 in Q2'19 as compared
to $249,121 in Q2'18, principally due to a decline in non-recurring
services revenue and recurring service revenue pending customer
renewals.
Software license revenue decreased 61% to $60,300 in Q2’19 from
$154,251 in Q2'18 principally due to the Company’s transition to
software as a service (SaaS) model from its historical license sale
model. The net effect of this transition is to decrease the upfront
revenue realized from a new software engagement and replace it with
a recurring revenue stream with the potential to be significantly
larger.
Hardware sales increased 26% to $436,090 from $344,769 in Q2'18
as a result of a large order from an existing customer in addition
to several new customer deployments.
Gross margin was 7% in Q2'19 compared to negative 38% in Q2’18,
reflecting the impact of a larger amount of non-cash software
license amortization expense in Q2'18. Excluding amortization of
software license rights, adjusted gross margin would have been 45%
in Q2'19 versus 51% in Q2’18, with the decrease attributable to a
reduction in software license revenue and an increase in hardware
sales in Q2’19 compared to the year ago period.
Q2’19 operating expenses decreased 1% to $1,359,888 from
$1,373,817 in Q2’18, due primarily to lower SG&A expenses
principally related to reduction in payroll and non-cash
compensation offset by increased factoring fees.
BIO-key's Q2'19 net loss improved to $(1,425,743), or $(0.10)
per basic share, as compared to $(1,697,335), or $(0.15) per basic
share after preferred dividends, in Q2’18.
Per share results are based on 14,117,062 and 11,375,320
weighted average basic shares outstanding in Q2’19 and Q2’18,
respectively.
For the first six-months of 2019, total revenue was $1,280,006
versus $1,589,596 in the first half of 2018, a decline of $309,590
or 19%, reflecting both the impact of the Company’s SaaS sales
strategy and the variable timing of software and hardware
deals.
Net loss improved to $(3,229,251), or $(0.23) per basic share in
the first half of 2019 versus $(4,045,489), or $(0.42) per basic
share after preferred dividends, in the corresponding period in
2018.
Per share results are based on 14,048,570 and 9,623,151 weighted
average basic shares outstanding in the first six months of 2019
and 2018, respectively.
At June 30, 2019, BIO-key had net working capital of $1.1
million compared to $3.0 million at December 31, 2018. Net working
capital included $687,023 of cash and cash equivalents at June 30,
2019 versus $323,943 at December 31, 2018.
In July 2019, BIO-key completed a $3.06M convertible note
financing generating $2.55M in gross proceeds to be used for
general working capital purposes, including repayment of
outstanding indebtedness. The note is convertible at the option of
the investor into common stock at $1.50 per share and is subject to
redemption at any time by BIO-key.
Conference Call and Webcast
Replay |
Date/Time: |
Thursday,
August 15, 2019 at 10 am ET |
Dial-In number: |
1-877-418-5460 U.S. or 412-717-9594 (Intl.) |
Webcast Replay: |
BIO-key Q2'19 Webcast – Available for 30
days |
Call Replay: |
1-877-344-7529 U.S. or 412-317-0088; Replay access code
10134247# |
About BIO-key International, Inc.
(www.bio-key.com)BIO-key
is revolutionizing authentication with biometric
solutions that enable convenient and secure access to
information and high-stakes transactions. We offer software-based
alternatives to passwords, PINs, tokens, and cards to make it easy
for enterprises and consumers to secure their devices as well as
information in the cloud. Our premium finger scanning
devices offer market-leading quality, performance and
price. BIO-key also brings the power and ease of use of biometric
technology to its TouchLock line™ of
biometric and Bluetooth enabled padlocks – providing more ways to
BIO-key your world!
BIO-key Safe Harbor StatementAll statements
contained in this press release other than statements of historical
facts are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995 (the "Act"). The words
"estimate," "project," "intends," "expects," "anticipates,"
"believes" and similar expressions are intended to identify
forward-looking statements. Such forward-looking statements are
made based on management's beliefs, as well as assumptions made by,
and information currently available to, management pursuant to the
"safe-harbor" provisions of the Act. These statements are not
guarantees of future performance or events and are subject to risks
and uncertainties that may cause actual results to differ
materially from those included within or implied by such
forward-looking statements. These risks and uncertainties include,
without limitation, our history of losses and limited revenue; 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; competition in the biometric technology
industry; market acceptance of biometric products generally and our
products under development; our ability to expand into the Asian
market; 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 see "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31, 2018 and
other filings with the Securities and Exchange Commission. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date made. Except as
required by law, the Company undertakes no obligation to disclose
any revision to these forward-looking statements whether as a
result of new information, future events, or otherwise.
Engage
with BIO-key |
|
Facebook – Corporate: |
BIO-key International |
Twitter – Corporate: |
@BIOkeyIntl |
Twitter – Investors: |
@BIO_keyIR |
StockTwits: |
BIO_keyIR |
Investor & Media
ContactsWilliam Jones, David CollinsCatalyst
IR212-924-9800bkyi@catalyst-ir.com
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARYCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
|
|
Three months endedJune 30, |
|
|
Six months endedJune 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
$ |
231,993 |
|
|
$ |
249,121 |
|
|
$ |
473,603 |
|
|
$ |
551,570 |
|
License fees |
|
|
60,300 |
|
|
|
154,251 |
|
|
|
143,508 |
|
|
|
256,970 |
|
Hardware |
|
|
436,090 |
|
|
|
344,769 |
|
|
|
662,895 |
|
|
|
781,056 |
|
Total revenues |
|
|
728,383 |
|
|
|
748,141 |
|
|
|
1,280,006 |
|
|
|
1,589,596 |
|
Costs and other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
58,421 |
|
|
|
120,841 |
|
|
|
149,250 |
|
|
|
275,573 |
|
Cost of license fees |
|
|
372,327 |
|
|
|
766,637 |
|
|
|
749,543 |
|
|
|
1,540,102 |
|
Cost of hardware |
|
|
248,678 |
|
|
|
142,325 |
|
|
|
384,683 |
|
|
|
393,573 |
|
Total costs and other
expenses |
|
|
679,426 |
|
|
|
1,029,803 |
|
|
|
1,283,476 |
|
|
|
2,209,248 |
|
Gross profit (loss) |
|
|
48,957 |
|
|
|
(281,662 |
) |
|
|
(3,470 |
) |
|
|
(619,652 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
1,058,671 |
|
|
|
1,076,184 |
|
|
|
2,435,704 |
|
|
|
2,538,038 |
|
Research, development and engineering |
|
|
301,217 |
|
|
|
297,633 |
|
|
|
675,335 |
|
|
|
689,787 |
|
Total Operating Expenses |
|
|
1,359,888 |
|
|
|
1,373,817 |
|
|
|
3,111,039 |
|
|
|
3,227,825 |
|
Operating loss |
|
|
(1,310,931 |
) |
|
|
(1,655,479 |
) |
|
|
(3,114,509 |
) |
|
|
(3,847,477 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
54 |
|
|
|
14 |
|
|
|
124 |
|
|
|
21 |
|
Interest expense |
|
|
(114,866 |
) |
|
|
- |
|
|
|
(114,866 |
) |
|
|
- |
|
Total other income (expense) net |
|
|
(114,812 |
) |
|
|
14 |
|
|
|
(114,742 |
) |
|
|
21 |
|
Net loss |
|
|
(1,425,743 |
) |
|
|
(1,655,465 |
) |
|
|
(3,229,251 |
) |
|
|
(3,847,456 |
) |
Convertible preferred stock
dividends |
|
|
- |
|
|
|
(41,870 |
) |
|
|
- |
|
|
|
(198,033 |
) |
Net loss available to common
stockholders |
|
$ |
(1,425,743 |
) |
|
$ |
(1,697,335 |
) |
|
$ |
(3,229,251 |
) |
|
$ |
(4,045,489 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per
common share attributable to |
|
$ |
(0.10 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.23 |
) |
|
$ |
(0.42 |
) |
common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
14,117,062 |
|
|
|
11,375,320 |
|
|
|
14,048,570 |
|
|
|
9,623,151 |
|
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARYCONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
June 30,2019 |
|
|
December 31,2018 |
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
687,023 |
|
|
$ |
323,943 |
|
Accounts receivable, net |
|
|
689,900 |
|
|
|
1,574,032 |
|
Due from factor |
|
|
138,568 |
|
|
|
56,682 |
|
Inventory |
|
|
1,011,703 |
|
|
|
998,829 |
|
Resalable software license
rights |
|
|
1,125,000 |
|
|
|
1,125,000 |
|
Prepaid expenses and
other |
|
|
161,997 |
|
|
|
150,811 |
|
Total current assets |
|
|
3,814,191 |
|
|
|
4,229,297 |
|
Resalable software license
rights, net of current portion |
|
|
6,193,417 |
|
|
|
6,790,610 |
|
Equipment and leasehold
improvements, net |
|
|
137,458 |
|
|
|
148,608 |
|
Capitalized contract costs,
net |
|
|
278,286 |
|
|
|
319,199 |
|
Deposits and other assets |
|
|
8,712 |
|
|
|
8,712 |
|
Operating lease right-of-use
assets |
|
|
532,757 |
|
|
|
- |
|
Intangible assets, net |
|
|
191,014 |
|
|
|
195,906 |
|
Total non-current assets |
|
|
7,341,644 |
|
|
|
7,463,035 |
|
TOTAL
ASSETS |
|
$ |
11,155,835 |
|
|
$ |
11,692,332 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
864,879 |
|
|
$ |
481,269 |
|
Accounts payable – related
party |
|
|
142,623 |
|
|
|
- |
|
Accrued liabilities |
|
|
714,250 |
|
|
|
548,232 |
|
Convertible notes payable, net
of debt discount and debt issuance costs |
|
|
541,667 |
|
|
|
- |
|
Deferred revenue |
|
|
294,261 |
|
|
|
196,609 |
|
Operating lease liabilities,
current portion |
|
|
141,068 |
|
|
|
- |
|
Total current liabilities |
|
|
2,698,748 |
|
|
|
1,226,110 |
|
Operating lease liabilities,
net of current portion |
|
|
383,028 |
|
|
|
- |
|
Total non-current liabilities |
|
|
383,028 |
|
|
|
- |
|
TOTAL
LIABILITIES |
|
|
3,081,776 |
|
|
|
1,226,110 |
|
|
|
|
|
|
|
|
|
|
Commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock — authorized,
170,000,000 shares; issued and outstanding; 14,295,923 and
13,977,868 of $.0001 par value at June 30, 2019 and December 31,
2018, respectively |
|
|
1,429 |
|
|
|
1,398 |
|
Additional paid-in
capital |
|
|
86,436,197 |
|
|
|
85,599,140 |
|
Accumulated deficit |
|
|
(78,363,567 |
) |
|
|
(75,134,316 |
) |
TOTAL STOCKHOLDERS’
EQUITY |
|
|
8,074,059 |
|
|
|
10,466,222 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
$ |
11,155,835 |
|
|
$ |
11,692,332 |
|
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARYCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)
|
|
Six Months Ended June 30, |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,229,251 |
) |
|
$ |
(3,847,456 |
) |
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
39,903 |
|
|
|
44,596 |
|
Amortization of intangible assets |
|
|
6,628 |
|
|
|
8,966 |
|
Amortization of resalable software license rights |
|
|
562,150 |
|
|
|
1,318,559 |
|
Amortization of debt discount |
|
|
15,467 |
|
|
|
- |
|
Amortization of capitalized contract costs |
|
|
67,774 |
|
|
|
59,044 |
|
Amortization of debt issuance costs |
|
|
56,200 |
|
|
|
- |
|
Share and warrant-based compensation for employees and
consultants |
|
|
635,077 |
|
|
|
676,454 |
|
Stock based directors’ fees |
|
|
22,011 |
|
|
|
23,021 |
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
884,132 |
|
|
|
2,424,295 |
|
Due from factor |
|
|
(81,886 |
) |
|
|
82,202 |
|
Operating leases right-of-use assets |
|
|
70,180 |
|
|
|
- |
|
Capitalized contract costs |
|
|
(26,861 |
) |
|
|
(160,649 |
) |
Inventory |
|
|
(12,874 |
) |
|
|
16,369 |
|
Resalable software license rights |
|
|
35,043 |
|
|
|
9,543 |
|
Prepaid expenses and other |
|
|
(23,781 |
) |
|
|
(4,041 |
) |
Accounts payable |
|
|
526,233 |
|
|
|
(168,799 |
) |
Accrued liabilities |
|
|
166,018 |
|
|
|
(203,445 |
) |
Deferred revenue |
|
|
97,652 |
|
|
|
(179,683 |
) |
Operating lease liabilities |
|
|
(66,246 |
) |
|
|
- |
|
Net cash provided by (used for) operating activities |
|
|
(256,431 |
) |
|
|
98,976 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of intangible assets |
|
|
(1,736 |
) |
|
|
- |
|
Capital expenditures |
|
|
(28,753 |
) |
|
|
(68,479 |
) |
Net cash used for investing activities |
|
|
(30,489 |
) |
|
|
(68,479 |
) |
CASH FLOW FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Issuance of convertible debentures |
|
|
667,000 |
|
|
|
- |
|
Costs to issue notes, preferred and common stock |
|
|
(17,000 |
) |
|
|
(15,212 |
) |
Net cash provided by (used for) financing activities |
|
|
650,000 |
|
|
|
(15,212 |
) |
NET INCREASE IN CASH
AND CASH EQUIVALENTS |
|
|
363,080 |
|
|
|
15,285 |
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD |
|
|
323,943 |
|
|
|
288,721 |
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD |
|
$ |
687,023 |
|
|
$ |
304,006 |
|
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