BIO-key International, Inc. (Nasdaq: BKYI), an innovative provider
of biometric identity, authentication and security solutions, today
reported results for its third quarter (Q3'19) ended September 30,
2019. BIO-key will host a conference call today at 10:00 a.m. ET
(details below) to review its results and outlook.
Highlights
- Government & Election Security Progress:
BIO-key Solutions Gain Traction with Capitol Lawmakers and Extend
Penetration of Florida Election Security Market
- Channel Alliance Partner Program: BIO-key
Launched Channel Alliance Program to Support its Sales &
Marketing Reach; Adds Technology Transfer Institute (TTI) of Africa
to Expand Reach in High-Growth Market; Teams with Applied
Technologies on Enterprise Authentication Solution for European
Customer
- Law Enforcement Engagements: BIO-key extended
Global Law Enforcement Reach with South American National Police
Force Deployment
- BIO-key’s Q3’19 revenues declined to $453K compared to Q3’18
revenues of $740K, as a number of opportunities were pushed forward
into Q4. Q3’19 was impacted by ongoing delays in the receipt of
anticipated software license payments amounting to $1.65M in Q3’19
and $4.4M in the first nine months of 2019.
- Operating Expenses declined 16% from $1.44M to $1.22M
BIO-key CEO Michael DePasquale commented, “Despite the
year-over-year decline in our third quarter revenue for reasons
explained below, we are at a true inflection point in our industry
and as a company. I serve as the Vice Chairman of our
industry group, the International Biometrics and Identity
Association (IBIA), and I see first-hand the number of
opportunities for biometric multi-factor authentication as well as
large scale Civil ID projects that are emerging on an International
basis. BIO-key is in an excellent position to take
advantage of these opportunities with our advanced technology and
marquis references across all verticals. Our results
this year also reflect our transition from a software license sales
model, where historically we were able to book the full value of a
perpetual software license, to a software subscription model, where
customers pay a much lower fee to access our software on an annual
basis, resulting in lower initial revenue.
“As we have discussed, the subscription model is far more
favorable for our Company in the long term as it creates more
predictable, recurring revenue streams with the potential to be
much larger over a period of several years than what we would have
otherwise generated from a conventional software license. Customers
also benefit from the subscription model via lower initial cash
outlays, predictable annual software expense, and immediate access
to updates and enhancements to our products.
“We are now fully standardized on subscription model pricing for
all new customers. And while the transition has negatively impacted
the level of revenues we have been able to record in new customer
engagements it is also providing growing visibility for a more
predictable base of recurring subscription revenue for the
future.
“Our Q3 and nine months results were also impacted by ongoing
U.S. and China trade uncertainty which plays a major role in
stalling the resumption of monthly cash payments due to BIO-key
under a large software license contract we closed with a Chinese
customer in Q4 2018. Fortunately, BIO-key’s outlook for the balance
of 2019 and next year is far more favorable, particularly as we are
engaged in several large, active customer procurement discussions
which we anticipate will close before year-end in order to meet
annual IT security and objectives.
“With regard to capital resources, the Company is currently
working to close an equity financing with a limited number of
investors. This private placement transaction is
expected to be priced at a premium to the current market price of
the Company’s common stock and be completed in short order.”
Growth InitiativesFred Corsentino, BIO-key’s
Chief Revenue Officer, added, “Our new Channel Alliance Program is
designed to attract a growing base of Managed Service Providers,
Security Integrators and Value-Added Resellers with a proven base
of activity in relevant enterprise and network security solutions.
Alliance partners are trained and authorized to represent BIO-key’s
complete line of biometric solutions for single sign on or
multi-factor authentication across an organization, and as such we
expect the program to substantially expand the reach of our
products around the globe. Although the program is just a few
months old, we have engaged with several new end-user customers and
are in dialogues with others.
“We are particularly excited about opportunities in Africa,
where biometrics are seen as an ideal and cost effective solution
to some large-scale issues, and substantial funding is being made
available in both the public and private sectors. For example, the
World Bank recently approved $433 million in funding for a Nigerian
biometric national ID registration program. We have partnered with
the Technology Transfer Institute of Africa to create a solid
in-country platform to pursue opportunities in the expansive
African market and plan on opening an African Subsidiary to service
that business.”
2019 Financial GuidanceDue to uncertainty with
regard to the timing of software and hardware deals, BIO-key’s
transition to a subscription model and uncertainly regarding the
timing of monthly software license payments due under a large
software license with a Chinese customer, BIO-key is adjusting
its full-year 2019 revenue guidance to a range of $5M to $11M
from $6M to $12M. The upper end of this range assumes the
receipt of all software license payments contractually due in 2019,
totaling $6M, and the lower end of the range excludes any such
payments.
Q3 2019 Results Q3'19 revenue declined to
$452,714 versus $739,750 in Q3’18, due principally to lower
hardware sales and license fees, partially offset by higher
services revenues.
Hardware sales decreased by $186,290, due to smaller new
customer deployments and reduced lock sales as BIO-key transitioned
to an "enterprise only" model for our smartlock technology moving
away from the low margin retail markets in the US.
Software license revenue decreased by $112,379 from Q3’18, while
increasing in customer diversity for smaller initial software
subscription orders. As previously discussed, software license
revenue has been negatively impacted by the Company’s transition to
a subscription 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, over time.
Service revenues increased by $11,633 to $237,372 in Q3’19 from
the prior-year period. Service revenue made up 52% of revenues in
Q3’19, up from 31% in Q3’18 with approximately 95% of service
revenue classified as recurring revenue.
Gross margin improved to -12% in Q3'19 compared to -27% in
Q3’18, reflecting the impact of a larger amount of non-cash
software license amortization expense in Q3'18 as well as improved
margins on services revenue related to reduced support
requirements.
Q3’19 operating expenses decreased $225,580 to $1,215,197 from
$1,440,777 in Q3’18, reflecting decreases in non-cash compensation,
and reduced marketing and administrative payroll, offset by
increased sales payroll and legal fees as well as to lower R&D
and engineering expenses, as a result of decreased contracting
services, non-cash compensation, and personnel and related costs,
offset by increased recruiting expenses.
BIO-key's Q3'19 net loss was $(1,829,567), or $(0.13) per basic
and diluted share, as compared to $(3,070,281), or $(0.23) per
basic share after preferred dividends, in Q3’18. The prior-year
period included $1,428,966, or $0.11 per share in non-cash “deemed
dividend” expense resulting from the required repricing of
outstanding warrants. 93% of these warrants have since
expired and are no longer part of BIO-key’s capitalization
table.
Per share results are based on weighted average basic and
diluted shares outstanding of 14,387,467 and 13,145,301 in Q3’19
and Q3’18, respectively.
For the first nine-months of 2019, total revenue was $1,732,720
versus $2,329,346 in the first nine months of 2018, reflecting
lower software license sales, including the impact of the
subscription model transition, and the variability in the timing of
other software and hardware activity.
Net loss improved to $(5,058,818), or $(0.36) per basic and
diluted share in the first nine months of 2019 versus $(7,115,771),
or $(0.66) per basic and diluted share after preferred dividends,
in the corresponding period in 2018. The comparable prior-year
period included a deemed dividend of $1,428,966, or $0.13 per
share, and convertible preferred dividends of $198,033, or $0.02
per share.
Per share results are based on weighted average basic shares
outstanding of 14,163,120 and 10,810,103 in the first nine months
of 2019 and 2018, respectively.
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.
At September 30, 2019 BIO-key had $851,574 of cash and accounts
receivable versus $1,897,975 at December 31, 2018.
|
Conference
Call and Webcast Replay |
|
Date/Time: |
Friday, November 15, 2019 at 10 am ET |
|
Dial-In
number: |
1-877-418-5460 U.S. or
412-717-9594 (Intl.) |
|
Webcast
Replay: |
BIO-key Q3'19
Webcast – Available for 3 months |
|
Call
Replay: |
1-877-344-7529 U.S. or
412-317-0088; Replay access code 10136774# |
|
|
|
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 – 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 Asia, Africa
and other foreign markets; delays in the development of products
and statements of assumption underlying any of the foregoing; our
ability to close the potential private placement transaction on the
terms described herein if at all 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
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
|
|
Three months endedSeptember
30, |
|
|
Nine months endedSeptember
30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
$ |
237,372 |
|
|
$ |
225,739 |
|
|
$ |
710,975 |
|
|
$ |
777,309 |
|
License fees |
|
|
98,272 |
|
|
|
210,651 |
|
|
|
241,780 |
|
|
|
467,621 |
|
Hardware |
|
|
117,070 |
|
|
|
303,360 |
|
|
|
779,965 |
|
|
|
1,084,416 |
|
Total Revenues |
|
|
452,714 |
|
|
|
739,750 |
|
|
|
1,732,720 |
|
|
|
2,329,346 |
|
Costs and other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
65,683 |
|
|
|
97,965 |
|
|
|
214,933 |
|
|
|
373,538 |
|
Cost of license fees |
|
|
369,604 |
|
|
|
757,288 |
|
|
|
1,119,147 |
|
|
|
2,297,390 |
|
Cost of hardware |
|
|
73,366 |
|
|
|
85,079 |
|
|
|
458,049 |
|
|
|
478,652 |
|
Total costs and other expenses |
|
|
508,653 |
|
|
|
940,332 |
|
|
|
1,792,129 |
|
|
|
3,149,580 |
|
Gross Profit (Loss) |
|
|
(55,939 |
) |
|
|
(200,582 |
) |
|
|
(59,409 |
) |
|
|
(820,234 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
915,066 |
|
|
|
1,049,270 |
|
|
|
3,350,770 |
|
|
|
3,587,308 |
|
Research, development and engineering |
|
|
300,131 |
|
|
|
391,507 |
|
|
|
975,466 |
|
|
|
1,081,294 |
|
Total operating expenses |
|
|
1,215,197 |
|
|
|
1,440,777 |
|
|
|
4,326,236 |
|
|
|
4,668,602 |
|
Operating loss |
|
|
(1,271,136 |
) |
|
|
(1,641,359 |
) |
|
|
(4,385,645 |
) |
|
|
(5,488,836 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
19 |
|
|
|
44 |
|
|
|
143 |
|
|
|
64 |
|
Interest expense |
|
|
(558,449 |
) |
|
|
- |
|
|
|
(673,316 |
) |
|
|
- |
|
Total other income (expense),
net |
|
|
(558,430 |
) |
|
|
44 |
|
|
|
(673,173 |
) |
|
|
64 |
|
Net loss |
|
|
(1,829,567 |
) |
|
|
(1,641,315 |
) |
|
|
(5,058,818 |
) |
|
|
(5,488,772 |
) |
Deemed dividend from trigger
of anti-dilution provision feature |
|
|
- |
|
|
|
(1,428,966 |
) |
|
|
- |
|
|
|
(1,428,966 |
) |
Convertible preferred stock
dividends |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(198,033 |
) |
Net loss available to common
stockholders |
|
$ |
(1,829,567 |
) |
|
$ |
(3,070,281 |
) |
|
$ |
(5,058,818 |
) |
|
$ |
(7,115,771 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss
per Common Share attributable to common stockholders |
|
$ |
(0.13 |
) |
|
$ |
(0.23 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
14,387,467 |
|
|
|
13,145,301 |
|
|
|
14,163,120 |
|
|
|
10,810,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
September 30,2019 |
|
|
December 31,2018 |
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
78,240 |
|
|
$ |
323,943 |
|
Accounts receivable, net |
|
|
773,334 |
|
|
|
1,574,032 |
|
Due from factor |
|
|
50,702 |
|
|
|
56,682 |
|
Inventory |
|
|
971,167 |
|
|
|
998,829 |
|
Resalable software license
rights |
|
|
1,125,000 |
|
|
|
1,125,000 |
|
Prepaid expenses and
other |
|
|
183,216 |
|
|
|
150,811 |
|
Investment – non-marketable security |
|
|
512,821 |
|
|
|
- |
|
Total current assets |
|
|
3,694,480 |
|
|
|
4,229,297 |
|
Resalable software license
rights, net of current portion |
|
|
5,906,466 |
|
|
|
6,790,610 |
|
Equipment and leasehold
improvements, net |
|
|
117,644 |
|
|
|
148,608 |
|
Capitalized contract costs,
net |
|
|
254,957 |
|
|
|
319,199 |
|
Deposits and other assets |
|
|
8,712 |
|
|
|
8,712 |
|
Operating lease right-of-use
assets |
|
|
611,883 |
|
|
|
- |
|
Intangible assets, net |
|
|
187,701 |
|
|
|
195,906 |
|
Total non-current assets |
|
|
7,087,363 |
|
|
|
7,463,035 |
|
TOTAL
ASSETS |
|
$ |
10,781,843 |
|
|
$ |
11,692,332 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
496,667 |
|
|
$ |
481,269 |
|
Accrued liabilities |
|
|
478,541 |
|
|
|
548,232 |
|
Convertible notes payable, net
of debt discount and debt issuance costs |
|
|
1,859,635 |
|
|
|
- |
|
Deferred revenue |
|
|
222,721 |
|
|
|
196,609 |
|
Operating lease liabilities,
current portion |
|
|
178,130 |
|
|
|
- |
|
Total current liabilities |
|
|
3,235,694 |
|
|
|
1,226,110 |
|
Operating lease liabilities,
net of current portion |
|
|
426,879 |
|
|
|
- |
|
Total non-current liabilities |
|
|
426,879 |
|
|
|
- |
|
TOTAL
LIABILITIES |
|
|
3,662,573 |
|
|
|
1,226,110 |
|
|
|
|
|
|
|
|
|
|
Commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock — authorized,
170,000,000 shares; issued and outstanding; 14,398,701 |
|
|
|
|
|
|
|
|
and 13,977,868 of $.0001 par value at September 30, 2019 and
December 31, 2018, respectively |
|
|
1,440 |
|
|
|
1,398 |
|
Additional paid-in
capital |
|
|
87,310,964 |
|
|
|
85,599,140 |
|
Accumulated deficit |
|
|
(80,193,134 |
) |
|
|
(75,134,316 |
) |
TOTAL STOCKHOLDERS’
EQUITY |
|
|
7,119,270 |
|
|
|
10,466,222 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
$ |
10,781,843 |
|
|
$ |
11,692,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)
|
|
Nine Months Ended September
30, |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(5,058,818 |
) |
|
$ |
(5,488,772 |
) |
Adjustments to reconcile net loss to cash used for
operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
59,717 |
|
|
|
69,083 |
|
Amortization of intangible assets |
|
|
9,941 |
|
|
|
12,281 |
|
Amortization of resalable software license rights |
|
|
843,287 |
|
|
|
1,978,349 |
|
Amortization of debt discount |
|
|
288,774 |
|
|
|
- |
|
Amortization of capitalized contract costs |
|
|
102,839 |
|
|
|
90,518 |
|
Amortization of debt issuance costs |
|
|
311,718 |
|
|
|
- |
|
Share-based and warrant compensation for employees and
consultants |
|
|
765,677 |
|
|
|
865,291 |
|
Stock based directors’ fees |
|
|
28,512 |
|
|
|
30,530 |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
800,698 |
|
|
|
2,262,423 |
|
Due from factor |
|
|
5,980 |
|
|
|
29,464 |
|
Operating leases right-of-use assets |
|
|
(8,946 |
) |
|
|
- |
|
Capitalized contract costs |
|
|
(38,597 |
) |
|
|
(183,569 |
) |
Inventory |
|
|
27,662 |
|
|
|
(97,306 |
) |
Resalable software license rights |
|
|
40,857 |
|
|
|
18,111 |
|
Prepaid expenses and other |
|
|
(45,000 |
) |
|
|
(20,243 |
) |
Accounts payable |
|
|
15,398 |
|
|
|
(129,445 |
) |
Accrued liabilities |
|
|
(69,691 |
) |
|
|
(102,422 |
) |
Deferred revenue |
|
|
26,112 |
|
|
|
(252,128 |
) |
Operating lease liabilities |
|
|
14,667 |
|
|
|
|
|
Net cash used for operating activities |
|
|
(1,879,213 |
) |
|
|
(917,835 |
) |
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of intangible assets |
|
|
(1,736 |
) |
|
|
- |
|
Capital expenditures |
|
|
(28,753 |
) |
|
|
(82,143 |
) |
Purchase of investment – non-marketable security |
|
|
(512,821 |
) |
|
|
- |
|
Net cash used for investing activities |
|
|
(543,310 |
) |
|
|
(82,143 |
) |
CASH FLOW FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from Issuance of convertible notes |
|
|
3,217,000 |
|
|
|
- |
|
Repayment of convertible notes |
|
|
(707,000 |
) |
|
|
- |
|
Proceeds from Issuance of common stock |
|
|
- |
|
|
|
1,875,100 |
|
Costs to issue notes, common and preferred stock |
|
|
(333,180 |
) |
|
|
(115,088 |
) |
Net cash provided by financing activities |
|
|
2,176,820 |
|
|
|
1,760,012 |
|
NET (DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
(245,703 |
) |
|
|
760,034 |
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD |
|
|
323,943 |
|
|
|
288,721 |
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD |
|
$ |
78,240 |
|
|
$ |
1,048,755 |
|
BIO key (NASDAQ:BKYI)
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From Aug 2024 to Sep 2024
BIO key (NASDAQ:BKYI)
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From Sep 2023 to Sep 2024