BIO-key International, Inc. (NASDAQ:BKYI), an
innovative provider of biometric software and hardware systems and
consumer products offering strong and convenient security and user
access, today reported results for its third quarter (Q3’17) and
first nine months ended September 30, 2017, reviewed recent
business developments and updated its full year outlook. BIO-key
will host an investor conference call tomorrow at 10:00 a.m. ET
(details below).
Financial Highlights:
- Q3’17 revenues rose 118% to $942K vs. $431K in Q3’16
- Hardware sales rose 133% to $512K, reflecting increased demand,
broader distribution and an expanded range of fingerprint readers
as well as the company’s new TouchLock line of biometric-enabled
padlocks.
- TouchLock sales totaled $164K in Q3’17, reflecting initial
orders in Asian markets leading up to the product line’s launch in
the U.S. in the current quarter.
Recent Operational Highlights:
- U.S. Sales Launch of TouchLock™ Biometric and Bluetooth
Enabled Padlocks
- Government Defense Contractor Deploys BIO-key
Windows-Compatible Fingerprint Readers
- Insurance Provider Strengthened User Sign-in with
BIO-key Fingerprint Biometric Solution
- Australian Govt. Agency Selected BIO-key’s ID Director
Software and SideSwipe Readers
- Global Financial Institution selected BIO-key to Secure
Windows 10 Devices in 189 Countries
- Japanese Security Systems Integrator DDS ordered 30K
SideSwipe readers for Asian markets
- BIO-key shares were listed on the Nasdaq Capital Market
effective July 25th
Michael DePasquale, Chairman & CEO of BIO-key, commented,
"Hardware sales continued to grow at an encouraging pace as we are
experiencing increasing demand and interest in our expanded range
of products. Our Windows 10 compatible fingerprint readers made a
significant contribution to revenues in the quarter along with
another solid contribution from our new line of biometric and
bluetooth enabled locks.
“In order to build visibility and support expanded sales, we
continue to expand our retail and online distribution. To this end,
we recently launched our own e-commerce website
(www.shopbio-key.com) targeted primarily to consumers. Managing our
own online marketplace should provide valuable customer insights
such as product preferences, purchasing patterns and the
effectiveness of various sales and marketing programs.
“We also believe that social media will prove to be a productive
channel for building consumer awareness. Recent marketing
promotions generated customer inquiries that led to modest sales
activity that we expect to increase as we invest more in these
digital platforms. Our hardware products are also available via
Amazon.com and our TouchLock line will be added at select e-tailers
and retailers over the next several months.
“Software license sales remain the least predictable part of our
business given the size and complexity of enterprise customers and
their purchasing practices. Nevertheless, we have made solid
progress year to date and the persistent wave of cyber attacks
continues to underscore the risks of failing to deploy stronger
security measures. As organizations increase their willingness to
take proactive measures to protect their critical infrastructure,
we are confident the security, user-friendliness and lower cost of
ownership of our solutions will drive growth in enterprise software
sales over time.
“Overall, we do see a changing sense of urgency for finding and
deploying two-factor authentication solutions. This trend, combined
with the attractiveness of our consumer offerings should provide
solid opportunities for growth and improved bottom line
performance.”
Financial GuidanceBased on our pipeline of
hardware, software and consumer product opportunities as well as
our growing global footprint we remain confident in BIO-key’s
long-term growth potential. Given our performance year-to-date and
anticipated software license renewals, contracted service revenues
and consumer product growth, we are reaffirming the low-end of our
previous revenue guidance range of $6 million, which would
represent year-over-year growth of approximately 100%.
Financial HighlightsQ3’17 total revenues
increased 118% to $942,417 compared to $431,463 in Q3’16,
reflecting solid increases in hardware sales and software service
fees which more than offset a decrease in software maintenance and
support revenue. For the nine months ended September 30 of 2017,
sales increased 154% to $3,247,633 from $1,277,869 in the
prior-year period.
Hardware sales rose 134% to $512,281 in Q3’17, refecting
increased demand and interest in our hardware offerings and our
expanded base of products and distribution channels. Q3'17 hardware
sales included our new line of biometric enabled locks that
resulted in sales of approximately $164,000. Hardware sales
increased 293% to $1.7 million in first nine months of 2017
compared to the prior-year period.
Custom service revenues increased 4715% to $260,000 in Q3'17
compared to $5,400 in Q3'16 in connection with a special software
requirement from an existing customer while recurring maintenance
and service revenues decreased 36% to $117,000 from $182,000 in
Q3'16 due to the non-renewal of two maintenance contracts.
Gross profit margins decreased to 2% in Q3’17 from 60% in Q3’16,
reflecting a higher percentage of hardware sales that carry lower
margins, as well as $388,681 of non-cash amortization, primarily
related to our license to the Finger Q portfolio of mobile and
online payment security software technologies.
Q3’17 operating expenses increased to $1.6M from $1.5M,
principally due to a 34% increase in selling, general and
administrative expenses, primarily related to our Hong Kong
subsidiary, commitment fees, non-cash compensation, Nasdaq related
fees and commissions, partially offset by a reduction in research,
development and engineering costs in the period.
BIO-key's Q3’17 net loss was ($1.6M), or ($0.28) per share after
preferred dividends, as compared to ($1.1M), or ($0.24) per share
after preferred dividends, in Q3’16. The higher loss was primarily
due to the decrease in gross margin. For the nine months ended
September 30, 2017, BIO-key's net loss was ($4.7M), or ($0.85) per
share after preferred dividends, versus ($3.6 M), or ($0.77) per
share after preferred dividends, in the nine months ended September
30, 2016.
Per share results in Q3’17 and Q3’16 are based on a weighted
average of 6.5 million and 5.5 million basic shares outstanding,
respectively, which have been adjusted to reflect the impact of the
Company’s 1-for-12 reverse split in December 2016.
Liquidity & Other Resources At September
30, 2017, our total cash and cash equivalents plus current
receivables were approximately $1.5 million, as compared to
approximately $2.6 million at December 31, 2016.
In September we issued 427,778 shares and warrants to purchase
138,889 shares to an existing investor and board member for an
aggregate purchase price of $1,540,000, or $3.60 per share. BIO-Key
received cash proceeds of $1,000,000 and converted an accrued
dividend payable in the amount of $540,000 on our Series A-1
Convertible Preferred Stock.
Subsequent to the close of Q3'17, the same investor and board
member converted 27,404 shares of Series A-1 Convertible Preferred
Stock at a conversion price of $3.60 per share resulting in the
issuance of 761,222 shares of common stock.
Conference Call and Webcast Replay
|
|
|
|
Date/Time: |
Wednesday, November 15,
2017 at 10 a.m. ET |
|
Dial-In
number: |
1-877-418-5460 U.S. or
412-717-9594 International |
|
Webcast
Replay: |
Q3’17 Webcast &
Replay – available for 30 days. |
|
Audio
Replay: |
1-877-344-7529 U.S. or
412-317-0088 Int'l; code 10114154 |
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 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,
including SideSwipe, SideTouch, EcoID and SidePass, offer
market-leading quality, performance and price. BIO-key is now
bringing the power and ease of use of biometric technology to its
just-launched TouchLock line of biometric and Bluetooth enabled
padlocks – thereby providing, even more, ways to BIO-key your
world!
BIO-key Safe Harbor StatementCertain statements
contained in this press release may be construed as
"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 subject
to certain risks and uncertainties that may cause actual results to
differ materially from those projected on the basis of these
statements. These risks and uncertainties include, without
limitation, our history of losses and limited revenue, our ability
to develop new products and evolve existing ones, market acceptance
of biometric solutions generally and our specific offerings, our
ability to expand into the Asian market, the impact on our business
of the past financial crisis in the global capital markets or our
ability to attract and retain key personnel. For a more
complete description of these and other risk factors that may
affect the future performance of BIO-key International, Inc., see
"Risk Factors" in the Company's Annual Report on Form 10-K for the
year ended December 31, 2016 and its 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. The Company undertakes no
obligation to disclose any revision to these forward-looking
statements to reflect events or circumstances after the date
made.
|
|
Facebook –
Corporate: |
BIO-key
International |
Twitter –
Corporate: |
@BIOkeyIntl |
Twitter –
Investors: |
@BIO_keyIR |
StockTwits: |
@BIO_keyIR |
|
|
Investor & Media ContactsWilliam Jones,
Tanya KamatuCatalyst
Global212-924-9800bkyi@catalyst-ir.com
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
September
30,2017 |
|
|
December 31,2016 |
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
971,857 |
|
|
$ |
1,061,307 |
|
Accounts receivable
net |
|
|
562,296 |
|
|
|
1,563,246 |
|
Due from factor |
|
|
28,750 |
|
|
|
53,638 |
|
Inventory |
|
|
879,592 |
|
|
|
465,428 |
|
Software license
rights |
|
|
2,370,000 |
|
|
|
1,560,000 |
|
Prepaid expenses and
other |
|
|
175,955 |
|
|
|
206,677 |
|
Total
current assets |
|
|
4,988,450 |
|
|
|
4,910,296 |
|
Software license
rights, net of current portion |
|
|
8,590,368 |
|
|
|
10,598,411 |
|
Accounts receivable,
net of current portion |
|
|
1,070,000 |
|
|
|
1,570,000 |
|
Equipment and leasehold
improvements, net |
|
|
186,917 |
|
|
|
67,814 |
|
Deposits and other
assets |
|
|
8,712 |
|
|
|
8,712 |
|
Intangible assets,
net |
|
|
175,896 |
|
|
|
134,132 |
|
Total
non-current assets |
|
|
10,031,893 |
|
|
|
12,379,069 |
|
TOTAL
ASSETS |
|
$ |
15,020,343 |
|
|
$ |
17,289,365 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
507,886 |
|
|
$ |
466,842 |
|
Accrued
liabilities |
|
|
427,671 |
|
|
|
335,323 |
|
Dividends payable on
preferred stock |
|
|
463,125 |
|
|
|
401,250 |
|
Deferred revenue |
|
|
308,622 |
|
|
|
633,062 |
|
Total
current liabilities |
|
|
1,707,304 |
|
|
|
1,836,477 |
|
TOTAL
LIABILITIES |
|
|
1,707,304 |
|
|
|
1,836,477 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
|
|
Series A-1 convertible
preferred stock; authorized, 100,000 (liquidation preference
of $100 per share): issued and outstanding 90,000 of $.0001
par value at September 30, 2017 and December 31, 2016
respectively |
|
|
9 |
|
|
|
9 |
|
Series B-1 convertible
preferred stock; authorized, 105,000 (liquidation preference
of $100 per share): issued and outstanding 105,000 of $.0001
par value at September 30, 2017 and December 31, 2016
respectively |
|
|
11 |
|
|
|
11 |
|
Common stock —
authorized, 170,000,000 shares; $.0001 par value issued and
outstanding; 6,927,826 and 6,093,843 at September 30, 2017 and
December 31, 2016, respectively |
|
|
692 |
|
|
|
609 |
|
Additional paid-in
capital |
|
|
80,864,782 |
|
|
|
78,253,413 |
|
Accumulated
deficit |
|
|
(67,552,455 |
) |
|
|
(62,801,154 |
) |
TOTAL
STOCKHOLDERS’ EQUITY |
|
|
13,313,039 |
|
|
|
15,452,888 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
15,020,343 |
|
|
$ |
17,289,365 |
|
|
|
|
|
|
|
|
|
|
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
|
|
|
|
|
|
|
|
|
Three months endedSeptember
30, |
|
|
Nine months endedSeptember
30, |
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
$ |
377,113 |
|
|
$ |
187,025 |
|
|
$ |
831,761 |
|
|
$ |
692,677 |
|
License
fees and other |
|
|
53,023 |
|
|
|
25,435 |
|
|
|
677,342 |
|
|
|
142,651 |
|
Hardware |
|
|
512,281 |
|
|
|
219,003 |
|
|
|
1,738,530 |
|
|
|
442,541 |
|
Total
Revenues |
|
|
942,417 |
|
|
|
431,463 |
|
|
|
3,247,633 |
|
|
|
1,277,869 |
|
Costs and other
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services |
|
|
190,889 |
|
|
|
46,257 |
|
|
|
285,369 |
|
|
|
168,636 |
|
Cost of
license fees, hardware and other |
|
|
732,192 |
|
|
|
125,526 |
|
|
|
2,094,608 |
|
|
|
251,485 |
|
Total
costs and other expenses |
|
|
923,081 |
|
|
|
171,783 |
|
|
|
2,379,977 |
|
|
|
420,121 |
|
Gross Profit |
|
|
19,336 |
|
|
|
259,680 |
|
|
|
867,656 |
|
|
|
857,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
1,238,296 |
|
|
|
925,939 |
|
|
|
4,289,655 |
|
|
|
2,957,368 |
|
Research,
development and engineering |
|
|
386,830 |
|
|
|
528,554 |
|
|
|
1,329,322 |
|
|
|
1,584,403 |
|
|
|
|
1,625,126 |
|
|
|
1,454,493 |
|
|
|
5,618,977 |
|
|
|
4,541,771 |
|
Operating
loss |
|
|
(1,605,790 |
) |
|
|
(1,194,813 |
) |
|
|
(4,751,321 |
) |
|
|
(3,684,023 |
) |
Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
6 |
|
|
|
6 |
|
|
|
20 |
|
|
|
19 |
|
Gain on
derivative liabilities |
|
|
- |
|
|
|
60,385 |
|
|
|
- |
|
|
|
10,879 |
|
Total other income
(expense) |
|
|
6 |
|
|
|
60,391 |
|
|
|
20 |
|
|
|
10,898 |
|
Net
loss |
|
|
(1,605,784 |
) |
|
|
(1,134,422 |
) |
|
|
(4,751,301 |
) |
|
|
(3,673,125 |
) |
Convertible preferred
stock dividends |
|
|
(200,625 |
) |
|
|
(200,625 |
) |
|
|
(601,875 |
) |
|
|
(601,875 |
) |
Net loss available to
common stockholders |
|
$ |
(1,806,409 |
) |
|
$ |
(1,335,047 |
) |
|
$ |
(5,353,176 |
) |
|
$ |
(4,275,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted Loss per Common Share |
|
$ |
(0.28 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.85 |
) |
|
$ |
(0.77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted |
|
|
6,535,449 |
|
|
|
5,530,105 |
|
|
|
6,333,530 |
|
|
|
5,521,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All BIO-key shares issued and outstanding for all
periods reflect BIO-key’s 1-for-12 reverse stock split, which was
effective December 29, 2016.
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)
|
|
|
|
|
|
Nine Months Ended September
30, |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(4,751,301 |
) |
|
$ |
(3,673,125 |
) |
Adjustments to reconcile net loss to cash used for
operating activities: |
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts |
|
|
500,000 |
|
|
|
|
|
Depreciation |
|
|
33,526 |
|
|
|
37,764 |
|
Amortization of intangible assets |
|
|
10,280 |
|
|
|
10,205 |
|
Amortization of software license rights |
|
|
1,118,436 |
|
|
|
- |
|
Gain on
derivative liabilities |
|
|
- |
|
|
|
(10,879 |
) |
Share-based and warrant compensation for employees and
consultants |
|
|
774,968 |
|
|
|
231,983 |
|
Stock
based directors fees |
|
|
28,025 |
|
|
|
48,999 |
|
Amortization on note payable discount |
|
|
- |
|
|
|
- |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
1,000,950 |
|
|
|
957,024 |
|
Due from
factor |
|
|
24,888 |
|
|
|
33,380 |
|
Inventory |
|
|
(414,164 |
) |
|
|
(219,591 |
) |
Prepaid
expenses and other |
|
|
(18,578 |
) |
|
|
(39,205 |
) |
Software
license rights |
|
|
79,607 |
|
|
|
450 |
|
Accounts
payable |
|
|
41,044 |
|
|
|
(607,748 |
|
Accrued
liabilities |
|
|
92,348 |
|
|
|
(156,000 |
) |
Deferred
revenue |
|
|
(324,440 |
) |
|
|
(136,251 |
) |
Net cash
used for operating activities |
|
|
(1,804,411 |
) |
|
|
(3,522,994 |
) |
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(204,673 |
) |
|
|
(52,976 |
) |
Net cash
used for investing activities |
|
|
(204,673 |
) |
|
|
(52,976 |
) |
CASH FLOW FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Issuance
of common stock |
|
|
2,000,000 |
|
|
|
|
|
Preferred
dividends paid |
|
|
- |
|
|
|
(535,100 |
|
Costs to
issue preferred and common stock |
|
|
(80,366 |
) |
|
|
(32,620 |
) |
Net cash
provided by (used for) financing activities |
|
|
1,919,634 |
|
|
|
(567,720 |
) |
NET DECREASE IN
CASH AND CASH EQUIVALENTS |
|
|
(89,450 |
) |
|
|
(4,143,690 |
) |
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD |
|
|
1,061,307 |
|
|
|
4,321,078 |
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD |
|
$ |
971,857 |
|
|
$ |
177,388 |
|
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