FY 2018 Revenue Guidance Range Narrowed to
$8M - $9M Based on Near-Term Contract Activity
BIO-key International, Inc. (NASDAQ: BKYI), an innovative provider
of biometric authentication and security solutions, today reported
results for its third quarter ended September 30, 2018 (Q3’18) and
reviewed recent progress. The Company will host a conference call
tomorrow at 10:00 a.m. EST (details below) to review its results
and outlook.
Recent Highlights
- BIO-key Named Veteran Technology Sales Executive Frederick
Corsentino Chief Revenue Officer to Drive Sales and Business
Development
- NY Regional Bank Selected BIO-key to Comply with New York State
Department of Financial Services Cybersecurity Law
- Two Florida County Election Boards Selected BIO-key Fingerprint
Authentication to Protect Integrity of Voting Process
- BIO-key Showcased Enterprise Biometric Authentication Solutions
for Microsoft Windows Hello at Microsoft Ignite 2018
- BIO-key Extends Internet-of-Things Security to Bicycles and
E-Bikes with U.S. Debut of its Fingerprint Biometric/ Bluetooth
Controlled TouchLock™ Bike Locks on Amazon.com
BIO-key's CEO Michael DePasquale commented, "We
see the pace of market adoption and acceptance of biometrics
accelerating as a growing number of enterprises are realizing the
urgency and need to adopt secure and convenient solutions to
protect access to their data systems and digital assets. In
particular, we are currently working with a two large international
partners that can deploy our biometric security solutions for both
consumer and enterprise applications on a large scale. While these
opportunities can generate recurring revenue and cash flow, they
will also potentially enable us to win additional business from
other customers seeking secure environments across mobile
communications, e-commerce and Internet of Things applications.
A critical part of our strategy remains to forge
partnerships with reputable technology providers that have extended
enterprise customer relationships. For example, BIO-key was a
sponsor and exhibitor at Microsoft's Ignite 2018 held in September,
which gathered more than 27,000 IT professionals. We garnered
several enterprise customer leads as many enterprises are looking
to transition to Microsoft's advanced applications for business,
including Windows Hello, Azure and Windows Servers, which are
supported by biometric solutions. Additionally, we continue to
expand distribution of our biometric and Bluetooth enabled locks
and hardware fingerprint readers through prominent retailers,
including Amazon where we recently debuted TouchLock Bike in the
U.S.
We also announced the appointment of Fred
Corsentino as Chief Revenue Officer. Mr. Corsentino will refine and
refocus BIO-key's business development, sales and marketing
functions to optimize opportunities from our strong base of
biometric software and hardware solutions. Mr. Corsentino has
decades of sales leadership experience and a strong record of sales
growth achievement. We look forward to benefitting from his
expertise as we work to transition BIO-key to improved topline
revenues.
Our outlook for the remainder of 2018 is
supported by initiatives we have in place, as well as multimillion
dollar software orders we expect to complete imminently. We remind
investors that our quarterly performance tends to fluctuate based
on the closing of larger software and hardware agreements, which
have typically been weighted towards the end of the year. For these
reasons, we continue to focus investors on full year results, which
represent a more accurate gauge of our business performance, and we
have revised our financial guidance to reflect our updated
outlook."
Financial Results Q3’18 total
revenue declined $202,667 to $739,750 in Q3’18, due principally to
lower fingerprint hardware and biometric lock sales, as well as
lower service revenue related to the timing of certain
projects.
Gross margin was negative 27% in Q3’18 compared
to 2% in Q3’17, due largely to an increase in non-cash software
license amortization to $660,000 in Q3’18 compared to $390,000 in
Q3’17. Excluding software license amortization costs, BIO-key's
Q3'18 gross margin would have been 62% versus 43% in Q3'17 with the
difference due to a revenue mix that included more license revenue
in Q3'18.
Q3’18 operating expenses declined $184,000 to
$1,440,777 or 11% below Q3'17, due to lower selling, general and
administrative expenses as the prior-year period had included
Nasdaq uplisting costs and higher personnel compensation
expenses.
During Q3'18, BIO-key incurred a onetime expense
related to the modification of outstanding warrants due to the
trigger of anti-dilution provisions, which repriced in connection
with our recently underwritten offering of common stock and
warrants discussed below.
BIO-key's Q3’18 net loss was ($1,641,315), or
$(0.23) per basic share after non-cash deemed dividend from trigger
of anti-dilution provision feature, (warrant modification), as
compared to $(1,605,784), or $(0.28) per basic share after
preferred dividends ($200K), in Q3’17. Per share results are based
on 13,145,301 and 6,535,449 weighted average basic shares
outstanding in Q3’18 and Q3’17, respectively.
In the first nine-months of 2018, total revenue
was $2,329,346 versus $3,247,633 in the first nine-months of 2017,
a decline of $918,287, principally due to the timing of larger
software and hardware deals.
Net loss was $(5,488,772), or $(0.66) per basic
share after preferred dividends ($198K) and non-cash deemed
dividend from trigger of anti-dilution provision feature, (warrant
modification), in the first nine months of 2018 versus
$(4,751,301), or $(0.85) per basic share after preferred dividends
($601K), in the prior-year period.
Per share results are based on 10,810,103 and
6,333,530 weighted average basic shares outstanding in the first
nine months of 2018 and 2017, respectively.
In August, we completed an underwritten offering
of 1,380,000 Units, including the over-allotment option, consisting
of 1,380,000 shares of BIO-key common stock and warrants to
purchase up to an aggregate of 1,035,000 shares of common stock at
a purchase price of $1.50 per Unit. Net proceeds from the offering
were approximately $1.8 million.
BIO-key had net working capital of $4.7 million
as of September 30, 2018 and $4.7 million at December 31, 2017. Net
working capital included approximately $1.0 million of cash and
cash equivalents at quarter end versus $288,721 at year-end.
Financial Guidance Based on
year-to-date performance as well as anticipated contract activity,
including multimillion dollar software orders expected to close
this week, BIO-key has tightened its full year revenue guidance to
$8M-$9M from $8M-12M. The updated revenue guidance represents
growth of 27% to 42% over 2017 revenue of $6.3M. Within this
anticipated revenue range, BIO-key expects to generate positive
operating cash flow and Earnings Before Interest Taxes Depreciation
and Amortization (EBITDA) for the full year 2018.
Conference Call and Webcast
Replay
|
Date/Time:
Dial-In number:Webcast Replay:Call Replay: |
|
Thursday, November 15,
2018 at 10 am ET1-877-418-5460 U.S. or 1-412-717-9594
(Intl.)BKYI Q3 2018 Webcast & Replay Available
for 30 days877-344-7529 U.S. or 412-317-0088 (Int’l); code
10126017 |
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 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 even 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 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; 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, 2017 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-keyFacebook – Corporate:Twitter – Corporate:Twitter –
Investors:StockTwits: |
|
BIO-key
International@BIOkeyIntl@BIO_keyIRBIO_keyIR |
|
|
|
Investor & Media
ContactsWilliam Jones, Tanya KamatuCatalyst
IR212-924-9800bkyi@catalyst-ir.com
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
September
30,2018 |
|
|
December 31,2017 |
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
1,048,755 |
|
|
$ |
288,721 |
|
Accounts receivable,
net |
|
|
653,523 |
|
|
|
2,875,946 |
|
Due from factor |
|
|
80,401 |
|
|
|
109,865 |
|
Inventory |
|
|
1,044,153 |
|
|
|
946,847 |
|
Resalable software
license rights |
|
|
2,910,000 |
|
|
|
2,640,000 |
|
Prepaid expenses and
other |
|
|
172,897 |
|
|
|
152,654 |
|
Total
current assets |
|
|
5,909,729 |
|
|
|
7,014,033 |
|
Resalable software
license rights, net of current portion |
|
|
5,667,348 |
|
|
|
7,933,808 |
|
Accounts receivable,
net of current portion |
|
|
720,000 |
|
|
|
760,000 |
|
Equipment and leasehold
improvements, net |
|
|
170,036 |
|
|
|
181,165 |
|
Capitalized contract
costs, net |
|
|
333,068 |
|
|
|
- |
|
Deposits and other
assets |
|
|
8,712 |
|
|
|
8,712 |
|
Intangible assets,
net |
|
|
193,013 |
|
|
|
181,104 |
|
Total
non-current assets |
|
|
7,092,177 |
|
|
|
9,064,789 |
|
TOTAL
ASSETS |
|
$ |
13,001,906 |
|
|
$ |
16,078,822 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
369,785 |
|
|
$ |
499,230 |
|
Accrued
liabilities |
|
|
585,601 |
|
|
|
688,023 |
|
Dividends payable |
|
|
- |
|
|
|
630,408 |
|
Deferred revenue |
|
|
255,738 |
|
|
|
507,866 |
|
Total
current liabilities |
|
|
1,211,124 |
|
|
|
2,325,527 |
|
TOTAL
LIABILITIES |
|
|
1,211,124 |
|
|
|
2,325,527 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-1 convertible
preferred stock: authorized, 100,000 (liquidation preference of
$100 per share); issued and outstanding 0 and 62,596 of $.0001 par
value at September 30, 2018 and December 31, 2017,
respectively |
|
|
- |
|
|
|
6 |
|
Series B-1 convertible
preferred stock; authorized, 105,000 (liquidation preference of
$100 per share): issued and outstanding 0 and 105,000 of $.0001 par
value at September 30, 2018 and December 31, 2017,
respectively |
|
|
- |
|
|
|
11 |
|
Common stock:
authorized, 170,000,000 shares; issued and outstanding; 13,972,158
and 7,691,324 of $.0001 par value at September 30, 2018 and
December 31, 2017, respectively |
|
|
1,398 |
|
|
|
769 |
|
Additional paid-in
capital |
|
|
85,543,597 |
|
|
|
80,829,001 |
|
Accumulated
deficit |
|
|
(73,754,213 |
) |
|
|
(67,076,492 |
) |
TOTAL
STOCKHOLDERS’ EQUITY |
|
|
11,790,782 |
|
|
|
13,753,295 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
13,001,906 |
|
|
$ |
16,078,822 |
|
|
|
|
|
|
|
|
|
|
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
|
|
Three months endedSeptember
30, |
|
|
Nine months endedSeptember
30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
$ |
225,739 |
|
|
$ |
377,113 |
|
|
$ |
777,309 |
|
|
$ |
831,761 |
|
License
fees |
|
|
210,651 |
|
|
|
53,023 |
|
|
|
467,621 |
|
|
|
677,342 |
|
Hardware |
|
|
303,360 |
|
|
|
512,281 |
|
|
|
1,084,416 |
|
|
|
1,738,530 |
|
Total
Revenues |
|
|
739,750 |
|
|
|
942,417 |
|
|
|
2,329,346 |
|
|
|
3,247,633 |
|
Costs and other
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services |
|
|
97,965 |
|
|
|
190,889 |
|
|
|
373,538 |
|
|
|
285,369 |
|
Cost of
license fees, hardware and other |
|
|
842,367 |
|
|
|
732,192 |
|
|
|
2,776,042 |
|
|
|
2,094,608 |
|
Total
costs and other expenses |
|
|
940,332 |
|
|
|
923,081 |
|
|
|
3,149,580 |
|
|
|
2,379,977 |
|
Gross Profit
(Loss) |
|
|
(200,582 |
) |
|
|
19,336 |
|
|
|
(820,234 |
) |
|
|
867,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
1,049,270 |
|
|
|
1,238,296 |
|
|
|
3,587,308 |
|
|
|
4,289,655 |
|
Research,
development and engineering |
|
|
391,507 |
|
|
|
386,830 |
|
|
|
1,081,294 |
|
|
|
1,329,322 |
|
Total operating
expenses |
|
|
1,440,777 |
|
|
|
1,625,126 |
|
|
|
4,668,602 |
|
|
|
5,618,977 |
|
Operating
loss |
|
|
(1,641,359 |
) |
|
|
(1,605,790 |
) |
|
|
(5,488,836 |
) |
|
|
(4,751,321 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
44 |
|
|
|
6 |
|
|
|
64 |
|
|
|
20 |
|
Total other income |
|
|
44 |
|
|
|
6 |
|
|
|
64 |
|
|
|
20 |
|
Net loss |
|
|
(1,641,315 |
) |
|
|
(1,605,784 |
) |
|
|
(5,488,772 |
) |
|
|
(4,751,301 |
) |
Deemed dividend from
trigger of anti-dilution provision feature |
|
|
(1,428,966 |
) |
|
|
- |
|
|
|
(1,428,966 |
) |
|
|
- |
|
Convertible preferred
stock dividends |
|
|
- |
|
|
|
(200,625 |
) |
|
|
(198,033 |
) |
|
|
(601,875 |
) |
Net loss available to
common stockholders |
|
$ |
(3,070,281 |
) |
|
$ |
(1,806,409 |
) |
|
$ |
(7,115,771 |
) |
|
$ |
(5,353,176 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted Loss per Common Share |
|
$ |
(0.23 |
) |
|
$ |
(0.28 |
) |
|
$ |
(0.66 |
) |
|
$ |
(0.85 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted |
|
|
13,145,301 |
|
|
|
6,535,449 |
|
|
|
10,810,103 |
|
|
|
6,333,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)
|
|
Nine Months Ended September
30, |
|
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(5,488,772 |
) |
|
$ |
(4,751,301 |
) |
Adjustments to reconcile net loss to cash used for
operating activities: |
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts |
|
|
- |
|
|
|
500,000 |
|
Depreciation |
|
|
69,083 |
|
|
|
33,526 |
|
Amortization of intangible assets |
|
|
12,281 |
|
|
|
10,280 |
|
Amortization of resalable software license rights |
|
|
1,978,349 |
|
|
|
1,118,436 |
|
Amortization of capitalized contract costs |
|
|
90,518 |
|
|
|
- |
|
Share-based and warrant compensation for employees and
consultants |
|
|
865,291 |
|
|
|
774,968 |
|
Stock
based directors fees |
|
|
30,530 |
|
|
|
28,025 |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
2,262,423 |
|
|
|
1,000,950 |
|
Due from
factor |
|
|
29,464 |
|
|
|
24,888 |
|
Capitalized contract costs |
|
|
(183,569 |
) |
|
|
- |
|
Inventory |
|
|
(97,306 |
) |
|
|
(414,164 |
) |
Resalable
software license rights |
|
|
18,111 |
|
|
|
79,607 |
|
Prepaid
expenses and other |
|
|
(20,243 |
) |
|
|
(18,578 |
) |
Accounts
payable |
|
|
(129,445 |
) |
|
|
41,044 |
|
Accrued
liabilities |
|
|
(102,422 |
) |
|
|
92,348 |
|
Deferred
revenue |
|
|
(252,128 |
) |
|
|
(324,440 |
) |
Net cash used for operating activities |
|
|
(917,835 |
) |
|
|
(1,804,411 |
) |
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(82,143 |
) |
|
|
(204,673 |
) |
Net cash
used for investing activities |
|
|
(82,143 |
) |
|
|
(204,673 |
) |
CASH FLOW FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Issuance
of common stock |
|
|
1,875,100 |
|
|
|
2,000,000 |
|
Costs to
issue preferred and common stock |
|
|
(115,088 |
) |
|
|
(80,366 |
) |
Net cash
provided by financing activities |
|
|
1,760,012 |
|
|
|
1,919,634 |
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
760,034 |
|
|
|
(89,450 |
) |
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD |
|
|
288,721 |
|
|
|
1,061,307 |
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD |
|
$ |
1,048,755 |
|
|
$ |
971,857 |
|
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