BKYI - Biometric ID and Authentication Security Provider BIO-key Reports Q2 Results

August, 14 2019 04:31 PM BIO-key International Inc.

WALL, N.J., Aug. 14, 2019 (GLOBE NEWSWIRE) -- 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 Guidance
Reflecting 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 Statement
All 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 Contacts
William Jones, David Collins
Catalyst IR
212-924-9800
bkyi@catalyst-ir.com

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)



Three months ended June 30,


Six months ended June 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 SUBSIDIARY
CONDENSED 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 SUBSIDIARY
CONDENSED 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

Company Name:	BIO-key International Inc.
Stock Symbol:	BKYI
Market:	NASDAQ
Website:	bio-key.com