WALL, NJ--(Marketwired - Aug 14, 2017) -  BIO-key International, Inc. (NASDAQ: BKYI), an innovative provider of biometric software and hardware solutions for strong and convenient user authentication, today reported results for its second quarter (Q2'17) and six months ended June 30, 2017 and reviewed recent business developments. BIO-key will host a conference call for investors tomorrow at 10:00 a.m. EDT (call details below).

Q2'17 Financial Highlights:

  • Total revenues rose 113% in Q2'17 to $887,000 vs. Q2'16, but did not include a $600,000 professional services contract executed in Q2'17 which will be recognized during the second half of 2017.
  • Software license revenues rose 76% to $128,000 reflecting demand from both new and existing customers.
  • Hardware sales rose 281% to $467,000, reflecting broader distribution and increased demand for BIO-key's fingerprint reader lines with plug & play integration to Windows 10.
  • Q2'17 results also included $158,000 in revenue from initial shipments of BIO-key's recently launched TouchLock™ line of biometric padlocks and bicycle locks in Asia.

Other Highlights:

Michael DePasquale, Chairman & CEO of BIO-key, commented, "We are encouraged by our sales and marketing progress on a global basis during the second quarter and first six months of 2017. Based on this performance and our pipeline of hardware and software opportunities, we remain very optimistic about BIO-key's growth potential and reiterate our full-year financial guidance.

"We are particularly gratified to build upon our relationship with a Fortune 500 telecommunications customer that selected BIO-key to support their endpoint security implementations through a $600,000 professional service engagement we expect to fulfill over the next two quarters.

"Software license sales rose 76% in the second quarter based on both new and existing customer demand. We continue to pursue a range of larger enterprise software opportunities, primarily within highly regulated industries like healthcare, government and financial services that are under the greatest pressure to adopt new security and authentication technologies. These dialogues also have the potential to drive hardware sales. Unfortunately, given the range of factors involved with each discussion, it's extremely difficult to predict the scope or timing of these potential deals.

"Hardware solutions were a bright spot in our second quarter performance as we achieved solid sales increases for our SideSwipe, SideTouch and EcoID fingerprint readers, and we also shipped initial orders of our new TouchLock line of biometric and Bluetooth enabled padlocks. We are pleased to see growing interest and encouraging demand trends building across our enterprise and consumer hardware solutions and expect this area to be an important contributor to second half results.

"Moreover, we continued to make progress in expanding our distribution channels on a global basis while actively supporting them with sales and marketing initiatives. To this end, we are currently in discussions with a leading national television shopping network that reaches nearly 100 million U.S. households to develop BIO-key product-based programing. We believe this broad visibility represents both an excellent sales opportunity as well as a powerful platform to build business and consumer awareness and understanding of the benefits and value of our solutions.

"Finally, we are excited to have successfully up-listed to Nasdaq. Beyond providing a more visible, accessible and liquid market for our common stock, we believe the visibility and credibility provided by a Nasdaq listing should also provide substantial sales and marketing support by raising the visibility of our solutions and brand before prospective customers and partners on a global basis."

Second Quarter and First Six Months Results
Q2'17 total revenue increased 113% to $886,881 compared to $415,814 in Q2'16, reflecting solid increases in both hardware sales and software license activity that offset a decrease in services revenue related to software maintenance. For the first half of 2017, sales increased 172% to $2,305,216 from $846,406 in the prior-year period.

Sales of fingerprint reader hardware rose 281% to $467,000 in Q2'17, reflecting growing demand and an expanded base of distribution channels. In addition, Q2'17 included approximately $158,000 in revenue from initial shipments of BIO-key's new TouchLock line of biometric padlocks. Software license revenue increased 76% to $128,000, and services revenue declined 39% to $134,061 reflecting lower revenue from software maintenance. 

Gross margin decreased to 10.3% in Q2'17 from 67.2% in Q2'16, reflecting a higher percentage of hardware sales that carry lower margins, as well as $389,000 of non-cash amortization related to the license to the Finger Q portfolio of mobile and online payment security software technologies. FingerQ's mobile security capabilities have been incorporated into BIO-key's existing solutions and initial sales have commenced.

Q2'17 operating expenses increased to $1.8M from $1.6M, principally due to a $0.4M increase in selling, general and administrative expenses, primarily related to BIO-key's Hong Kong subsidiary, commitment fees and commissions, offset by a $0.1M reduction in research, development and engineering costs in the period.

BIO-key's Q2'17 net loss was ($1.8M), or ($0.32) per share after preferred dividends, as compared to ($1.4M), or ($0.29) per share after preferred dividends, in Q2'16. The slightly higher loss was primarily due to the decrease in gross margin and the increase in operating expenses. For the first six months of 2017, BIO-key's net loss was ($3.1M), or ($0.57) per share after preferred dividends, versus ($2.5M), or ($0.53) per share after preferred dividends, in the first half of 2016.

Per share results in Q2'17 and first six months of 2017 are based on a weighted average of 6.4 million and 6.2 million respectively, and Q2'16 and first six months 2016 are both based on a weighted average of 5.5 million basic shares outstanding, which have been adjusted to reflect the impact of the Company's 1-for-12 reverse split in December 2016.

Financial Guidance
Based on the company's year to date performance, combined with anticipated revenues discussed herein and sales and marketing efforts for its hardware and software solutions, including several large enterprise opportunities in pilot stages, management reiterates its 2017 revenue guidance range of $6M to $12M, with a gross margin range of 53% to 70% depending on the mix of software and hardware sales.

Liquidity & Other Resources
At June 30, 2017, total cash and cash equivalents plus current receivables was approximately $1.8 million, as compared to approximately $2.6 million at December 31, 2016. On April 28, 2017, BIO-key raised $1 million through the sale of common stock priced at $3.60 per share in a private placement with an existing investor and board member.

Conference Call and Webcast Replay 
 Tuesday, August 15, 2017 at 10 a.m. EDT
Dial-In number: 1-877-418-5460 U.S. or 412-717-9594 International
Webcast Replay: Q2'17 Webcast & Replay - available for 30 days.
Audio Replay: 1-877-344-7529 U.S. or 412-317-0088 Int'l; code 10111348

About BIO-key International, Inc. (www.bio-key.com)
BIO-key is revolutionizing authentication as our easy to use biometric solutions enable convenient and secure access to information and financial transactions. We eliminate passwords, PINs tokens and cards and 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 also bringing the power and ease of use of biometric technology to its recently launched TouchLock line of biometric and Bluetooth enabled padlocks - providing even more ways to BIO-key your world!

BIO-key Safe Harbor Statement
Certain 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 recent financial crisis in the global capital markets, and negative global economic trends, availability of capital, and 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.

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    June 30,
    December 31,
Cash and cash equivalents   $ 988,342     $ 1,061,307  
Accounts receivable, net     847,889       1,563,246  
Due from factor     29,462       53,638  
Inventory     567,182       465,428  
Software license rights     2,100,000       1,560,000  
Prepaid expenses and other     203,113       206,677  
  Total current assets     4,735,988       4,910,296  
Software license rights, net     9,253,008       10,598,411  
Accounts receivable, net     1,070,000       1,570,000  
Equipment and leasehold improvements, net     153,529       67,814  
Deposits and other assets     8,712       8,712  
Intangible assets, net     166,735       134,132  
  Total non-current assets     10,651,984       12,379,069  
TOTAL ASSETS   $ 15,387,972     $ 17,289,365  
Accounts payable   $ 333,627     $ 466,842  
Accrued liabilities     421,350       335,323  
Dividends payable     802,500       401,250  
Deferred revenue     417,464       633,062  
  Total current liabilities     1,974,941       1,836,477  
TOTAL LIABILITIES     1,974,941       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 June 30, 2017 and December 31, 2016     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 June 30, 2017 and December 31, 2016     11       11  
Common stock: authorized, 170,000,000 shares; issued and outstanding; 6,493,290 and 6,093,843 of $.0001 par value at June 30, 2017 and December 31, 2016, respectively     649       609  
Additional paid-in capital     79,359,032       78,253,413  
Accumulated deficit     (65,946,670 )     (62,801,154 )
TOTAL STOCKHOLDERS' EQUITY     13,413,031       15,452,888  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 15,387,972     $ 17,289,365  

All BIO-key shares issued and outstanding for all periods reflect BIO-key's 1-for-2 reverse stock split, which was effective February 3, 2015, and its 1-for-12 reverse stock split, which was effective December 29, 2016.

    Three months ended
June 30,
    Six months ended
June 30,
    2017     2016     2017     2016  
  Services   $ 134,061     $ 220,926     $ 454,648     $ 505,652  
  License fees and other     752,820       194,888       1,850,568       340,754  
      886,881       415,814       2,305,216       846,406  
Costs and other expenses                                
  Cost of services     55,660       66,597       94,480       122,379  
  Cost of license fees and other     740,301       69,893       1,362,415       125,959  
      795,961       136,490       1,456,895       248,338  
Gross Profit     90,920       279,324       848,321       598,068  
Operating Expenses                                
  Selling, general and administrative     1,431,208       1,038,904       3,051,358       2,031,429  
  Research, development and engineering     449,049       566,448       942,493       1,055,849  
Total Operating Expenses     1,880,257       1,605,352       3,993,851       3,087,278  
    Operating loss     (1,789,337 )     (1,326,028 )     (3,145,530 )     (2,489,210 )
Other income (expenses)                                
  Interest income     8       7       14       13  
  Loss on derivative liabilities     -       (49,468 )     -       (49,506 )
  Total other income (expenses)     8       (49,461 )     14       (49,493 )
Net loss     (1,789,329 )     (1,375,489 )     (3,145,516 )     (2,538,703 )
Convertible preferred stock dividends     (200,625 )     (200,625 )     (401,250 )     (401,250 )
Net loss available to common stockholders   $ (1,989,954 )   $ (1,576,114 )   $ (3,546,766 )   $ (2,939,953 )
Basic and Diluted Loss per Common Share   $ (0.32 )   $ (0.29)     $ (0.57 )   $ (0.53 )
Weighted Average Shares Outstanding:                                
  Basic and diluted     6,359,974       5,523,072       6,228,197       5,516,726  

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.

    Six Months Ended June 30,  
    2017     2016  
  Net loss   $ (3,145,516 )   $ (2,538,703 )
  Adjustments to reconcile net loss to cash used for operating activities:                
    Allowance for doubtful accounts     500,000       -  
    Depreciation     15,513       24,577  
    Amortization of intangible assets     6,833       6,803  
    Amortization of software license rights     729,755       -  
    Loss on derivative liabilities     -       49,506  
    Share-based and warrant compensation for employees and consultants     564,275       184,299  
    Stock based directors' fees     10,008       39,999  
Change in assets and liabilities:                
    Accounts receivable     715,357       1,092,661  
    Due from factor     24,176       35,098  
    Inventory     (101,754 )     (131,394 )
    Software license rights     75,648       -  
    Prepaid expenses and other     16,556       4,348  
    Accounts payable     (133,215 )     (462,136 )
    Accrued liabilities     86,027       (142,234 )
    Deferred revenue     (215,598 )     (58,359 )
      Net cash used for operating activities     (851,935) )     (1,895,535 )
    Capital expenditures     (140,664 )     (51,783 )
      Net cash used for investing activities     (140,664 )     (51,783 )
    Issuance of common stock     1,000,000       -  
    Preferred dividends paid     -       (334,476 )
    Costs to issue preferred and common stock     (80,366)       (32,619 )
      Net cash provided by financing activities     919,634       (367,095 )
NET DECREASE IN CASH AND CASH EQUIVALENTS     (72,965 )     (2,314,413 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     1,061,307       4,321,078  
CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 988,342     $ 2,006,665  

Contact Information:

Investor & Media Contacts
David Collins, William Jones, Tanya Kamatu
Catalyst Global