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 | ||||