SOURCE: BIO-key International, Inc.

BIO-key International, Inc.

August 15, 2016 16:48 ET

Biometric ID Provider BIO-key Reports Q2 2016 Results

WALL, NJ--(Marketwired - Aug 15, 2016) - BIO-key International, Inc. (OTCQB: BKYI), an innovative provider of biometric software and hardware solutions for stronger user authentication, today reported results for its second quarter ended June 30, 2016 (Q2'16). BIO-key will host a conference call tomorrow at 10:00 a.m. ET to review its results (details below).

Michael DePasquale, Chairman & CEO of BIO-key, commented, "While we made good incremental progress positioning BIO-key for significant hardware and software revenue opportunities later this year and into next year, our second quarter sales performance was disappointing. Revenue declined to $415,000 in the second quarter as several larger scale opportunities did not close during the period for a variety of reasons that were unrelated to BIO-key. We believe these opportunities still have strong prospects for closing, and we remain in active discussions with the customers to that end. At the same time, we are building out our sales, marketing and distribution channels to drive sales of our line of fingerprint readers for enterprise and retail users.

"We have also continued to build upon our strategic partnership with Microsoft to support the use of expanded biometric security capabilities now resident in the Windows 10 Anniversary Edition released on August 2nd. Windows 10 has already been downloaded on over 350 million devices, providing a substantial and growing market opportunity for our biometric solutions. We believe BIO-key offers the the strongest, most convenient, and cost effective authentication solutions for Windows 10 enterprise and retail users.

"To tackle this opportunity, we are establishing enterprise and retail distribution channels, packaging and collateral, and sales and marketing support and expect to see broad availability of our products in September. In summary, despite the slow start to the year, BIO-key is working a robust pipeline of enterprise hardware and software opportunities. Over the next several months we believe we can convert these opportunities into meaningful revenue growth for the full year 2016, which we now expect to range between $6.0M and $8.5M."

Recent Highlights:

Guidance:
Managment remains confident in the company's pipeline of hardware and software revenue opportunities for the balance of 2016. However, based on delays in the conversion of several significant opportunities into revenue so far in 2016, BIO-key believes it prudent to reduce its full year revenue guidance to a range of $6.0M - $8.5M in 2016, versus revenue of approximately $5M in 2015. BIO-key's estimated breakeven revenue run rate is approximately $7.5M.

Q2 2016 Results:
Q2'16 total revenue declined to $415,814 compared to $2,272,804 in Q2'15, principally due to a $2.0 million software license from an existing customer in Q2'15. Service revenues, principally comprised of recurring maintenance and support, decreased 13% to $220,926 compared to $255,269 in Q2'15, reflecting an increase in maintenance revenue offset by no special software requirements for current or new customers. License and other revenue decreased to $194,888 from $2,017,535, principally reflecting the $2.0 million software license booked in Q2'15. Hardware sales increased 5% reflecting an increase in volume.

Q2'16 gross margin declined to 67% from 94% in Q2'15, due to lower revenue and a change in revenue mix. Q2'16 operating expenses rose 17% to $1,605,352 compared to $1,373,860 in Q2'15, principally due to increased R&D expense for new personnel, temporary outside services, and recruiting expenses.

BIO-key's Q2'16 net loss to common shareholders was ($1,576,114), or ($0.02) per share, compared to net income of $753,146, or $0.01 per share, in Q2'15.

Liquidity and Capital Resources
At June 30, 2016, BIO-key had cash, cash equivalents and net receivables of $4.3M compared to $7.7M at December 31, 2015.

Conference Call and Webcast Replay 

Date/Time: Tuesday, August 16, 2016 at 10 am ET

Dial-In number: 1-877-418-5460 (U.S.), 412-717-9594 (Intl.)

Webcast Replay: http://services.choruscall.com/links/biokey160815 - Available for 30 days.

Call Replay: 1-877-344-7529 U.S. or 412-317-0088 use code 10091361#

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 SideSwipe, SideTouch and EcoID offer market leading quality, performance and price.

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, 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, 2015 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.

Twitter: BIO-keyIR

Investor & Media Contacts:
David Collins, William Jones
Catalyst Global
212-984-9800
bkyi@catalyst-ir.com

   
BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY  
CONDENSED CONSOLIDATED BALANCE SHEETS  
   
  June 30,
2016
    December 31,
2015
 
  (Unaudited)        
ASSETS              
Cash and cash equivalents $ 2,006,665     $ 4,321,078  
Accounts receivable, net of allowance for doubtful accounts of $13,785 at June 30, 2016 and December 31, 2015   2,298,744       3,391,405  
Due from factor   2,323       37,421  
Inventory   480,039       348,645  
Software license rights   5,000,000       5,000,000  
Prepaid expenses and other   92,855       97,203  
  Total current assets   9,880,626       13,195,752  
Software license rights, less current portion   7,000,000       7,000,000  
Equipment and leasehold improvements, net   91,083       63,877  
Deposits and other assets   8,712       8,712  
Intangible assets--less accumulated amortization   140,935       147,738  
  Total non-current assets   7,240,730       7,220,327  
TOTAL ASSETS $ 17,121,356     $ 20,416,079  
               
LIABILITIES              
Accounts payable $ 696,419     $ 1,158,555  
Accrued liabilities   350,833       493,067  
Dividends payable   200,625       133,851  
Deferred revenue   318,046       376,405  
Warrant liabilities   153,790       104,284  
  Total current liabilities   1,719,713       2,266,162  
TOTAL LIABILITIES   1,719,713       2,266,162  
               
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   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   11       11  
Common stock - authorized, 170,000,000 shares; issued and outstanding; 66,339,655 and 66,098,482 of $.0001 par value at June 30, 2016 and December 31, 2015, respectively   6,634       6,610  
Additional paid-in capital   76,545,142       76,754,737  
Accumulated deficit   (61,150,153 )     (58,611,450 )
TOTAL STOCKHOLDERS' EQUITY   15,401,643       18,149,917  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,121,356     $ 20,416,079  
               
               
BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
  Three months ended
June 30,
    Six months ended
June 30,
 
  2016     2015     2016     2015  
Revenues                              
  Services $ 220,926     $ 255,269     $ 505,652     $ 505,622  
  License fees and other   194,888       2,017,535       340,754       2,416,008  
    415,814       2,272,804       846,406       2,921,630  
Costs and other expenses                              
  Cost of services   66,597       56,905       122,379       123,968  
  Cost of license fees and other   69,893       88,489       125,959       160,782  
    136,490       145,394       248,338       284,750  
Gross Profit   279,324       2,127,410       598,068       2,636,880  
                               
Operating Expenses                              
  Selling, general and administrative   1,038,904       979,861       2,030,517       2,020,542  
  Research, development and engineering   566,448       393,999       1,055,849       800,640  
    1,605,352       1,373,860       3,086,366       2,821,182  
    Operating profit (loss)   (1,326,028 )     753,550       (2,488,298 )     (184,302 )
Other income (expenses)                              
  Interest income   7       2       13       4  
  Gain (loss) on derivative liabilities   (49,468 )     (406 )     (49,506 )     14,253  
  Income taxes   -       -       (912 )     (912 )
  Total other income (expenses)   (49,461 )     (404 )     (50,405 )     13,345  
Net income (loss)   (1,375,489 )     753,146       (2,538,703 )     (170,957 )
Convertible preferred stock dividends   (200,625 )     -       (401,250 )     -  
Net income (loss) available to common stockholders $ (1,576,114 )   $ 753,146     $ (2,939,953 )   $ (170,957 )
                               
Basic and Diluted Earnings (Loss) per Common Share $ (0.02 )   $ 0.01     $ (0.04 )   $ (0.00 )
                               
Weighted Average Shares Outstanding:                              
  Basic and diluted   66,276,050       66,001,260       66,199,903       66,001,260  
                                 
                                 
BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Six Months Ended June 30,  
    2016     2015  
                 
CASH FLOW FROM OPERATING ACTIVITIES:                
  Net loss   $ (2,538,703 )   $ (170,957 )
  Adjustments to reconcile net loss to cash used in operating activities:                
    Depreciation     24,577       21,270  
    Amortization of intangible assets     6,803       6,803  
    Share-based and warrant compensation for employees and consultants     184,299       222,247  
    Loss (gain) on derivative liabilities     49,506       (14,253 )
    Stock based directors fees     39,999       -  
  Change in assets and liabilities:                
    Accounts receivable trade     1,092,661       491,356  
    Due from factor     35,098       (1,465,527 )
    Inventory     (131,394 )     (400,744 )
    Prepaid expenses and other     4,348       162,209  
    Accounts payable     (462,136 )     521,803  
    Accrued liabilities     (142,234 )     (52,324 )
    Deferred revenue     (58,359 )     172,518  
      Net cash used for operating activities     (1,895,535 )     (505,599 )
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Capital expenditures     (51,783 )     (2,078 )
      Net cash used for investing activities     (51,783 )     (2,078 )
CASH FLOW FROM FINANCING ACTIVITIES:                
    Preferred dividends paid     (334,476 )     -  
    Costs to issue preferred and common stock     (32,619 )     (53,579 )
      Net cash used for financing activities     (367,095 )     (53,579 )
NET DECREASE IN CASH AND CASH EQUIVALENTS     (2,314,413 )     (561,256 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     4,321,078       843,632  
CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 2,006,665     $ 282,376  
                 

Contact Information

  • Investor & Media Contacts:
    David Collins, William Jones
    Catalyst Global
    212-984-9800
    bkyi@catalyst-ir.com