SOURCE: BIO-key International, Inc.

BIO-key International, Inc.

March 30, 2016 08:00 ET

Fingerprint Biometric ID Provider BIO-key's 2015 Revenue Rose 31% to $5.3M; Sees Growth Accelerating in 2016 With Initial Revenue Guidance of $7M - $9.5M

WALL, NJ--(Marketwired - Mar 30, 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 fourth quarter (Q4'15) and year ended December 31, 2015 and provided initial revenue guidance for 2016. BIO-key is hosting a conference call today at 10:00 a.m. EDT to review its results and outlook, details below.

2015 Highlights:

  • 2015 revenue rose 31% to $5.3M, principally due to growth in both software and hardware sales.
  • Strategic investment and partnership with a group led by China GoldJoy Group (HK: 1282) which yielded $7.5M in net proceeds along with rights to a portfolio of patented technology licenses focused on online and mobile payment systems.
  • Formed Hong Kong subsidiary, BIO-key HK Ltd. to provide access to Asian markets for sales, product development, and manufacturing which closed its first sale in Q4'15. The contract, with a global payments company, was valued at $244K.
  • Marketing alliance with Microsoft centered on BIO-key's SideSwipe fingerprint readers which offer simple plug-and-play compatibility with Windows 10 biometric support. SideSwipe readers offer a small form factor, high quality and attractively priced solution to enable enterprise biometric authentication with Windows 10. Co-marketing efforts across the country and at recent invitation-only Microsoft CIO summits have generated a solid base of interest and leads with large enterprise customers.

Q4 Results:
Driven principally by a growing base of software license agreements with new and existing customers and record hardware sales, Q4'15 total revenue rose 75% to $1,669,749 compared to $951,698 in Q4'14. Q4'15 results included a $485K order to supply a large regional healthcare provider with technology to support 10,000 individuals accessing patient data from approximately 3,500 devices.

Q4'15 gross margin declined to 63% from 76% in Q4'14, principally due to the increase in lower margin hardware sales and a decline in services revenue due to the completion of a large customer project at the end of 2014. Q4'15 operating expenses were held to a 16% increase to $1,473,308 compared to $1,272,025 in Q4'14.

Reflecting higher revenues and the Company's expense management, BIO-key's Q4'15 net loss decreased to ($423,490), or ($0.01) per basic share, compared to a net loss of ($546,648), or ($0.01) per basic share, in Q4'14.

2015 Results:
Total revenue increased 31% in 2015 to $5,261,225 compared to $4,005,856 in 2014. The improvement reflected solid increases in both software license and hardware revenue, more than offsetting a $560K decrease in services revenue, due principally to the completion of a large service contract at the end of 2014.

Gross margin decreased to 76% in 2015 as compared to 81% in 2014 due primarily to a higher level of lower margin hardware sales, as well as resale of third party software. Operating expenses increased 7% year over year, to $5,677,055 in 2015 from $5,296,226 in 2014, reflecting increased variable marketing expenses and higher general and administrative expenses, which offset a modest decrease in R&D spending. The 2015 net loss decreased slightly to ($1,857,306), or ($0.03) per basic share, versus a net loss of ($1,883,572), or ($0.03) per basic share, in 2014.

2016 Financial Guidance
BIO-key estimates that full year 2016 revenues will grow to a targeted range of $7M - $9.5M, implying a growth rate ranging from 35% to 83% versus 2015. Anticipated revenue drivers for 2016 include:

  • Sales growth in Asian markets benefiting from BIO-key's recently established Hong Kong subsidiary, the China GoldJoy partnership and the development of mobile payment and other technologies utilizing biometrics which BIO-key plans to introduce during 2016.
  • Expected demand for BIO-key's high quality, lower-cost fingerprint readers, SideSwipe, SideTouch and ECO-ID, moving BIO-key further into solution sales. These readers also support enterprise use of Windows 10's native biometric capabilities.
  • Regulatory mandates for two factor authentication to protect electronic patient records as well e-prescriptions. BIO-key has expanded its sales infrastructure to accelerate its pursuit of these opportunities.
  • Progress expanding BIO-key's base of OEM customers that build its technology into their solutions and/or offer BIO-key's technology as an added feature.
  • Growing recognition that biometric solutions are the strongest alternative to prevailing identification methods that rely on weak credentials, such as passwords or PINs, which are easily compromised by hackers and criminals.
  • Expanding use, scope and value of digital commerce, information access, and business processes along with the rapid proliferation of devices requiring access to electronic ecosystems.

BIO-key's sales initiatives involve a variety of complexities, mix of software and hardware components and sales channels, making it difficult to predict the timing or size of expected sales opportunities. Because its quarterly revenue performance will likely be variable, BIO-key is only providing initial full-year revenue guidance and the Company expects its revenues to build as the year progresses. BIO-key targets a blended gross margin ranging from 59% to 75%, depending on the mix of services, software and hardware sales during 2016.

BIO-key Chairman and CEO, Michael DePasquale, commented, "We are proud of our progress and feel BIO-key has emerged from 2015 a far stronger company with a broader array of technology solutions and growth opportunities around the globe. We believe we are well positioned to execute on our ambitious growth strategy and achieve record revenue and profitability in 2016.

Our optimism for the business is rooted in a growing base of sales channels and opportunities. These include OEM's, distribution and reseller partners, healthcare and financial services institutions complying with regulatory mandates, domestic and international governments, online and mobile payment service providers and the potential from our hardware marketing partnership with Microsoft.

Widespread data breaches, identity theft and cyber-attacks confirm the failure of authentication systems that rely on passwords, PINS or tokens and illustrate the value of quality biometric technologies that can positively confirm the identity of a person seeking to access a network or consummate a transaction. With our industry leading software and recently introduced hardware offerings we are well positioned to tap the global market for secure authentication technology."

Liquidity and Capital Resources
At year-end, BIO-key had cash, cash equivalents and net receivables of $7,712,483, compared to $1,468,973 in 2014, principally reflecting the net proceeds of the strategic investment.

Conference Call and Webcast Replay

Date/Time:  Wednesday March 30, 2016 at 10am EDT
Dial-In number: 1-877-418-5460 (U.S.), 412-717-9594 (Intl.) 
Webcast Replay: www.bio-key.com - Available for 30 days
Call Replay:
 1-877-344-7529 (U.S.), 1-412-317-0088 (Intl.)
Access code: 10083138.

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, 2014 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 or the occurrence of unanticipated events.

   
   
BIO-key International, Inc. and Subsidiary  
CONSOLIDATED BALANCE SHEETS  
   
    December 31,  
    2015     2014  
ASSETS                
Cash and cash equivalents   $ 4,321,078     $ 843,632  
Accounts receivable, net     3,353,984       625,341  
Due from factor     37,421       76,657  
Software license rights, current     5,000,000       -  
Inventory     348,645       11,825  
Prepaid expenses and other     134,624       236,429  
Total current assets     13,195,752       1,793,884  
Software license rights, net of current     7,000,000       -  
Equipment and leasehold improvements, net     63,877       103,509  
Deposits and other assets     8,712       8,712  
Intangible assets--less accumulated amortization     147,738       161,344  
Total non-current assets     7,220,327       273,565  
TOTAL ASSETS   $ 20,416,079     $ 2,067,449  
                 
LIABILITIES                
Accounts payable   $ 1,158,555     $ 347,311  
Accrued liabilities     626,918       488,617  
Deferred revenue     376,405       429,233  
Warrant liabilities     104,284       43,227  
Total current liabilities     2,266,162       1,308,388  
TOTAL LIABILITIES     2,266,162       1,308,388  
                 
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 and 0 of $.0001 par value at 12/31/15 and 12/31/14, respectively     9       -  
Series B-1 convertible preferred stock: authorized, 105,000 (liquidation preference of $100 per share); issued and outstanding 105,000 and 0 of $.0001 par value at 12/31/15 and 12/31/14, respectively     11       -  
Common stock -- authorized, 170,000,000 shares; issued and outstanding; 66,098,482 and 66,001,260 of $.0001 par value at 12/31/15 and 12/31/14, respectively     6,610       6,600  
Additional paid-in capital     76,754,737       57,506,605  
Accumulated deficit     (58,611,450 )     (56,754,144 )
TOTAL STOCKHOLDERS' EQUITY     18,149,917       759,061  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 20,416,079     $ 2,067,449  
                 
                 
                 
   
   
BIO-key International, Inc. and Subsidiary  
CONSOLIDATED STATEMENTS OF OPERATIONS  
   
    Three months ended
December 31,
    Years ended
December 31,
 
    2015     2014     2015     2014  
                                 
REVENUES                                
License fees and other   $ 808,631     $ 370,873     $ 3,024,788     $ 2,051,877  
Hardware     685,537       118,074       1,305,043       464,159  
Maintenance Revenue     173,391       155,701       679,104       627,422  
Services Revenue     2,190       307,050       252,290       862,398  
Total Revenue     1,669,749       951,698       5,261,225       4,005,856  
                                 
Cost of License and Other Revenue     513,746       77,022       1,019,085       302,947  
Cost of Service Revenue     106,185       149,299       260,436       445,803  
Total Cost of Goods Sold     619,931       226,321       1,279,521       748,750  
Gross Profit     1,049,818       725,377       3,981,704       3,257,106  
                                 
OPERATING EXPENSES                                
Sales     395,433       394,585       1,520,485       1,589,024  
Marketing     200,455       154,168       720,442       608,684  
General and Administrative     484,582       379,672       1,873,863       1,472,382  
Selling, Gen. & Admin (HK)     6,239       -       6,239       -  
Research, Development and Engineering     386,598       343,600       1,556,025       1,626,137  
      1,473,308       1,272,025       5,677,055       5,296,225  
OPERATING LOSS     (423,490 )     (546,648 )     (1,695,351 )     (2,039,120 )
                                 
OTHER INCOME (EXPENSES)                                
Interest income     9       2       14       7  
Interest Expense     (80,000 )     40,100       (100,000 )     157,253  
Non-cash Interest Expense     (103,285 )     -       (61,057 )     -  
Total Interest Expense     (183,285 )     -       (161,057 )     -  
Income taxes     -       -       (912 )     (1,712 )
                                 
Net loss   $ (606,766 )   $ (506,546 )   $ (1,857,306 )   $ (1,883,572 )
BASIC AND DILUTED LOSS PER COMMON SHARE   $ (0.01 )   $ (0.01 )   $ (0.03 )   $ (0.03 )
                                 
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING: Basic and Diluted     66,087,612       62,187,130       66,032,523       59,047,282  
                                 
                                 
                                 
   
   
BIO-key International, Inc. and Subsidiary  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
   
    Years ended December 31,  
    2015     2014  
             
CASH FLOW FROM OPERATING ACTIVITIES:                
Net loss   $ (1,857,306 )   $ (1,883,572 )
Adjustments to reconcile net loss to cash used for operating activities:                
Allowance for doubtful accounts     (6,741 )     -  
Depreciation     42,996       40,186  
Amortization                
Intangible assets     13,606       13,606  
Amortization of debt discount     92,199       -  
Share and warrant-based compensation for employees and consultants     324,115       207,258  
Stock issued to directors     17,000       -  
Gain on derivative liabilities     (31,142 )     (157,253 )
Change in assets and liabilities:                
Accounts receivable trade     (2,721,902 )     (341,316 )
Due from factor     39,236       (74,208 )
Software license rights     (12,000,000 )     -  
Inventory     (336,820 )     (2,449 )
Prepaid expenses and other     101,805       (162,947 )
Accounts payable     811,244       (193,601 )
Accrued liabilities     4,450       150,296  
Deferred revenue     (52,828 )     (98,927 )
Net cash used for operating activities     (15,560,088 )     (2,502,927 )
CASH FLOWS FROM INVESTING ACTIVITIES:                
Capital expenditures     (3,364 )     (18,633 )
Net cash used for investing activities     (3,364 )     (18,633 )
CASH FLOW FROM FINANCING ACTIVITIES:                
Proceeds from issuances of preferred stock     19,500,000       -  
Proceeds from issuances of common stock     -       1,595,000  
Proceeds from issuance of note payable     250,000          
Repayment of note payable     (250,000 )        
Repurchase of outstanding warrants     -       (150,000 )
Costs to issue preferred and common stock and note payable     (459,102 )     (103,157 )
Net cash provided by financing activities     19,040,898       1,341,843  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     3,477,446       (1,179,717 )
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR     843,632       2,023,349  
CASH AND CASH EQUIVALENTS, END OF YEAR   $ 4,321,078     $ 843,632  
                 
                 
                 

Contact Information

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