BIO-key International, Inc. (Nasdaq: BKYI), an
innovative provider of biometric software and hardware solutions
for strong, convenient user authentication and large-scale
identity, today reported results for its year ended December 31,
2019 and preliminary results for its first quarter ended March 31,
2020 (Q1’20). BIO-key will host a conference call today at 10:00
a.m. ET (details below) to review its results and outlook.
Recent Highlights:
- BIO-key Africa through our partner TTI won a $30M contract to
deploy biometric solutions for the enrollment and the positive
identification of millions of customers for a leading Nigerian
telecom.
- BIO-key Secures $45M Contract in Nigeria along with Exponential
Launch Africa Limited (ELA) an affiliate of Technology Transfer
Institute of Africa (TTI) and Imperial Education Services (IES) to
build secure e-commerce infrastructure across Nigeria in support of
a Nigerian Ministry of Labour program to educate, empower and
create employment for one million recent college graduates.
- South Africa’s Capitec Bank Exceeds Nine Million
BIO-key-Enrolled Customers for in-branch identification
- Manny Alia Joins Board to help drive biometric ID projects
across Africa
- Dubai Police Force Expands Deployment of Biometric
Authentication, utilizing BIO-key’s ID Director for Windows
Software and PIV-Pro Fingerprint Readers
- Three more Florida counties deploy BIO-key for election data
security since December Update
- BIO-key launches ‘Remote Worker’ sales & marketing
initiative to capitalize on the benefits of its biometric
technologies in addressing the security challenges of employees
working from home.
BIO-key CEO Michael DePasquale commented, “BIO-key navigated a
very challenging and disappointing year from a revenue and cash
flow standpoint, but laid the foundation for what we believe is the
transformation of our company to play a leadership role in
biometric multi-factor authentication as well as large scale Civil
ID projects that are emerging on an international basis,
particularly in Africa. We launched our BIO-key Africa subsidiary
in late 2019 and so far this year we have executed agreements
totaling over $75M in expected revenue over the next 24 months, and
are focused on building on this momentum.
We also took prudent steps to ensure our financial strength and
made difficult decisions regarding the write-down of software
licenses based on their increasingly unlikely monetization, the
pivoting away from our lock business and initiated efforts to
enhance our suite of multifactor authentication capabilities, while
altering our geographic focus to pursue much larger scale
opportunities.
At the same time we absorbed the near-term revenue impact of our
transition from a software license sales model to a subscription or
software as a service (SaaS) model, where customers pay a lower fee
to access our software on an annual basis. We believe the
subscription model is more favorable for BIO-key as it creates
enduring customer relationships and predictable, recurring revenue
streams that over the long term are likely to exceed what we would
have earned from a conventional software licenses.
Finally, we continue to invest in enhancing our suite of
solutions to meet the evolving needs of our customers. In
particular, we are working to provide a full suite of multi-factor
authentication capabilities to allow our customers flexibility in
addressing their needs across a wide variety of locations, devices
and requirements. We recognize such flexibility is an increasingly
important capability and differentiator in the marketplace. By
building on our core biometric strengths to put in place a full
suite of multi-factor capabilities, we expect to substantially
enhance BIO-key’s attractiveness in the market.”
OutlookDePasquale continued, “Reflecting
actions taken in 2019, our Q1’20 bottom-line performance improved
substantially compared to the same period in 2019, and we have a
strong outlook for 2020. We expect to commence work on our large
African contracts in the coming months and expect to receive
upfront deposits to precede our efforts. Given their scale and
expected duration, these projects alone position BIO-key for
substantial revenue growth and for the full year 2020, and we are
confident they will allow us to pursue other large-scale
opportunities in Africa and on a global basis. We look to provide
more visibility into the timing and expected impact of our Africa
business as final planning is completed and the projects are
underway.”
Growth InitiativesFred Corsentino, BIO-key’s
Chief Revenue Officer, added, “We are very pleased with the success
of our Channel Alliance Program launched last year to attract a
growing base of Managed Service Providers, Security Integrators and
Value-Added Resellers to expand our global sales and marketing
reach. We achieved early traction in Africa where we added several
channel partners in support of our BIO-key Africa subsidiary formed
earlier this year.
“Biometrics have gained solid support across Africa as an ideal,
cost effective solution to large scale identity and authentication
challenges for governments, public programs, telecommunications,
financial services and other high-value processes vulnerable to
fraud or security breaches. Importantly, such initiatives are
gaining traction and financial support in both the public and
private sectors, including $433 million in World Bank funding for a
biometric national ID registration program in Nigeria.”
Remote Worker ProgramMr. Corsentino added, “In
response to the COVID-19 outbreak, BIO-key moved quickly to launch
our ‘Remote Worker’ sales and marketing campaign to communicate how
our finger scanners and software solutions help solve the unique
and large scale challenges posed by the sudden global transition to
working from home. Many companies relied on physical location
within a firewall to secure access, but are now forced to operate
remotely. BIO-key provides very cost-effective, user-friendly
solutions to the increased security and authentication challenges
created when workers are outside the protection of enterprise
systems and direct oversight. In this context, the use of physical
tokens becomes far more challenging, given delays and increased
costs when replacements are needed.
Governments and enterprises are now scrambling to solve remote
work challenges such as implementing stronger security and access
control for video conferencing solutions used to connect disparate
teams. We are actively highlighting BIO-key and our unique ability
to address these challenges and very excited about the opportunity
this provides going forward.”
2019 Results 2019 revenues declined to $2.3M
from $4.0M in 2018, due principally to lower license fees,
including the impact of the Company’s transition to the software
subscription business model, as well as reduced hardware sales and
lower services revenues. In particular, 2019 revenue was impacted
by the absence of anticipated software license payments totaling
$5.0M. As a result, BIO-key has determined the payments are
unlikely to be collected and it took a $7.0M charge in 2019 to
fully write down resalable software license rights it had secured
as part of a $19M strategic investment completed in 2015.
The decline in hardware sales principally reflects a decrease in
lock sales as BIO-key transitioned to an “enterprise only“ model
for its SmartlLock technology and exited lower margin U.S. and
online retail markets.
2019 operating expenses decreased to $6.4M from $6.7M in 2018,
reflecting lower selling general and administrative expense and
lower research, development and engineering expense.
The Company also recorded interest expense of $1.1M in 2019
related to interest, amortization of debt discount and issuance
costs for a convertible debt financing. In 2018, BIO-key recorded a
$1.4M “deemed dividend” expense resulting from the required
repricing of outstanding warrants, most of which have since
expired.
BIO-key reported a 2019 net loss of $14.6M, or $1.03 per basic
share, compared to a net loss of $8.5M, or $0.73 per basic share,
in 2018. The weighted average basic shares outstanding were 14.2M
and 11.6M in 2019 and 2018, respectively.
Preliminary Q1 2020 ResultsBIO-key is providing
preliminary financial results for its first quarter ended March 31,
2020 in today’s release as its final financial statements for this
period are not yet finalized. Q1’20 revenues declined to $530,000
from $552,000 in Q1’19, primarily due to lower hardware revenue
related to BIO-key’s exit of the retail lock business, and a
decrease in maintenance revenue reflecting the transition to
software subscription sales, partially offset by a more than
$150,000 increase in software license revenue.
Gross margin improved to 67% in Q1’20 versus a negative gross
margin in Q1’19, primarily reflecting the elimination of $281,000
in non-cash software license amortization expense recorded in Q1’19
which did not recur in Q1’20.
Q1’20 operating expenses declined to $1.7 million from $1.8
million, reflecting the benefit of cost reduction efforts.
BIO-key’s preliminary first quarter results include $0.5M in
non-cash compensation expense that will be allocated to each
expense category in the final results filed on form 10-Q.
Reflecting the substantial improvement in gross profit and the
decrease in operating expenses, BIO-key’s operating loss was
reduced to $1.3M in Q1’20 versus $1.8M in Q1’19. Weighted average
basic shares outstanding were approximately 16,635,606 in Q1’20
compared to 13,979,318 in the year ago first quarter.
At March 31, 2020, BIO-key had $1.3M of cash and accounts
receivable versus $0.7M at December 31, 2019.
To provide added financial liquidity to support operations and
the launch of the Africa engagements, in May, BIO-key completed a
$2.4M convertible note financing with warrants, generating gross
proceeds of $2.1M. The note is convertible at the option of the
investor into common stock at an ‘above market’ conversion price of
$1.16 per share and is subject to redemption at any time by
BIO-key.
Conference Call Details |
|
Date / Time |
Friday, May 15 at 10 a.m. ET |
Call Dial In #: |
1-877-418-5460 U.S. or 1-412-717-9594 International |
Live Webcast / Replay: |
Investor Webcast & Replay – Available for
3 months. |
Audio Replay: |
1-877-344-7529 U.S. or 1-412-317-0088 Int’l; code 10143410 |
About BIO-key International, Inc.
(www.bio-key.com)BIO-key
is revolutionizing authentication with biometric solutions that
enable convenient and secure access to devices, information,
applications and high-value transactions. BIO-key’s software and
hardware finger scanning solutions offer secure, user-friendly and
attractively priced alternatives to passwords, PINs, tokens and
security cards, enabling enterprises and consumers to secure their
networks and devices as well as their information in the cloud.
BIO-key Safe Harbor
StatementAll 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 Asia, Africa and other foreign markets;
delays in the development of products and statements of assumption
underlying any of the foregoing; our ability to close the potential
private placement transaction on the terms described herein if at
all 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, 2019 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. Additionally, there may be other factors of which the
Company is not currently aware that may affect matters discussed in
forward-looking statements and may also cause actual results to
differ materially from those discussed. In particular, the
consequences of the coronavirus outbreak to economic conditions and
the industry in general and the financial position and operating
results of our company in particular have been material, are
changing rapidly, and cannot be predicted.
Engage
with BIO-keyFacebook – Corporate:Twitter –
Corporate: Twitter – Investors: StockTwits –
Investors: |
BIO-key
International @BIOkeyIntl @BIO_keyIR @BIO_keyIR |
Investor & Media Contacts William Jones,
David CollinsCatalyst
IR212-924-9800bkyi@catalyst-ir.com
BIO-KEY INTERNATIONAL, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
Three months endedMarch
31,(Preliminary) |
|
|
|
Year endedDecember 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License fees |
|
$ |
239,379 |
|
|
$ |
83,208 |
|
|
|
$ |
442,649 |
|
|
$ |
1,739,897 |
|
Services |
|
|
202,849 |
|
|
|
226,805 |
|
|
|
|
925,245 |
|
|
|
1,012,576 |
|
Hardware |
|
|
87,938 |
|
|
|
83,208 |
|
|
|
|
899,634 |
|
|
|
1,292,069 |
|
Total Revenues |
|
|
530,166 |
|
|
|
551,623 |
|
|
|
|
2,267,528 |
|
|
|
4,044,542 |
|
Costs and other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of license fees, hardware and other |
|
|
128,480 |
|
|
|
513,221 |
|
|
|
|
2,188,927 |
|
|
|
3,720,980 |
|
Cost of services |
|
|
48,379 |
|
|
|
90,829 |
|
|
|
|
272,318 |
|
|
|
443,210 |
|
Total costs and other expenses |
|
|
176,859 |
|
|
|
604,050 |
|
|
|
|
2,461,245 |
|
|
|
4,164,190 |
|
Gross Profit (Loss) |
|
|
353,307 |
|
|
|
(52,427 |
) |
|
|
|
(193,717 |
) |
|
|
(119,648 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
1,346,083 |
|
|
|
1,377,033 |
|
|
|
|
5,036,820 |
|
|
|
5,333,906 |
|
Research, development and engineering |
|
|
325,449 |
|
|
|
374,118 |
|
|
|
|
1,331,667 |
|
|
|
1,415,401 |
|
Total operating expenses |
|
|
1,671,532 |
|
|
|
1,751,151 |
|
|
|
|
6,368,487 |
|
|
|
6,749,307 |
|
Operating loss |
|
|
(1,318,225 |
) |
|
|
(1,803,578 |
) |
|
|
|
(6,562,204 |
) |
|
|
(6,868,955 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
70 |
|
|
|
|
154 |
|
|
|
80 |
|
Interest expense |
|
|
|
|
|
|
|
- |
|
|
|
(1,069,134 |
) |
|
|
- |
|
Impairment of resalable software license rights |
|
|
|
|
|
|
|
- |
|
|
|
(6,957,516 |
) |
|
|
|
|
Total other income (expense),
net |
|
|
|
|
|
|
70 |
|
|
|
|
(8,026,496 |
) |
|
|
64 |
|
Net loss |
|
|
|
|
|
|
(1,803,508 |
) |
|
|
|
(14,588,700 |
) |
|
|
(6,868,875 |
) |
Deemed dividend from trigger
of anti-dilution provision feature |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
(1,428,966 |
) |
Convertible preferred stock
dividends |
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
(198,033 |
) |
Net loss available to common
stockholders |
|
|
|
|
|
$ |
(1,803,508 |
) |
|
|
$ |
(14,588,700 |
) |
|
$ |
(8,495,874 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per Common Share
attributable to common stockholders -
Basic |
|
|
|
|
|
$ |
(0.13 |
) |
|
|
$ |
(1.03 |
) |
|
$ |
(0.73 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding - Basic: |
|
|
|
|
|
|
13,979,318 |
|
|
|
|
14,223,685 |
|
|
|
11,607,933 |
|
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