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Table of Contents

 

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

☒

QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2024

or

 

☐

TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT

 

For the Transition Period from              to

 

Commission file number 1-13463

 

BIO-KEY INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

41-1741861

(State or Other Jurisdiction of Incorporation of Organization)

(IRS Employer Identification Number)

 

101 CRAWFORDS CORNER ROAD, SUITE 4116, HOLMDEL, NJ 07733

 

(Address of Principal Executive Offices) (Zip Code)

 

(732) 359-1100

(Registrant’s telephone number, including area code)

 

Securities registered pursuance to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which

registered

Common Stock, par value $0.0001 per share

BKYI

Nasdaq Capital Market

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒   No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒   No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

 

Accelerated filer ☐
  

Non-accelerated filer ☒

 

Smaller Reporting Company ☒
  
 

 

Emerging growth company  ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined by rule 12b-2 of the Exchange Act)  Yes  ☐  No  ☒

 

Number of shares of Common Stock, $.0001 par value per share, outstanding as of November 13, 2024 is 3,127,049

 

 
Table of Contents

 

 

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

 

INDEX

 

PART I. FINANCIAL INFORMATION

 3
   

Item 1— Financial Statements:

  

Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2024 and 2023 (Unaudited)

4

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023 (Unaudited)

5

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (Unaudited)

7

Notes to Condensed Consolidated Financial Statements

9
   

Item 2—Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

16
   
Item 3—Quantitative and Qualitative Disclosures about Market Risk. 23
   

Item 4—Controls and Procedures.

23
   

PART II. OTHER INFORMATION

 24
   
Item 1—Legal Proceedings. 24
   
Item 1A—Risk Factors. 24
   
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds. 24
   
Item 3—Defaults upon Senior Securities. 24
   
Item 4—Mine Safety Disclosures. 24
   
Item 5—Other Information. 24
   

Item 6—Exhibits.

24
   

Signatures

25

 

 
Table of Contents
 

 

 

PART I -- FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

  

September 30,

  

December 31,

 
  

2024

  

2023

 
  

(Unaudited)

     

ASSETS

        

Cash and cash equivalents

 $1,801,137  $511,400 

Accounts receivable, net

  1,930,258   1,201,526 

Due from factor

  49,018   99,320 

Inventory

  386,944   445,740 

Prepaid expenses and other

  382,866   364,171 

Total current assets

  4,550,223   2,622,157 

Equipment and leasehold improvements, net

  162,551   220,177 

Capitalized contract costs, net

  430,596   229,806 

Deposits and other assets

  7,975   - 

Operating lease right-of-use assets

  73,637   36,905 

Intangible assets, net

  1,174,721   1,407,990 

Total non-current assets

  1,849,480   1,894,878 

TOTAL ASSETS

 $6,399,703  $4,517,035 
         

LIABILITIES

        

Accounts payable

 $1,564,654  $1,316,014 

Accrued liabilities

  1,254,415   1,305,848 

Note payable

  2,164,693   - 

Government loan – BBVA Bank, current portion

  141,854   138,730 

Deferred revenue, current

  719,846   414,968 

Operating lease liabilities, current portion

  24,545   37,829 

Total current liabilities

  5,870,007   3,213,389 

Deferred revenue, long term

  240,664   28,296 

Deferred tax liability

  22,998   22,998 

Government loan – BBVA Bank – net of current portion

  83,901   188,787 

Operating lease liabilities, net of current portion

  49,091   - 

Total non-current liabilities

  396,654   240,081 

TOTAL LIABILITIES

  6,266,661   3,453,470 
         

Commitments and Contingencies

          
         

STOCKHOLDERS’ EQUITY

        
         

Common stock — authorized, 170,000,000 shares; issued and outstanding; 3,109,288 and 1,032,777 of $.0001 par value at September 30, 2024 and December 31, 2023, respectively

  311   103 

Additional paid-in capital

  127,981,436   126,047,851 

Accumulated other comprehensive loss

  74,699   22,821 

Accumulated deficit

  (127,923,404)  (125,007,210)

TOTAL STOCKHOLDERS’ EQUITY

  133,042   1,063,565 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 $6,399,703  $4,517,035 

 

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements.

 

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BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

       

Three Months Ended

    

Nine Months Ended

  
       

September 30,

    

September 30,

  
       

2024

    

2023

    

2024

    

2023

  

Revenues

                                    

Services

       $ 267,371     $ 587,893     $ 764,062     $ 1,740,880  

License fees

         1,441,011       950,015       4,165,669       3,764,342  

Hardware

         436,422       279,200       537,562       424,582  

Total revenues

         2,144,804       1,817,108       5,467,293       5,929,804  

Costs and other expenses

                                    

Cost of services

         110,723       125,039       322,957       639,996  

Cost of license fees

         146,732       253,891       443,384       1,022,919  

Cost of hardware

         207,655       97,674       260,684       240,074  

Cost of hardware - reserve

         -       1,000,000       -       2,500,000  

Total costs and other expenses

         465,110       1,476,604       1,027,025       4,402,989  

Gross profit

         1,679,694       340,504       4,440,268       1,526,815  
                                     

Operating Expenses

                                    

Selling, general and administrative

         1,607,925       1,776,305       5,332,764       5,851,201  

Research, development and engineering

         652,174       529,757       1,850,929       1,778,097  

Total Operating Expenses

         2,260,099       2,306,062       7,183,693       7,629,298  

Operating loss

         (580,405 )     (1,965,558 )     (2,743,425 )     (6,102,483 )

Other income (expense)

                                    

Interest income

         2       5,917       53       5,944  

Loss on foreign currency transactions

         -       -       -       (15,000 )

Loan fee amortization

         (60,000 )     -       (64,000 )     -  

Change in fair value of convertible note

         -       167,283       -       264,706  

Interest expense

         (98,556 )     (45,655 )     (108,823 )     (159,380 )

Total other income (expense), net

         (158,554 )     127,545       (172,770 )     96,270  
                                     

Loss before provision for income tax

         (738,959 )     (1,838,013 )     (2,916,195 )     (6,006,213 )
                                     

Provision for (income tax) tax benefit

         -       189       -       (142,811 )
                                     

Net loss

       $ (738,959 )   $ (1,837,824 )   $ (2,916,195 )   $ (6,149,024 )
                                     

Comprehensive loss:

                                    

Net loss

       $ (738,959 )   $ (1,837,824 )   $ (2,916,195 )   $ (6,149,024 )

Other comprehensive income (loss) – Foreign currency translation adjustment

         89,933       35,364       51,878       127,394  

Comprehensive loss

       $ (649,026 )   $ (1,802460 )   $ (2,864,317 )   $ (6,021,630 )
                                     

Basic and Diluted Loss per Common Share

       $ (0.39 )   $ (3.22 )   $ (1.69 )   $ (10.79 )
                                     

Weighted Average Common Shares Outstanding:

                                    

Basic and diluted

         1,889,694       570,753       1,726,716       569,882  

 

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements. 

 

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BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

                           

Accumulated

                  
                   

Additional

    

Other

                  
   

Common Stock

    

Paid-in

    

Comprehensive

    

Accumulated

          
      Shares       Amount     Capital     Income (Loss)     Deficit       Total  

Balance as of January 1, 2024

     1,032,777     $ 103     $ 126,047,851     $ 22,821     $ (125,007,210 )   $ 1,063,565  

Issuance of common stock for directors’ fees

     4,287       -       9,003       -       -       9,003  

Issuance of common stock to employees

     -       -       -       -       -       -  

Restricted stock forfeited

     (316 )     -       -       -       -       -  

Exercise of warrants

     777,666       78       1,322       -       -       1,400  

Foreign currency translation adjustment

     -       -             (62,275 )     -       (62,275 )

Share-based compensation

     -       -       47,790       -       -       47,790  

Issuance costs

     -       -       (13,470 )     -       -       (13,470 )

Net loss

     -       -       -       -       (510,285 )     (510,285 )

Balance as of March 31, 2024

     1,814,414     $ 181     $ 126,092,496     $ (39,454 )   $ (125,517,495 )   $ 535,728  

Restricted stock forfeited

     (186 )     -       -       -       -       -  

Issuance of common stock for Employee stock purchase plan

     1,390       1       1,938       -       -       1,939  

Share based compensation for employee stock plan

     -       -       456       -       -       456  

Share-based compensation

     48,315       48,315                          

Foreign currency translation adjustment

     -       -       -       24,220       -       24,220  

Net loss

     -       -       -       -       (1,666,950 )     (1,666,950 )

Balance as of June 30, 2024

     1,815,618     $ 182     $ 126,143,205     $ (15,234 )   $ (127,184,445 )   $ (1,056,292 )

Restricted stock forfeited

     (849 )     -       -       -       -       -  

Issuance of restricted common stock to employees and directors

     168,963       17       (17 )     -       -       -  

Foreign currency translation adjustment

     -       -       -       89,933       -       89,933  

Share-based compensation

     -       -       66,053       -       -       66,053  

Exercise of prefunded warrants

     95,000       9       162                   171  

Exercise of warrants

     1,030,556       103       1,906,425                   1,906,528  

Issuance costs

     (134,392 )     (134,392 )                        

Net loss

     -       -       -       -       (738,959 )     (738,959 )

Balance as of September 30, 2024

     3,109,288     $ 311     $ 127,981,436     $ 74,699     $ (127,923,404 )   $ 133,042  

 

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements. 

 

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BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

                           

Accumulated

                  
                   

Additional

    

Other

                  
   

Common Stock

    

Paid-in

    

Comprehensive

    

Accumulated

          
      Shares       Amount     Capital     Income (Loss)     Deficit       Total  

Balance as of January 1, 2023

     552,739     $ 55     $ 122,029,476     $ (242,602 )   $ (116,485,373 )   $ 5,301,556  

Issuance of common stock for directors’ fees

     855       -       12,002       -       -       12,002  

Issuance of common stock to employees

     2,222       -       4       -       -       4  

Restricted stock forfeited

     (1,102 )     -       (3,105 )     -       -       (3,105 )

Foreign currency translation adjustment

     -       -       -       72,146       -       72,146  

Share-based compensation

     -       -       62,474       -       -       62,474  

Net loss

     -       -       -       -       (1,688,322 )     (1,688,322 )

Balance as of March 31, 2023

     554,714     $ 55     $ 122,100,851     $ (170,456 )   $ (118,173,695 )   $ 3,756,755  

Issuance of common stock for directors’ fees

     1,286       -       16,002       -       -       16,002  

Restricted stock forfeited

     (799 )     -       -       -       -       -  

Issuance of common stock for Employee stock purchase plan

     1,557       -       13,934       -       -       13,934  

Share based compensation for employee stock plan

     -       -       3,563       -       -       3,563  

Foreign currency translation adjustment

     -       -       -       19,884       -       19,884  

Share-based compensation

     -       -       57,831       -       -       57,831  

Net loss

     -       -       -       -       (2,622,878 )     (2,622,878 )

Balance as of June 30, 2023

     556,758     $ 55     $ 122,192,181     $ (150,572 )   $ (120,796,573 )   $ 1,245,091  

Issuance of common stock for directors’ fees

     937       -       11,002       -       -       11,002  

Restricted stock forfeited

     (1,852 )     -       (3 )     -       -       (3 )

Issuance of restricted common stock to employees

     14,183       2       (2 )     -       -       -  

Foreign currency translation adjustment

     -       -       -       35,364       -       35,364  

Share-based compensation

     -       -       60,821       -       -       60,821  

Net loss

     -       -       -       -       (1,837,824 )     (1,837,824 )

Balance as of September 30, 2023

     570,026     $ 57     $ 122,263,999     $ (115,208 )   $ (122,634,397 )   $ (485,549 )

 

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements.

 

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BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   

Nine Months Ended September 30,

  
   

2024

    

2023

  
                 

CASH FLOW FROM OPERATING ACTIVITIES:

                

Net loss

   $ (2,916,195 )   $ (6,149,024 )

Adjustments to reconcile net loss to net cash used for operating activities:

                

Depreciation

     69,115       38,213  

Amortization of intangible assets

     233,269       217,978  

Change in fair value of convertible note

     -       (264,706 )

Amortization of capitalized contract costs

     128,953       126,057  

Amortization of Note Payable

     64,000       -  

Reserve for inventory

     (98,875 )     2,500,000  

Operating leases right-of-use assets

     (58,950 )     146,890  

Share and warrant-based compensation for employees and consultants

     162,614       163,584  

Stock based directors’ fees

     9,003       39,006  

Deferred income tax benefit

     -       (20,000 )

Bad debts

     -       550,000  

Change in assets and liabilities:

                

Accounts receivable

     (398,753 )     (434,989 )

Due from factor

     50,302       (13,072 )

Capitalized contract costs

     (329,743 )     (107,336 )

Deposits

     (7,975 )     -  

Inventory

     58,796       145,156  

Prepaid expenses and other

     (18,695 )     (51,831 )

Accounts payable

     248,640       488,417  

Accrued liabilities

     (51,433 )     327,131  

Income taxes payable

     -       62,811  

Deferred revenue

     517,246       128,253  

Operating lease liabilities

     (60,827 )     (154,460 )

Net cash used in operating activities

     (2,399,508 )     (2,261,922 )

CASH FLOWS FROM INVESTING ACTIVITIES:

                

Capital expenditures

     (23,047 )     -  

Net cash used in investing activities

     (23,047 )     -  

CASH FLOW FROM FINANCING ACTIVITIES:

                

Proceeds from Note Payable

     2,000,000       -  

Offering costs

     (147,862 )     (25,434 )

Proceeds for exercise of warrants

     1,908,099       -  

Receipt of cash from Employee stock purchase plan

     1,939       13,934  

Repayment of government loan

     (101,762 )     (113,885 )

Net cash used in financing activities

     3,660,414       (125,385 )
                 

Effect of exchange rate changes

     51,878       58,871  
                 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     1,289,737       (2,328,436 )

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     511,400       2,635,522  

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 1,801,137     $ 307,086  

 

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements. 

 

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BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION

 

   

Nine Months Ended September 30,

  
   

2024

    

2023

  
                 

Cash paid for:

                

Interest

   $ 8,130     $ 159,379  

 

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements. 

 

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BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 (Unaudited)

 

 

 

1.

NATURE OF BUSINESS AND BASIS OF PRESENTATION

 

Nature of Business

 

The Company, founded in 1993, develops and markets proprietary fingerprint identification biometric technology and software solutions enterprise-ready identity access management solutions to commercial, government and education customers throughout the United States and internationally. The Company was a pioneer in developing automated, finger identification technology that supplements or compliments other methods of identification and verification, such as personal inspection identification, passwords, tokens, smart cards, ID cards, PKI, credit cards, passports, driver’s licenses, OTP or other form of possession or knowledge-based credentialing. Additionally, advanced BIO-key® technology has been, and is, used to improve both the accuracy and speed of competing finger-based biometrics.

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key International, Inc. and its wholly-owned subsidiaries (collectively, the “Company” or “BIO-key”) and are stated in conformity with accounting principles generally accepted in the United States of America (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. Intercompany accounts and transactions have been eliminated in consolidation.

 

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented. The balance sheet at September 30, 2024 was derived from the audited financial statements, but does not include all of the disclosures required by GAAP. These unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on June 5, 2024.

 

Foreign Currencies

 

The Company accounts for foreign currency transactions pursuant to ASC 830, Foreign Currency Matters ("ASC 830”). The functional currency of the Company is the U.S. dollar, which is the currency of the primary economic environment in which it operates. In accordance with ASC 830, all assets and liabilities are translated into U. S. dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. All transaction gains and losses from the measurement of monetary balance sheet items denominated in Euros are reflected in the statement of operations as appropriate. Translation adjustments are included in accumulated other comprehensive income (loss).

 

Recently Issued Accounting Pronouncements

 

Effective January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), referred to herein as ASU 2016-13, which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. The adoption of ASU 2016-13 had a material effect on the consolidated financial statements of the Company. 

 

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In August 2020, the Financial Accounting Standards Board issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 was effective for the Company on January 1, 2024 and should be applied on a full or modified retrospective basis. The adoption of ASU 2016-13 did not have a material effect on the consolidated financial statements of the Company. 

 

Management does not believe that any other recently issued, but not yet effective, accounting standard, if currently adopted, would have a material effect on the accompanying consolidated financial statements.

 
 

2.

GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which contemplate continuation of the Company as a going concern, and assumes continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has suffered substantial net losses and negative cash flows from operations in recent years and is dependent on debt and equity financing to fund its operations all of which raise substantial doubt about the Company’s ability to continue as a going concern. Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Company’s ability to increase its revenue and meet its financing requirements on a continuing basis and become profitable in its future operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

 

As of the date of this report, the Company does not have enough cash for twelve months of operations. The history of significant losses, the negative cash flow from operations, the limited cash resources on hand and the dependence by the Company on its ability to obtain additional financing to fund its operations after the current cash resources are exhausted raises substantial doubt about the Company's ability to continue as a going concern. In recent periods, the Company has reduced its marketing, research and development, and rent expenses. In addition, the Company has purchased inventory for projects in Nigeria, which have been delayed in deployment, and is currently exploring other markets and opportunities to sell or return the product to generate additional cash.

 
 

3.

REVENUE FROM CONTRACTS WITH CUSTOMERS

 

Disaggregation of Revenue

 

The following table summarizes revenue from contracts with customers for the three month periods ended September 30, 2024 and September 30, 2023:

 

  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2024

 
                     

Services

 $188,181  $34,753  $44,437  $-  $267,371 

License fees

  738,838   223,703   478,470   -   1,441,011 

Hardware

  52,897   -   361,525   22,000   436,422 

Total Revenues

 $979,916  $258,456  $884,432  $22,000  $2,144,804 

 

  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2023

 
                     

Services

 $294,581  $26,009  $267,303  $-  $587,893 

License fees

  426,059   -   523,956   -   950,015 

Hardware

  48,057   -   231,143   -   279,200 

Total Revenues

 $768,697  $26,009  $1,022,402  $-  $1,817,108 

 

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The following table summarizes revenue from contracts with customers for the nine month periods ended September 30, 2024 and September 30, 2023:

  

  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2024

 
                     

Services

 $618,421  $98,430  $47,211  $-  $764,062 

License fees

  1,797,707   1,490,255   877,707   -   4,165,669 

Hardware

  140,598   -   361,764   35,200   537,562 

Total Revenues

 $2,556,726  $1,588,685  $1,286,682  $35,200  $5,467,293 

  

  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2023

 
                     

Services

 $840,045  $75,806  $812,654  $12,375  $1,740,880 

License fees

  1,614,971   552,630   1,526,091   70,650   3,764,342 

Hardware

  134,390   -   278,292   11,900   424,582 

Total Revenues

 $2,589,406  $628,436  $2,617,037  $94,925  $5,929,804 

  

*EMESA – Europe, Middle East, South America

 

Deferred Revenue 

 

Deferred revenue includes customer advances and amounts that have been paid by customer for which the contractual maintenance terms have not yet occurred. The majority of these amounts are related to maintenance contracts for which the revenue is recognized ratably over the applicable term, which generally is 12-60 months. Contracts greater than 12 months are segregated as long term deferred revenue. Maintenance contracts include provisions for unspecified when-and-if available product updates and customer telephone support services. At September 30, 2024 and December 31, 2023, amounts in deferred revenue were approximately $961,000 and $443,000, respectively. Revenue recognized during the three and nine-months ended September 30, 2024 from amounts included in deferred revenue at the beginning of the period was approximately $51,000 and $482,000, respectively. Revenue recognized during the three and nine-months ended September 30, 2023 from amounts included in deferred revenue at the beginning of the period was approximately $67,000 and $402,000, respectively.

 
 

4.

ACCOUNTS RECEIVABLE

 

Accounts receivable are carried at original amount less an estimate made for credit losses based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for credit losses by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, current economic conditions and other relevant factors, including specific reserves for certain accounts. Accounts receivable are written off when deemed uncollectible.

 

Accounts receivable at September 30, 2024 and December 31, 2023 consisted of the following: 

 

  

September 30,

  

December 31,

 
  

2024

  

2023

 
         

Accounts receivable

 $2,606,064  $2,207,311 

Allowance for credit losses

  (675,806)  (1,005,785)

Accounts receivable, net of allowances for credit losses

 $1,930,258  $1,201,526 

 

Bad debt expenses are recorded in selling, general, and administrative expense.

 

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5.

SHARE BASED COMPENSATION

 

The following table presents share-based compensation expenses included in the Company’s unaudited condensed interim consolidated statements of operations:

 

  

Three Months Ended September 30,

 
  

2024

  

2023

 
         

Selling, general and administrative

 $53,117  $56,414 

Research, development and engineering

  12,936   48,758 
  $66,053  $105,172 

   

  

Nine Months Ended September 30,

 
  

2024

  

2023

 
         

Selling, general and administrative

 $140,142  $171,833 

Research, development and engineering

  31,475   48,758 
  $171,617  $220,591 

  
 

6.

INVENTORY

 

Inventory is stated at the lower of cost, determined on a first in, first out basis, or realizable value. The Company periodically evaluates inventory items and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow moving goods, and for other impairment of value based upon assumptions of future demand and market conditions. Approximately $3,200,000 of the reserve on inventory is due to slow moving inventory purchased for projects in Nigeria, and the balance for other slow-moving inventory. The Company has been selling units in small quantities and continues to explore other markets and opportunities to sell the product. Inventory is comprised of the following as at September 30, 2024 and December 31, 2023:

 

  

September 30,

  

December 31,

 
  

2024

  

2023

 
         

Finished goods

 $4,220,416  $4,373,056 

Fabricated assemblies

  54,153   59,184 

Reserve on finished goods

  (3,887,625)  (3,986,500)

Total inventory

 $386,944  $445,740 

 
 

7.

COMMITMENTS AND CONTINGENCIES

 

Distribution Agreement

 

Swivel Secure has a distribution agreement with Swivel Secure Limited (“SSL”). Terms of the agreement include the following:

 

1.

The initial term of the agreement ends on January 31, 2027 and will be automatically extended for additional one-year terms thereafter unless either party provides written notice to the other party not later than 30 days before the end of the term that it does not wish to extend the term.

 

2.

SSL appoints Swivel Secure as the exclusive distributor of SSL’s products, to market, sell and distribute in the EMEA (Europe, Middle East and Africa), excluding the United Kingdom and Republic of Ireland, for a defined discount on the sale price.

 

3.

Swivel Secure is expected to generate a certain minimum level of orders of SSL products each year during the term of the agreement. If Swivel Secure fails to meet such minimum level of orders in any year, the exclusive distribution rights will terminate and Swivel Secure will serve as a non-exclusive distributer of SSL Products.

 

The Company expects the revenue targets to continue to be met based on historical performance and increasing distribution by Swivel Secure.

 

Litigation

 

From time to time, the Company may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of September 30, 2024, the Company was not a party to any pending lawsuits.

 

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8.

LEASES

 

The Company’s leases office space in New Jersey, Minnesota, New Hampshire, Madrid and Hong-Kong with lease termination dates in 2024. On August 11, 2023, the Company signed a new one-year lease starting September 1, 2023 for office space in New Jersey. The property leased in China is paid monthly as used, without a formal agreement. The following tables present the components of lease expense and supplemental balance sheet information related to the operating leases were:

  

  

3 Months ended

  

3 Months ended

 
  

September 30,

  

September 30,

 
  

2024

  

2023

 
         

Lease cost

        

Total lease cost

 $9,702  $34,145 

  

  

9 Months ended

  

9 Months ended

 
  

September 30,

  

September 30,

 
  

2024

  

2023

 
         

Lease cost

        

Total lease cost

 $38,808  $145,828 

   

  

September 30,

  

December 31,

 

Balance sheet information

 

2024

  

2023

 

Operating right-of-use assets

 $73,636  $36,905 
         

Operating lease liabilities, current portion

 $24,545  $37,829 

Operating lease liabilities, non-current portion

  49,091   0 

Total operating lease liabilities

 $73,636  $37,829 
         

Weighted average remaining lease term (in years) – operating leases

  3.00   0.67 

Weighted average discount rate – operating leases

  5.50%  5.50%
         
         

Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2024 and 2023:

 $51,950  $213,783 

 

Maturities of operating lease liabilities were as follows as of September 30, 2024:

 

2024 (3 months remaining)

 $6,978 

2025

  28,191 

2026

  29,262 

2027

  22,473 

Total future lease payments

 $86,904 

Less: imputed interest

  (13,268)

Total

 $73,636 

 
 

9.

NOTE PAYABLE

 

Note Purchase Agreement dated June 24, 2024

 

On June 24, 2024, the Company entered into and closed a note purchase agreement (the “Purchase Agreement”) which provided for the issuance of a $2,360,000 principal amount senior secured promissory note (the “2024 Note”). The 2024 Note carries an original issue discount of $350,000 and the Company agreed to pay $10,000 to the Lender to cover its transaction costs, which were deducted from the proceeds of the 2024 Note resulting in a total of $2,000,000 being funded to the Company at closing. The proceeds will be used for general working capital.
 
The principal amount of the 2024 Note is due eighteen months (18) following the date of issuance. Interest under the 2024 Note accrues at a rate of nine percent (9%) per annum. All repayments of principal due under the 2024 Note will be subject to an exit fee of seven percent (7%) of the principal amount being repaid (the “Exit Fee”). Commencing six months after the date of issuance of the Note (the “Redemption Start Date”), Lender shall have the right to redeem up to $270,000 of principal amount under the 2024 Note each month which amount plus the Exit Fee will be due and payable three (3) business days after Lender’s delivery of a redemption notice to the Company. At the end of each month following the Redemption Start Date, if the Company has not reduced the outstanding balance under the 2024 Note by at least $270,000, then by the fifth (5th) day of the following month, the Company must either pay to Lender the difference between $270,000 and the amount, if any, redeemed in such month plus the Exit Fee, or the outstanding balance due under the Note will automatically increase by one percent (1%).
 
The 2024 Note is secured by a lien on substantially all of the Company’s assets and properties and the Company’s obligations under the Note are guaranteed by Pistol Star, Inc., a wholly owned subsidiary of the Company. The 2024 Note can be prepaid in whole or in part without penalty at any time. In the event that the Company receives any proceeds in connection with any fundraising or financing transaction (including any warrant exercises), it will be required to make a mandatory prepayment equal to the lesser of (i) forty percent (40%) of the amount raised in such transaction and (ii) the full amount due under the 2024 Note.

 

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The 2024 Note provides for customary events of default, including, among other things, the event of non-payment of principal, interest, fees or other amounts, a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants within a specified period of time, the bankruptcy or insolvency of the Company or of all or a substantial part of its property, and monetary judgment defaults of a specified amount. Upon the occurrence of an Event of Default, Lender may (i) cause interest on the outstanding balance to accrue at an interest rate equal to the lesser of twenty two (22%) or the maximum rate permitted under applicable law, and (ii) accelerate all amounts due under the 2024 Note plus an amount equal to (a) fifteen percent (15%) of the amount due under the 2024 Note for each default that is considered a major trigger event (as defined), and (b) five percent (5%) of the amount due under the 2024 Note for each occurrence of any default that is considered a minor trigger event (as defined), in any case not to exceed twenty five percent (25%).

 

The Company received gross proceeds of approximately $1.9 million in connection with a financing transaction (see Note 12. 3. Warrants). In accordance with the terms of the 2024 Note, on October 1, 2024, 40% of the proceeds received, or approximately $762,600, was used to prepay amounts due under the 2024 Note. 

 

 
 

10.

CONVERTIBLE NOTE PAYABLE

 

Securities Purchase Agreement dated December 22, 2022

 

On December 22, 2022, the Company entered into and closed a securities purchase agreement (the “Purchase Agreement”) and issued a $2,200,000 principal amount senior secured promissory note (the “Note”). At closing, a total of $2,002,000 was funded, with the proceeds to be used for general working capital.

 

The principal amount of the Note was due six months following the date of issuance, subject to one six-month extension by the Company. Interest under the Note accrues at a rate of 10% per annum, payable monthly through month six and at the rate of 12% per annum in months seven through twelve, payable monthly. The Note was secured by a lien on substantially all of the Company’s assets and properties can be prepaid in whole or in part without penalty at any time.

 

In connection with the issuance of the Note, the Company issued to the investor 38,889 shares of Common Stock (the “Commitment Shares”) valued at $18.00 per share and a warrant (the “Warrant”) to purchase 11,112 shares of common stock (the “Warrant Shares”) at an exercise price of $54.00 per share, exercisable commencing on the date of issuance with a term of five years. The warrant was valued at $94,316.

 

On October 31, 2023, the Company repaid $1,400,000 of principal due under the Note, and on December 21, 2023 the Company repaid the remaining principal balance of $800,000 due under the Note.

 

As of  December 31, 2023, the Note was paid in full.

 

 

11.

EARNINGS (LOSS) PER SHARE - COMMON STOCK (“EPS”)

 

The Company’s basic EPS is calculated using net income (loss) available to common shareholders and the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes the effect from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options and warrants and the assumed conversion of preferred stock.

 

 

The following table sets forth options and warrants which were excluded from the diluted per share calculation because the exercise price was greater than the average market price of the common shares:

 

  

Three Months ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2024

  

2023

  

2024

  

2023

 
                 

Stock options

  3,007   9,266   3,007   9,266 

Warrants

  2,739,362   207,234   2,739,362   270,234 

Total

  2,742,369   216,500   2,742,369   279,500 

   
 

12.

STOCKHOLDERS’ EQUITY

 

Issuances of Common Stock

 

During the nine-month periods ended September 30, 2024, and 2023, there have not been any shares of common stock issued to anyone outside the Company, except as noted in this Note 12.

 

On June 18, 2021, the stockholders approved the Employee Stock Purchase Plan. Under the terms of this plan, 43,334 shares of common stock are reserved for issuance to employees and officers of the Company at a purchase price equal to 85% of the lower of the closing price of the common stock on the first day or the last day of the offering period as reported on the Nasdaq Capital Market. Eligible employees are granted an option to purchase shares under the plan funded by payroll deductions. The Board may suspend or terminate the plan at any time, otherwise the plan expires June 17, 2031. On June 28, 2024, 1,390 shares were issued to employees which resulted in a $456 non-cash compensation expense for the Company. On June 30, 2023, 1,557 shares were issued to employees which resulted in a $3,563 non-cash compensation expense for the Company. 

 

Issuances of Restricted Stock

 

Restricted stock consists of shares of common stock that are subject to restrictions on transfer and risk of forfeiture until the fulfillment of specified conditions. The fair value of nonvested shares is determined based on the market price of the Company's common stock on the grant date. Nonvested stock is expensed ratably over the term of the restriction period.

 

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During the nine-month periods ended September 30, 2024 and 2023, the Company issued 168,963 and 16,404 shares of restricted common stock, respectively, to certain employees and directors. These shares vest in equal annual installments over a three-year period from the date of grant and had a fair value on the date of issuance of $244,996 and $31,200, respectively.

 

During the nine-month periods ended September 30, 2024 and 2023, 1,351 and 2,650 shares of restricted common stock were forfeited, respectively.

 

Share based compensation for the nine-month periods ended September 30, 2024 and 2023, was $171,617 and $220,591, respectively.

 

Issuances to Directors

 

During the nine-month periods ended September 30, 2024, and 2023, the Company issued 4,287 and 3,078, shares of common stock to its directors in lieu of payment of board and committee fees valued at $9,003 and $39,006, respectively. 

 

Employees’ exercise options

 

During the nine-month periods ended September 30, 2024 and 2023, no employee stock options were exercised.

 

3. Warrants

 

During the nine-month period ended September 30, 2024, the entered into a warrant inducement agreement with an existing institutional investor for the immediate exercise of certain outstanding warrants that the Company issued on October 30, 2023. Pursuant to the warrant inducement agreement, the investor agreed to exercise outstanding warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock at an amended exercise price of $1.85. The gross proceeds from the exercise of the warrants was approximately $1.9 million, prior to deducting placement agent fees and estimated offering expenses. In consideration for the immediate exercise of the warrants, the Company also agreed to issue to the investor unregistered Series A Warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock and unregistered Series B Warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock, each with an exercise price of $1.85 per share. The Series A Warrants and Series B Warrants share substantially the same terms, are immediately exercisable and will expire five years from the date of issuance. 

 

There were no warrants issued for the nine-month period ended September 31, 2023. 

 

There were 911,672 prefunded warrants exercised during the nine-month period ended September 30, 2024.

 
 

13.

FAIR VALUES OF FINANCIAL INSTRUMENTS

 

Cash and cash equivalents, accounts receivable, due from factor, accounts payable and accrued liabilities are carried at, or approximate, fair value because of their short-term nature. The carrying value of the Company’s government loan payable approximates fair value as the interest rate related to the financial instruments approximated market.

  
 

14.

MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

 

During each of the three month periods ended September 30, 2024, and 2023, three customers accounted for 47% and two customers accounted for 33% of the revenue, respectively. For the nine month periods ended September 30, 2024, and 2023, one customer accounted for 29% and two customers accounted for 23% of revenue, respectively.

 

Four customers accounted for 65% of current accounts receivable at September 30, 2024. At December 31, 2023, one customer accounted for 35% of current accounts receivable.

 
 

15.

INCOME TAXES

 

United States, Hong Kong and Nigeria

The Company recorded no income tax expense for the three and nine months ended September 30, 2024 and 2023 because the estimated annual effective tax rate was zero. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.

 

As of September 30, 2024 and December 31, 2023, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

 

Spain

Due to the current loss for the nine months ended September 30, 2024, the Company did not record income taxes.  The deferred tax liability presented on the condensed consolidated balance sheet relates to intangible assets from the acquisition of Swivel Secure.

 
 

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SUBSEQUENT EVENTS

 

On November 7, 2024, the Company issued 7,761 shares of common stock to its directors in payment of meeting fees. Additionally, the Company issued an aggregate of 10,000 shares of restricted stock to new employees with three-year vesting. All the shares were issued at $1.16 the closing price on November 7, 2024, as reported on the Nasdaq Capital Market. 

 

The Company has reviewed subsequent events through the date of this filing. 

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “should,” “estimate,” “will,” “may,” “future,” “plan,” “intend” and “expect” and similar expressions generally identify forward-looking statements. 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 raise additional capital to satisfy debt repayment obligations and working capital needs; our ability to continue as a going concern; 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; security breaches; competition in the biometric technology and identity access management industries; market acceptance of biometric products generally and our products under development; our ability to convert sales opportunities to customer contracts; our ability to expand into Asia, Africa and other foreign markets; our ability to integrate the operations and personnel of Swivel Secure into our business; fluctuations in foreign currency and exchange rates; the duration and extent of continued hostilities in Ukraine and its impact on our European customers; delays in the development of products, the commercial, reputational and regulatory risks to our business that may arise as a consequence the restatement of our financial statements; if we fail to increase our stockholders' equity to at least $2.5 million, our common stock will be delisted from the Nasdaq Stock Market which could negatively impact the trading price of our common stock and impair our ability to raise capital, our temporary loss of the use of a Registration Statement on Form S-3 to register securities in the future; any disruption to our business that may occur on a longer-term basis should we be unable to remediate during fiscal year 2024 certain material weaknesses in our internal controls over financial reporting, statements of assumption underlying any of the foregoing, and numerous other matters of national, regional and global scale, including those set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and other filings with the SEC. These factors are not intended to represent a complete list of the general or specific factors that may affect us. It should be recognized that other factors, including general economic factors and business strategies, may be significant, presently or in the future. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS 

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to and should be read in conjunction with our unaudited condensed consolidated financial statements and related information contained herein and our audited financial statements as of December 31, 2023.

 

Overview

 

BIO-key International, Inc. (the “Company,” “BIO-key,” “we,” or “us”) is a leading identity and access management, or IAM, platform provider enabling secure work-from-anywhere for enterprise, education, and government customers. Our vision is to enable any organization to secure streamlined and passwordless workforce, employee, customer, student and citizen access to any online service, workstation, or mobile application, without a requirement to use tokens or phones. Our products include PortalGuard® and PortalGuard Identity-as-a-Service (IDaaS) enterprise IAM, WEB-key® biometric civil and large-scale ID infrastructure, and accessory hardware to provide a complete solution for our customers.

 

Millions of people use BIO-key multi-factor-authentication, or MFA, solutions every day to securely access a variety of cloud, mobile and web applications, on-premise and cloud-based servers from all of their devices. We go beyond passwordless to offer phone-less and token-less authentication methods. This critical differentiator is particularly effective for retail, call center, manufacturing, shop-floor, and healthcare environments which utilize roving workers and shared workstations. Unlike most digital identity solutions, BIO-key also plays a role in securing in-person identity. For example, a banking customer has enrolled over 25 million of its customers’ biometrics with BIO-key as part of their know your customer, or KYC process, and then uses BIO-key fingerprint technology each time their customers access bank services to ensure positive identification before transacting with them.

 

BIO-key PortalGuard and hosted PortalGuard IDaaS authentication platforms enable our customers to assure that only the right people can access the right systems by utilizing our world-class biometric capabilities, among 17 other available authentication methods. PortalGuard goes beyond traditional MFA solutions by allowing roving users to biometrically authenticate at any workstation without using their phones or tokens which addresses sizeable security gaps, including eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification. 

 

Our customers use PortalGuard to manage and secure digital systems access by their employees, contractors and partners, which we call workforce identity. PortalGuard is also used to manage and secure the identities of an organization’s customers through integration of APIs we have developed and industry-standard federation standards, which we call customer identity. By using PortalGuard, our customers can securely collaborate with their supply chain and partners, and provide their customers with flexible, resilient user experiences online or in-person.

 

In 2022, we expanded our product offerings and customer base when we acquired Swivel Secure Europe, a Madrid, Spain based provider of IAM solutions. Swivel Secure Europe is a distributer of the AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland. These solutions include PINsafe, a patented one-time-code extraction technology, helping enterprises manage the increasing data security risks posed by cloud services and “bring your own device” policies.

 

Large-scale customer and civil ID customers use our scalable biometric management platform and FBI-certified scanner hardware to manage enrollment, de-duplication and authentication for millions of users. 

 

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We sell our branded USB fingerprint and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution. Our fingerprint biometric platform is certified by NIST and unique among fingerprint platforms in that it supports mixing and matching of different manufactures’ fingerprint scanners in a deployment. This provides our customers with the flexibility to select the right scanner for their specific use case, without mandating the use of a particular scanner.

    

We operate a SaaS business model with customers subscribing to term use of our software for annual recurring revenue. We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners including resellers, system integrators, master agents and other distribution partners. Our subscription fees include a term license of hosted or on-premise product and technical support and maintenance of our platform. We base subscription fees primarily on the products used and the number of users enrolled in our platform. We generate subscription fees pursuant to noncancelable contracts with a weighted average duration of approximately one year.

 

Strategic Outlook

 

We plan to have a more significant role in the IAM market which continues to expand.  With the adoption of MFA as a cybersecurity requirement, nearly all enterprises are beginning to adopt MFA for their user bases. We plan to continue to offer customers a suite of authentication options that complement our biometric solutions. Our ability to add value to or replace the first-generation MFA solutions deployed by these enterprises with our phone-less and token-less biometrics sets us apart from a crowded field of phone- and token-based MFA solutions. We believe that as enterprises experience the lifecycle costs associated with managing tokens and passwords, they will have an economic incentivize to consider adding BIO-key PortalGuard to their IAM solution. PortalGuard will allow them to continue to use their existing FIDO devices, while selectively augmenting their authentication options with tokenless and phoneless biometric choices.

 

We expect to grow our business within government services and highly-regulated industries in which we have historically had a strong presence including financial services, higher education, and healthcare.  We believe that continued heightened security and privacy requirements in these industries, and as colleges and universities continue operating in remote environments, we will generate increased demand for security solutions, including biometrics. In addition, we expect that the compatible, yet superior portable biometric user experience offered by our technology for Windows 10 users will accelerate the demand for our computer network log-on solutions and fingerprint readers.  Through value add-offerings via direct sales, resellers, and strategic partnerships with leading higher education platform providers, we will continue to grow our installed base. Through Swivel Secure Europe, we also expect to grow our business in EMEA.

 

Our primary sales strategies are focused on (i) increased marketing efforts into the IAM market, (ii) dedicated pursuit of large-scale identification projects across the globe, and (iii) growing our channel alliance program which we have grown to more than one hundred and fifty participants and continues to generate incremental revenues.

 

A second component of our growth strategy is to pursue strategic acquisitions of select businesses and assets in the IAM space.  In furtherance of this strategy, we are active in the industry and regularly evaluate businesses that we believe will either provide an entry into new market verticals or be synergistic with our existing operations and in either case, be accretive to earnings.  We cannot provide any assurance as to whether we will be able to complete any acquisition and if completed, successfully integrate any business we acquire into our operations.

 

Recent Developments

 

The current trend of continued remote work environments increases the risk of unauthorized users, phishing attacks, and hackers who are eager to take advantage of the challenges of securing remote workers. A growing trend of security incidents that highlight potential cybersecurity vulnerabilities, additional regulatory requirements, and increasingly stringent Cyber Insurance underwriting standards that mandate enhanced security solutions has resulted in many businesses requiring MFA for their employees, partners and customers to access their business systems and data.  We believe that biometrics should continue to play a key role in remote user authentication.

 

Critical Accounting Policies and Estimates

 

For detailed information regarding our critical accounting policies and estimates, see our financial statements and notes thereto included in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2023.  There have been no material changes to our critical accounting policies and estimates from those disclosed in our most recent Annual Report on Form 10-K.

 

Recent Accounting Pronouncements

 

For detailed information regarding recent account pronouncements, see Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

 

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RESULTS OF OPERATIONS

 

THREE MONTHS ENDED September 30, 2024 AS COMPARED TO September 30, 2023

 

Consolidated Results of Operations - Percent Trend

 

   

Three Months Ended September 30,

  
   

2024

    

2023

  

Revenues

                

Services

     13 %     33 %

License fees

     67 %     52 %

Hardware

     20 %     15 %

Total Revenues

     100 %     100 %

Costs and other expenses

                

Cost of services

     5 %     7 %

Cost of license fees

     7 %     14 %

Cost of hardware

     10 %     5 %

           Cost of hardware - reserve

     0 %     55 %

Total Cost of Goods Sold

     22 %     81 %

Gross profit

     78 %     19 %
                 

Operating expenses

                

Selling, general and administrative

     75 %     98 %

Research, development and engineering

     30 %     29 %

Total Operating Expenses

     105 %     127 %

Operating loss

     -27 %     -108 %
                 

Other expense

     -7 %     7 %

Loss before provision for income tax

     -34 %     -101 %

Provision for income tax

     0 %     0 %

Net loss

     -34 %     -101 %

 

Revenues and cost of goods sold

 

   

Three Months Ended

                  
   

September 30,

                  
   

2024

    

2023

    

$ Change

    

% Change

  
                                 

Revenues

                                

Service

   $ 267,371     $ 587,893     $ (320,522 )     -55 %

License

     1,441,011       950,015       490,996       52 %

Hardware

     436,422       279,200       157,222       56 %

Total Revenue

   $ 2,144,804     $ 1,817,108     $ 327,696       18 %

 

   

Three Months Ended

                  
   

September 30,

                  
   

2024

    

2023

    

$ Change

    

% Change

  

Cost of Goods Sold

                                

Service

   $ 110,723     $ 125,039     $ (14,316 )     -11 %

License

     146,732       253,891       (107,159 )     -42 %

Hardware

     207,655       97,674       109,981       113 %

           Hardware - reserve

     -       1,000,000       (1,000,000 )     -100 %

Total COGS

   $ 465,110     $ 1,476,604     $ (1,011,494 )     -69 %

 

18
Table of Contents

 

Revenues

 

For the three months ended September 30, 2024, and 2023, service revenues included approximately $214,000 and $279,000, respectively, of recurring maintenance and support revenue, and approximately $53,000 and $291,000 respectively, of non-recurring custom services revenue.  Recurring service revenue decreased $65,000 or 24% in 2024 which was due to the loss of one large customer service agreement. Non-recurring custom services decreased 97% due to loss of one large customer for Swivel Secure customizations and upgrades. We expect the service revenue to remain at the current lower rate in future periods.

 

For the three months ended September 30, 2024, license revenue increased $490,996 or 52% to $1,441,011 from $950,015 in the corresponding period in 2023 , as several long-term customers expanded their license deployments. 

 

For the three months ended  September 30, 2024, hardware sales increased 56% to $436,422 from $279,200 in the corresponding period in  2023. The increase was due largely to several long-term customers expanding their biometric cybersecurity solutions.

 

Costs of goods sold

 

For the three months ended September 30, 2024, cost of service decreased approximately $14,000 or 11% to $110,723 from $125,039 in the three months ended September 30, 2023, due to reduced costs to support the PortalGuard and Swivel Secure deployments. For the three months ended September 30, 2024, license fees decreased to $146,732 from $253,891 in the three months ended September 30, 2023, due largely to a decrease in license fees for third-party software included in our Swivel Secure offerings. For the three months ended September 30, 2024, hardware costs increased to $207,655 from $97,674 in the three months ended September 30, 2023, related to increase of hardware revenue.

 

Selling, general and administrative

 

   

Three Months Ended

                  
   

September 30,

                  
   

2024

    

2023

    

$ Change

    

% Change

  
                                 

Selling, general and administrative

   $ 1,607,925     $ 1,776,305     $ (168,380 )     -9 %

 

Selling, general and administrative expenses for the three months ended September 30, 2024, decreased 9% from $1,776,305 in the corresponding period in 2023 to $1,607,925 in the current quarter.  The decreases included reductions in administration, sales personnel costs and marketing show expenses, offset by an increase in professional services incurred in connection with financing transactions.

 

Research, development and engineering

 

   

Three Months Ended

                  
   

September 30,

                  
   

2024

    

2023

    

$ Change

    

% Change

  
                                 

Research, development, and engineering

   $ 652,174     $ 529,757     $ 122,417       23 %

 

For the three months ended September 30, 2024, research, development, and engineering costs increased 23% to $652,174 compared to $529,757 in the corresponding period in 2023. The increase consisted primarily in an increase in personnel costs.

 

Other income (expense)

 

   

Three Months Ended

                  
   

September 30,

                  
   

2024

    

2023

    

$ Change

    

% Change

  
                                 

Interest income

   $ 2     $ 5,917     $ (5,915 )     -100 %

Loan fee amortization

     (60,000 )     -       (60,000 )     -100 %

Change in fair value of convertible note

     -       167,283       (167,283 )     100 %

Interest expense

     (98,556 )     (45,655 )     (52,901 )     -116 %

Other income (expense)

   $ (158,554 )   $ 127,545     $ (286,099 )     224 %

 

19
Table of Contents

 

Other income (expense) for the three months ended September 30, 2024 consisted of interest income of $2 and interest expense of $98,556 comprised of approximately $4,200 on the government loan through the BBVA bank and the balance on the 2024 Note, and a loan fee amortization amount of $60,000. Other income (expense) for the three months ended September 30, 2023 consisted of interest income of $5,917, interest expense of $45,655 on the secured note payable and the government loan through the BBVA bank net of interest, and change in fair value of $167,283 on the convertible note payable. 

  

Nine MONTHS ENDED September 30, 2024 AS COMPARED TO September 30, 2023

 

Consolidated Results of Operations - Percent Trend

 

   

Nine Months Ended September 30,

  
   

2024

    

2023

  

Revenues

                

Services

     14 %     29 %

License fees

     76 %     64 %

Hardware

     10 %     7 %

Total Revenues

     100 %     100 %

Costs and other expenses

                

Cost of services

     6 %     11 %

Cost of license fees

     8 %     17 %

Cost of hardware

     5 %     4 %

           Cost of hardware - reserve

     0 %     42 %

Total Cost of Goods Sold

     19 %     74 %

Gross profit

     81 %     26 %
                 

Operating expenses

                

Selling, general and administrative

     98 %     99 %

Research, development and engineering

     34 %     30 %

Total Operating Expenses

     131 %     129 %

Operating loss

     -50 %     -103 %
                 

Other expense

     -4 %     2 %

Loss before provision for income tax

     -53 %     -101 %

Provision for income tax

     0 %     -2 %

Net loss

     -53 %     -104 %

 

Revenues and cost of goods sold

  

   

Nine Months Ended

                  
   

September 30,

                  
   

2024

    

2023

    

$ Change

    

% Change

  

Revenues

                                

Service

   $ 764,062     $ 1,740,880     $ (976,818 )     -56 %

License

     4,165,669       3,764,342       401,327       11 %

Hardware

     537,562       424,582       112,980       27 %

Total Revenue

   $ 5,467,293     $ 5,929,804     $ (462,511 )     -8 %
                                 

Cost of Goods Sold

                                

Service

     322,957       639,996       (317,039 )     -50 %

License

     443,384       1,022,919       (579,535 )     -57 %

Hardware

     260,684       240,074       20,610       9 %

Hardware - reserve

     -       2,500,000       (2,500,000 )     -100 %

Total COGS

   $ 1,027,025     $ 4,402,989     $ (3,375,964 )     -77 %

 

20
Table of Contents

 

Revenues

 

For the nine months ended September 30, 2024, and 2023, service revenues included approximately $682,000 and $899,000, respectively, of recurring maintenance and support revenue, and approximately $82,000 and $842,000 respectively, of non-recurring custom services revenue.  Recurring service revenue decreased $217,000 or 24% in 2024 which was due to the loss of one large customer service agreement. Non-recurring custom services decreased 90% due to loss of one large customer for Swivel Secure customizations and upgrades. We expect the service revenue to remain at the current lower rate in future periods.

 

For the nine months ended September 30, 2024, license revenue increased $401,327 or 11% to $4,165,6699 from $3,764,342 in the corresponding period in 2023. Several long-term customers expanded their license deployments which contributed to the increase. 

 

For the nine months ended  September 30, 2024, hardware sales increased 27% to $537,562 from $424,582 in the corresponding period in  2023. The increase was due largely to add-on orders from existing customers in  2024, compared to increased new hardware deployments in  2023.

 

Costs of goods sold

 

For the nine months ended September 30, 2024, cost of service decreased approximately $317,000 or 50% to $322,957 from $639,996 in the nine months ended September 30, 2023, due to reduced costs to support the PortalGuard and Swivel Secure deployments. For the nine months ended September 30, 2024, license fees decreased to $443,384 from $1,022,919 in the nine months ended September 30, 2023, due largely to a decrease in license fees for third-party software included in our Swivel Secure offerings. For the nine months ended September 30, 2024, hardware costs increased to $260,684 from $240,074 in the nine months ended September 30, 2023, related to costs associated with increased hardware revenue.

 

Selling, general and administrative

 

   

Nine Months Ended

                  
   

September 30,

                  
   

2024

    

2023

    

$ Change

    

% Change

  
                                 

Selling, general and administrative

   $ 5,332,764     $ 5,851,201     $ (518,437 )     -9 %

 

Selling, general and administrative expenses for the nine months ended September 30, 2024, decreased 9% from $5,851,201in the corresponding period in 2023 to $5,332,764.  The decreases included reductions in administration, sales personnel costs and marketing show expenses, offset by an increase in professional fees incurred in connection with financing transactions.

 

Research, development and engineering

 

   

Nine Months Ended

                  
   

September 30,

                  
   

2024

    

2023

    

$ Change

    

% Change

  
                                 

Research, development and engineering

   $ 1,850,929     $ 1,778,097     $ 72,832       4 %

 

For the nine months ended September 30, 2024, research, development, and engineering costs increased 4% to $1,850,929 compared to $1,778,097 in the corresponding period in 2023. The increase consisted primarily of changes in personnel costs and reductions in outside services. 

 

Other income (expense)

 

   

Nine Months Ended

                  
   

September 30,

                  
   

2024

    

2023

    

$ Change

    

% Change

  
                                 

Interest income

   $ 53     $ 5,944     $ (5,891 )     -99 %

Loss on foreign currency transactions

     -       (15,000 )     15,000       100 %

Loan fee amortization

     (64,000 )     -       (64,000 )     -100 %

Change in fair value of convertible note

     -       264,706       (264,706 )     -100 %

Interest expense

     (108,823 )     (159,380 )     50,557       32 %

Other income (expense)

   $ (172,770 )   $ 96,270     $ (269,040 )     279 %

  

Other income (expense) for the nine months ended September 30, 2024 consisted of interest income of $53 and interest expense of $108,823 comprised of approximately $8,100 on the government loan through the BBVA bank and the balance accrued on the 2024 Note, and a loan fee amortization amount of $64,000. Other income (expense) for the nine months ended September 30, 2023 consisted of interest income of $5,944, a loss on foreign currency of $15,000, a change in fair value of $264,706 on the convertible note payable, and interest expense of $159,379 on the secured note payable and the government loan through the BBVA bank. 

   

21
Table of Contents

  

LIQUIDITY AND CAPITAL RESOURCES

 

Cash Flows

 

Operating activities overview

 

Net cash used in operations during the nine months ended September 30, 2024 was $2,399,508. Items of note included:

 

●

Net positive cash flows related to adjustments for non-cash expenses of approximately $667,000. 

 

●

Net positive cash flows related to inventory, amount due from factor, accounts payable, and deferred revenue of approximately $875,000. 

 

●

Negative cash flows related to changes in accounts receivable, prepaid expenses, and accrued liabilities of approximately $469,000, due to working capital management.

 

Financing activities overview

 

Net cash provided by financing activities during the nine months ended September 30, 2024 was $3,660,414 which included $2,000,000 of proceeds from the 2024 Note, $1,906,528 from the exercise of warrants,  $1,571 from the exercise of prefunded warrants, and $1,939 from the purchase of shares in the Employee Stock Purchase Plan, which amounts were offset by $101,762 in repayment of the government loan through the BBVA bank and $147,862 for offering costs. 

 

Investing activities overview

 

Net cash used in investing activities during the nine months ended September 30, 2024 was $23,047 for capital expenditures.

 

Liquidity and Capital Resources

 

Since our inception, our capital needs have been met through proceeds from the sale of equity and debt securities, and revenue. We expect capital expenditures to be less than $100,000 during the next twelve months.  

 

The following sets forth our investment sources of capital during the previous two years:

 

On September 12, 2024, we entered into a warrant exercise agreement with an existing investor (the “Investor”) to exercise certain outstanding warrants to purchase an aggregate of 1,030,556 shares of the Company’s common stock.  The warrants were originally issued to the Investor on October 31, 2023 and had an original exercise price of $3.15 per share. In consideration for the immediate exercise of the warrants, we reduced the exercise price of the warrants to $1.85 per share and issued to the Investor unregistered Series A Warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock and unregistered Series B Warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock, each with an exercise price of $1.85 per share. The Series A and Series B warrants share substantially the same terms, are immediately exercisable and will expire five years from the date of issuance. The forgoing transaction resulted in gross proceeds of approximately $1.9 million prior to deducting placement agent fees and estimated offering expenses.

 

On June 24, 2024, we entered into and closed a note purchase agreement which provided for the issuance of a $2,360,000 principal amount senior secured promissory note (the "2024 Note"). This resulted in gross proceeds of approximately $1,826,000 after deducting placement agent fees, estimated offering expenses, and the original issue discount. The 2024 Note is due eighteen months (18) following the date of issuance, accrues interest at a rate of nine percent (9%) per annum, and commencing six months after the date of issuance of, the lender shall have the right to redeem up to $270,000 of principal amount each month.  For a more complete description of the 2024 Note, please see Note 9 to Our Condensed Consolidated Financial Statements included in Part I Item 1 of this report. In connection with the warrant exercise agreement described above, we prepaid approximately $762,600 of the amount due under the 2024 Note.

 

On November 20, 2023, we completed a private placement of shares of common stock and warrants resulting in net proceeds of approximately $435,000, after deducting placement agent fees and estimated offering expenses. 

 

On October 30, 2023, we completed a public offering of units consisting of shares of common stock, pre-funded warrants to purchase shares of common stock, and warrants to purchase share of common stock.  Each Unit was sold at a public offering price of $0.175. resulting in net proceeds of $3.3 million, after deducting the placement agent fees and offering expenses.

 

In December 2022, we entered into and closed a securities purchase agreement with AJB Capital Investments, LLC under which we issued a $2,2 million principal amount senior secured promissory note (the “Note”). The principal amount of the Note was due six months following the date of issuance, subject to one six-month extension. Interest under the Note accrued at a rate of 10% per annum, payable monthly through month six and at 12% per annum in months seven through twelve, payable monthly. The Note was secured by a lien on substantially all of our assets and properties.  The Note was repaid in December 2023.

 

We entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to October 31, 2025 and may be discontinued at that time. Pursuant to the terms of the arrangement, from time to time, we sell to the Factor a minimum of $150,000 per quarter of certain of our accounts receivable balances on a non-recourse basis for credit approved accounts. The Factor remits 35% of the foreign and 75% of the domestic accounts receivable balance to us (the “Advance Amount”), with the remaining balance, less fees, forwarded to us once the Factor collects the full accounts receivable balance from the customer. In addition, from time to time, we receive over advances from the Factor. Factoring fees range from 2.75% to 15% of the face value of the invoice factored and are determined by the number of days required for collection of the invoice. We expect to continue to use this factoring arrangement periodically to assist with our general working capital requirements due to contractual requirements.

 

22
Table of Contents

 

Liquidity outlook

 

At September 30, 2024, our total cash and cash equivalents were $1,801,137, as compared to $511,400 at December 31, 2023.  At September 30, 2024, we had negative working capital of approximately $1,320,000.

 

As discussed above, we have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $732,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. We also have approximately $3.5 million of inventory (currently reserved) purchased for projects in Nigeria. We continue to explore other markets and opportunities to sell the product to generate additional cash. If we are unable to generate sufficient revenue to fund current operations and execute our business plan, we will need to obtain additional third-party financing. Unless we generate sufficient positive cash flow from operations or liquidation of existing inventory, we expect that we will need to obtain additional financing during the next twelve months to support operations.

 

In addition, as reported in our Current Report on Form 8-K filed June 14, 2024, we are no longer in compliance with Nasdaq Capital Market continued listing rules which require us to maintain stockholders' equity of at least $2,500,000. Our plan to regain compliance will require us to raise additional equity capital in the near term, or engage in a strategic transaction. There can be no assurance that we will be able to raise such capital or regain compliance with the continued listing requirements.

 

Our long-term viability and growth will depend upon the successful commercialization of our technologies and our ability to obtain adequate financing. To the extent that we require such additional financing, no assurance can be given that any form of additional financing will be available on terms acceptable to us, that adequate financing will be obtained to meet our needs, or that such financing would not be dilutive to existing stockholders. If available financing is insufficient or unavailable or we fail to continue to generate sufficient revenue, we may be required to further reduce operating expenses, delay the expansion of operations, be unable to pursue merger or acquisition candidates, or in the extreme case, not continue as a going concern.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of September 30, 2024, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were not effective. 

 

As previously reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, in connection with the audit of our financial statements as of and for the year ended December 31, 2023, our management identified a lack of control over properly assessing revenue, allowances for accounts receivable and certain reserves for inventory. This resulted in certain errors in the manner in which we recognized revenue generated by our European subsidiary, Swivel Secure Europe, SA, in the first quarter of 2023. In addition, certain allowances for accounts receivable and certain reserves for inventory were understated. We are currently working to implement appropriate corrective actions to remediate the material weakness to strengthen our internal controls over the recording of revenues. This has included thoroughly accessing all accounts for potential adjustments required for proper presentation of the value of the accounts, changing management of our Swivel Secure operation, and implementing additional revenue recognition controls.

        

Changes in Internal Control Over Financial Reporting

 

Other than as described above, there have been no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

23
Table of Contents

 

PART II.  OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this report, we are not a party to any pending lawsuits.

 

ITEM 1A.  RISK FACTORS

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.  MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

During the nine months ended September 30, 2024, none of our directors or “officers” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Securities and Exchange Commission Regulation S-K.     
 

ITEM 6. EXHIBITS

 

Exhibit

No.

  

Description
     
4.1   Form of Series A Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed September 16, 2024)
     
4.2   Form of Series B Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed September 16, 2024)
     
10.1   Form of Warrant Exercise Agreement, dated September 12, 2024, by and between the Company and the Investor (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed September 16, 2024)
     

31.1

  

Certificate of CEO of Registrant required under Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended
     

31.2

  

Certificate of CFO of Registrant required under Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended
     

32.1

  

Certificate of CEO of Registrant required under 18 U.S.C. Section 1350
     

32.2

  

Certificate of CFO of Registrant required under 18 U.S.C. Section 1350
     

101.INS

  

Inline XBRL Instance
     

101.SCH

  

Inline XBRL Taxonomy Extension Schema
     

101.CAL

  

Inline XBRL Taxonomy Extension Calculation
     

101.DEF

  

Inline XBRL Taxonomy Extension Definition
     

101.LAB

  

Inline XBRL Taxonomy Extension Labels
     

101.PRE

  

Inline XBRL Taxonomy Extension Presentation
     

104

  

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

24
Table of Contents

 

SIGNATURES

 

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

   

BIO-Key International, Inc.
     

Dated: November 14, 2024

  

/s/ Michael W. DePasquale
   

Michael W. DePasquale
   

Chief Executive Officer
   

(Principal Executive Officer)
     

Dated: November 14, 2024

  

/s/ Cecilia C. Welch
   

Cecilia C. Welch
   

Chief Financial Officer
   

(Principal Financial Officer)

 

 

25

Exhibit 31.1

 

CERTIFICATION

 

I, Michael W. DePasquale, certify that: 

 

1.

I have reviewed this quarterly report on Form 10-Q of BIO-key International, Inc. (the “Company”);

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

 

4.

The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 
   

 
 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   

 
 

(c)

Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 
   

 
 

(d)

Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; 

 

5.

The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): 

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and 
   

 
 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

Dated: November 14, 2024

  
   
   
 

/s/ Michael W. DePasquale

  
 

Michael W. DePasquale
 

Chief Executive Officer

 

 

 

Exhibit 31.2

 

CERTIFICATION

 

I, Cecilia C. Welch, certify that: 

 

1.

I have reviewed this quarterly report on Form 10-Q of BIO-key International, Inc. (the “Company”);

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

 

4.

The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   

 
 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   

 
 

(c)

Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   

 
 

(d)

Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; 

 

5.

The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): 

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and 
   

 
 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

Dated: November 14, 2024

  
   
   
 

/s/ Cecilia C. Welch

  
 

Cecilia C. Welch
 

Chief Financial Officer

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of BIO-key International, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael W. DePasquale, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

 

 

 

BIO-KEY INTERNATIONAL, INC.
   
   
 

By:

/s/ Michael W. DePasquale

  
   

Michael W. DePasquale
   

Chief Executive Officer
   
   
 

Dated: November 14, 2024

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of BIO-key International, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Cecilia Welch, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

 

 

 

BIO-KEY INTERNATIONAL, INC.
   
   
 

By:

/s/ Cecilia C. Welch

  
   

Cecilia C. Welch
   

Chief Financial Officer
   
   
 

Dated: November 14, 2024

 

 
v3.24.3
Document And Entity Information - shares
 9 Months Ended
Sep. 30, 2024
Nov. 13, 2024
Document Information [Line Items]    
Entity Central Index Key 0001019034  
Entity Registrant Name BIO KEY INTERNATIONAL INC  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2024  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2024  
Document Transition Report false  
Entity File Number 1-13463  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 41-1741861  
Entity Address, Address Line One 101 CRAWFORDS CORNER ROAD, SUITE 4116  
Entity Address, City or Town HOLMDEL  
Entity Address, State or Province NJ  
Entity Address, Postal Zip Code 07733  
City Area Code 732  
Local Phone Number 359-1100  
Title of 12(b) Security Common Stock, par value $0.0001 per share  
Trading Symbol BKYI  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   3,127,049
v3.24.3
Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
ASSETS    
Cash and cash equivalents $ 1,801,137 $ 511,400
Accounts receivable, net 1,930,258 1,201,526
Due from factor 49,018 99,320
Inventory 386,944 445,740
Prepaid expenses and other 382,866 364,171
Total current assets 4,550,223 2,622,157
Equipment and leasehold improvements, net 162,551 220,177
Capitalized contract costs, net 430,596 229,806
Deposits and other assets 7,975 0
Operating lease right-of-use assets 73,637 36,905
Intangible assets, net 1,174,721 1,407,990
Total non-current assets 1,849,480 1,894,878
TOTAL ASSETS 6,399,703 4,517,035
LIABILITIES    
Accounts payable 1,564,654 1,316,014
Accrued liabilities 1,254,415 1,305,848
Deferred revenue, current 719,846 414,968
Operating lease liabilities, current portion 24,545 37,829
Total current liabilities 5,870,007 3,213,389
Deferred revenue, long term 240,664 28,296
Deferred tax liability 22,998 22,998
Government loan – BBVA Bank – net of current portion 83,901 188,787
Operating lease liabilities, net of current portion 49,091 0
Total non-current liabilities 396,654 240,081
TOTAL LIABILITIES 6,266,661 3,453,470
Commitments and Contingencies
STOCKHOLDERS’ EQUITY    
Common stock — authorized, 170,000,000 shares; issued and outstanding; 3,109,288 and 1,032,777 of $.0001 par value at September 30, 2024 and December 31, 2023, respectively 311 103
Additional paid-in capital 127,981,436 126,047,851
Accumulated other comprehensive loss 74,699 22,821
Accumulated deficit (127,923,404) (125,007,210)
TOTAL STOCKHOLDERS’ EQUITY 133,042 1,063,565
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 6,399,703 4,517,035
Senior Secured Promissory Note [Member]    
LIABILITIES    
Debt, current 2,164,693 0
Government Loan [Member]    
LIABILITIES    
Debt, current $ 141,854 $ 138,730
v3.24.3
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares
Sep. 30, 2024
Dec. 31, 2023
Common stock, shares authorized (in shares) 170,000,000 170,000,000
Common stock, shares issued (in shares) 3,109,288 1,032,777
Common stock, shares outstanding (in shares) 3,109,288 1,032,777
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
v3.24.3
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenues        
Revenues $ 2,144,804 $ 1,817,108 $ 5,467,293 $ 5,929,804
Costs and other expenses        
Cost of Goods and Services Sold 465,110 1,476,604 1,027,025 4,402,989
Gross profit 1,679,694 340,504 4,440,268 1,526,815
Operating Expenses        
Selling, general and administrative 1,607,925 1,776,305 5,332,764 5,851,201
Research, development and engineering 652,174 529,757 1,850,929 1,778,097
Total Operating Expenses 2,260,099 2,306,062 7,183,693 7,629,298
Operating loss (580,405) (1,965,558) (2,743,425) (6,102,483)
Other income (expense)        
Interest income 2 5,917 53 5,944
Loss on foreign currency transactions 0 0 0 (15,000)
Loan fee amortization (60,000) 0 (64,000) 0
Change in fair value of convertible note 0 167,283 0 264,706
Interest expense (98,556) (45,655) (108,823) (159,380)
Total other income (expense), net (158,554) 127,545 (172,770) 96,270
Loss before provision for income tax (738,959) (1,838,013) (2,916,195) (6,006,213)
Provision for (income tax) tax benefit 0 189 0 (142,811)
Net loss (738,959) (1,837,824) (2,916,195) (6,149,024)
Comprehensive loss:        
Net loss (738,959) (1,837,824) (2,916,195) (6,149,024)
Other comprehensive income (loss) – Foreign currency translation adjustment 89,933 35,364 51,878 127,394
Comprehensive loss $ (649,026) $ (1,802,460) $ (2,864,317) $ (6,021,630)
Basic and Diluted Loss per Common Share (in dollars per share) $ (0.39) $ (3.22) $ (1.69) $ (10.79)
Weighted Average Common Shares Outstanding:        
Basic and diluted (in shares) 1,889,694 570,753 1,726,716 569,882
Service [Member]        
Revenues        
Revenues $ 267,371 $ 587,893 $ 764,062 $ 1,740,880
Costs and other expenses        
Cost of Goods and Services Sold 110,723 125,039 322,957 639,996
License [Member]        
Revenues        
Revenues 1,441,011 950,015 4,165,669 3,764,342
Costs and other expenses        
Cost of Goods and Services Sold 146,732 253,891 443,384 1,022,919
Hardware [Member]        
Revenues        
Revenues 436,422 279,200 537,562 424,582
Costs and other expenses        
Cost of Goods and Services Sold 207,655 97,674 260,684 240,074
Hardware Reserve [Member]        
Costs and other expenses        
Cost of Goods and Services Sold $ 0 $ 1,000,000 $ 0 $ 2,500,000
v3.24.3
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
Approximation [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
AOCI Attributable to Parent [Member]
Retained Earnings [Member]
Total
Balance (in shares) at Dec. 31, 2022   552,739        
Balance at Dec. 31, 2022   $ 55 $ 122,029,476 $ (242,602) $ (116,485,373) $ 5,301,556
Issuance of common stock for directors’ fees (in shares)   855        
Issuance of common stock for directors’ fees   $ 0 12,002 0   12,002
Issuance of common stock to employees   $ 0 4 0 0 4
Restricted stock forfeited (in shares)   (1,102)        
Restricted stock forfeited   $ (0) 3,105 (0) (0) 3,105
Other comprehensive income (loss) – Foreign currency translation adjustment   0 0 72,146 0 72,146
Share-based compensation   0 62,474 0 0 62,474
Net loss   $ 0 0 0 (1,688,322) (1,688,322)
Issuance of restricted common stock to employees and directors (in shares)   2,222        
Net loss   $ 0 0 0 (1,688,322) (1,688,322)
Balance (in shares) at Mar. 31, 2023   554,714        
Balance at Mar. 31, 2023   $ 55 122,100,851 (170,456) (118,173,695) 3,756,755
Restricted stock forfeited   $ 0 (3,105) 0 0 (3,105)
Balance (in shares) at Dec. 31, 2022   552,739        
Balance at Dec. 31, 2022   $ 55 122,029,476 (242,602) (116,485,373) 5,301,556
Other comprehensive income (loss) – Foreign currency translation adjustment           127,394
Net loss           (6,149,024)
Net loss           (6,149,024)
Balance (in shares) at Sep. 30, 2023   570,026        
Balance at Sep. 30, 2023   $ 57 122,263,999 (115,208) (122,634,397) (485,549)
Balance (in shares) at Mar. 31, 2023   554,714        
Balance at Mar. 31, 2023   $ 55 122,100,851 (170,456) (118,173,695) 3,756,755
Issuance of common stock for directors’ fees (in shares)   1,286        
Issuance of common stock for directors’ fees   $ 0 16,002 0 0 16,002
Restricted stock forfeited (in shares)   (799)        
Other comprehensive income (loss) – Foreign currency translation adjustment   $ 0 0 19,884 0 19,884
Share-based compensation   0 57,831 0 0 57,831
Net loss   $ 0 0 0 (2,622,878) (2,622,878)
Issuance of common stock for Employee stock purchase plan (in shares)   1,557        
Issuance of common stock for Employee stock purchase plan   $ 0 13,934 0 0 13,934
Share based compensation for employee stock plan   0 3,563 0 0 3,563
Net loss   $ 0 0 0 (2,622,878) (2,622,878)
Balance (in shares) at Jun. 30, 2023   556,758        
Balance at Jun. 30, 2023   $ 55 122,192,181 (150,572) (120,796,573) 1,245,091
Restricted stock forfeited   0 0 0 0 0
Restricted stock forfeited   $ 0 0 0 0 0
Issuance of common stock for directors’ fees (in shares)   937        
Issuance of common stock for directors’ fees   $ 0 11,002 0 0 11,002
Issuance of common stock to employees   $ 2 (2) 0 0 0
Restricted stock forfeited (in shares)   (1,852)        
Other comprehensive income (loss) – Foreign currency translation adjustment   $ 0 0 35,364 0 35,364
Share-based compensation   0 60,821 0 0 60,821
Net loss   $ 0 0 0 (1,837,824) (1,837,824)
Issuance of restricted common stock to employees and directors (in shares)   14,183        
Net loss   $ 0 0 0 (1,837,824) (1,837,824)
Balance (in shares) at Sep. 30, 2023   570,026        
Balance at Sep. 30, 2023   $ 57 122,263,999 (115,208) (122,634,397) (485,549)
Restricted stock forfeited   0 (3) 0 0 (3)
Restricted stock forfeited   $ 0 (3) 0 0 (3)
Balance (in shares) at Dec. 31, 2023   1,032,777        
Balance at Dec. 31, 2023   $ 103 126,047,851 22,821 (125,007,210) 1,063,565
Issuance of common stock for directors’ fees (in shares)   4,287        
Issuance of common stock for directors’ fees   $ 0 9,003 0   9,003
Issuance of common stock to employees   $ 0 0 0 0 0
Restricted stock forfeited (in shares)   (316)        
Restricted stock forfeited   $ 0 0 0 0 0
Exercise of warrants (in shares)   777,666        
Exercise of warrants   $ 78 1,322 0 0 1,400
Other comprehensive income (loss) – Foreign currency translation adjustment   0 (62,275) 0 (62,275)
Share-based compensation   0 47,790 0 0 47,790
Issuance costs   0 (13,470) 0 0 (13,470)
Net loss   0 0 0 (510,285) (510,285)
Exercise of warrants   78 1,322 0 0 1,400
Net loss   $ 0 0 0 (510,285) (510,285)
Balance (in shares) at Mar. 31, 2024   1,814,414        
Balance at Mar. 31, 2024   $ 181 126,092,496 (39,454) (125,517,495) 535,728
Restricted stock forfeited   $ 0 0 0 0 0
Balance (in shares) at Dec. 31, 2023   1,032,777        
Balance at Dec. 31, 2023   $ 103 126,047,851 22,821 (125,007,210) 1,063,565
Other comprehensive income (loss) – Foreign currency translation adjustment           51,878
Net loss           (2,916,195)
Net loss           (2,916,195)
Balance (in shares) at Sep. 30, 2024   3,109,288        
Balance at Sep. 30, 2024   $ 311 127,981,436 74,699 (127,923,404) 133,042
Balance (in shares) at Mar. 31, 2024   1,814,414        
Balance at Mar. 31, 2024   $ 181 126,092,496 (39,454) (125,517,495) 535,728
Issuance of common stock for directors’ fees   $ 48,315        
Restricted stock forfeited (in shares)   (186)        
Restricted stock forfeited   $ 0 0 0 0 0
Other comprehensive income (loss) – Foreign currency translation adjustment   0 0 24,220 0 24,220
Share-based compensation    
Net loss $ (1,666,950) $ 0 0 0 (1,666,950)  
Issuance of common stock for Employee stock purchase plan (in shares)   1,390        
Issuance of common stock for Employee stock purchase plan   $ 1 1,938 0 0 1,939
Share based compensation for employee stock plan   0 456 0 0 456
Net loss $ (1,666,950) $ 0 0 0 (1,666,950)  
Balance (in shares) at Jun. 30, 2024   1,815,618        
Balance at Jun. 30, 2024   $ 182 126,143,205 (15,234) (127,184,445) (1,056,292)
Restricted stock forfeited   0 0 0 0 0
Issuance of common stock to employees   $ 17 (17) 0 0 0
Restricted stock forfeited (in shares)   (849)        
Restricted stock forfeited   $ 0 0 0 0 0
Exercise of warrants (in shares)   1,030,556        
Exercise of warrants   $ 103 1,906,425 1,906,528
Other comprehensive income (loss) – Foreign currency translation adjustment   0 0 89,933 0 89,933
Share-based compensation   0 66,053 0 0 66,053
Issuance costs    
Net loss   $ 0 0 0 (738,959) (738,959)
Issuance of restricted common stock to employees and directors (in shares)   168,963        
Exercise of prefunded warrants (in shares)   95,000        
Exercise of prefunded warrants   $ 9 162 171
Exercise of warrants   103 1,906,425 1,906,528
Issuance costs   (134,392)        
Net loss   $ 0 0 0 (738,959) (738,959)
Balance (in shares) at Sep. 30, 2024   3,109,288        
Balance at Sep. 30, 2024   $ 311 127,981,436 74,699 (127,923,404) 133,042
Restricted stock forfeited   $ 0 $ 0 $ 0 $ 0 $ 0
v3.24.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
CASH FLOW FROM OPERATING ACTIVITIES:    
Net loss $ (2,916,195) $ (6,149,024)
Adjustments to reconcile net loss to net cash used for operating activities:    
Depreciation 69,115 38,213
Amortization of intangible assets 233,269 217,978
Change in fair value of convertible note (0) (264,706)
Amortization of capitalized contract costs 128,953 126,057
Amortization of Note Payable 64,000 0
Reserve for inventory (98,875) 2,500,000
Operating leases right-of-use assets (58,950) 146,890
Share and warrant-based compensation for employees and consultants 162,614 163,584
Stock based directors’ fees 9,003 39,006
Deferred income tax benefit 0 (20,000)
Bad debts 0 550,000
Change in assets and liabilities:    
Accounts receivable (398,753) (434,989)
Due from factor 50,302 (13,072)
Capitalized contract costs (329,743) (107,336)
Deposits (7,975) 0
Inventory 58,796 145,156
Prepaid expenses and other (18,695) (51,831)
Accounts payable 248,640 488,417
Accrued liabilities (51,433) 327,131
Income taxes payable 0 62,811
Deferred revenue 517,246 128,253
Operating lease liabilities (60,827) (154,460)
Net cash used in operating activities (2,399,508) (2,261,922)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (23,047) 0
Net cash used in investing activities (23,047) 0
CASH FLOW FROM FINANCING ACTIVITIES:    
Proceeds from Note Payable 2,000,000 0
Offering costs (147,862) (25,434)
Proceeds for exercise of warrants 1,908,099 0
Receipt of cash from Employee stock purchase plan 1,939 13,934
Repayment of government loan (101,762) (113,885)
Net cash used in financing activities 3,660,414 (125,385)
Effect of exchange rate changes 51,878 58,871
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,289,737 (2,328,436)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 511,400 2,635,522
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,801,137 307,086
Cash paid for:    
Interest $ 8,130 $ 159,379
v3.24.3
Note 1 - Nature of Business and Basis of Presentation
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Business Description and Accounting Policies [Text Block]

1.

NATURE OF BUSINESS AND BASIS OF PRESENTATION

 

Nature of Business

 

The Company, founded in 1993, develops and markets proprietary fingerprint identification biometric technology and software solutions enterprise-ready identity access management solutions to commercial, government and education customers throughout the United States and internationally. The Company was a pioneer in developing automated, finger identification technology that supplements or compliments other methods of identification and verification, such as personal inspection identification, passwords, tokens, smart cards, ID cards, PKI, credit cards, passports, driver’s licenses, OTP or other form of possession or knowledge-based credentialing. Additionally, advanced BIO-key® technology has been, and is, used to improve both the accuracy and speed of competing finger-based biometrics.

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key International, Inc. and its wholly-owned subsidiaries (collectively, the “Company” or “BIO-key”) and are stated in conformity with accounting principles generally accepted in the United States of America (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. Intercompany accounts and transactions have been eliminated in consolidation.

 

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented. The balance sheet at September 30, 2024 was derived from the audited financial statements, but does not include all of the disclosures required by GAAP. These unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on June 5, 2024.

 

Foreign Currencies

 

The Company accounts for foreign currency transactions pursuant to ASC 830, Foreign Currency Matters ("ASC 830”). The functional currency of the Company is the U.S. dollar, which is the currency of the primary economic environment in which it operates. In accordance with ASC 830, all assets and liabilities are translated into U. S. dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. All transaction gains and losses from the measurement of monetary balance sheet items denominated in Euros are reflected in the statement of operations as appropriate. Translation adjustments are included in accumulated other comprehensive income (loss).

 

Recently Issued Accounting Pronouncements

 

Effective January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), referred to herein as ASU 2016-13, which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. The adoption of ASU 2016-13 had a material effect on the consolidated financial statements of the Company. 

 

In August 2020, the Financial Accounting Standards Board issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 was effective for the Company on January 1, 2024 and should be applied on a full or modified retrospective basis. The adoption of ASU 2016-13 did not have a material effect on the consolidated financial statements of the Company. 

 

Management does not believe that any other recently issued, but not yet effective, accounting standard, if currently adopted, would have a material effect on the accompanying consolidated financial statements.

 
v3.24.3
Note 2 - Going Concern
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Substantial Doubt about Going Concern [Text Block]

2.

GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which contemplate continuation of the Company as a going concern, and assumes continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has suffered substantial net losses and negative cash flows from operations in recent years and is dependent on debt and equity financing to fund its operations all of which raise substantial doubt about the Company’s ability to continue as a going concern. Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Company’s ability to increase its revenue and meet its financing requirements on a continuing basis and become profitable in its future operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

 

As of the date of this report, the Company does not have enough cash for twelve months of operations. The history of significant losses, the negative cash flow from operations, the limited cash resources on hand and the dependence by the Company on its ability to obtain additional financing to fund its operations after the current cash resources are exhausted raises substantial doubt about the Company's ability to continue as a going concern. In recent periods, the Company has reduced its marketing, research and development, and rent expenses. In addition, the Company has purchased inventory for projects in Nigeria, which have been delayed in deployment, and is currently exploring other markets and opportunities to sell or return the product to generate additional cash.

 
v3.24.3
Note 3 - Revenue From Contracts With Customers
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

3.

REVENUE FROM CONTRACTS WITH CUSTOMERS

 

Disaggregation of Revenue

 

The following table summarizes revenue from contracts with customers for the three month periods ended September 30, 2024 and September 30, 2023:

 

  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2024

 
                     

Services

 $188,181  $34,753  $44,437  $-  $267,371 

License fees

  738,838   223,703   478,470   -   1,441,011 

Hardware

  52,897   -   361,525   22,000   436,422 

Total Revenues

 $979,916  $258,456  $884,432  $22,000  $2,144,804 

 

  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2023

 
                     

Services

 $294,581  $26,009  $267,303  $-  $587,893 

License fees

  426,059   -   523,956   -   950,015 

Hardware

  48,057   -   231,143   -   279,200 

Total Revenues

 $768,697  $26,009  $1,022,402  $-  $1,817,108 

 

The following table summarizes revenue from contracts with customers for the nine month periods ended September 30, 2024 and September 30, 2023:

  

  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2024

 
                     

Services

 $618,421  $98,430  $47,211  $-  $764,062 

License fees

  1,797,707   1,490,255   877,707   -   4,165,669 

Hardware

  140,598   -   361,764   35,200   537,562 

Total Revenues

 $2,556,726  $1,588,685  $1,286,682  $35,200  $5,467,293 

  

  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2023

 
                     

Services

 $840,045  $75,806  $812,654  $12,375  $1,740,880 

License fees

  1,614,971   552,630   1,526,091   70,650   3,764,342 

Hardware

  134,390   -   278,292   11,900   424,582 

Total Revenues

 $2,589,406  $628,436  $2,617,037  $94,925  $5,929,804 

  

*EMESA – Europe, Middle East, South America

 

Deferred Revenue 

 

Deferred revenue includes customer advances and amounts that have been paid by customer for which the contractual maintenance terms have not yet occurred. The majority of these amounts are related to maintenance contracts for which the revenue is recognized ratably over the applicable term, which generally is 12-60 months. Contracts greater than 12 months are segregated as long term deferred revenue. Maintenance contracts include provisions for unspecified when-and-if available product updates and customer telephone support services. At September 30, 2024 and December 31, 2023, amounts in deferred revenue were approximately $961,000 and $443,000, respectively. Revenue recognized during the three and nine-months ended September 30, 2024 from amounts included in deferred revenue at the beginning of the period was approximately $51,000 and $482,000, respectively. Revenue recognized during the three and nine-months ended September 30, 2023 from amounts included in deferred revenue at the beginning of the period was approximately $67,000 and $402,000, respectively.

 
v3.24.3
Note 4 - Accounts Receivable
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

4.

ACCOUNTS RECEIVABLE

 

Accounts receivable are carried at original amount less an estimate made for credit losses based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for credit losses by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, current economic conditions and other relevant factors, including specific reserves for certain accounts. Accounts receivable are written off when deemed uncollectible.

 

Accounts receivable at September 30, 2024 and December 31, 2023 consisted of the following: 

 

  

September 30,

  

December 31,

 
  

2024

  

2023

 
         

Accounts receivable

 $2,606,064  $2,207,311 

Allowance for credit losses

  (675,806)  (1,005,785)

Accounts receivable, net of allowances for credit losses

 $1,930,258  $1,201,526 

 

Bad debt expenses are recorded in selling, general, and administrative expense.

 
v3.24.3
Note 5 - Share Based Compensation
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Share-Based Payment Arrangement [Text Block]

5.

SHARE BASED COMPENSATION

 

The following table presents share-based compensation expenses included in the Company’s unaudited condensed interim consolidated statements of operations:

 

  

Three Months Ended September 30,

 
  

2024

  

2023

 
         

Selling, general and administrative

 $53,117  $56,414 

Research, development and engineering

  12,936   48,758 
  $66,053  $105,172 

   

  

Nine Months Ended September 30,

 
  

2024

  

2023

 
         

Selling, general and administrative

 $140,142  $171,833 

Research, development and engineering

  31,475   48,758 
  $171,617  $220,591 

  
v3.24.3
Note 6 - Inventory
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Inventory Disclosure [Text Block]

6.

INVENTORY

 

Inventory is stated at the lower of cost, determined on a first in, first out basis, or realizable value. The Company periodically evaluates inventory items and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow moving goods, and for other impairment of value based upon assumptions of future demand and market conditions. Approximately $3,200,000 of the reserve on inventory is due to slow moving inventory purchased for projects in Nigeria, and the balance for other slow-moving inventory. The Company has been selling units in small quantities and continues to explore other markets and opportunities to sell the product. Inventory is comprised of the following as at September 30, 2024 and December 31, 2023:

 

  

September 30,

  

December 31,

 
  

2024

  

2023

 
         

Finished goods

 $4,220,416  $4,373,056 

Fabricated assemblies

  54,153   59,184 

Reserve on finished goods

  (3,887,625)  (3,986,500)

Total inventory

 $386,944  $445,740 

 
v3.24.3
Note 7 - Commitments and Contingencies
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Commitments Disclosure [Text Block]

7.

COMMITMENTS AND CONTINGENCIES

 

Distribution Agreement

 

Swivel Secure has a distribution agreement with Swivel Secure Limited (“SSL”). Terms of the agreement include the following:

 

1.

The initial term of the agreement ends on January 31, 2027 and will be automatically extended for additional one-year terms thereafter unless either party provides written notice to the other party not later than 30 days before the end of the term that it does not wish to extend the term.

 

2.

SSL appoints Swivel Secure as the exclusive distributor of SSL’s products, to market, sell and distribute in the EMEA (Europe, Middle East and Africa), excluding the United Kingdom and Republic of Ireland, for a defined discount on the sale price.

 

3.

Swivel Secure is expected to generate a certain minimum level of orders of SSL products each year during the term of the agreement. If Swivel Secure fails to meet such minimum level of orders in any year, the exclusive distribution rights will terminate and Swivel Secure will serve as a non-exclusive distributer of SSL Products.

 

The Company expects the revenue targets to continue to be met based on historical performance and increasing distribution by Swivel Secure.

 

Litigation

 

From time to time, the Company may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of September 30, 2024, the Company was not a party to any pending lawsuits.

 
v3.24.3
Note 8 - Leases
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]

8.

LEASES

 

The Company’s leases office space in New Jersey, Minnesota, New Hampshire, Madrid and Hong-Kong with lease termination dates in 2024. On August 11, 2023, the Company signed a new one-year lease starting September 1, 2023 for office space in New Jersey. The property leased in China is paid monthly as used, without a formal agreement. The following tables present the components of lease expense and supplemental balance sheet information related to the operating leases were:

  

  

3 Months ended

  

3 Months ended

 
  

September 30,

  

September 30,

 
  

2024

  

2023

 
         

Lease cost

        

Total lease cost

 $9,702  $34,145 

  

  

9 Months ended

  

9 Months ended

 
  

September 30,

  

September 30,

 
  

2024

  

2023

 
         

Lease cost

        

Total lease cost

 $38,808  $145,828 

   

  

September 30,

  

December 31,

 

Balance sheet information

 

2024

  

2023

 

Operating right-of-use assets

 $73,636  $36,905 
         

Operating lease liabilities, current portion

 $24,545  $37,829 

Operating lease liabilities, non-current portion

  49,091   0 

Total operating lease liabilities

 $73,636  $37,829 
         

Weighted average remaining lease term (in years) – operating leases

  3.00   0.67 

Weighted average discount rate – operating leases

  5.50%  5.50%
         
         

Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2024 and 2023:

 $51,950  $213,783 

 

Maturities of operating lease liabilities were as follows as of September 30, 2024:

 

2024 (3 months remaining)

 $6,978 

2025

  28,191 

2026

  29,262 

2027

  22,473 

Total future lease payments

 $86,904 

Less: imputed interest

  (13,268)

Total

 $73,636 

 
v3.24.3
Note 9 - Note Payable
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Long-Term Debt [Text Block]

9.

NOTE PAYABLE

 

Note Purchase Agreement dated June 24, 2024

 

On June 24, 2024, the Company entered into and closed a note purchase agreement (the “Purchase Agreement”) which provided for the issuance of a $2,360,000 principal amount senior secured promissory note (the “2024 Note”). The 2024 Note carries an original issue discount of $350,000 and the Company agreed to pay $10,000 to the Lender to cover its transaction costs, which were deducted from the proceeds of the 2024 Note resulting in a total of $2,000,000 being funded to the Company at closing. The proceeds will be used for general working capital.
 
The principal amount of the 2024 Note is due eighteen months (18) following the date of issuance. Interest under the 2024 Note accrues at a rate of nine percent (9%) per annum. All repayments of principal due under the 2024 Note will be subject to an exit fee of seven percent (7%) of the principal amount being repaid (the “Exit Fee”). Commencing six months after the date of issuance of the Note (the “Redemption Start Date”), Lender shall have the right to redeem up to $270,000 of principal amount under the 2024 Note each month which amount plus the Exit Fee will be due and payable three (3) business days after Lender’s delivery of a redemption notice to the Company. At the end of each month following the Redemption Start Date, if the Company has not reduced the outstanding balance under the 2024 Note by at least $270,000, then by the fifth (5th) day of the following month, the Company must either pay to Lender the difference between $270,000 and the amount, if any, redeemed in such month plus the Exit Fee, or the outstanding balance due under the Note will automatically increase by one percent (1%).
 
The 2024 Note is secured by a lien on substantially all of the Company’s assets and properties and the Company’s obligations under the Note are guaranteed by Pistol Star, Inc., a wholly owned subsidiary of the Company. The 2024 Note can be prepaid in whole or in part without penalty at any time. In the event that the Company receives any proceeds in connection with any fundraising or financing transaction (including any warrant exercises), it will be required to make a mandatory prepayment equal to the lesser of (i) forty percent (40%) of the amount raised in such transaction and (ii) the full amount due under the 2024 Note.

 

The 2024 Note provides for customary events of default, including, among other things, the event of non-payment of principal, interest, fees or other amounts, a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants within a specified period of time, the bankruptcy or insolvency of the Company or of all or a substantial part of its property, and monetary judgment defaults of a specified amount. Upon the occurrence of an Event of Default, Lender may (i) cause interest on the outstanding balance to accrue at an interest rate equal to the lesser of twenty two (22%) or the maximum rate permitted under applicable law, and (ii) accelerate all amounts due under the 2024 Note plus an amount equal to (a) fifteen percent (15%) of the amount due under the 2024 Note for each default that is considered a major trigger event (as defined), and (b) five percent (5%) of the amount due under the 2024 Note for each occurrence of any default that is considered a minor trigger event (as defined), in any case not to exceed twenty five percent (25%).

 

The Company received gross proceeds of approximately $1.9 million in connection with a financing transaction (see Note 12. 3. Warrants). In accordance with the terms of the 2024 Note, on October 1, 2024, 40% of the proceeds received, or approximately $762,600, was used to prepay amounts due under the 2024 Note. 

 

 
v3.24.3
Note 10 - Convertible Note Payable
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Debt Disclosure [Text Block]

10.

CONVERTIBLE NOTE PAYABLE

 

Securities Purchase Agreement dated December 22, 2022

 

On December 22, 2022, the Company entered into and closed a securities purchase agreement (the “Purchase Agreement”) and issued a $2,200,000 principal amount senior secured promissory note (the “Note”). At closing, a total of $2,002,000 was funded, with the proceeds to be used for general working capital.

 

The principal amount of the Note was due six months following the date of issuance, subject to one six-month extension by the Company. Interest under the Note accrues at a rate of 10% per annum, payable monthly through month six and at the rate of 12% per annum in months seven through twelve, payable monthly. The Note was secured by a lien on substantially all of the Company’s assets and properties can be prepaid in whole or in part without penalty at any time.

 

In connection with the issuance of the Note, the Company issued to the investor 38,889 shares of Common Stock (the “Commitment Shares”) valued at $18.00 per share and a warrant (the “Warrant”) to purchase 11,112 shares of common stock (the “Warrant Shares”) at an exercise price of $54.00 per share, exercisable commencing on the date of issuance with a term of five years. The warrant was valued at $94,316.

 

On October 31, 2023, the Company repaid $1,400,000 of principal due under the Note, and on December 21, 2023 the Company repaid the remaining principal balance of $800,000 due under the Note.

 

As of  December 31, 2023, the Note was paid in full.
v3.24.3
Note 11 - Earnings (Loss) Per Share - Common Stock ("EPS")
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Earnings Per Share [Text Block]

11.

EARNINGS (LOSS) PER SHARE - COMMON STOCK (“EPS”)

 

The Company’s basic EPS is calculated using net income (loss) available to common shareholders and the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes the effect from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options and warrants and the assumed conversion of preferred stock.

 

 

The following table sets forth options and warrants which were excluded from the diluted per share calculation because the exercise price was greater than the average market price of the common shares:

 

  

Three Months ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2024

  

2023

  

2024

  

2023

 
                 

Stock options

  3,007   9,266   3,007   9,266 

Warrants

  2,739,362   207,234   2,739,362   270,234 

Total

  2,742,369   216,500   2,742,369   279,500 

   
v3.24.3
Note 12 - Stockholders' Equity
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Equity [Text Block]

12.

STOCKHOLDERS’ EQUITY

 

Issuances of Common Stock

 

During the nine-month periods ended September 30, 2024, and 2023, there have not been any shares of common stock issued to anyone outside the Company, except as noted in this Note 12.

 

On June 18, 2021, the stockholders approved the Employee Stock Purchase Plan. Under the terms of this plan, 43,334 shares of common stock are reserved for issuance to employees and officers of the Company at a purchase price equal to 85% of the lower of the closing price of the common stock on the first day or the last day of the offering period as reported on the Nasdaq Capital Market. Eligible employees are granted an option to purchase shares under the plan funded by payroll deductions. The Board may suspend or terminate the plan at any time, otherwise the plan expires June 17, 2031. On June 28, 2024, 1,390 shares were issued to employees which resulted in a $456 non-cash compensation expense for the Company. On June 30, 2023, 1,557 shares were issued to employees which resulted in a $3,563 non-cash compensation expense for the Company. 

 

Issuances of Restricted Stock

 

Restricted stock consists of shares of common stock that are subject to restrictions on transfer and risk of forfeiture until the fulfillment of specified conditions. The fair value of nonvested shares is determined based on the market price of the Company's common stock on the grant date. Nonvested stock is expensed ratably over the term of the restriction period.

 

During the nine-month periods ended September 30, 2024 and 2023, the Company issued 168,963 and 16,404 shares of restricted common stock, respectively, to certain employees and directors. These shares vest in equal annual installments over a three-year period from the date of grant and had a fair value on the date of issuance of $244,996 and $31,200, respectively.

 

During the nine-month periods ended September 30, 2024 and 2023, 1,351 and 2,650 shares of restricted common stock were forfeited, respectively.

 

Share based compensation for the nine-month periods ended September 30, 2024 and 2023, was $171,617 and $220,591, respectively.

 

Issuances to Directors

 

During the nine-month periods ended September 30, 2024, and 2023, the Company issued 4,287 and 3,078, shares of common stock to its directors in lieu of payment of board and committee fees valued at $9,003 and $39,006, respectively. 

 

Employees’ exercise options

 

During the nine-month periods ended September 30, 2024 and 2023, no employee stock options were exercised.

 

3. Warrants

 

During the nine-month period ended September 30, 2024, the entered into a warrant inducement agreement with an existing institutional investor for the immediate exercise of certain outstanding warrants that the Company issued on October 30, 2023. Pursuant to the warrant inducement agreement, the investor agreed to exercise outstanding warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock at an amended exercise price of $1.85. The gross proceeds from the exercise of the warrants was approximately $1.9 million, prior to deducting placement agent fees and estimated offering expenses. In consideration for the immediate exercise of the warrants, the Company also agreed to issue to the investor unregistered Series A Warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock and unregistered Series B Warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock, each with an exercise price of $1.85 per share. The Series A Warrants and Series B Warrants share substantially the same terms, are immediately exercisable and will expire five years from the date of issuance. 

 

There were no warrants issued for the nine-month period ended September 31, 2023. 

 

There were 911,672 prefunded warrants exercised during the nine-month period ended September 30, 2024.

 
v3.24.3
Note 13 - Fair Values of Financial Instruments
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

13.

FAIR VALUES OF FINANCIAL INSTRUMENTS

 

Cash and cash equivalents, accounts receivable, due from factor, accounts payable and accrued liabilities are carried at, or approximate, fair value because of their short-term nature. The carrying value of the Company’s government loan payable approximates fair value as the interest rate related to the financial instruments approximated market.

  
v3.24.3
Note 14 - Major Customers and Accounts Receivable
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Concentration Risk Disclosure [Text Block]

14.

MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

 

During each of the three month periods ended September 30, 2024, and 2023, three customers accounted for 47% and two customers accounted for 33% of the revenue, respectively. For the nine month periods ended September 30, 2024, and 2023, one customer accounted for 29% and two customers accounted for 23% of revenue, respectively.

 

Four customers accounted for 65% of current accounts receivable at September 30, 2024. At December 31, 2023, one customer accounted for 35% of current accounts receivable.

 
v3.24.3
Note 15 - Income Taxes
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

15.

INCOME TAXES

 

United States, Hong Kong and Nigeria

The Company recorded no income tax expense for the three and nine months ended September 30, 2024 and 2023 because the estimated annual effective tax rate was zero. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.

 

As of September 30, 2024 and December 31, 2023, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

 

Spain

Due to the current loss for the nine months ended September 30, 2024, the Company did not record income taxes.  The deferred tax liability presented on the condensed consolidated balance sheet relates to intangible assets from the acquisition of Swivel Secure.

 
v3.24.3
Note 16 - Subsequent Events
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Subsequent Events [Text Block]

16

SUBSEQUENT EVENTS

 

On November 7, 2024, the Company issued 7,761 shares of common stock to its directors in payment of meeting fees. Additionally, the Company issued an aggregate of 10,000 shares of restricted stock to new employees with three-year vesting. All the shares were issued at $1.16 the closing price on November 7, 2024, as reported on the Nasdaq Capital Market. 

 

The Company has reviewed subsequent events through the date of this filing. 

 
v3.24.3
Insider Trading Arrangements
 9 Months Ended
Sep. 30, 2024
Insider Trading Arr Line Items  
Material Terms of Trading Arrangement [Text Block]

ITEM 5. OTHER INFORMATION

 

During the nine months ended September 30, 2024, none of our directors or “officers” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Securities and Exchange Commission Regulation S-K.     
Rule 10b5-1 Arrangement Adopted [Flag] false
Non-Rule 10b5-1 Arrangement Adopted [Flag] false
Rule 10b5-1 Arrangement Terminated [Flag] false
Non-Rule 10b5-1 Arrangement Terminated [Flag] false
v3.24.3
Note 3 - Revenue From Contracts With Customers (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Disaggregation of Revenue [Table Text Block]
  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2024

 
                     

Services

 $188,181  $34,753  $44,437  $-  $267,371 

License fees

  738,838   223,703   478,470   -   1,441,011 

Hardware

  52,897   -   361,525   22,000   436,422 

Total Revenues

 $979,916  $258,456  $884,432  $22,000  $2,144,804 
  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2023

 
                     

Services

 $294,581  $26,009  $267,303  $-  $587,893 

License fees

  426,059   -   523,956   -   950,015 

Hardware

  48,057   -   231,143   -   279,200 

Total Revenues

 $768,697  $26,009  $1,022,402  $-  $1,817,108 
  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2024

 
                     

Services

 $618,421  $98,430  $47,211  $-  $764,062 

License fees

  1,797,707   1,490,255   877,707   -   4,165,669 

Hardware

  140,598   -   361,764   35,200   537,562 

Total Revenues

 $2,556,726  $1,588,685  $1,286,682  $35,200  $5,467,293 
  

North

              

September 30,

 
  

America

  

Africa

  

EMESA*

  

Asia

  

2023

 
                     

Services

 $840,045  $75,806  $812,654  $12,375  $1,740,880 

License fees

  1,614,971   552,630   1,526,091   70,650   3,764,342 

Hardware

  134,390   -   278,292   11,900   424,582 

Total Revenues

 $2,589,406  $628,436  $2,617,037  $94,925  $5,929,804 
v3.24.3
Note 4 - Accounts Receivable (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]
  

September 30,

  

December 31,

 
  

2024

  

2023

 
         

Accounts receivable

 $2,606,064  $2,207,311 

Allowance for credit losses

  (675,806)  (1,005,785)

Accounts receivable, net of allowances for credit losses

 $1,930,258  $1,201,526 
v3.24.3
Note 5 - Share Based Compensation (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]
  

Three Months Ended September 30,

 
  

2024

  

2023

 
         

Selling, general and administrative

 $53,117  $56,414 

Research, development and engineering

  12,936   48,758 
  $66,053  $105,172 
  

Nine Months Ended September 30,

 
  

2024

  

2023

 
         

Selling, general and administrative

 $140,142  $171,833 

Research, development and engineering

  31,475   48,758 
  $171,617  $220,591 
v3.24.3
Note 6 - Inventory (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Inventory, Current [Table Text Block]
  

September 30,

  

December 31,

 
  

2024

  

2023

 
         

Finished goods

 $4,220,416  $4,373,056 

Fabricated assemblies

  54,153   59,184 

Reserve on finished goods

  (3,887,625)  (3,986,500)

Total inventory

 $386,944  $445,740 
v3.24.3
Note 8 - Leases (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Lessee, Operating Lease, Costs, Assets and Liabilities [Table Text Block]
  

3 Months ended

  

3 Months ended

 
  

September 30,

  

September 30,

 
  

2024

  

2023

 
         

Lease cost

        

Total lease cost

 $9,702  $34,145 
  

9 Months ended

  

9 Months ended

 
  

September 30,

  

September 30,

 
  

2024

  

2023

 
         

Lease cost

        

Total lease cost

 $38,808  $145,828 
  

September 30,

  

December 31,

 

Balance sheet information

 

2024

  

2023

 

Operating right-of-use assets

 $73,636  $36,905 
         

Operating lease liabilities, current portion

 $24,545  $37,829 

Operating lease liabilities, non-current portion

  49,091   0 

Total operating lease liabilities

 $73,636  $37,829 
         

Weighted average remaining lease term (in years) – operating leases

  3.00   0.67 

Weighted average discount rate – operating leases

  5.50%  5.50%
         
         

Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2024 and 2023:

 $51,950  $213,783 

2024 (3 months remaining)

 $6,978 

2025

  28,191 

2026

  29,262 

2027

  22,473 

Total future lease payments

 $86,904 

Less: imputed interest

  (13,268)

Total

 $73,636 
v3.24.3
Note 11 - Earnings (Loss) Per Share - Common Stock ("EPS") (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]
  

Three Months ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2024

  

2023

  

2024

  

2023

 
                 

Stock options

  3,007   9,266   3,007   9,266 

Warrants

  2,739,362   207,234   2,739,362   270,234 

Total

  2,742,369   216,500   2,742,369   279,500 
v3.24.3
Note 3 - Revenue From Contracts With Customers (Details Textual) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Contract with Customer, Liability $ 961,000   $ 961,000   $ 443,000
Contract with Customer, Liability, Revenue Recognized $ 51,000 $ 482,000 $ 67,000 $ 402,000  
Minimum [Member]          
Capitalized Contract Cost, Amortization Period (Month) 12 months   12 months    
Maximum [Member]          
Capitalized Contract Cost, Amortization Period (Month) 60 months   60 months    
v3.24.3
Note 3 - Revenue From Contracts With Customers - Disaggregation of Revenue (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenues $ 2,144,804 $ 1,817,108 $ 5,467,293 $ 5,929,804
Service [Member]        
Revenues 267,371 587,893 764,062 1,740,880
License [Member]        
Revenues 1,441,011 950,015 4,165,669 3,764,342
Hardware [Member]        
Revenues 436,422 279,200 537,562 424,582
North America [Member]        
Revenues 979,916 768,697 2,556,726 2,589,406
North America [Member] | Service [Member]        
Revenues 188,181 294,581 618,421 840,045
North America [Member] | License [Member]        
Revenues 738,838 426,059 1,797,707 1,614,971
North America [Member] | Hardware [Member]        
Revenues 52,897 48,057 140,598 134,390
Africa [Member]        
Revenues 258,456 26,009 1,588,685 628,436
Africa [Member] | Service [Member]        
Revenues 34,753 26,009 98,430 75,806
Africa [Member] | License [Member]        
Revenues 223,703 0 1,490,255 552,630
Africa [Member] | Hardware [Member]        
Revenues 0 0 0 0
EMESA [Member]        
Revenues [1] 884,432 1,022,402 1,286,682 2,617,037
EMESA [Member] | Service [Member]        
Revenues [1] 44,437 267,303 47,211 812,654
EMESA [Member] | License [Member]        
Revenues [1] 478,470 523,956 877,707 1,526,091
EMESA [Member] | Hardware [Member]        
Revenues [1] 361,525 231,143 361,764 278,292
Asia [Member]        
Revenues 22,000 0 35,200 94,925
Asia [Member] | Service [Member]        
Revenues 0 0 0 12,375
Asia [Member] | License [Member]        
Revenues 0 0 0 70,650
Asia [Member] | Hardware [Member]        
Revenues $ 22,000 $ 0 $ 35,200 $ 11,900
[1] EMESA – Europe, Middle East, South America
v3.24.3
Note 4 - Accounts Receivable - Summary of Accounts Receivable (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Accounts receivable $ 2,606,064 $ 2,207,311
Allowance for credit losses (675,806) (1,005,785)
Accounts receivable, net of allowances for credit losses $ 1,930,258 $ 1,201,526
v3.24.3
Note 5 - Share Based Compensation - Expenses for Continuing Operations (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Share-based compensation expense $ 66,053 $ 105,172 $ 171,617 $ 220,591
Selling, General and Administrative Expenses [Member]        
Share-based compensation expense 53,117 56,414 140,142 171,833
Research and Development Expense [Member]        
Share-based compensation expense $ 12,936 $ 48,758 $ 31,475 $ 48,758
v3.24.3
Note 6 - Inventory (Details Textual)
Sep. 30, 2024
USD ($)
NIGERIA  
Inventory Valuation Reserves $ 3,200,000
v3.24.3
Note 6 - Inventory - Components of Inventory (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Finished goods $ 4,220,416 $ 4,373,056
Fabricated assemblies 54,153 59,184
Reserve on finished goods (3,887,625) (3,986,500)
Total inventory $ 386,944 $ 445,740
v3.24.3
Note 8 - Leases (Details Textual)
Aug. 11, 2023
Office Space in New Jersey [Member]  
Lessee, Operating Lease, Term of Contract (Year) 1 year
v3.24.3
Note 8 - Leases - Operating Lease Balance Sheet Information (Details) - USD ($)
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Total lease cost $ 9,702 $ 34,145 $ 38,808 $ 145,828  
Operating lease right-of-use assets 73,637   73,637   $ 36,905
Operating lease liabilities, current portion 24,545   24,545   37,829
Operating lease liabilities, non-current portion 49,091   49,091   $ 0
Total operating lease liabilities $ 73,636   $ 73,636    
Weighted average remaining lease term (in years) – operating leases (Year) 3 years   3 years   8 months 1 day
Weighted average discount rate – operating leases 5.50%   5.50%   5.50%
Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2024 and 2023:     $ 51,950   $ 213,783
2024 (3 months remaining) $ 6,978   6,978    
2025 28,191   28,191    
2026 29,262   29,262    
2027 22,473   22,473    
Total future lease payments 86,904   86,904    
Less: imputed interest (13,268)   (13,268)    
Total 73,636   73,636    
Approximation [Member]          
Operating lease right-of-use assets 73,636   73,636   36,905
Total operating lease liabilities 73,636   73,636   37,829
Total $ 73,636   $ 73,636   $ 37,829
v3.24.3
Note 9 - Note Payable (Details Textual) - USD ($)
 9 Months Ended
Oct. 01, 2024
Jun. 24, 2024
Sep. 30, 2024
Sep. 30, 2023
Proceeds from Debt, Net of Issuance Costs     $ 2,000,000 $ 0
Warrant Inducement Agreement [Member]        
Proceeds from Issuance of Warrants     $ 1,900,000  
The 2024 Note [Member] | Senior Secured Promissory Note [Member]        
Debt Instrument, Face Amount   $ 2,360,000    
Debt Instrument, Unamortized Discount   350,000    
Payments of Financing Costs   10,000    
Proceeds from Debt, Net of Issuance Costs   $ 2,000,000    
Debt Instrument, Term (Month)   18 months    
Debt Instrument, Interest Rate, Stated Percentage   9.00%    
Debt Instrument, Exit Fee Percentage   7.00%    
Debt Instrument, Redemption Amount   $ 270,000    
Debt Instrument, Reduction in Outstanding Balance at The End Of Each Month   $ 270,000    
Debt Instrument, Mandatory Prepayment, Percentage   40.00%    
The 2024 Note [Member] | Senior Secured Promissory Note [Member] | Subsequent Event [Member]        
Debt Instrument, Percentage of Proceeds Repaid 40.00%      
Repayments of Debt $ 762,600      
The 2024 Note [Member] | Senior Secured Promissory Note [Member] | Debt Instrument, Event of Default [Member]        
Debt Instrument, Interest Rate, Stated Percentage   22.00%    
Debt Instrument, Increase (Decrease), Percentage   1.00%    
Debt Instrument Interest Rate, MajorTrigger Event     15.00%  
The 2024 Note [Member] | Senior Secured Promissory Note [Member] | Maximum [Member]        
Debt Instrument, Redemption Amount   $ 270,000    
The 2024 Note [Member] | Senior Secured Promissory Note [Member] | Maximum [Member] | Debt Instrument, Event of Default [Member]        
Debt Instrument, Interest Rate, Stated Percentage     25.00%  
The 2024 Note [Member] | Senior Secured Promissory Note [Member] | Minimum [Member] | Debt Instrument, Event of Default [Member]        
Debt Instrument Interest Rate, Minor Trigger Event     5.00%  
v3.24.3
Note 10 - Convertible Note Payable (Details Textual) - USD ($)
 9 Months Ended
Dec. 21, 2023
Oct. 31, 2023
Dec. 22, 2022
Sep. 30, 2024
Sep. 30, 2023
Proceeds from Debt, Net of Issuance Costs       $ 2,000,000 $ 0
Class of Warrant or Right, Issued During Period (in shares)         0
Warrants and Rights Outstanding, Term (Year)       5 years  
Warrants Issued in Connection with Convertible Notes [Member]          
Class of Warrant or Right, Issued During Period (in shares)     11,112    
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)     $ 54    
Warrants and Rights Outstanding, Term (Year)     5 years    
Warrants and Rights Outstanding     $ 94,316    
The Note [Member]          
Repayments of Notes Payable $ 800,000 $ 1,400,000      
The Note [Member] | Senior Secured Promissory Note [Member]          
Debt Instrument, Face Amount     2,200,000    
Proceeds from Debt, Net of Issuance Costs     $ 2,002,000    
Debt Instrument, Interest Rate, Stated Percentage     10.00% 12.00%  
Stock Issued During Period, Shares, Commitment Fees (in shares)     38,889    
Shares Issued, Price Per Share (in dollars per share)     $ 18    
v3.24.3
Note 11 - Earnings (Loss) Per Share - Common Stock ("EPS") - Securities Excluded From the Diluted Per Share Calculation (Details) - Exercise Price Greater Than Average Market Price Of Common Shares [Member] - shares
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Antidilutive securities (in shares) 2,742,369 216,500 2,742,369 279,500
Share-Based Payment Arrangement, Option [Member]        
Antidilutive securities (in shares) 3,007 9,266 3,007 9,266
Warrant [Member]        
Antidilutive securities (in shares) 2,739,362 207,234 2,739,362 270,234
v3.24.3
Note 12 - Stockholders' Equity (Details Textual) - USD ($)
 3 Months Ended 9 Months Ended
Jun. 28, 2024
Jun. 30, 2023
Jun. 18, 2021
Sep. 30, 2024
Jun. 30, 2024
Mar. 31, 2024
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Share-Based Payment Arrangement, Expense       $ 66,053     $ 105,172     $ 171,617 $ 220,591
Shares Issued, Value, Share-Based Payment Arrangement, after Forfeiture           $ 9,003 $ 11,002 $ 16,002 $ 12,002    
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period (in shares)                   0 0
Warrants and Rights Outstanding, Term (Year)       5 years           5 years  
Class of Warrant or Right, Issued During Period (in shares)                     0
Warrant Inducement Agreement [Member]                      
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)       1,030,556           1,030,556  
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)       $ 1.85           $ 1.85  
Proceeds from Issuance of Warrants                   $ 1,900,000  
Series A Warrants [Member]                      
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)       1,030,556           1,030,556  
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)       $ 1.85           $ 1.85  
Series B Warrants [Member]                      
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)       1,030,556           1,030,556  
Pre-Funded Warrants [Member]                      
Total Warrants Exercised (in shares)                   911,672  
Common Stock [Member]                      
Stock Issued During Period, Shares, Employee Stock Purchase Plans (in shares)         1,390     1,557      
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures (in shares)       168,963     14,183   2,222    
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited (in shares)       849 186 316 1,852 799 1,102    
Shares Issued, Shares, Share-Based Payment Arrangement, after Forfeiture (in shares)           4,287 937 1,286 855    
Shares Issued, Value, Share-Based Payment Arrangement, after Forfeiture         $ 48,315 $ 0 $ 0 $ 0 $ 0    
Common Stock [Member] | Director [Member]                      
Shares Issued, Shares, Share-Based Payment Arrangement, after Forfeiture (in shares)                   4,287 3,078
Shares Issued, Value, Share-Based Payment Arrangement, after Forfeiture                   $ 9,003 $ 39,006
Restricted Stock [Member]                      
Share-Based Payment Arrangement, Expense                   $ 171,617 $ 220,591
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures (in shares)                   168,963 16,404
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)                   3 years 3 years
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Granted in Period, Fair Value                   $ 244,996 $ 31,200
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited (in shares)                   1,351 2,650
Employee Stock Purchase Plan [Member]                      
Common Stock, Capital Shares Reserved for Future Issuance (in shares)     43,334                
Share-Based Compensation Arrangement by Share-Based Payment Award, Purchase Price of Common Stock, Percent     85.00%                
Stock Issued During Period, Shares, Employee Stock Purchase Plans (in shares) 1,390 1,557                  
Share-Based Payment Arrangement, Expense $ 456 $ 3,563                  
v3.24.3
Note 14 - Major Customers and Accounts Receivable (Details Textual) - Customer Concentration Risk [Member]
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Revenue Benchmark [Member] | Three Customers [Member]          
Concentration Risk, Number of Major Customers 3        
Concentration Risk, Percentage 47.00%        
Revenue Benchmark [Member] | Two Customers [Member]          
Concentration Risk, Number of Major Customers   2   2  
Concentration Risk, Percentage   33.00%   23.00%  
Revenue Benchmark [Member] | One Customer [Member]          
Concentration Risk, Number of Major Customers     1    
Concentration Risk, Percentage     29.00%    
Accounts Receivable [Member] | One Customer [Member]          
Concentration Risk, Number of Major Customers         1
Concentration Risk, Percentage         35.00%
Accounts Receivable [Member] | Four Customers [Member]          
Concentration Risk, Number of Major Customers   4      
Concentration Risk, Percentage     65.00%    
v3.24.3
Note 15 - Income Taxes (Details Textual) - USD ($)
Pure in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Expense (Benefit) $ (0) $ (189) $ (0) $ 142,811
United States, Hong Kong, and Nigeria [Member]        
Income Tax Expense (Benefit) $ 0 $ 0 $ 0 $ 0
Effective Income Tax Rate Reconciliation, Percent 0.00% 0.00% 0.00% 0.00%
SPAIN        
Income Tax Expense (Benefit)     $ 0  
v3.24.3
Note 16 - Subsequent Events (Details Textual) - $ / shares
 9 Months Ended
Nov. 07, 2024
Sep. 30, 2024
Sep. 30, 2023
Restricted Stock [Member]      
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)   3 years 3 years
Director [Member] | Subsequent Event [Member]      
Stock Issued During Period, Shares, New Issues (in shares) 7,761    
Director [Member] | Subsequent Event [Member] | Restricted Stock [Member]      
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year) 3 years    
Shares Issued, Price Per Share (in dollars per share) $ 1.16    
New Employees [Member] | Subsequent Event [Member] | Restricted Stock [Member]      
Shares Issued, Shares, Share-Based Payment Arrangement, after Forfeiture (in shares) 10,000    
Shares Issued, Price Per Share (in dollars per share) $ 1.16    
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