BIO KEY INTERNATIONAL INC
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
BKYI$2.38+0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-06-14.
0001437749-24-020368
Item 2. —Management’s Discussion and Analysis of Financial Conditions and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001437749-24-026861
Item 2. —Management’s Discussion and Analysis of Financial Conditions and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 58 previous paragraphs and 74 current paragraphs.
42 unchanged; 14 reworded; 13 added; 1 removed; 1 previous and 5 current paragraphs rearranged.
Tables are not compared: 9 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
For the three months ended June 30, 2024, license revenue decreased $461,546 or 37% to $774,2254 from $1,235,771 in the corresponding period in 2023 , as several anticipated orders slipped into the third quarter.
Current report
For the three months ended June 30, 2024, hardware sales increased 15% to $83,492 from $72,693 in the corresponding period in 2023. The increase was due largely to a change in the mixture of hardware sales.
Current report
For the three months ended June 30, 2024, research, development, and engineering costs increased 6% to $591,234 compared to $558,181 in the corresponding period in 2023. The increase consisted primarily in an increase in personnel costs.
Current report
Other income (expense) for the three months ended June 30, 2024 consisted of interest income of $46 and interest expense of $8,910 comprised of approximately $1,400 on the government loan through the BBVA bank and the balance on the 2024 Note, and a loan fee amortization amount of $4,000. Other income (expense) for the three months ended June 30, 2023 consisted of interest income of $23, interest expense of $56,806 on the secured note payable and the government loan through the BBVA, bank net of interest and change in fair value of $44,568 on the convertible note payable.
Current report
Six MONTHS ENDED June 30, 2024 AS COMPARED TOJune 30, 2023
Current report
Revenues
Current report
For the six months ended June 30, 2024, license revenue decreased 89,668 or 3% to $2,724,659 from $2,814,327 in the corresponding period in 2023. Several anticipated orders sliding from the second quarter to the third quarter, contributed to the decrease.
Current report
Costs of goods sold
Current report
Selling, general and administrative
Current report
Research, development and engineering
Current report
Other income (expense)
Current report
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.
Current report
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. There can be no assurance that we will be able to raise such capital or regain compliance with the continued listing requirements.
Removed paragraphs (1)
Previous report
For the three months ended March 31, 2024, license revenue increased 371,878 or 24% to $1,950,434 from $1,578,556 in the corresponding period in 2023. We received one large customer order that contributed to the increase.
Reworded paragraphs (14)
Previous wording
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, AuthControl Sentry, AuthControl Enterprise, AuthControl MSP, WEB-key® biometric civil and large-scale ID infrastructure, and accessory hardware to provide a complete solution for our customers.
Current wording
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.
Previous wording
THREE MONTHS ENDED March 31, 2024 AS COMPARED TOMarch 31, 2023
Current wording
THREE MONTHS ENDED June 30, 2024 AS COMPARED TOJune 30, 2023
Previous wording
For the three months ended March 31, 2024, and 2023, service revenues included approximately $194,000 and $292,000, respectively, of recurring maintenance and support revenue, and approximately $19,000 and $240,000 respectively, of non-recurring custom services revenue. Recurring service revenue decreased $98,000 or 24% in 2024 which was due to the loss of one large customer service agreement. Non-recurring custom services decreased 92% 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.
Current wording
For the three months ended June 30, 2024, and 2023, service revenues included approximately $274,000 and $310,000, respectively, of recurring maintenance and support revenue, and approximately $10,000 and $310,000 respectively, of non-recurring custom services revenue. Recurring service revenue decreased $36,000 or 12% 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.
Previous wording
For the three months ended March 31, 2024, cost of service decreased approximately $16,000 or 10% to $138,849 from $154,801 in the three months ended March 31, 2023, due to reduced costs to support the PortalGuard and Swivel Secure deployments. For the three months ended March 31, 2024, license fees decreased to $148,221 from $620,881 in the three months ended March 31, 2023, due largely to a decrease in license fees for third-party software included in our Swivel Secure offerings. For the three months ended March 31, 2024, hardware costs decreased to $12,573 from $44,592 in the three months ended March 31, 2023, related to costs associated with decreased hardware revenue.
Current wording
For the three months ended June 30, 2024, cost of service decreased approximately $287,000 or 80% to $73,385 from $360,156 in the three months ended June 30, 2023, due to reduced costs to support the PortalGuard and Swivel Secure deployments. For the three months ended June 30, 2024, license fees decreased to $148,432 from $198,147 in the three months ended June 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 June 30, 2024, hardware costs decreased to $40,455 from $47,808 in the three months ended June 30, 2023, related to costs associated with mixture of hardware revenue.
Previous wording
Selling, general and administrative expenses for the three months ended March 31, 2024, decreased 8% from $1,931,732 in the corresponding period in 2023 to $1,782,973 in the current quarter. The decreases included reductions in administration, sales personnel costs and marketing show expenses.
Current wording
Selling, general and administrative expenses for the three months ended June 30, 2024, decreased 9% from $2,143,164 in the corresponding period in 2023 to $1,941,866 in the current quarter. The decreases included reductions in administration, sales personnel costs and marketing show expenses, offset by an increase in professional services.
Previous wording
For the three months ended March 31, 2024, hardware sales decreased 76% to $17,647 from $72,689 in the corresponding period in 2023. The decrease was due largely to reduced add-on orders from an existing customer in 2024, compared to increased new hardware deployments in 2023.
Current wording
For the six months ended June 30, 2024, hardware sales decreased 30% to $101,140 from $145,382 in the corresponding period in 2023. The decrease was due largely to reduced add-on orders from an existing customer in 2024, compared to increased new hardware deployments in 2023.
Previous wording
For the three months ended March 31, 2024, research, development, and engineering costs decreased 12% to $607,521 compared to $690,159 in the corresponding period in 2023. The decrease consisted primarily of reductions in personnel costs and reductions in outside services.
Current wording
For the six months ended June 30, 2024, research, development, and engineering costs decreased 4% to $1,198,755 compared to $1,248,340 in the corresponding period in 2023. The decrease consisted primarily of changes in personnel costs and reductions in outside services.
Previous wording
Other income (expense) for the three months ended March 31, 2024 consisted of interest income of $5 and interest expense of $1,356 on the government loan through the BBVA bank net of interest. Other income (expense) for the three months ended March 31, 2023 consisted of interest income of $4, a change on foreign currency in the amount of $15,000, interest expense of $1,920 on the government loan through the BBVA bank and $54,999 on the secured note payable, which amounts were offset by a change in fair value of $141,991 on our secured convertible note payable.
Current wording
Other income (expense) for the six months ended June 30, 2024 consisted of interest income of $51 and interest expense of $10,267 for approximately $,2,700 on the government loan through the BBVA bank and the balance accrued on the 2024 Note, and a loan fee amortization amount of $4,000. Other income (expense) for the six months ended June 30, 2023 consisted of interest income of $27, a change on foreign currency in the amount of $15,000, interest expense of approximately $2,000 on the government loan through the BBVA bank and approximately $112,000 on the secured note payable, which amounts were offset by a change in fair value of $97,423 on our secured convertible note payable.
Previous wording
Net cash provided by operations during the three months ended March 31, 2024 was $297,085. Items of note included:
Current wording
Net cash used in operations during the six months ended June 30, 2024 was $1,123,533. Items of note included:
Previous wording
Net cash used for financing activities during the three months ended March 31, 2024 was $41,841 for repayment of the government loan through the BBVA bank and $13,470 for offering costs. Net cash received from financing activities during the three months ended March 31, 2024 was $1,400 of proceeds for the exercise of prefunded warrants.
Current wording
Net cash provided by financing activities during the six months ended June 30, 2024 was $1,912,408 which included $2,000,000 of proceeds from the 2024 Note, $1,400 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 repayment of the government loan through the BBVA bank and $13,470 for offering costs. Net cash received from financing activities during the six months ended June 30, 2024 was $1,400 of proceeds from the exercise of prefunded warrants.
Previous wording
Net cash used in investing activities during the three months ended March 31, 2024 was $1,869 for capital expenditures.
Current wording
Net cash used in investing activities during the six months ended June 30, 2024 was $1,869 for capital expenditures.
Previous wording
In December 2022, we entered into and closed a securities purchase agreement with AJB Capital Investments, LLC under which we issued a $2,200,000 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.
Current wording
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.
Previous wording
At March 31, 2024, our total cash and cash equivalents were $690,449, as compared to $511,00 at December 31, 2023. At March 31, 2024, we had negative working capital of approximately $1,048,000.
Current wording
At June 30, 2024, our total cash and cash equivalents were $1,260,351, as compared to $511,400 at December 31, 2023. At June 30, 2024, we had negative working capital of approximately $2,560,000.
Previous wording
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 $3.6 million of inventory (currently reserved) purchased for projects in Nigeria. We are exploring other markets and opportunities to sell the product to generate additional cash.
Current wording
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 $3.6 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.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Consolidated Results of Operations -Percent Trend
Current report — wording carried from elsewhere
Revenues and cost of goods sold
Current report — wording carried from elsewhere
For the six months ended June 30, 2024, and 2023, service revenues included approximately $467,000 and $602,000, respectively, of recurring maintenance and support revenue, and approximately $30,000 and $551,000 respectively, of non-recurring custom services revenue. Recurring service revenue decreased $135,000 or 22% in 2024 which was due to the loss of one large customer service agreement. Non-recurring custom services decreased 95% 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.
Current report — wording carried from elsewhere
For the six months ended June 30, 2024, cost of service decreased approximately $303,000 or 59% to $212,234 from $514.957 in the six months ended June 30, 2023, due to reduced costs to support the PortalGuard and Swivel Secure deployments. For the six months ended June 30, 2024, license fees decreased to $296,652 from $819,028 in the six months ended June 30, 2023, due largely to a decrease in license fees for third-party software included in our Swivel Secure offerings. For the six months ended June 30, 2024, hardware costs decreased to $12,573 from $44,592 in the six months ended June 30, 2023, related to costs associated with decreased hardware revenue.
Current report — wording carried from elsewhere
Selling, general and administrative expenses for the six months ended June 30, 2024, decreased 9% from $4,074,896 in the corresponding period in 2023 to $3,724,839. The decreases included reductions in administration, sales personnel costs and marketing show expenses, offset by professional fees.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
If we are unable to generate sufficient revenue to fund current operations and execute our business plan, we may 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.