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CST: 24/08/2019 18:18:40   

Biometric Authentication Provider BIO-key Reports Q1 Results

101 Days ago

WALL, N.J., May 15, 2019 (GLOBE NEWSWIRE) -- BIO-key International, Inc. (Nasdaq: BKYI), an innovative provider of biometric authentication and security solutions, today reported results for its first quarter (Q1'19) ended March 31, 2019 and will host a conference call tomorrow at 10:00 a.m. EDT (details below) to review its results and outlook.

BIO-key CEO Michael DePasquale commented, “Our Q1 results fell short of our expectations as a result of delays in the receipt of monthly cash payments related to a significant software license agreement completed with a Chinese customer in Q4 2018. We had anticipated recording as Q1’19 revenue the receipt of two payments totaling $1.1 million as we had done in Q4’18, however the payments have not yet been received. Candidly, the deteriorating state of U.S. – China trade relations the past few months has emerged as a significant impediment in cross border commerce and particularly in the case of intangible goods such as software.  We continue to aggressively monitor the timing of these anticipated payments.” 

"Importantly, BIO-key continues to see increasing customer interest and traction for our biometric authentication solutions. We are also enhancing our sales efforts and resources and already see positive developments that should lead to stronger results in future periods. To date in 2019, we executed several new deployments of our technology, including deployments by internationally recognized police forces in both Dubai and Singapore and a global aerospace and defense contractor that deployed BIO-key's fingerprint technology.

“Expanding the application scope of our solutions, we introduced ID Director for SAML, a biometric single sign-on solution, which we are targeting toward larger enterprises as well as to identity access management (IAM) providers. We also debuted smart commercial biometric locks with cloud tracking and reporting capabilities at CES 2019 and along with our partners, announced a new smart emergency notification system for schools using biometric data."

Mr. DePasquale concluded, “Despite payment delays with one large customer, there are many reasons for BIO-key to remain confident in its growth prospects. Our optimism is supported by a growing number of enterprises that are starting to take action on security initiatives and are interested in biometric solutions.  Those that have evaluated our solution have been impressed by the ease of implementation with Microsoft solutions. Importantly, recurring service revenue grew 19% and contributed 99% of total service revenues in Q1’19, compared to 66% of total service revenues in Q1'18, demonstrating traction in our focus on recurring Software-as-a-Service revenue.”

Q1 Highlights:  

2019 Financial Guidance
Notwithstanding the revenue impact of delays of monthly payments for the large software license, BIO-key remains confident that it is well positioned to deliver significant top and bottom line improvements for full year 2019. BIO-key believes that its full-year 2019 revenue guidance of $11 to $14M remains achievable and within this revenue guidance range, it would also expect to achieve positive cash flow and net income for the full year. However, the Company cautions investors that based on additional data and collections experience in coming months, it may have to reduce its 2019 revenue and other guidance later in the year when it reports Q2 or Q3 results.

Q1 2019 Results
Q1'19 revenue declined by $289,832 to $551,623 versus $841,455 in Q1'18 with hardware sales, which decreased by $209,500, contributing most to the decline. Hardware sales include both fingerprint readers and biometric locks. During Q1'19, the Company shipped $34,826 of biometric locks or 15% of total hardware revenue compared to $150,680 or 35% of hardware revenue in Q1'18, with the prior-year period benefitting from our introduction of biometric locks.

Service revenues were $241,610 as compared to $302,449 in Q1'18, a decrease of $60,839 or 20%. The decrease was due to non-recurring custom service revenue decreasing $99,100, mostly related to the end of a custom project to one customer. This decrease was partially offset by recurring maintenance and support revenue increasing by $38,300.

License revenue decreased to $83,208 from $102,719 or 19%, due to smaller initial orders from new customers. During the quarter, we shipped products to Omnicell for the continued deployment of our identification technology in its AccuDose(R) product line, as well as to several commercial partners and several healthcare facilities and banks for initial biometric ID deployments or expansion.

Gross margin improved to -9.5% compared to -40.2% in Q1'18, principally due to lower non-cash software license rights amortization expense of $281,074 versus $659,414 in Q1'18. Adjusting for this amortization of non-cash software license rights, gross margin would have been 41% in Q1'19 versus 38% in Q1'18, with the improvement due to a higher proportion of software and services in the Q1'19 revenue mix.

Operating expenses declined 6% to $1.8M in Q1'19 compared to $1.9M in Q1'18, primarily reflecting a decrease in selling, general and administrative expenses as well as lower R&D expenses.

BIO-key’s Q1'19 net loss was ($1.8M), or ($0.13) per basic share, compared to a net loss of ($2.3M), or ($0.30) per basic share after preferred dividends, in Q1'18. Per share results in Q1'19 and Q1'18 are based on a weighted average of 14.0 million and 7.9 million basic shares outstanding, respectively.

BIO-key had net working capital of $1.9 million as of March 31, 2019 compared to $3.0 million at December 31, 2018. Net working capital included $459,311 of cash and cash equivalents at March 31, 2019 versus $323,943 at December 31, 2018.

In April 2019 BIO-key entered into a financing agreement to fund BIO-key’s sales efforts and working capital requirements. The funding is in the form of a $550,000 principal amount secured convertible debenture issued at a 7% discount which was completed on April 4, 2019. The debenture converts into BIO-key common stock at $1.50 per share and may be redeemed at any time by BIO-key at a premium to the principal balance. Subject to the mutual agreement of the Company and the investor, two additional $550,000 debentures may be issued on the same terms at 45 day intervals from the first debenture. 

Conference Call and Webcast Replay 
Date/Time:  Thursday, May 16, 2019 at 10 am ET
Dial-In number:  1-877-418-5460 U.S. or 412-717-9594 (Intl.)
Webcast Replay:  BKYI Q1 2019 Webcast & Replay – Available for 30 days
Call Replay:  1-877-344-7529 U.S. or 412-317-0088; Int’l code 10131570#

BIO-key Safe Harbor Statement
All statements contained in this press release other than statements of historical facts are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the "Act"). The words "estimate," "project," "intends," "expects," "anticipates," "believes" and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are made based on management's beliefs, as well as assumptions made by, and information currently available to, management pursuant to the "safe-harbor" provisions of the Act. These statements are not guarantees of future performance or events and are subject to risks and uncertainties that may cause actual results to differ materially from those included within or implied by such forward-looking statements. These risks and uncertainties include, without limitation, our history of losses and limited revenue; our ability to protect our intellectual property; changes in business conditions; changes in our sales strategy and product development plans; changes in the marketplace; continued services of our executive management team; competition in the biometric technology industry; market acceptance of biometric products generally and our products under development; our ability to expand into the Asian market; delays in the development of products and statements of assumption underlying any of the foregoing, as well as other factors set forth under the caption see "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2018 and other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, the Company undertakes no obligation to disclose any revision to these forward-looking statements whether as a result of new information, future events, or otherwise.

Facebook – Corporate: BIO-key International
Twitter – Corporate: @BIOkeyIntl
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Investor & Media Contacts
William Jones, Tanya Kamatu
Catalyst IR

BIO-KEY International, Inc. and Subsidiary

  Three months ended
March 31,
  2019   2018
Services $ 241,610   $ 302,449
License fees   83,208     102,719
Hardware   226,805     436,287
    551,623     841,455
Costs and other expenses          
Cost of services   90,829     154,733
Cost of license fees and hardware   513,221     1,024,712
    604,050     1,179,445
Gross Profit (Loss)   (52,427)     (337,990)
Operating Expenses          
Selling, general and administrative   1,377,033     1,461,854
Research, development and engineering   374,118     392,154
Total Operating Expenses   1,751,151     1,854,008
Operating loss   (1,803,578)     (2,191,998)
Other income (expenses)          
Interest income   70     6
Total Other Income (Expenses)   70     6
Net loss   (1,803,508)     (2,191,992)
Convertible preferred stock dividends   -     (156,162)
Net loss available to common stockholders $ (1,803,508)   $ (2,348,154)
Basic & Diluted Loss per Common Share $ (0.13)   $ (0.30)
Weighted Average Shares Outstanding:          
Basic & Diluted   13,979,318     7,851,514

BIO-KEY International, Inc. and Subsidiary

  March 31,
    December 31,
Cash and cash equivalents $ 459,311     $ 323,943  
Accounts receivable, net   740,419       1,574,032  
Due from factor   75,824       56,682  
Inventory   980,908       998,829  
Resalable software license rights   1,125,000       1,125,000  
Prepaid expenses and other   175,144       150,811  
Total current assets   3,556,606       4,229,297  
Resalable software license rights, net of current portion   6,483,406       6,790,610  
Equipment and leasehold improvements, net   152,707       148,608  
Capitalized contract costs, net   299,398       319,199  
Deposits and other assets   8,712       8,712  
Operating lease right-of-use assets   568,073        
Intangible assets, net   194,330       195,906  
Total non-current assets   7,706,626       7,463,035  
TOTAL ASSETS $ 11,263,232     $ 11,692,332  
Accounts payable $ 472,629     $ 481,269  
Accounts payable – related party   133,174        
Accrued liabilities   577,996       548,232  
Deferred revenue   333,240       196,609  
Operating lease liabilities, current portion   138,274        
Total current liabilities   1,655,313       1,226,110  
Operating lease liabilities, net of current portion   419,171        
Total non-current liabilities   419,171        
TOTAL LIABILITIES   2,074,484       1,226,110  
Common stock — authorized, 170,000,000 shares; issued and outstanding; 13,991,688 and 13,977,868 of $.0001 par value at March 31, 2019 and December 31, 2018, respectively   1,399       1,398  
Additional paid-in capital   86,125,173       85,599,140  
Accumulated deficit   (76,937,824 )     (75,134,316 )
TOTAL STOCKHOLDERS’ EQUITY   9,188,748       10,466,222  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 11,263,232     $ 11,692,332  

BIO-KEY International, Inc. and Subsidiary

  Three Months Ended March 31,  
  2019     2018  
Net loss $ (1,803,508 )   $ (2,191,992 )
Adjustments to reconcile net loss to cash provided by operating activities:              
Depreciation   19,292       21,020  
Amortization of intangible assets   3,314       5,655  
Amortization of software license rights   281,074       659,414  
Amortization of capitalized contract costs   33,510       18,668  
Operating leases right-of-use assets   34,864        
Stock based directors’ fees   16,505       16,512  
Share and warrant-based compensation for employees and consultants   509,528       533,421  
Change in assets and liabilities:              
Accounts receivable   833,613       2,590,770  
Due from factor   (19,142 )     55,820  
Capitalized contract costs   (13,709 )     (144,018 )
Inventory   17,921       47,687  
Resalable software license rights   26,130       (11,954 )
Prepaid expenses and other   (36,928 )     (14,221 )
Accounts payable   124,534       (246,245 )
Accrued liabilities   29,764       (163,343 )
Deferred revenue   136,631       (133,427 )
Operating leases liability   (32,897 )      
Net cash provided by operating activities   160,496       1,043,767  
Purchase of intangible assets   (1,737 )      
Capital expenditures   (23,391 )     (32,857 )
Net cash used for investing activities   (25,128 )     (32,857 )
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 459,311     $ 1,299,631  

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