Bio Key International Inc 10-Q for FY2020 Q3

Bio Key International Inc (BKYI)

10-Q 2020-11-16 For: 2020-09-30

Added on April 05, 2026

About this 10-Q

Bio Key International Inc filed this 10-Q on November 16, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $943.33K; up 108.4% from $452.71K a year earlier
Net loss: $3.29M; compared with a net loss of $1.83M a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

DELAWARE	41-1741861
(State or Other Jurisdiction of Incorporation of Organization)	(IRS Employer Identification Number)

Large accelerated filer ☐	Accelerated filer ☐	Smaller Reporting Company ☒

Non-accelerated filer ☒	Emerging growth company ☐

PART I. FINANCIAL INFORMATION

Item 1	Condensed Consolidated Financial Statements (unaudited):
	Balance sheets as of September 30, 2020 (unaudited) and December 31, 2019 (audited)	3
	Statements of operations for the three and nine months ended September 30, 2020 and 2019	4
	Statements of Stockholders’ Equity (deficit) for the three and nine months ended September 30, 2020 and 2019	5
	Statements of cash flows for the nine months ended September 30, 2020 and 2019	7
	Notes to condensed consolidated financial statements	9
Item 2	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	25
Item 4	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6	Exhibits	35

Signatures		37

	September 30, 2020			December 31, 2019
	(Unaudited)
ASSETS
Cash and cash equivalents	$	18,395,508		$	79,013
Accounts receivable, net		492,380			126,000
Due from factor		63,262			110,941
Note receivable		295,000			-
Inventory		399,396			429,119
Prepaid expenses and other		204,019			108,397
Investment in debt security		516,121			512,821
Total current assets		20,365,686			1,366,291
Resalable software license rights		68,758			73,802
Equipment and leasehold improvements, net		78,941			95,509
Capitalized contract costs, net		149,860			231,519
Deposits and other assets		8,712			8,712
Operating lease right-of-use assets		556,915			566,479
Intangible assets, net		1,617,171			154,386
Goodwill		1,154,526			-
Total non-current assets		3,634,883			1,130,407
TOTAL ASSETS	$	24,000,569		$	2,496,698

LIABILITIES
Accounts payable	$	314,546		$	844,557
Loans payable – related parties		-			188,737
Accrued liabilities		399,756			572,885
Convertible notes payable, net of debt discount and debt issuance costs		-			2,255,454
Note payable – PistolStar Acquisition, net of debt discount		235,000			-
Deferred revenue - current		773,013			359,212
Operating lease liabilities, current portion		229,853			170,560
Total current liabilities		1,952,168			4,391,405
Deferred revenue - long term		40,492			-
Operating lease liabilities, net of current portion		325,454			390,466
Total non-current liabilities		365,946			390,466
TOTAL LIABILITIES		2,318,114			4,781,871

COMMITMENTS

STOCKHOLDERS’ EQUITY

Common stock — authorized, 170,000,000 shares; issued and outstanding; 62,376,443 and 14,411,432 of $.0001 par value at September 30, 2020 and December 31, 2019, respectively		6,237			1,441
Additional paid-in capital		119,748,463			87,436,402
Accumulated deficit		(98,072,245	)		(89,723,016	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		21,682,455			(2,285,173	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	24,000,569		$	2,496,698

	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019

Revenues
Services	$	491,535		$	237,372		$	928,561		$	710,975
License fees		346,479			98,272			605,366			241,780
Hardware		105,311			117,070			239,025			779,965
Total Revenues		943,325			452,714			1,772,952			1,732,720
Costs and other expenses
Cost of services		173,823			65,683			336,940			214,933
Cost of license fees		10,775			369,604			29,486			1,119,147
Cost of hardware		27,011			73,366			117,900			458,049
Total costs and other expenses		211,609			508,653			484,326			1,792,129
Gross Profit (Loss)		731,716			(55,939	)		1,288,626			(59,409	)

Operating Expenses
Selling, general and administrative		1,490,241			915,066			4,083,568			3,350,770
Research, development and engineering		331,213			300,132			986,675			975,466
Total operating expenses		1,821,454			1,215,198			5,070,243			4,326,236
Operating loss		(1,089,738	)		(1,271,137	)		(3,781,617	)		(4,385,645	)

Other income (expense)
Interest income		1,106			19			26,908			143
Government grant – Paycheck Protection Program		-			-			340,819			-
Interest expense		(2,204,920	)		(558,449	)		(4,323,577	)		(673,316	)
Loss on extinguishment of debt		-			-			(499,076	)		-
Total other income (expense), net		(2,203,814	)		(558,430	)		(4,454,926	)		(673,173	)
Net loss		(3,293,552	)		(1,829,567	)		(8,236,543	)		(5,058,818	)
Deemed dividend from trigger of anti-dilution provision feature		-			-			(112,686	)		-
Net loss available to common stockholders	$	(3,293,552	)	$	(1,829,567	)	$	(8,349,229	)	$	(5,058,818	)

Basic and Diluted Loss per Common Share	$	(0.06	)	$	(0.13	)	$	(0.28	)	$	(0.36	)

Weighted Average Shares Outstanding:
Basic and Diluted		51,486,756			14,387,467			29,305,427			14,163,120

	Common Stock						Additional Paid-in			Accumulated
	Shares			Amount			Capital			Deficit			Total
Balance as of January 1, 2020		14,411,432		$	1,441		$	87,436,402		$	(89,723,016	)	$	(2,285,173	)
Issuance of common stock pursuant to securities purchase agreements		700,000			70			1,032,430			-			1,032,500
Commitment fee adjustment		-			-			(900,000	)		-			(900,000	)
Beneficial conversion feature		-			-			641,215			-			641,215
Issuance of common stock pursuant to warrant exercises		972,000			97			1,457,903			-			1,458,000
Issuance of common stock for conversion of convertible note payable		2,307,690			231			1,499,769			-			1,500,000
Deemed dividends related to down-round features		-			-			112,686			(112,686	)		-
Share-based compensation		-			-			512,719			-			512,719
Net loss		-			-			-			(3,370,282	)		(3,370,282	)
Balance as of March 31, 2020		18,391,122		$	1,839		$	91,793,124		$	(93,205,984	)	$	(1,411,021	)
Issuance of common stock for directors’ fees		17,140			2			15,005			-			15,007
Issuance of common stock for pursuant to securities purchase agreements		251,518			25			145,308			-			145,333
Warrants issued with convertible notes		-			-			1,388,339			-			1,388,339
Warrant issued for consulting fees		-			-			94,655			-			94,655
Legal and commitment fees		-			-			(199,328	)		-			(199,328	)
Issuance of common stock for conversion of convertible note payable		3,521,535			352			2,288,648			-			2,289,000
Share-based compensation		-			-			33,177			-			33,177
Net loss		-			-			-			(1,572,709	)		(1,572,709	)
Balance as of June 30, 2020		22,181,315		$	2,218		$	95,558,928		$	(94,778,693	)	$	782,453
Issuance of common stock for directors’ fees		10,328			1			7,002			-			7,003
Issuance of common stock pursuant to public offering		34,114,500			3,411			22,171,014			-			22,174,425
Commitment fee adjustment		(600,000	)		(60	)		60			-			-
Issuance of common stock pursuant to warrant exercises		6,364,300			636			4,136,159			-			4,136,795
Warrant issued for consulting fees		-			-			12,921			-			12,921
Issuance of restricted common stock to employees		306,000			31			(31	)		-			-
Legal and commitment fees		-			-			(2,171,896	)		-			(2,171,896	)
Share-based compensation		-			-			34,306			-			34,306
Net loss		-			-			-			(3,293,552	)		(3,293,552	)
Balance as of September 30, 2020		62,376,443		$	6,237		$	119,748,463		$	(98,072,245	)	$	21,682,455

	North America		South America		EMEA*		Asia		September 30, 2020

License fees	$	339,747	$	-	$	6,732	$	-	$	346,479
Hardware		103,511		-		1,800		-		105,311
Services		450,994		13,800		22,893		3,848		491,535
Total Revenues	$	894,252	$	13,800	$	31,425	$	3,848	$	943,325

Purchase consideration:
Total cash paid, net of acquired cash	$	2,000,000
4% Promissory note, net of discount of $36,000		464,000
Working capital adjustment		(108,000	)
Total purchase price consideration	$	2,356,000

Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	100,747
Accounts receivable		184,792
Prepaid expenses and other current assets		9,485
Fixed assets		36,467
Intangible assets		1,480,000
Goodwill		1,154,526
Total assets acquired		2,966,017

Accrued expenses and other current liabilities		738
Accrued payroll		19,279
Deferred revenue		590,000
Total fair value of assets acquired and liabilities assumed	$	2,356,000

	Amount		Estimated useful life (in years)
Trade Name	$	130,000		15
Proprietary Software		420,000		5
Customer relationships		930,000	8	-	10
Total identifiable intangible assets	$	1,480,000

	September 30,			December 31,
	2020			2019

Accounts receivable - current	$	506,165		$	139,785
Accounts receivable - non current		1,720,000			1,720,000
Total accounts receivable		2,226,165			1,859,785
Allowance for doubtful accounts - current		(13,785	)		(13,785	)
Allowance for doubtful accounts - non current		(1,720,000	)		(1,720,000	)
Total allowance for doubtful accounts		(1,733,785	)		(1,733,785	)
Accounts receivable, net of allowance for doubtful accounts	$	492,380		$	126,000

	Three Months Ended September 30,		Three Months Ended September 30,
	2020		2019

Selling, general and administrative	$	51,157	$	121,999
Research, development and engineering		3,073		15,102
	$	54,230	$	137,101

	Nine Months Ended September 30,		Nine Months Ended September 30,
	2020		2019

Selling, general and administrative	$	632,793	$	690,612
Research, development and engineering		76,995		103,577
	$	709,788	$	794,189

	Three Months ended September 30,				Nine Months ended September 30,
	2020		2019		2020		2019

Factoring fees	$	15,934	$	32,891	$	81,164	$	125,231

	September 30,		December 31,
	2020		2019

Securities Purchase Agreement dated July 10, 2019	$	-	$	2,255,454
January 2020 Note		-		-
February 2020 Note		-		-
May 2020 Note		-		-
June 2020 Note		-		-
Convertible notes payable, net	$	-	$	2,255,454

	3 Months ended September 30,		9 Months ended September 30,
	2020		2020

Lease cost
Operating lease cost	$	67,773	$	175,219
Total lease cost	$	67,773	$	175,219

Balance sheet information
Operating ROU assets			$	556,915

Operating lease liabilities, current portion			$	229,853
Operating lease liabilities, non-current portion				325,454
Total operating lease liabilities			$	555,307

Weighted average remaining lease term (in years) – operating leases				2.49
Weighted average discount rate – operating leases				5.50	%

	September 30,		December 31,
	2020		2019

Finished goods	$	258,038	$	287,761
Fabricated assemblies		141,358		141,358
Total inventory	$	399,396	$	429,119

2020 (remaining three months)	$	63,812
2021		256,977
2022		187,594
2023		89,226
Total future lease payments		597,609
Less: imputed interest		(42,302	)
Total	$	555,307

	% of Total Revenues for the Three Months Ended September 30,
	2020			2019
Revenues
Services		52	%		52	%
License fees		37	%		22	%
Hardware		11	%		26	%
Total revenues		100	%		100	%
Costs and other expenses
Cost of services		18	%		15	%
Cost of license fees		1	%		82	%
Cost of hardware		3	%		16	%
Total costs and other expenses		22	%		112	%
Gross Profit (loss)		78	%		-12	%

Operating expenses
Selling, general and administrative		158	%		202	%
Research, development and engineering		35	%		66	%
Total operating expenses		193	%		268	%
Operating loss		-116	%		-281	%

Other income (expense)
Total other income (expense)		-234	%		-123	%
Net loss		-349	%		-404	%

	% of Total Revenues for the Nine Months Ended September 30,
	2020			2019
Revenues
Services		52	%		41	%
License fees		34	%		14	%
Hardware		13	%		45	%
Total revenues		100	%		100	%
Costs and other expenses
Cost of services		19	%		12	%
Cost of license fees		2	%		65	%
Cost of hardware		7	%		26	%
Total costs and other expenses		27	%		103	%
Gross profit (loss)		73	%		-3	%

Operating expenses
Selling, general and administrative		230	%		193	%
Research, development and engineering		56	%		56	%
Total operating expenses		286	%		250	%
Operating loss		-213	%		-253	%

Other income (expense)
Total other income (expense)		-251	%		-39	%
Net loss		-465	%		-292	%

	●	Net positive cash flows related to adjustments for non-cash expenses of approximately $5,772,000.

	●	Net negative cash flows related to accounts receivable, prepayments, accounts payable, accruals, lease liabilities, and deferred revenue of approximately $1,224,000 and our net loss for the nine months.

Exhibit No.					Description

1.1*					Form of Underwriting Agreement (incorporated by reference to Exhibit 1.1 to Amendment No. 1 to the Registration Statement on Form S-1/A, filed with the SEC on July 17, 2020).

4.1					Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Registration Statement on Form S-1/A, filed with the SEC on July 17, 2020).

4.2					Form of Warrant (incorporated by reference to Exhibit 4.3 to Amendment No. 1 to the Registration Statement on Form S-1/A, filed with the SEC on July 17, 2020).

4.3					Form of Warrant Agency Agreement (incorporated by reference to Exhibit 4.4 to Amendment No. 2 to the Registration Statement on Form S-1/A, filed with the SEC on July 20, 2020).

10.1					$500,000 Promissory note, dated June 30, 2020 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on July 7, 2020).

10.2					Securities Purchase Agreement dated June 29, 2020 by and between the Company and Lind Global Macro Fund, LP (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed with the SEC on July 1, 2020)

10.3					Form of Restricted Stock Award Agreement under the BIO-key International, Inc. Amended & Restated 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed with the SEC on August 28, 2020)

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		XBRL Instance

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation

101.DEF		XBRL Taxonomy Extension Definition

101.LAB		XBRL Taxonomy Extension Labels

101.PRE		XBRL Taxonomy Extension Presentation

	BIO-key International, Inc.

Dated: November 16, 2020	/s/ Michael W. DePasquale
	Michael W. DePasquale
	Chief Executive Officer
	(Principal Executive Officer)

Dated: November 16, 2020	/s/ Cecilia Welch
	Cecilia Welch Chief Financial Officer
	(Principal Financial Officer)

Dated: November 16, 2020

	/s/ CECILIA C. WELCH
	Cecilia C. Welch
	Chief Financial Officer

	BIO-KEY INTERNATIONAL, INC.


	By:	/s/ Michael W. DePasquale
		Michael W. DePasquale
		Chief Executive Officer

	Dated: November 16, 2020