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Biometric Authentication Technology Provider BIO-key Reports 2018 Revenue of $4M Reflecting New Revenue Recognition Standards; Initiates 2019 Revenue Guidance of $11M - $14M

By GlobeNewswire,  April 01, 2019, 05:10:00 PM EDT


WALL, N.J., April 01, 2019 (GLOBE NEWSWIRE) -- BIO-key International, Inc. (Nasdaq:BKYI), an innovative provider of biometric authentication and security solutions, today reported results for its fourth quarter (Q4'18) and full year ended December 31, 2018 and provided initial 2019 financial guidance. BIO-key will host a conference call tomorrow at 10:00 a.m. EDT (details below) to review its results and 2019 outlook.

2018 Highlights:

BIO-key CEO Michael DePasquale commented, "We have closed out 2018 with our most significant software license deployments to date which included a $5M Q4 '2018 license deployment.  However, our 2018 financial statements include revenue of only approximately $1.1M of the $5M as under new GAAP revenue recognition standards, this contract is being recorded to revenue as payments are received.   We expect to record the approximate $4M balance due under this license as revenue in 2019.  On a positive note, the deferral of revenue recognition until payments are received will allow for more predictable, consistent quarterly performance.

"Importantly, 2018 marked a significant year of progress for BIO-key both in terms of new business productivity and developing predictable and recurring revenue opportunities for our core biometric software technology for 2019 and beyond. Case in point, our recurring service revenue contributed to 88% of total service revenues in 2018 compared to 41% of total service revenues in 2017. This was a result of a large three-year maintenance contract, and several new orders from smaller customers. In addition, we received multiple contract awards for our ID Director for Windows from highly visible customers in law enforcement, financial services and manufacturing around the world. These customers were looking to either secure the online activity of remote users and shared workstations or incorporate workflow efficiencies, such as replacing cumbersome passwords with ‘frictionless' biometric authentication, while also adding enhanced  tracking and reporting capabilities to their security infrastructure.

2019 Financial Guidance

"Based on revenue and cash flow from contracts in place, combined with favorable prospects from our business development efforts, we believe BIO-key is well positioned to deliver sustainable, top and bottom line improvements in 2019 and thereafter. As a result, BIO-key is initiating 2019 full-year revenue guidance of $11 to $14M, representing significant growth over the past two years combined. Within this revenue guidance range, we expect BIO-key will achieve positive cash flow and net income for the full year period."

Mr. DePasquale concluded, "Our strategy remains to position BIO-key as a preferred provider of secure biometric authentication solutions across a growing base of use cases. We made solid progress in this regard over the past few years, and we are confident in our growth prospects for 2019 and beyond. This view is supported by clear and growing global need for enhanced authentication solutions and the clear value, security and user efficiency our solutions provide across various devices and enterprise and mobile networks."

BIO-key's 2018 results reflect the implementation of the Financial Accounting Standards Board's new revenue recognition standards in Topic 606, Revenue from Contracts with Customers. During Q4 2018, BIO-key executed a $5 million order, which includes two annual extensions for an additional $7 million for its biometric authentication platform from a Chinese based company focused on the technology and financial services industries in Asia.  However, pursuant to the new revenue recognition standards, BIO-key recorded $1.1 million of the $5 million license sale deployed in 2018.   BIO-key's revenue recognition under the contract is being driven by the receipt of monthly cash payments of $555,000 which commenced in early 2019.   Going forward, BIO-key will record revenue on a quarterly basis as those additional payments are received under the contract.

Q4 2018 Results

Q4'18 total revenue decreased to $1.7M from $3.1M in Q4'17, reflecting the recognition of just $1.1M in revenue from over $5M in software licenses shipped in the Q4'18 period. Gross margin decreased to 41% in Q4'18 from 72% in Q4'17, due primarily to lower software revenue and an increase of $270,000 of non-cash software license rights amortization expense.

Operating expenses in Q4'18 decreased by $0.3M, but were offset by a $0.7M write-down of an aged receivable  for a net increase of 21% to $2M in Q4'18 compared to $1.7M in Q4'17.

BIO-key's Q4'18 net loss was $1.4M, or $0.10 per basic share after preferred dividends, compared to a net income of $0.5M, or $0.04 per diluted share after preferred dividends, in Q4'17.

FY 2018 Results

Full year 2018 revenue declined 36% to $4.0M versus $6.3M in 2017, reflecting the recognition of $1.1M in revenue from over $5M in software licenses shipped in Q4 2018 versus $2.5M in Q4 2017. Hardware revenue, including readers and locks, also declined to $1.3M in 2018 compared to $1.9M in 2017. Gross margin declined to (3%) compared to 49% in 2017, principally due to lower recorded revenue in 2018 and increased non-cash software license rights amortization expense of $1.1M.

Operating expenses declined to $6.7M in 2018 compared to $7.3M in 2017, reflecting decreases of $0.3M and $0.2M in selling, general and administrative expenses and R&D expenses, respectively, offset by a $0.7M write-down of an aged receivable in 2018. Full Year 2017 operating expenses included $531K of non-recurring fees and costs related to the up listing of BIO-key's shares to the Nasdaq Capital Market.

BIO-key's 2018 net loss was ($6.9M), or ($0.73) per basic share after preferred dividends, compared to a net loss of ($4.3M), or ($0.76) per basic share after preferred dividends, in 2017. Per share results in 2018 and 2017 are based on a weighted average of 11.6 million and 6.6 million basic shares outstanding, respectively.

BIO-key had net working capital of $3.0 million as of December 31, 2018 and $4.7 million at December 31, 2017. Net working capital included approximately $1.9 million of cash and cash equivalents plus accounts receivable at December 31, 2018 versus $3.2 million at December 31, 2017.

  Conference Call and Webcast Replay

Date/Time:  Tuesday, April 2, 2019 at 10 am ET

Dial-In number:  1-877-418-5460 U.S. or 412-717-9594 (Intl.)

Webcast Replay:  BKYI Q4 and FY 2018 Webcast & Replay - Available for 30 days

Call Replay:  1-877-344-7529 U.S. or 412-317-0088; Int'l code 10129884#

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.

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Investor & Media Contacts

William Jones, Tanya Kamatu

Catalyst IR

212-924-9800

bkyi@catalyst-ir.com

                                                               

BIO-key International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

    Three months ended Dec. 31,

    Years ended Dec. 31,

 
    2018        2017      2018     2017  
                     
                                 
Revenues                                
Services   $   235,267     $   361,428     $   1,012,576     $ 1,193,190  
License fees and other       1,272,276         2,543,029       1,739,897       3,220,371  
Hardware     207,653       150,893       1,292,069       1,889,423  
Total revenues     1,715,196       3,055,350       4,044,542       6,302,984  
                                 
Costs and other expenses                                
Cost of services       69,672         135,921       443,210       439,291  
Cost of license fees, hardware and other     944,938        708,251       3,720,980       2,802,860  
Total costs and other expenses       1,014,610         844,173       4,164,190       3,242,151  
Gross Profit (Loss)       700,586         2,211,177       (119,648       3,060,833  
                                 
Operating expenses                                
Selling, general and administrative       1,746,598         1,384,668       5,333,906       5,676,323  
Research, development and engineering       334,107         330,552       1,415,401       1,659,875  
Total operating expenses       2,080,705         1,715,220       6,749,307       7,336,198  
Operating Income (loss)       (1,380,119 )       495,956       (6,868,955 )     (4,275,365 )
                                 
                                 
Other income                                
Interest income       16        6       80       27  
Total other income       16         6       80       27  
Net Income (loss)     (1,380,103 )       495,963       (6,868,875 )     (4,275,338 )
Deemed dividend from trigger of anti-dilution provision feature                     (1,428,966 )     -  
Convertible preferred stock dividends             (167,283 )     (198,033 )     (769,158 )
Net income (loss) available to common stockholders     (1,380,103 )       328,680       (8,495,874 )     (5,044,496 )
                                 
                                 
Income or (Loss) per Diluted or Basic Common Share   $   (0.10 )   $     0.04     $   (0.73 )   $ (0.76 )
                                 
                                 
Weighted Average Shares Outstanding:                                
Basic or Diluted     14,001,423         7,549,575       11,607,933       6,638,382  
                                 





BIO-key International, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

    December 31,  
    2018     2017  
ASSETS                
Cash and cash equivalents   $ 323,943     $ 288,721  
Accounts receivable, net     1,574,032       2,875,946  
Due from factor     56,682       109,865  
Inventory     998,829       946,847  
Resalable software license rights     1,125,000       2,640,000  
Prepaid expenses and other     150,811       152,654  
Total current assets     4,229,297       7,014,033  
Resalable software license rights, net of current portion     6,790,610       7,933,808  
Accounts receivable, net of current portion     -       760,000  
Equipment and leasehold improvements, net     148,608       181,165  
Capitalized contract costs, net     319,199       -  
Deposits and other assets     8,712       8,712  
Intangible assets, net     195,906       181,104  
Total non-current assets     7,463,035       9,064,789  
TOTAL ASSETS   $ 11,692,332     $ 16,078,822  
                 
LIABILITIES                
Accounts payable   $ 481,269     $ 499,230  
Accrued liabilities     548,232       688,023  
Dividends payable on preferred stock     -       630,408  
Deferred revenue     196,609       507,866  
Total current liabilities     1,226,110       2,325,527  
TOTAL LIABILITIES     1,226,110       2,325,527  
                 
Commitments and Contingencies                
                 
STOCKHOLDERS' EQUITY                
Series A-1 convertible preferred stock: authorized, 100,000 (liquidation preference of $100 per share); issued and outstanding 0 and 62,596 of $.0001 par value at December 31, 2018 and December 31, 2017, respectively     -       6  
Series B-1 convertible preferred stock: authorized, 105,000 (liquidation preference of $100 per share); issued and outstanding 0 and 105,000 of $.0001 par value at December 31, 2018 and December 31, 2017, respectively     -       11  
Common stock — authorized, 170,000,000 shares; issued and outstanding; 13,977,868 and 7,691,324 of $.0001 par value at December 31, 2018 and December 31, 2017, respectively     1,398       769  
Additional paid-in capital     85,599,140       80,829,001  
Accumulated deficit     (75,134,316 )     (67,076,492 )
TOTAL STOCKHOLDERS' EQUITY     10,466,222       13,753,295  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 11,692,332     $ 16,078,822  
                 

  

BIO-key International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

    Years ended December 31,  
    2018     2017  
                 
CASH FLOW FROM OPERATING ACTIVITIES:                
Net loss   $ (6,868,875 )   $ (4,275,338 )
Adjustments to reconcile net loss to cash used for operating activities:                
Allowance for doubtful accounts     720,000       500,000  
Depreciation     84,617       52,709  
Amortization of intangible assets     15,596       13,726  
Amortization of resaleable software license rights     1,513,237       1,510,051  
Amortization of capitalized contract costs     123,171       -  
Share and warrant-based compensation for employees and consultants     942,692       940,734  
Stock based fees to directors     37,532       32,030  
Change in assets and liabilities:                
Accounts receivable     1,341,914       (1,002,700 )
Due from factor     53,183       (56,227 )
Capitalized contract costs     (202,353 )     -  
Inventory     (51,982 )     (481,419 )
Resaleable software license rights     1,144,961       74,552  
Prepaid expenses and other     1,843       (33,472 )
Accounts payable     (17,961 )     32,388  
Accrued liabilities     (139,793 )     352,700  
Deferred revenue     (311,257 )     (125,196 )
Net cash used for operating activities     (1,613,475 )     (2,465,462 )
CASH FLOWS FROM INVESTING ACTIVITIES:                
Patents     (30,398 )     (60,698 )
Capital expenditures     (52,060 )     (166,060 )
Net cash used for investing activities     (82,458 )     (226,758 )
CASH FLOWS FROM FINANCING ACTIVITIES:                
Issuance of common stock     1,875,100       2,000,000  
Costs to issue common stock     (143,945 )     (80,366 )
Net cash provided by financing activities     1,731,155       1,919,634  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     35,222       (772,586 )
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR     288,721       1,061,307  
CASH AND CASH EQUIVALENTS, END OF YEAR   $ 323,943     $ 288,721  

Source: BIO-key International, Inc.

This article appears in: News Headlines

Referenced Stocks: BKYI










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