bkyi20210630

bkyi20210630_10q.htm

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 June 30, 2021

☐

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)

3349 HIGHWAY 138, BUILDING A, SUITE E, WALL, NJ 07719

(Address of Principal Executive Offices)

(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 August 13, 2021, is 7,824,971.

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

Item 1	—	Condensed Consolidated Financial Statements (unaudited):
		Balance sheets as of June 30, 2021 (unaudited) and December 31, 2020 (audited)	3
		Statements of operations for the three and six months ended June 30, 2021 and 2020	4
		Statements of Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2021 and 2020	5
		Statements of cash flows for the six months ended June 30, 2021 and 2020	7
		Notes to condensed consolidated financial statements	9

Item 2	—	Management’s Discussion and Analysis of Financial Conditions and Results of Operations.	20

Item 4	—	Controls and Procedures.	28

PART II. OTHER INFORMATION

Item 6	—	Exhibits.	29

Signatures			30

PART I -- FINANCIAL INFORMATION

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2021			December 31, 2020
	(Unaudited)
ASSETS
Cash and cash equivalents	$	11,479,691		$	16,993,096
Accounts receivable, net		1,347,677			548,049
Due from factor		49,500			60,453
Note receivable		-			295,000
Inventory		2,290,628			330,947
Prepaid expenses and other		1,612,099			201,507
Investment – debt security		512,821			512,821
Total current assets		17,292,416			18,941,873
Resalable software license rights		53,873			58,882
Equipment and leasehold improvements, net		60,259			81,793
Capitalized contract costs, net		192,509			165,315
Deposits and other assets		8,712			8,712
Note receivable		295,000			-
Operating lease right-of-use assets		372,303			487,325
Intangible assets, net		1,406,112			1,514,146
Goodwill		1,262,526			1,262,526
Total non-current assets		3,651,294			3,578,699
TOTAL ASSETS	$	20,943,710		$	22,520,572

LIABILITIES
Accounts payable	$	864,847		$	244,158
Accrued liabilities		575,214			508,487
Note payable – PistolStar acquisition, net of debt discount		-			232,000
Deferred revenue, current portion		549,792			657,349
Operating lease liabilities, current portion		221,399			234,309
Total current liabilities		2,211,252			1,876,303
Deferred revenue, net of current portion		71,037			44,987
Operating lease liabilities, net of current portion		162,373			264,163
Total non-current liabilities		233,410			309,150
TOTAL LIABILITIES		2,444,662			2,185,453

Commitments and Contingencies

STOCKHOLDERS’ EQUITY

Common stock — authorized, 170,000,000 shares; issued and outstanding; 7,819,661 and 7,814,572 of $.0001 par value at June 30, 2021 and December 31, 2020, respectively		782			782
Additional paid-in capital		120,021,069			119,844,026
Accumulated deficit		(101,522,803	)		(99,509,689	)
TOTAL STOCKHOLDERS’ EQUITY		18,499,048			20,335,119
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	20,943,710		$	22,520,572

All BIO-key securities issued and outstanding for all periods reflect BIO-key’s 1-for-8 reverse stock split, which was effective November 20, 2020.

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
Revenues
Services	$	286,641		$	229,503		$	666,663		$	437,026
License fees		662,193			23,542			1,141,151			258,887
Hardware		43,256			54,097			1,072,914			133,714
Total revenues		992,090			307,142			2,880,728			829,627
Costs and other expenses
Cost of services		158,440			92,672			334,384			163,117
Cost of license fees		48,373			8,255			87,342			18,711
Cost of hardware		32,756			47,527			584,478			90,889
Total costs and other expenses		239,569			148,454			1,006,204			272,717
Gross profit		752,521			158,688			1,874,524			556,910

Operating Expenses
Selling, general and administrative		1,374,084			1,211,928			2,890,482			2,593,327
Research, development and engineering		490,952			318,573			932,603			655,462
Total Operating Expenses		1,865,036			1,530,501			3,823,085			3,248,789
Operating loss		(1,112,515	)		(1,371,813	)		(1,948,561	)		(2,691,879	)
Other income (expense)
Interest income		832			25,801			3,447			25,802
Government grant – Paycheck Protection Program		-			340,819			-			340,819
Loss on foreign currency transactions		(50,000	)		-			(50,000	)		-
Interest expense		-			(567,516	)		(18,000	)		(2,118,657	)
Loss on extinguishment of debt		-			-			-			(499,076	)
Total other income (expense), net		(49,168	)		(200,896	)		(64,553	)		(2,251,112	)
Net loss		(1,161,683	)		(1,572,709	)		(2,013,114	)		(4,942,991	)
Deemed dividends related to down-round features		-			-			-			(112,686	)
Net loss available to common stockholders	$	(1,161,683	)	$	(1,572,709	)	$	(2,013,114	)	$	(5,055,677	)

Basic and diluted loss per common share	$	(0.15	)	$	(0.60	)	$	(0.26	)	$	(2.24	)

Weighted Average Common Shares Outstanding:
Basic and diluted		7,776,190			2,608,108			7,774,946			2,253,867

All BIO-key securities issued and outstanding for all periods reflect BIO-key’s 1-for-8 reverse stock split, which was effective November 20, 2020.

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock					Additional Paid-in			Accumulated
	Shares			Amount		Capital			Deficit			Total
Balance as of January 1, 2021		7,814,572		$	782	$	119,844,026		$	(99,509,689	)	$	20,335,119
Issuance of common stock for directors’ fees		2,091			-		7,510			-			7,510
Legal and commitment fees		-			-		(2,709	)		-			(2,709	)
Issuance of restricted common stock to employees		1,250			-		-			-			-
Share-based compensation		-			-		133,638			-			133,638
Net loss		-			-		-			(851,431	)		(851,431	)
Balance as of March 31, 2021		7,817,913		$	782	$	119,982,465		$	(100,361,120	)	$	19,622,127
Issuance of common stock for directors’ fees		1,748			-		5,505			-			5,505
Legal and commitment fees		-			-		(2,519	)		-			(2,519	)
Issuance of restricted common stock to employees		1,250			-		-			-			-
Restricted stock forfeited		(1,250	)		-		-			-			-
Share-based compensation		-			-		35,618			-			35,618
Net loss		-			-		-			(1,161,683	)		(1,161,683	)
Balance as of June 30, 2021		7,819,661		$	782	$	120,021,069		$	(101,522,803	)	$	18,499,048

All BIO-key securities issued and outstanding for all periods reflect BIO-key’s 1-for-8 reverse stock split, which was effective November 20, 2020.

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

	Common Stock				Additional Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance as of January 1, 2020		1,812,483	$	182	$	87,437,661		$	(89,723,016	)	$	(2,285,173	)
Issuance of common stock pursuant to securities purchase agreements		87,500		8		1,032,492			-			1,032,500
Commitment fee adjustment		-		-		(900,000	)		-			(900,000	)
Beneficial conversion feature		-		-		641,215			-			641,215
Issuance of common stock pursuant to warrant conversion		121,500		12		1,457,988			-			1,458,000
Conversion of convertible note payable		288,461		29		1,499,971			-			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		2,309,944	$	231	$	91,794,732		$	(93,205,984	)	$	(1,411,021	)
Issuance of common stock for directors’ fees		2,143		1

SEC Form 10-Q filed by BIO-key International, Inc.