bkyi20210930

bkyi20210930_10q.htm

UNITED STATES 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 September 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) (Zip Code)

(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 ☐	Smaller Reporting Company ☒

Non-accelerated filer ☒	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 November 12, 2021, was 7,833,789.

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

Item 1	Condensed Consolidated Financial Statements (unaudited):
	Balance sheets as of September 30, 2021 (unaudited) and December 31, 2020 (audited)	3
	Statements of operations for the three and nine months ended September 30, 2021 and 2020	4
	Statements of Stockholders’ Equity (deficit) for the three and nine months ended September 30, 2021 and 2020	5
	Statements of cash flows for the nine months ended September 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	21
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

	September 30, 2021			December 31, 2020
	(Unaudited)
ASSETS
Cash and cash equivalents	$	9,591,863		$	16,993,096
Accounts receivable, net		1,541,239			548,049
Due from factor		53,500			60,453
Note receivable		-			295,000
Inventory		4,634,835			330,947
Prepaid expenses and other		950,552			201,507
Investment - debt security		-			512,821
Total current assets		16,771,989			18,941,873
Resalable software license rights		51,294			58,882
Equipment and leasehold improvements, net		71,466			81,793
Capitalized contract costs, net		218,596			165,315
Deposits and other assets		8,712			8,712
Note receivable, net		195,000			-
Investment - debt security		482,821			-
Operating lease right-of-use assets		313,607			487,325
Intangible assets, net		1,352,095			1,514,146
Goodwill		1,262,526			1,262,526
Total non-current assets		3,956,117			3,578,699
TOTAL ASSETS	$	20,728,106		$	22,520,572

LIABILITIES
Accounts payable	$	1,437,045		$	244,158
Accrued liabilities		699,422			508,487
Note payable – PistolStar acquisition, net of debt discount		-			232,000
Deferred revenue, current portion		671,896			657,349
Operating lease liabilities, current portion		206,004			234,309
Total current liabilities		3,014,367			1,876,303
Deferred revenue, net of current portion		61,488			44,987
Operating lease liabilities, net of current portion		118,800			264,163
Total non-current liabilities		180,288			309,150
TOTAL LIABILITIES		3,194,655			2,185,453

COMMITMENTS

STOCKHOLDERS’ EQUITY

Common stock — authorized, 170,000,000 shares; issued and outstanding; 7,825,299 and 7,814,572 of $.0001 par value at September 30, 2021 and December 31, 2020, respectively		783			782
Additional paid-in capital		120,079,118			119,844,026
Accumulated deficit		(102,546,450	)		(99,509,689	)
TOTAL STOCKHOLDERS’ EQUITY		17,533,451			20,335,119
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	20,728,106		$	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 September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020

Revenues
Services	$	318,500		$	491,535		$	985,163		$	928,561
License fees		870,459			346,479			2,011,610			605,366
Hardware		109,870			105,311			1,182,784			239,025
Total Revenues		1,298,829			943,325			4,179,557			1,772,952
Costs and other expenses
Cost of services		176,976			173,823			511,360			336,940
Cost of license fees		45,986			10,775			133,328			29,486
Cost of hardware		71,712			27,011			656,190			117,900
Total costs and other expenses		294,674			211,609			1,300,878			484,326
Gross Profit		1,004,155			731,716			2,878,679			1,288,626

Operating Expenses
Selling, general and administrative		1,385,534			1,490,241			4,276,016			4,083,568
Research, development and engineering		612,597			331,213			1,545,200			986,675
Total operating expenses		1,998,131			1,821,454			5,821,216			5,070,243
Operating loss		(993,976	)		(1,089,738	)		(2,942,537	)		(3,781,617	)

Other income (expense)
Interest income		329			1,106			3,776			26,908
Government grant – Paycheck Protection Program		-			-			-			340,819
Foreign currency loss		-			-			(50,000	)		-
Investment-debt security reserve		(30,000	)		-			(30,000	)		-
Interest expense		-			(2,204,920	)		(18,000	)		(4,323,577	)
Loss on extinguishment of debt		-			-			-			(499,076	)
Total other income (expense), net		(29,671	)		(2,203,814	)		(94,224	)		(4,454,926	)
Net loss		(1,023,647	)		(3,293,552	)		(3,036,761	)		(8,236,543	)
Deemed dividend from trigger of anti-dilution provision feature		-			-			-			(112,686	)
Net loss available to common stockholders	$	(1,023,647	)	$	(3,293,552	)	$	(3,036,761	)	$	(8,349,229	)

Basic and Diluted Loss per Common Share	$	(0.13	)	$	(0.51	)	$	(0.39	)	$	(2.28	)

Weighted Average Shares Outstanding:
Basic and Diluted

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