Initiates 2017 Revenue Guidance Range of $6M - $12M
WALL, NJ / ACCESSWIRE / March 31, 2017 / BIO-key International, Inc. (OTCQB: BKYI), an innovative provider of biometric software
and hardware solutions for strong and convenient user authentication, today reported results for its fourth quarter (Q4'16) and
year ended December 31, 2016 and reviewed recent highlights. BIO-key will host a conference call today at 10:00 a.m. ET to review
its results (call details below).
Recent Highlights:
- Initial $1M enterprise biometric software subscription with Fortune 500 company for secure
authentication of several hundred thousand global personnel accessing customer records and enterprise resources; - Launch of
BIO-key's Windows Hello compatible fingerprint readers in Microsoft Stores; - Distribution agreement with Shinden Hightex
Corporation (JASDAQ: 3131) to market and sell BIO-key compact fingerprint readers in Asia; - Consumer Electronics Show 2017 product
introductions: - TouchLock - fingerprint biometric and bluetooth enabled padlocks - FreePass - wearable, mobile USB fingerprint
reader - Q-180 Touch - Micro USB compatible fingerprint reader for Android devices - SidePass - a compact, square, touch reader for
Windows devices; and - BIO-key solutions for healthcare highlighted in booths of eight partners at annual Healthcare Information
and Management Systems Society Conference (HIMSS) February 2017. - Executed 1-for-12 Reverse Stock Split in support of its goal to
seek an uplisting to the Nasdaq Capital Market.
Michael DePasquale, Chairman & CEO of BIO-key, commented, "Over the past year we executed on several strategic initiatives that
should contribute to our growth and solidify our position in the biometrics technology market. We also continued to invest in
product development to expand our software and hardware biometric product offerings to meet a broader array of security needs. We
unveiled some of these 'next generation' products, including innovative fingerprint readers and biometric padlocks, at the Consumer
Electronics Show in January.
"In the past year, we also advanced our distribution reach, both in retail, including in Microsoft Stores and on Amazon, as well
as in new international markets. Collectively, these investments in new products and expanded global distribution put BIO-key in an
even stronger position to participate in the expected ramp-up in adoption of biometric technologies."
Q4 2016 Results
Q4'16 total revenue increased by $28,138 to $1.7 million compared to $1.67 million in Q4'15. A decline in service revenues of
$47,080 was more than offset by an increase in license fees, hardware and other revenue of $75,218, primarily related to a $1
million software subscription recorded in Q4'16.
Gross margin increased to 81.8% in Q4'16 from 62.9% in Q4'15, due to a greater concentration of higher margin software
subscription revenues in Q4'16. Q'416 operating expenses increased due to a $500,000 year-end reserve against a non-current
receivable and slightly higher research and development costs, offset by $67,187 lower selling, general and administrative
expenses.
BIO-key's Q4'16 net loss was ($516,580), or ($0.12) per share after preferred dividends, compared to ($606,766), or ($0.11) per
share after preferred dividends, in Q4'15. BIO-key's bottom line performance improved in Q4'16 primarily due to the higher gross
margin discussed above as well as the elimination of $183,285 in interest expense recorded in Q4'15.
2016 Results
Revenue for the full year 2016 decreased to $3.0M versus $5.3M in 2015, due primarily to a slower than expected pace of software
and hardware deployments as well as the impact of the growing customer preference for the software as a service, or SaaS license
model. BIO-key and third party hardware represented 33% of total revenues in 2016 versus 25% in 2015.
Gross margin remained consistent at approximately 76% in 2016 and 2015. Operating expenses rose to $6.4M in 2016, principally
due to a $0.5M increase in research, development and engineering expense and the $0.5M reserve, partially offset by a $0.2M
decrease in selling general and administrative expense.
BIO-key's 2016 net loss increased to ($4.2M), or ($0.89) per share after preferred dividends, compared to a loss of ($2.0M) or
($0.36) per share after preferred dividends, in 2015. Per share results in 2016 and 2015 are based on a weighted average of 5.6
million and 5.5 million basic shares outstanding, respectively, reflecting the impact of the Company's 1-for-12 reverse split
effected December 2016.
Mr. DePasquale added, "Our 2016 revenue declined to approximately $3 million, the low end of our revised guidance range,
reflecting the inherent variability of our business at this stage due to the timing of large enterprise contracts, and a growing
customer preference for the 'software as a service' (SaaS) delivery model versus perpetual software licenses. Illustrating these
points, we advanced trials with several large enterprises in the past year, however these projects have been slower in progressing
into the larger scale opportunities than we had expected. In Q4'16 we recorded a $1M software subscription contract from a Fortune
500 company that will use our software to authenticate their several hundred thousand employees worldwide. While the SaaS model has
the potential to convert larger perpetual license deals into smaller annual revenue streams, the recurring revenue base of this
structure delivers more stable and predictable financial performance and cash flow.
"While we have substantial confidence in our hardware and software growth initiatives, including several large enterprise
opportunities currently in pilot stages, our experience has demonstrated the challenge of accurately predicting the timing or
ultimate license model that will drive revenue recognition. As a result, we are initiating a wide 2017 revenue guidance range of
$6M to $12M, with a gross margin range of 68% to 82% depending on the mix of software and hardware sales."
Conference Call and Webcast Replay
Date/Time: Friday, March 31, 2017 at 10 am ET Dial-In number: 1-877-418-5460 U.S. or 412-717-9594 (Intl.) Webcast Replay: BKYI
Q4 Webcast & Replay - Available for 30 days Call Replay: 1-877-344-7529 U.S. or 412-317-0088 Int'l; code 10103643#
About BIO-key International, Inc. (www.bio-key.com)
BIO-key is revolutionizing authentication as our easy to use biometric solutions enable convenient and secure access to
information and financial transactions. We eliminate passwords, PINs tokens and cards and make it easy for enterprises and
consumers to secure their devices as well as information in the cloud. Our premium finger scanning devices, including SideSwipe,
SideTouch, EcoID and SidePass offer market leading quality, performance and price. Now anyone can BIO-key their world!
BIO-key Safe Harbor Statement
Certain statements contained in this press release may be construed as "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 subject to certain risks and uncertainties that may cause actual results
to differ materially from those projected on the basis of these statements. These risks and uncertainties include, without
limitation, our history of losses and limited revenue, our ability to develop new products and evolve existing ones, market
acceptance of biometric solutions generally and our specific offerings, our ability to expand into the Asian market, the impact on
our business of the recent financial crisis in the global capital markets, and negative global economic trends, and our ability to
attract and retain key personnel. For a more complete description of these and other risk factors that may affect the future
performance of BIO-key International, Inc., see "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended
December 31, 2015 and its 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. The Company undertakes no obligation to
disclose any revision to these forward-looking statements to reflect events or circumstances after the date made.
Investor & Media Contacts
David Collins, William Jones, Tanya Kamatu Catalyst Global 212-924-9800 bkyi@catalyst-ir.com
Twitter: BIO-keyIR
BIO-key International, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, 2016 2015 ASSETS
Cash and cash equivalents $ 1,061,307 $ 4,321,078 Accounts receivable, current, net of allowance for doubtful accounts 1,563,246
3,391,405 Due from factor 53,638 37,421 Inventory 465,428 348,645 Software license rights 1,560,000 5,000,000 Prepaid expenses and
other 206,677 97,203 Total current assets 4,910,296 13,195,752 Software license rights, less current portion 10,598,411 7,000,000
Accounts receivable, net of current portion 1,570,000 - Equipment and leasehold improvements, net 67,814 63,877 Deposits and other
assets 8,712 8,712 Intangible assets—less accumulated amortization 134,132 147,738 Total non-current assets 12,379,069 7,220,327
TOTAL ASSETS $ 17,289,365 $ 20,416,079 LIABILITIES Accounts payable $ 466,842 $ 1,158,555 Accrued liabilities 335,323 493,067
Dividends payable 401,250 133,851 Deferred revenue 633,062 376,405 Warrant liabilities - 104,284 Total current liabilities
1,836,477 2,266,162 TOTAL LIABILITIES 1,836,477 2,266,162 Commitments and Contingencies STOCKHOLDERS' EQUITY Series A-1 convertible
preferred stock: authorized, 100,000 (liquidation preference of $100 per share); issued and outstanding 90,000 of $.0001 par value
at December 31, 2016 and December 31, 2015 9 9 Series B-1 convertible preferred stock: authorized, 105,000 (liquidation preference
of $100 per share); issued and outstanding 105,000 of $.0001 par value at December 31, 2016 and December 31, 2015 11 11 Common
stock — authorized, 170,000,000 shares; issued and outstanding; 6,093,843 and 5,508,261 of $.0001 par value at December 31, 2016
and December 31, 2015, respectively 609 551 Additional paid-in capital 78,253,413 76,760,796 Accumulated deficit (62,801,154 )
(58,611,450 ) TOTAL STOCKHOLDERS' EQUITY 15,452,888 18,149,917 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,289,365 $ 20,416,079
All BIO-key shares issued and outstanding for all periods reflect BIO-key's 1-for-2 reverse stock split, which was effective
February 3, 2015, and its 1-for-12 reverse stock split, which was effective December 29, 2016.BIO-key International, Inc. and
Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS Three months Ended December 31, Years ended December 31, 2016 2015 2016 2015
Revenues Services $ 128,501 $ 175,581 $ 821,178 $ 931,394 License fees, hardware and other 1,569,386 1,494,168 2,154,578 4,329,831
1,697,887 1,669,749 2,975,756 5,261,225 Costs and other expenses Cost of services 47,829 106,185 216,465 260,436 Cost of license
fees and other 261,733 513,746 513,218 1,019,085 309,562 619,931 729,683 1,279,521 Gross Profit 1,388,325 1,049,818 2,246,073
3,981,704 Operating expenses Selling, general and administrative 1,481,582 1,086,710 4,438,038 4,121,030 Research, development and
engineering 424,540 386,598 2,008,942 1,556,025 1,906,122 1,473,308 6,446,980 5,677,055 Operating loss (517,797 ) (423,490 )
(4,200,907 ) (1,695,351 ) Other income (deductions) Interest income 11 9 30 14 Interest expense (183,285 ) (192,199 ) Gain on
derivative liabilities 1,206 12,085 31,142 Income taxes (912 ) (912 ) 1,217 (183,276 ) 11,203 (161,955 ) Net loss $ (516,580 ) $
(606,766 ) $ (4,189,704 ) $ (1,857,306 ) Convertible preferred stock dividends (200,625 ) (133,851 ) (802,500 ) (133,851 ) Net loss
available to common stockholders (717,205 ) (740,617 ) (4,992,204 ) (1,991,157 ) Basic and Diluted Loss per Common Share $ (0.12 )
$ (0.11 ) $ (0.89 ) $ (0.36 ) Weighted Average Shares Outstanding - basic: 5,783,490 5,507,369 5,587,144 5,502,778 All BIO-key
shares issued and outstanding for all periods reflect BIO-key's 1-for-2 reverse stock split, which was effective February 3, 2015,
and its 1-for-12 reverse stock split, which was effective December 29, 2016.BIO-key International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2016 2015 CASH FLOW FROM OPERATING ACTIVITIES: Net loss $ (4,189,704
) $ (1,857,306 ) Adjustments to reconcile net loss to cash used for operating activities: Allowance for doubtful accounts - (6,741
) Depreciation 49,038 42,996 Amortization of: Intangible assets 13,606 13,606 Debt discount - 92,199 Share and warrant-based
compensation for employees and consultants 260,842 324,115 Gain on derivative liabilities (12,085 ) (31,142 ) Stock issued to
Directors and consultants 167,000 17,000 Change in assets and liabilities: Accounts receivable, net 258,159 (2,759,323 ) Due from
factor (16,217 ) 39,236 Inventory (116,783 ) (336,820 ) Software license rights (158,411 ) (12,000,000 ) Prepaid expenses and other
(109,474 ) 139,226 Accounts payable (691,713 ) 811,244 Accrued liabilities (157,745 ) 4,450 Deferred revenue 256,657 (52,828 ) Net
cash used for operating activities (4,446,830 ) (15,560,088 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (52,975 )
(3,364 ) Net cash used for investing activities (52,975 ) (3,364 ) CASH FLOW FROM FINANCING ACTIVITIES: Preferred dividends paid
(535,100 ) - Proceeds from issuances of preferred stock - 19,500,000 Proceeds from issuances of common stock 1,860,000 - Proceeds
from issuance of note payable - 250,000 Repayment of note payable - (250,000 ) Costs to issue preferred and common stock and note
payable (84,866 ) (459,102 ) Net cash provided by financing activities 1,240,034 19,040,898 NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (3,259,771 ) 3,477,446 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,321,078 843,632 CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,061,307 $ 4,321,078
SOURCE: BIO-key International, Inc.
