BIO-key(BKYI) - 2022 Q3 - Quarterly Report

Financial Performance - Total revenues for the three months ended September 30, 2022, were $1,373,549, an increase of 5.8$1,298,829 for the same period in 2021[14] - Total revenues for the nine months ended September 30, 2022, reached $5,261,835, up 26.0$4,179,557 in the prior year[14] - Gross profit for the three months ended September 30, 2022, was $979,766, a decrease of 2.4$1,004,155 in the same quarter of 2021[14] - Operating loss for the three months ended September 30, 2022, was $(2,360,446), compared to$(993,976) for the same period in 2021[14] - The company reported a net loss of $(2,402,509) for the three months ended September 30, 2022, compared to$(1,023,647) in the same quarter of 2021[14] - The net loss for the nine months ended September 30, 2022, was $(5,120,869), compared to a net loss of$(3,036,761) for the same period in 2021, representing an increase of approximately 68.6%[24] Cash and Assets - Cash and cash equivalents decreased to $2,774,617 as of September 30, 2022, from$7,754,046 at December 31, 2021[10] - Total current assets decreased to $9,882,546 as of September 30, 2022, from$14,012,873 at December 31, 2021[10] - As of September 30, 2022, the company had a total cash balance of approximately $2.8 million and$1,808,036 in trade accounts receivable expected to be collected by early December[40] - The company anticipates converting approximately 50% of its $4.9 million inventory to cash over the next six months[40] - Total inventory as of September 30, 2022, is$4,892,667, a decrease from $4,940,660 as of December 31, 2021, representing a reduction of approximately 1$3,827,503 as of September 30, 2022, compared to $2,153,586 at December 31, 2021[10] - Stockholders' equity decreased to$11,198,508 as of September 30, 2022, from $15,615,455 at December 31, 2021[10] - As of September 30, 2022, the total stockholders' equity was$11,198,508, with an accumulated deficit of $(109,696,339)[18] Revenue Breakdown - For the nine months ended September 30, 2022, license fees revenue amounted to$3,540,592, a significant portion of total revenue[43] - The company reported hardware revenue of $518,377 for the nine months ended September 30, 2022, compared to$1,182,784 for the same period in 2021, indicating a decline[43] - The company’s services revenue for the nine months ended September 30, 2022, was $1,202,866, showing growth compared to the previous year[43] Share-Based Compensation - The company incurred share-based compensation expenses of$236,108 for employees and consultants during the nine months ended September 30, 2022[24] - Share-based compensation expenses for the three months ended September 30, 2022, totaled $100,746, up from$58,050 in the same period of 2021[64] - Restricted stock compensation for the nine-month period ended September 30, 2022, was $156,880, compared to$52,081 for the same period in 2021[97] Acquisitions and Investments - The company made a purchase of Swivel Secure for $(543,578), net of cash acquired, during the nine months ended September 30, 2022[24] - The acquisition of Swivel Secure was completed for a total purchase price consideration of$2,373,487, including a cash payment of $1,273,483 and common stock valued at$600,004[58] - The company acquired accounts receivable, equipment, intangible assets, and goodwill from Swivel Secure totaling approximately $2,401,000, which includes$1,067,372 in goodwill[27] Future Outlook and Risks - The company expects additional cash flows in excess of $1 million annually from the acquisition of Swivel Secure, based on current recurring revenue and expense projections[40] - The earn-out from the Swivel Secure acquisition is contingent upon generating$3,000,000 in revenue and $1,000,000 in operating profit by January 31, 2023[57] - The Company has identified various risks and uncertainties that may affect future performance, including a history of losses and limited revenue[111] - The ongoing COVID-19 pandemic and geopolitical tensions, such as the situation in Ukraine, may affect the Company's business operations and sales cycles[111] - The Company has not provided specific future financial guidance or performance guarantees, emphasizing the uncertainty of forward-looking statements[111] Tax and Valuation - The Company recorded no income tax expense for the three and nine months ended September 30, 2022 and 2021, with an estimated annual effective tax rate of zero[105] - As of September 30, 2022, the Company provided a full valuation allowance against its net deferred tax assets, indicating a belief that these assets are unlikely to be realized[106]