GlobeNewswire Inc | May 14, 2021 07:58AM EDT

May 14, 2021

WALL, N.J., May 14, 2021 (GLOBE NEWSWIRE) -- BIO-key International, Inc. (Nasdaq: BKYI), an innovative provider of biometric and multi-factor identity and access management (IAM) solutions for strong, convenient user authentication and large-scale identity applications, today reported results for its first quarter ended March 31, 2021 (Q121). BIO-key will host a conference call today at 10:00 a.m. ET (details below) to review its results and outlook.

Q1 & Recent Highlights

-- BIO-key began initial technology deployments for its large-scale ID projects in Africa, recording hardware revenue of $680k in Q1. -- BIO-key secured a$1.2M, three-year contract extension from a Fortune 500 telecommunications customer for fingerprint biometric security support services. -- BIO-key added new higher education customer contracts in the quarter, extending the penetration of its PortalGuard identity and access management solution, while also converting several customers to the new cloud hosted version, PortalGuard IDaaS (Identity-as-a-Service). -- U.S. Department of Justice Division Leverages PortalGuard for Secure Authentication. -- West Coast State Increased Deployment of BIO-keys Biometric Authentication Solution to secure access to Centralized Voter Registration database. -- BIO-key secured a U.S. patent for enabling next-generation continuous biometric user authentication, increasing its IP portfolio to 18 patents.

BIO-key CEO Michael DePasquale commented, Our first quarter performance reflects the progress BIO-key has achieved over the past year in expanding and strengthening our business. We saw improved demand across the business in the first quarter, adding 29 new members to our Channel Alliance Partner program, positioning BIO-key to pursue a much broader base of opportunities on a global basis. Importantly, after several quarters of delay, we commenced initial hardware shipments in support of our large-scale ID projects in Africa and expect to see growing momentum as we progress through the year.

We also continue to focus on innovation and new product development to provide greater functionality and value to our enterprise customers. We recently launched our new mobile app, BIO-key MobileAuthTM with PalmPositiveTM, a touchless palm-scan authentication technology for IOS and Android systems. This easy-to-use app requires no specialized hardware, as it utilizes the devices camera, offers fast registration and enrollment while supporting multifactor and Single Sign-on solutions to streamline logins, while also making them more secure. MobileAuth builds upon our substantial biometric experience to add touchless biometric capabilities to the 16 authentication factors already supported by BIO-keys PortalGuard platform.

PalmPositive is substantially more accurate than common, user-controlled mobile biometric authentication methods. Given the well-known deficiencies in traditional authentication methods, such as passwords, we believe enterprises are increasingly recognizing that they have no choice but to raise the bar on their authentication methods. We plan to add other identity-bound biometric authentication methods, such as voice and facial recognition, to the MobileAuth application in 2021. This will extend our leadership and support for strong multi-factor authentication (MFA) that offers the highest levels of integrity, security, accuracy, and availability across devices.

We continue to see building demand for our PortalGuard solution within the higher education and enterprise markets, particularly our cloud-hosted, IDaaS solution, launched in Q4. PortalGuard IDaaS is an ideal solution for enterprises and institutions that are increasingly moving their IT infrastructure to the asset-light cloud model. The transition to the cloud has been accelerated by the pandemic and the rapid rise in work-from-anywhere and study-from-home demands, and we believe the need to support remote access is here to stay. Off-premises access creates unprecedented IT security challenges as more users access mission critical data and applications outside the enterprise firewall. BIO-key helps enterprises meet these challenges with attractively priced IAM solutions supporting a wide array of MFA options, including our core, patented biometric capabilities.

BIO-keys Channel Alliance Partner (CAP) Program continues to build momentum and is expected to be a key component of our long-term growth strategy as it helps us to substantially expand our reach into new customers on a global basis. We have grown to 60 Partners over the past year, and we are working to double the size of this program in coming months, having expanded the program to include managed service providers (MSPs) and managed security service providers (MSSPs) in addition to system integrators and value-added resellers. We are targeting partners in key verticals, including financial services, government, and higher education where our solutions and value proposition are well established.

During the first quarter, we delivered our first shipment of biometric fingerprint scanners in support of our initiatives in Nigeria, recording initial revenue of $680K in the period. We anticipate increased activity from these contracts throughout 2021, while we continue pursuing other projects in neighboring countries, and additional opportunities across Africa.

OutlookWe believe we have the right team in place, a broad suite of solutions, a strong balance sheet, and the resources we need to drive growth. We are on-track to achieve our full year revenue guidance of $8M to $12M, with potential upside, particularly related to our African contracts, the pace and timing of which remain difficult to predict. The mid-point of our revenue guidance range would represent growth of more than 250% over FY 2020. We believe BIO-key is positioned to achieve profitability within this guidance range depending on the mix of hardware and software revenues.

Financial ResultsQ121 revenue grew significantly to $1.8M from $522k in Q120. The increase is attributable to more than 100% growth in license revenue and 1193% growth in hardware revenue, including $680k of revenue from the Africa projects. License and services growth includes revenue from the PistolStar/PortalGuard acquisition that closed on June 30, 2020 and was not included in Q120 results.

Q121 gross profit increased 182% to $1.1M from $0.4M in Q120 reflecting higher revenues. Gross margin decreased to 59.4% in Q121 vs. 76.2% in Q120, due to a higher proportion of hardware sales in Q121, including fingerprint scanners for our African projects. Hardware represented 55% of Q121 revenue vs. 15% in Q120, however the mix between hardware and software is expected to include more software revenue in future periods.

Q121 operating expenses increased 7% to $1.8M from $1.7M in Q120, despite significantly higher revenue. The increase in operating expenses was attributable primarily to higher research, development and engineering costs reflecting the addition of the PortalGuard operations and continued investments in new product development.

BIO-key reported a net loss available to stockholders of $0.7M, or ($0.09) per share, in Q121, compared to a net loss of $3.5M, or ($1.84) per share, in Q120. Weighted average basic shares outstanding were approximately 7.8M in Q121 compared to 1.9M in Q120.

Financial StrengthBIO-key ended the first quarter with no debt and current assets of $17.8M, including $13.5M of cash and cash equivalents, compared to current assets of $2.0M and $2.3M of convertible notes outstanding at the end of Q120.

Conference Call DetailsDate / Time: Today, Friday, May 14th at 10 a.m. ETCall Dial In #: 1-877-418-5460 U.S. or 1-412-717-9594 InternationalLive Webcast / Replay: Investor Webcast & Replay ? Available for 3 months.Audio Replay: 1-877-344-7529 U.S. or 1-412-317-0088 Int?l; code 10156403

About BIO-key International, Inc. (www.bio-key.com) BIO-key has over two decades of expertise in providing authentication technology for thousands of organizations and millions of users and is revolutionizing authentication with biometric-centric, multi-factor identity and access management (IAM) solutions. Its PortalGuard IAM solution provides convenient and secure access to devices, information, applications, and high-value transactions. BIO-key's patented software and hardware solutions, with industry-leading biometric capabilities, enable large-scale on-premise and Identity-as-a-Service (IDaaS) solutions as well as customized enterprise and cloud solutions.

BIO-key Safe Harbor StatementAll 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 raise additional capital; 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; security breaches; competition in the biometric technology industry; market acceptance of biometric products generally and our products under development; our ability to execute and deliver on contracts in Africa; our ability to expand into Asia, Africa and other foreign markets; our ability to integrate the operations and personnel of PistolStar into our business; the duration and severity of the current coronavirus COVID-19 pandemic and its effect on our business operations, sales cycles, personnel, and the geographic markets in which we operate;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 "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020 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.

Engage with BIO-keyFacebook Corporate: https://www.facebook.com/BIOkeyInternational/LinkedIn Corporate: https://www.linkedin.com/company/bio-key-internationalTwitter Corporate: @BIOkeyIntlTwitter Investors: @BIO_keyIRStockTwits: BIO_keyIR

Media Contact Investor ContactErin Knapp William Jones, David CollinsMatter Communications Catalyst IRBIO-key@matternow.com BKYI@catalyst-ir.com914-260-3158 212-924-9800

BIO-KEY International, Inc. and Subsidiaries PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, December 31, 2021 2020 (Unaudited) ASSETS Cash and cash equivalents $ 13,528,521 $ 16,993,096 Accounts receivable, net 1,432,248 548,049 Due from factor 49,808 60,453 Note receivable - 295,000 Inventory 600,447 330,947 Prepaid expenses and other 1,706,161 201,507 Investment ? debt security 512,821 512,821 Total current assets 17,830,006 1,894,873 Resalable software license rights 56,361 58,882 Equipment and leasehold improvements, net 69,985 81,793 Capitalized contract costs, net 170,219 165,315 Deposits and other assets 8,712 8,712 Note receivable 295,000 - Operating lease right-of-use assets 430,206 487,325 Intangible assets, net 1,460,130 1,514,146 Goodwill 1,262,526 1,262,526 Total non-current assets 3,753,139 3,578,699 TOTAL ASSETS $ 21,583,145 $ 22,520,572 LIABILITIES Accounts payable $ 309,323 $ 244,158 Accrued liabilities 515,952 508,487 Note payable ? PistolStar acquisition, net - 232,000 of debt discountDeferred revenue ? current 524,836 657,349 Operating lease liabilities, current 230,072 234,309 portionTotal current liabilities 1,580,183 1,876,303 Deferred revenue ? long term 49,393 44,987 Operating lease liabilities, net of 211,442 264,163 current portionTotal non-current liabilities 260,835 309,150 TOTAL LIABILITIES 1,841,018 2,185,453 Commitments and Contingencies STOCKHOLDERS? EQUITY Common stock ? authorized, 170,000,000shares; issued and outstanding; 7,817,913and 7,814,572 of $.0001 par value at March 782 782 31, 2021 and December 31, 2020,respectivelyAdditional paid-in capital 119,982,465 119,844,026 Accumulated deficit (100,241,120 ) (99,509,689 )TOTAL STOCKHOLDERS? EQUITY 19,742,127 20,335,119 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 21,583,145 $ 22,520,572

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

BIO-KEY International, Inc. and Subsidiaries PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three months ended March 31, 2021 2020 Revenues Services $ 380,022 $ 207,523 License fees 478,958 235,345 Hardware 1,029,658 79,617 Total revenues 1,888,638 522,485 Costs and other expenses Cost of services 175,944 70,445 Cost of license fees 38,969 10,456 Cost of hardware 551,722 43,362 Total cost of goods sold 766,635 124,263 Gross Profit 1,122,003 398,222 Operating Expenses Selling, general and administrative 1,396,398 1,381,399 Research, development and engineering 441,651 336,889 Total Operating Expenses 1,838,049 1,718,288 Operating loss (716,046 ) (1,320,066 )Other income (expenses) Interest income 2,615 1 Interest expense (18,000 ) (1,551,141 )Loss on extinguishment of debt - (499,076 )Total Other Income (Expenses) (15,385 ) (2,050,216 )Net loss (731,431 ) (3,370,282 )Deemed dividends related to down-round - (112,686 )featuresNet loss available to common stockholders $ (731,431 ) $ (3,482,968 ) Basic Loss per Common Share $ (0.09 ) $ (1.84 ) Weighted Average Shares Outstanding: Basic 7,773,688 1,895,690

BIO-keys weighted average shares outstanding in the 2021 and 2020 periods have been adjusted to reflect BIO-keys 1-for-8 reverse stock split, which was effective November 20, 2020.