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BIO KEY INTERNATIONAL INC

BIO KEY INTERNATIONAL INCBKYI決算レポート

Nasdaq · 情報技術 · サービス-オフィス用ソフトウェア

Bio Key International Inc develops and supplies biometric identity verification and access management solutions, including fingerprint, palm and facial recognition technologies. Its products serve enterprise, government, healthcare, education and retail sectors across North America, Europe and Asia, helping clients enhance security and streamline identity validation workflows.

What changed in BIO KEY INTERNATIONAL INC's 10-K — 2023 vs 2024

Top changes in BIO KEY INTERNATIONAL INC's 2024 10-K

109 paragraphs added · 101 removed · 65 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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We partner with leading application, managed service and infrastructure vendors, such as Intelisys, Insight, NGEN, Amazon Web Services, Pathify (formerly UCROO Campus), Software House International (SHI), BlueAlly, Atlassian, and ProCirrus. We offer our software under a SaaS term license and generate annual recurring revenue (ARR) primarily by selling multi-year subscriptions to our software.
We partner with leading application, managed service and infrastructure vendors, such as Intelisys, Insight, NGEN, Amazon Web Services, Pathify (formerly UCROO Campus), Software House International (SHI), Atlassian, and ProCirrus. We offer our software under a SaaS term license and generate annual recurring revenue (ARR) primarily by selling multi-year subscriptions to our software.
EcoID II® has emerged as our most popular scanner for enterprise deployments. For customers that require the highest level of security, PIV-Pro is a FIPS compliant fingerprint scanner, suitable for highly regulated industries and organizations that want a best-in-class solution.
EcoID II® has emerged as one of our most popular scanner for enterprise deployments. For customers that require the highest level of security, PIV-Pro is a FIPS compliant fingerprint scanner, suitable for highly regulated industries and organizations that want a best-in-class solution.
As governments, colleges and universities continue to operate in remote environments, we have seen additional demand for our solutions. 3 Table of Contents We believe there is potential for significant market growth in the following key areas: ● Enterprise MFA for access to computer networks, and applications. ● Large scale identification projects, especially in Africa and the surrounding regions. ● Government funded initiatives, including the state board of elections. ● International law enforcement applications where we are viewed as a global leader in the biometric technology and serve customers such as the Israeli Defense Force and the Singapore Police departments. ● Consumer mobile credentialing, including mobile payments, credit and payment card programs, data and application access, and commercial loyalty programs. ● Demand for BIO-key hardware products from Windows Hello for Business users and Fortune 2000 companies. ● Government services and highly regulated industries including, Medicare, Medicaid, Social Security, drivers' licenses, campus and school ID, passports/visas. ● Remote authentication challenges, including those created by the remote work shift resulting from the pandemic.
As governments, colleges and universities continue to operate in remote environments, we have seen additional demand for our solutions. 3 Table of Contents We believe there is potential for significant market growth in the following key areas: ● Enterprise MFA for access to computer networks, and applications. ● Large scale identification projects. ● Government funded initiatives, including the state board of elections. ● International law enforcement applications where we are viewed as a global leader in the biometric technology and serve customers such as the Israeli Defense Force and the Singapore Police departments. ● Consumer mobile credentialing, including mobile payments, credit and payment card programs, data and application access, and commercial loyalty programs. ● Demand for BIO-key hardware products from Windows Hello for Business users and Fortune 2000 companies. ● Government services and highly regulated industries including, Medicare, Medicaid, Social Security, drivers' licenses, campus and school ID, passports/visas. ● Remote authentication challenges, including those created by the remote work shift resulting from the pandemic.
As of December 31, 2023, more than 600 customers across multiple industries use BIO-key to secure and manage access for users around the world. Development of Business BIO-key was founded in 1993 to develop and market advanced fingerprint biometric technology and related security software solutions.
As of December 31, 2024, more than 600 customers across multiple industries use BIO-key to secure and manage access for users around the world. Development of Business BIO-key was founded in 1993 to develop and market advanced fingerprint biometric technology and related security software solutions.
Marketing and Distribution We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners. Through our Channel Alliance Program, we have partnered with more than 85 resellers, system integrators and other distribution partners. We are committed to continue to aggressively grow this program in 2024.
Marketing and Distribution We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners. Through our Channel Alliance Program, we have partnered with more than 85 resellers, system integrators and other distribution partners. We are committed to continue to aggressively grow this program in 2025.
Microsoft Partnership We are a Microsoft Partner and our line of compact fingerprint scanners has been tested and qualified by Microsoft to support Windows Hello and Windows Hello for Business. 4 Table of Contents Hardware Hardware products generated 15% and 9% of our revenue in 2023 and 2022, respectively.
Microsoft Partnership We are a Microsoft Partner and our line of compact fingerprint scanners has been tested and qualified by Microsoft to support Windows Hello and Windows Hello for Business. 4 Table of Contents Hardware Hardware products generated 9% and 15% of our revenue in 2024 and 2023, respectively.
Highly Regulated Industries Government ID projects and healthcare organizations, including hospitals, clinics, and small private practices present a strong opportunity for us. Additionally, the financial services industry, including banks and credit unions has grown substantially. Partner Model In 2023, we continued to grow our Channel Alliance Partner program (CAP) focused on partnering with select value added resellers, integrators, and distributors.
Highly Regulated Industries Government ID projects and healthcare organizations, including hospitals, clinics, and small private practices present a strong opportunity for us. Additionally, the financial services industry, including banks and credit unions has grown substantially. Partner Model In 2024, we continued to grow our Channel Alliance Partner program focused on partnering with select value added resellers, integrators, and distributors.
One of those gaps is the challenge of authenticating users that “rove” among workstations. A second gap is preventing unauthorized account sharing and delegation. OEM Customers We continue to prioritize securing agreements with OEM customers. The history of success supporting NCR, McKesson, Omnicell, and LexisNexis provides an established footprint that we intend to build upon.
One of those gaps is the challenge of authenticating users that “rove” among workstations. A second gap is preventing unauthorized account sharing and delegation. OEM Customers We continue to prioritize securing agreements with OEM customers. The history of success supporting NCR, Omnicell, and Idemia provides an established footprint that we intend to build upon.
Government Regulations Various state, federal and EU privacy laws govern the collection, storage, use and any sale of biometric-related data. To the extent that BIO-key’s IDaaS offerings include the collection and storage of customer users’ personal or biometric data, we operate as a processor of such data.
Government Regulations Various state, federal and EU privacy laws govern the collection, storage, use and any sale of biometric-related data. To the extent that our IDaaS offerings include the collection and storage of customer users’ personal or biometric data, we operate as a processor of such data.
Human Capital Resources As of the date of this report, we have forty-two employees consisting of forty-three individuals on a full-time basis and one part-time employee as follows: (i) nineteen in engineering, customer support, and research and development; (ii) ten in finance and administration; and (iii) thirteen in sales and marketing. We also have two factory contractors in China.
Human Capital Resources As of the date of this report, we have forty-two employees consisting of forty-one individuals on a full-time basis and one part-time employee as follows: (i) nineteen in engineering, customer support, and research and development; (ii) nine in finance and administration; and (iii) fourteen in sales and marketing. We also have two factory contractors in China.
Swivel Secure Europe is a Madrid, Spain based provider of IAM solutions serving over 300 customers through a network of dozens of channel partners throughout EMEA. Swivel Secure Europe is the exclusive distributer of AuthControl® Sentry, AuthControl Enterprise and AuthControl MSP product line in Europe, Middle East, and Africa, excluding the United Kingdom.
Swivel Secure Europe is a Madrid, Spain based provider of IAM solutions serving over 300 customers through a network of dozens of channel partners throughout EMEA. Until the fourth quarter of 2024, Swivel Secure Europe was the exclusive distributer of the AuthControl® Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Middle East, and Africa, excluding the United Kingdom.
In order to maintain our position in the market, we will need to continue to upgrade and refine our existing technologies as new standards become relevant to our customers and markets. During the years ended December 31, 2023 and 2022, we incurred expenses of $2,394,926 and $3,252,236, respectively, for research and development.
In order to maintain our position in the market, we will need to continue to upgrade and refine our existing technologies as new standards become relevant to our customers and markets. During the years ended December 31, 2024 and 2023, we incurred expenses of $2,511,080 and $2,394,926, respectively, for research and development.
We employ a customer success team, focused on customer satisfaction and early remediation. Intellectual Property Rights We develop and own significant intellectual property and believe that our intellectual property is fundamental to our biometric and IAM product operation: We own patented technologies and trade secrets developed or acquired by us.
Intellectual Property Rights We develop and own significant intellectual property and believe that our intellectual property is fundamental to our biometric and IAM product operation: We own patented technologies and trade secrets developed or acquired by us. 5 Table of Contents Patents On November 18, 2008, we were issued US patent No. 7,454,624 for our “Match Template Protection within a Biometric Security System” method.
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Swivel Secure maintains a direct sales force with offices in Madrid, Spain and Lisbon, Portugal.
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Swivel Secure, now operates under the name BIO-key EMEA, maintains a direct sales force with offices in Madrid, Spain and Lisbon, Portugal, and sells only BIO-key hardware, software and services. On November 27, 2024, we commenced a collaboration with Fiber Food Systems, Inc., an early-stage company engaged in developing global food security solutions.
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AuthControl Sentry; AuthControl Enterprise; AuthControl MSP Swivel Secure is the exclusive distributer of AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland.
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Under this arrangement, we are working to explore IAM use cases across the food industry. As part of this agreement, we acquired shares of Boumarang, Inc. from Fiber. Boumarang is developing sustainable, AI-driven, hydrogen-powered, long-range drone technology. We are working with Boumarang and its partners to integrate our biometric technology into autonomous systems, targeting applications across aerospace and other industries.
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These solutions include a patented one-time-code extraction technology, helping enterprises manage the increasing data security risks posed by cloud services and bring your own device policies.
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We expect that these initiatives have the potential to create new commercial opportunities in future periods.
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Patents On December 26, 2006, we were issued US patent No. 7,155,040 covering our unique image processing technology, which is critical for enhancing information used in the extraction of biometric minutiae. The issued patent protects a critical part of an innovative four-phase image enhancement process developed by us.
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We employ a customer success team, focused on customer satisfaction and early remediation.
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With the payment of all maintenance fees, this patent will expire on January 29, 2025. On April 15, 2008, we were issued US patent No. 7,359,553 covering our image enhancement and data extraction core algorithm components.
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The solution protected under this patent provides the capability to quickly and accurately transform a fingerprint image into a computer image that can be analyzed to determine the critical data elements.
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With the payment of all maintenance fees, this patent will expire on January 3, 2025. 5 Table of Contents On November 18, 2008, we were issued US patent No. 7,454,624 for our “Match Template Protection within a Biometric Security System” method.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

27 edited+17 added−18 removed125 unchanged
Although recent security concerns relating to identification of individuals and appearance of biometric readers on popular consumer products, including the Apple iPhone, have increased interest in biometrics generally, it remains an undeveloped, evolving market. Biometric based solutions compete with more traditional security methods including keys, cards, personal identification numbers and security personnel.
Although recent security concerns relating to identification of individuals and appearance of biometric readers on popular consumer products, including the Apple iPhone, have increased interest in biometrics generally, it remains an evolving market. Biometric based solutions compete with more traditional security methods including keys, cards, personal identification numbers and security personnel.
In March 2024, the SEC adopted new climate disclosure rules, which require new disclosure in certain SEC filings about material climate-related risks, activities to mitigate or adapt to such risks, board oversight of climate-related risks and management’s role in managing material climate-related risks, and climate-related targets and goals.
In March 2024, the SEC adopted climate disclosure rules, which would require new disclosure in certain SEC filings about material climate-related risks, activities to mitigate or adapt to such risks, board oversight of climate-related risks and management’s role in managing material climate-related risks, and climate-related targets and goals.
There can be no assurance that we will be able to identify, acquire or profitably manage businesses or successfully integrate acquired businesses into the Company without substantial costs, delays or other operational or financial problems.
There can be no assurance that we will be able to identify, acquire or profitably manage any businesses or successfully integrate acquired businesses into the Company without substantial costs, delays or other operational or financial problems.
In addition, if one or more other biometric technologies such as voice, face, iris, hand geometry or blood vessel recognition are widely adopted, it would significantly reduce the potential market for our fingerprint identification technology. We recognized revenues from Africa and the European Union in 2022 and 2023 and expect continued revenues from these regions in future periods.
In addition, if one or more other biometric technologies such as voice, face, iris, hand geometry or blood vessel recognition are widely adopted, it would significantly reduce the potential market for our fingerprint identification technology. We recognized revenues from Africa and the European Union in 2023 and 2024 and expect continued revenues from these regions in future periods.
If we are unable to achieve revenue or raise capital sufficient to cover our ongoing operating expenses, we will be required to scale back operations, including marketing and research initiatives, or in the extreme case, discontinue operations. 9 Table of Contents We may need to obtain additional financing to execute our business plan over the long-term, which may not be available.
If we are unable to achieve revenue or raise capital sufficient to cover our ongoing operating expenses, we will be required to scale back operations, including marketing and research initiatives, or in the extreme case, discontinue operations. 9 Table of Contents We may need to obtain additional financing to execute our business plan, which may not be available.
As of the date of this report, approximately 1,814,000 shares of our common stock (as adjusted to reflect our 1-for-18 reverse stock split, which was effective December 21, 2023) were reserved for issuance upon exercise or conversion of outstanding stock options and warrants.
As of the date of this report, approximately 4,275,056 shares of our common stock (as adjusted to reflect our 1-for-18 reverse stock split, which was effective December 21, 2023) were reserved for issuance upon exercise or conversion of outstanding stock options and warrants.
DePasquale, our Chairman of the Board and Chief Executive Officer, Cecilia C. Welch, our Chief Financial Officer, and James D. Sullivan, our Chief Legal Officer, expire annually, and renew automatically for successive one-year periods unless notice of non-renewal is provided by the Company.
DePasquale, our Chairman of the Board and Chief Executive Officer, Cecilia C. Welch, our Chief Financial Officer, and James D. Sullivan, our Chief Legal Officer, each have one-year terms and renew automatically for successive one-year periods unless notice of non-renewal is provided by the Company.
Based on our limited cash resources, history of significant losses, and negative cash flow, our independent registered public accounting firm has included an explanatory paragraph in their opinion as to the substantial doubt about our ability to continue as a going concern.
Based on our limited cash resources, history of significant losses, negative cash flow, and dependence on debt and equity financing to fund operations, our independent registered public accounting firm has included an explanatory paragraph in their opinion as to the substantial doubt about our ability to continue as a going concern.
We currently require approximately $732,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. During 2023, we generated approximately $9.0 million of revenue, which is below our average monthly requirements.
We currently require approximately $812,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. During 2024, we generated approximately $7.0 million of revenue, which is below our average monthly requirements.
There is significant risk of expanded military confrontation between Russia and other countries. It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof, as well as any counter measures or retaliatory actions by Russia in response.
It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof, as well as any counter measures or retaliatory actions by Russia in response.
Due to, among other factors, our history of significant losses, limited cash resources, and negative cash flow, our independent registered public accounting firm has included an explanatory paragraph in their opinion for the year ended December 31, 2023 as to the substantial doubt about our ability to continue as a going concern.
Due to, among other factors, our history of significant losses, limited cash resources, negative cash flow, and dependence on debt and equity financing to fund operations, our independent registered public accounting firm has included an explanatory paragraph in their opinion for the year ended December 31, 2024 as to the substantial doubt about our ability to continue as a going concern.
We completed the restatement and are now evaluating and working towards the appropriate corrective actions to remediate the material weakness to strengthen our internal controls over the recording of revenue transactions. It is possible that we may discover significant deficiencies or material weaknesses in our internal control over financial reporting in the future.
We completed the restatement and have now corrected and continue to monitor the applied corrective actions to remediate the material weakness and continue to strengthen our internal controls over the recording of revenue transactions. It is possible that we may discover significant deficiencies or material weaknesses in our internal control over financial reporting in the future.
We identified a material weakness in our internal control over financial reporting related to the recording and processing of revenue transactions. Such material weaknesses could materially and adversely affect our operations, financial condition, reputation and stock price.
BUSINESS AND FINANCIAL RISKS We identified a material weakness in our internal control over financial reporting related to the recording and processing of revenue transactions which required the restatement of our quarterly financial statements for the interim periods in 2023. Such material weaknesses could materially and adversely affect our operations, financial condition, reputation and stock price.
These and related actions, responses, and consequences that cannot now be predicted or controlled may contribute to world-wide economic reversals. There is a scarcity of and competition for acquisition opportunities. There are a limited number of operating companies available for acquisition that we deem to be desirable targets.
These and related actions, responses, and consequences that cannot now be predicted or controlled may contribute to world-wide economic reversals. There is a scarcity of and competition for acquisition opportunities.
Delisting could also harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities.
Delisting could also harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities We may need to raise additional funds in the future through issuances of securities and such additional funding may be dilutive to stockholders or impose operational restrictions.
We may experience difficulties in integrating the operations, personnel and assets of any business we acquire which may disrupt our business, dilute stockholder value, and adversely affect our operating results . A component of our business plan is to acquire businesses and assets in the biometric and identity access management industry.
We may experience difficulties in integrating the operations, personnel and assets of any business we acquire which may disrupt our business, dilute stockholder value, and adversely affect our operating results .
Therefore, the Company misstated gross revenues, accounts receivable, and inventory during the Restatement Periods. The restatement related to the Company’s material weakness in internal control over financial reporting over the recording of revenue, accounts receivable, and inventory transactions.
In addition, certain allowances for accounts receivable and certain reserves for inventory were understated. Therefore, the Company misstated gross revenues, accounts receivable, and inventory during the first three quarters of 2023. The restatement related to the Company’s material weakness in internal control over financial reporting over the recording of revenue, accounts receivable, and inventory transactions.
However, we may incur increased costs relating to the assessment and disclosure of climate-related risks and increased litigation risks related to disclosures made pursuant to the new rules, either of which could materially and adversely affect our future results of operations and financial condition.
We may incur increased costs relating to the assessment and disclosure of climate-related risks and increased litigation risks related to such disclosures, either of which could materially and adversely affect our future results of operations and financial condition. Adverse publicity or climate-related litigation that impacts us could have a negative impact on our business.
As a result of the delayed filing of this annual report with the SEC, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until one year from the date we regain and maintain status as a current filer.
As a result of our failure to timely file our annual report on Form 10-K for the year ended December 31, 2023 and our Quarterly Report on SEC Form 10-Q for the period ended March 31, 2024, we are not eligible to register the offer and sale of our securities using a registration statement on Form S-3 until one year from the date we regain and maintain status as a current filer.
As discussed in Note U of our consolidated financial statements, Management has concluded that the Company’s previously issued consolidated financial statements should be restated due to inadvertently including certain revenue from our European subsidiary, Swivel Secure Europe, Ltd., in the first quarter of 2023. In addition, certain allowances for accounts receivable and certain reserves for inventory were understated.
In connection with the audit of our financial statements for the year ended December 31,2023, management concluded that the Company’s previously issued consolidated financial statements should be restated due to inadvertently including certain revenue from our European subsidiary, Swivel Secure Europe, Ltd., in the first quarter of 2023.
If we fail to comply with the requirement to timely file all required periodic financial reports with the Securities and Exchange Commission, or other continued listing requirements of The Nasdaq Stock Market, our Common Stock may be delisted and the price of our Common Stock and our ability to access the capital markets could be negatively impacted.
If we fail to comply with the continued listing requirements of The Nasdaq Stock Market, our Common Stock may be delisted and the price of our Common Stock and our ability to access the capital markets could be negatively impacted. Our common stock is listed for trading on Nasdaq.
The delayed filing of this annual report has made us currently ineligible to use a registration statement on Form S-3 to register the offer and sale of securities, which could adversely affect our ability to raise future capital.
Our failure to timely our annual report on Form 10-K for the year ended December 31, 2023 and our quarterly report on Form 10-Q for the period ended March 31, 2024 has made us ineligible to use a Form S-3 to register the offer and sale of securities, which could adversely affect our ability to raise future capital.
We have international operations and continue to expand our international operations when we acquired Swivel Secure Europe SA.
We are subject to risks and uncertainties associated with the continued growth of our international operations, which may harm our business. We have international operations and continue to expand our international operations when we acquired Swivel Secure Europe SA.
Additionally, in 2023, the SEC adopted new rules related to cybersecurity risk management, which may further increase our regulatory burden and the cost of compliance in such events. 14 Table of Contents Our failure to maintain appropriate environmental, social, and governance ("ESG") practices and disclosures could result in reputational harm, a loss of customer and investor confidence, and adverse business and financial results.
Additionally, in 2023, the SEC adopted new rules related to cybersecurity risk management, which may further increase our regulatory burden and the cost of compliance in such events. 14 Table of Contents Our business could be adversely affected by trade tariffs or other trade barriers.
The new climate disclosure rules have been the subject of multiple legal challenges, so the extent to which the new rules will go into effect remains uncertain. We are currently assessing the impact of the new rules, but at this time, we cannot predict the costs of implementation or any potential adverse impacts resulting from the new rules.
These climate disclosure rules have been the subject of multiple legal challenges, and the SEC recently dropped its defense of the rules, so the extent to which the rules will go into effect remains uncertain. Inconsistency of regulations at the federal and state level may affect the costs of compliance with such legal or regulatory requirements.
New climate disclosure rules adopted by the SEC, may increase our costs and litigation risks, which could materially and adversely affect our future results of operations and financial condition.
Legal, regulatory or market measures to address climate change may materially and adversely affect our future results of operations and financial condition.
On May 22, 2024, we received a second notice from Nasdaq indicating that we were not in compliance with Nasdaq’s continued listing rules due to our failure to timely file our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024.
In order to maintain our listing, we must satisfy Nasdaq’s continued listing requirements. In 2024, we received multiple notices from Nasdaq indicating that we were not in compliance with Nasdaq continued listing requirements.
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BUSINESS AND FINANCIAL RISKS The restatement of our previously issued financial statements has been time-consuming and expensive and could expose us to additional risks that could materially adversely affect our financial position, results of operations and cash flows.
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Our business is subject to the imposition of tariffs and other trade barriers, which may make it more costly for us to import inventory from China and Hong Kong and certain product components from South Korea.
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As discussed in the Explanatory Note to this Annual Report and in Note U, Quarterly Financial Data (Unaudited and Restated), to the consolidated financial statements included in this Annual Report, we are restating our previously issued financial statements for our unaudited consolidated financial statements covering the quarterly reporting periods during fiscal year 2023, consisting of the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023 (the "Restatement Periods").
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The new presidential administration recently imposed new tariffs on imports to the United States from China, Mexico, Canada, and Europe and is expected to impose new tariffs on imports from other countries. In addition, these countries have, and in the future other countries may, impose retaliatory tariffs.
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These restatements, and the remediation efforts we have undertaken and are continuing to undertake, have been time-consuming and expensive and could expose us to a number of additional risks that could materially adversely affect our financial position, results of operations and cash flows.
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The resulting environment of retaliatory trade or other practices or additional trade restrictions or barriers could harm our ability to obtain inventory and product components or sell our products and services at prices customers are willing to pay, which could have a material adverse effect on our business, prospects, results of operations, and cash flows.
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To the extent these steps are not successful, we could be forced to incur additional time and expense. Our management’s attention has also been diverted from the operation of our business in connection with the restatements and ongoing remediation of material weaknesses in our internal controls.
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Relatedly, trade policies could lead to an increasing number of competitors entering the United States, thereby creating more competition.
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If we fail to adequately manage our resources, it could have a severe negative impact on our financial results or stock price. We could be subject to fluctuations in technology spending by existing and potential customers. Accordingly, we will have to actively manage expenses in a rapidly changing economic environment.
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If we experience cost increases as a result of existing or future tariffs and are unable to pass on such additional costs to our customers, or otherwise mitigate the costs, our business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected.
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This could require reducing costs during economic downturns and selectively growing in periods of economic expansion. If we do not properly manage our resources in response to these conditions, our results of operations could be negatively impacted. We are subject to risks and uncertainties associated with the continued growth of our international operations, which may harm our business.
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Scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks. Public companies are facing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure.
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There is an increasing focus from certain investors, employees, customers and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance matters (“ESG”).
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Investor advocacy groups, investment funds and influential investors are also focused on these practices, especially as they relate to the environment, climate change, health and safety, supply chain management, diversity, labor conditions and human rights, both in our own operations and in our supply chain. Increased ESG-related compliance costs could result in material increases to our overall operational costs.
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Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to corporate responsibility are inadequate. The growing investor demand for measurement of non-financial performance is addressed by third-party providers of sustainability assessment and ratings on companies.
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Our ESG practices may not meet the standards of all of our stakeholders and advocacy groups may campaign for further changes.
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The criteria by which our corporate responsibility practices are assessed may change due to the constant evolution of the sustainability landscape, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria.
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Additionally, different stakeholder groups have divergent views on ESG matters, which increases the risk that any action or lack thereof with respect to ESG matters may be perceived negatively by at least some stakeholders and adversely impact our reputation and business.
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If we elect not to or are unable to satisfy such new criteria, investors may conclude that our policies and/or actions with respect to corporate social responsibility are inadequate. We may face reputational damage in the event that we do not meet the ESG standards set by various constituencies.
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Anti-ESG sentiment has gained some momentum across the United States, with several states having enacted or proposed “anti-ESG” policies or legislation or issued related legal opinions. The federal government has similarly taken action to curtail ESG initiatives.
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Furthermore, if our competitors’ corporate social responsibility performance is perceived to be better than ours, potential or current investors may elect to invest with our competitors instead.
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A failure, or perceived failure, to adapt to or comply with regulatory requirements or to respond to investor or stakeholder expectations and standards could negatively impact our business and reputation and have a negative impact on the trading price of our common stock.
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In addition, in the event that we communicate certain initiatives and goals regarding environmental, social and governance matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals.
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A component of our business plan is to acquire businesses and assets in the biometric and identity access management industry and other industries which we believe would complement our current offerings. There are a limited number of operating companies available for acquisition that we deem to be desirable targets.
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If we fail to satisfy the expectations of investors, employees and other stakeholders or our initiatives are not executed as planned, our reputation and business, operating results and financial condition could be adversely impacted.
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These notices referenced failures to timely file our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, to timely file our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024, and failure to maintain minimum stockholders' equity of at least $2.5 million.
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Our common stock is listed for trading on Nasdaq. We must satisfy Nasdaq’s continued listing requirements, including, among other things, to timely file all required periodic financial reports with the Securities and Exchange Commission.
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We have timely cured each of these deficiencies and are currently in compliance with Nasdaq’s continued listing standards. The value of the shares of common stock of Boumarang Inc. that we purchased from Fiber Food Systems, Inc. in connection with our collaboration with Fiber Food Systems increased our stockholders’ equity to a level which satisfied the Nasdaq minimum requirement.
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On April 17, 2024, we received notice from Nasdaq indicating that were not in compliance with Nasdaq continued listing rule which requires us to timely file all required periodic financial reports with the Securities and Exchange Commission due to our failure to timely file this Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
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As a privately held pre-revenue company, Boumarang is subject to all of the risks and uncertainties inherent in an early-stage enterprise and the value of its shares are subject to fluctuation which could be material.
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We have 60 calendar days from the initial notification letter, or until June 17, 2024 to submit a plan to regain compliance with Nasdaq’s continued listing requirements.
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Any material decrease in the value of these shares could cause us our stockholders’ equity to fall below the Nasdaq minimum requirement resulting in the potential delisting of our shares from the Nasdaq stock market.
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If the plan is accepted, we may be eligible for up to 180 calendar days from the original due date to file this Annual Report on Form 10-K, or until October 14, 2024, to regain compliance.
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In addition, in recent weeks the trading price of our common stock has fallen below the $1.00 minimum bid required to maintain our listing on Nasdaq. Continued trading below $1.00 per share could subject us to delisting from the Nasdaq stock market.
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We may need to raise additional funds in the future through issuances of securities and such additional funding may be dilutive to stockholders or impose operational restrictions.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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The cybersecurity team within BIO-key is responsible for assessing and managing risks and informing/gaining feedback from the cybersecurity steering committee. Additionally, our team of dedicated cybersecurity experts/professionals maintain a comprehensive set of cybersecurity policies and standards, including a security incident response framework.
The cybersecurity team within BIO-key is responsible for assessing and managing risks associated with both our internal operations and our use of third-party service providers and informing/gaining feedback from the cybersecurity steering committee. Additionally, our cybersecurity team maintains a comprehensive set of cybersecurity policies and standards, including a security incident response framework.

Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTY We do not own any real estate. We conduct operations from leased premises in Eagan, Minnesota (5,544 square feet), Bedford, New Hampshire (3,364 square feet), and Holmdel, New Jersey (150 square feet).
ITEM 2. PROPERTY We do not own any real estate. We conduct operations from leased premises in Eagan, Minnesota (1,994 square feet), Bedford, New Hampshire (3,364 square feet), and Holmdel, New Jersey (150 square feet).

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Securities Authorized for Issuance under Equity Compensation Plans For information on securities authorized for issuance under the Company’s equity compensation plans, see “Item 12 - Security Ownership of Certain Beneficial Owners and Related Stockholder Matters.” Unregistered Sales of Equity Securities There were no unregistered sales of the Company’s equity securities during 2023 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
Securities Authorized for Issuance under Equity Compensation Plans For information on securities authorized for issuance under the Company’s equity compensation plans, see “Item 12 - Security Ownership of Certain Beneficial Owners and Related Stockholder Matters.” Unregistered Sales of Equity Securities There were no unregistered sales of the Company’s equity securities during 2024 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock currently trades on the Nasdaq Capital Market under the symbol “BKYI”. Holders As of June 4, 2024 the number of stockholders of record of our common stock was 159.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock currently trades on the Nasdaq Capital Market under the symbol “BKYI”. Holders As of April 21, 2025 the number of stockholders of record of our common stock was 170.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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As discussed above, we have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $732,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation.
As discussed above, we have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $812,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand our Company. This discussion is provided as a supplement to and should be read in conjunction with our consolidated financial statements for the years ended December 31, 2023 and 2022 and the accompanying notes included elsewhere in this Report.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand our Company. This discussion is provided as a supplement to and should be read in conjunction with our consolidated financial statements for the years ended December 31, 2024 and 2023 and the accompanying notes included elsewhere in this Report.
PortalGuard operates as a single MFA user experience, providing a rich set of authentication choices to meet every use case. We sell our branded biometric and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution.
PortalGuard operates as a single MFA user experience, providing a wide set of authentication choices to meet every use case. We sell our branded biometric and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution.
We continue to explore other markets and opportunities to sell or return the product to generate additional cash. If we are unable to generate sufficient revenue and positive cash flow from operations or liquidation of existing inventory to fund current operations and execute our business plan, we will need to obtain additional third-party financing during the next twelve months.
We continue to explore other markets and opportunities to sell or return the product to generate additional cash. 24 Table of Contents If we are unable to generate sufficient revenue and positive cash flow from operations or liquidation of existing inventory to fund current operations and execute our business plan, we will need to obtain additional third-party financing during the next twelve months.
In 2022, we expanded our product offerings and customer base when we acquired Swivel Secure, a Madrid, Spain based provider of IAM solutions. Swivel Secure is the exclusive distributer of AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland.
In 2022, we expanded our product offerings and customer base when we acquired Swivel Secure, a Madrid, Spain based provider of IAM solutions. Until the fourth quarter of 2024, Swivel Secure was the exclusive distributer of AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations, as listed below: 1. Revenue Recognition 2. Impairment or Disposal of Long Lived Assets, including Intangible Assets 3. Allowances for Accounts Receivable
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations, as listed below: 1. Revenue Recognition 2. Allowances for Accounts Receivable
The increase was associated with the increased hardware sales and hardware mix described above. Hardware reserve costs for the year ended December 31, 2023 increased $3,186,500 due to a complete reserve of slow moving inventory purchased for projects in Nigeria, and for other older inventory.
The decrease was associated with the decreased hardware sales and hardware mix. Hardware reserve costs for the year ended December 31, 2024 decreased $3,799,505 due to sales of slow-moving inventory after a complete reserve of slow-moving inventory purchased for projects in Nigeria, and for other older inventory in 2023.
These amounts were offset by repayment of convertible note payable, costs associated with the issuance of our securities, and proceeds of $17,478 from sales of common stock under the employee stock purchase plan. Sources of Liquidity Since our inception, our capital needs have been principally met through proceeds from the sale of equity and debt securities.
These amounts were offset by a partial repayment of note payable, repayment of a government loan, and costs associated with the issuance of our securities. Sources of Liquidity Since our inception, our capital needs have been principally met through proceeds from the sale of equity and debt securities.
Items of note included: ● Net positive cash flows related to non-cash expenses of approximately $4,933,000. ● Net negative cash flows related to changes in accounts receivable, prepayments, lease liabilities, and deferred revenue in the aggregate amount of approximately $244,000 and our net loss for the period.
Items of note included: ● Net positive cash flows related to non-cash expenses of approximately $1,219,000. ● Net negative cash flows related to changes in lease liabilities, accounts payable, deposits and accrued liabilities in the aggregate amount of approximately $605,000 and our net loss for the period.
If available financing is insufficient or unavailable or we fail to continue to generate sufficient revenue, we may be required to further reduce operating expenses, delay the expansion of operations, be unable to pursue merger or acquisition candidates, or in the extreme case, not continue as a going concern. 24 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our financial statements are prepared in accordance with accounting principles generally accepted in the United States.
If available financing is insufficient or unavailable or we fail to continue to generate sufficient revenue, we may be required to further reduce operating expenses, delay the expansion of operations, be unable to pursue merger or acquisition candidates, or in the extreme case, not continue as a going concern.
Upon closing of the acquisition, Swivel Secure had cash equal to the outstanding balance. We entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to October 31, 2024 and may be discontinued at that time.
We entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to October 2025 and may be discontinued at that time.
The increase was attributable largely to fourth quarter 2023 sales to an international defense agency. Costs of goods sold For the year ended December 31, 2023, cost of services increased approximately 19% to $861,936, due to the increased costs to support Swivel Secure deployments.
The decrease was attributable largely to fourth quarter 2023 sales to an international defense agency that did not reoccur in 2024. Costs of goods sold For the year ended December 31, 2024, cost of services decreased approximately 54% to $396,274, due primarily to the decreased costs to support Swivel Secure deployments.
For the years ended December 31, 2023, and 2022, service revenues included approximately $1,193,000 and $1,243,000, respectively, of recurring maintenance and support revenue, and approximately $1,026,000 and $546,000, respectively, of non-recurring custom services revenue. Recurring service revenue decreased 4% in 2023 due to delayed renewals in the fourth quarter.
For the years ended December 31, 2024, and 2023, service revenues included approximately $1,017.000 and $1,193,000, respectively, of recurring maintenance and support revenue, and approximately $91,000 and $1,026,000, respectively, of non-recurring custom services revenue. Recurring service revenue decreased 15% in 2024 due to the loss of one large customer service agreement.
License fees for the year ended December 31, 2023 increased $268,502, or approximately 30%, to $1,174,919 due primarily to increased license revenue and related license fees payable for third-party software distributed by Swivel Secure. Hardware costs for the year ended December 31, 2023 increased $289,230, or approximately 70%, to $700,231 from $411,001 in 2022.
License fees for the year ended December 31, 2024 decreased $585,414, or approximately 50%, to 589,505 from $1,174,919 due primarily to decreased license revenue and related license fees payable for third-party software distributed by Swivel Secure. Hardware costs for the year ended December 31, 2024 decreased $183,620, or approximately 26%, to $516,611 from $700,231 in 2023.
We expect capital expenditures to be less than $100,000 during the next twelve months. The following sets forth our primary sources of capital during the previous two years: On November 20, 2023, we completed a private placement of shares of common stock and warrants resulting in net proceeds of approximately $435,000, after deducting placement agent fees and estimated offering expenses.
On November 20, 2023, we completed a private placement of shares of common stock and warrants resulting in net proceeds of approximately $435,000, after deducting placement agent fees and estimated offering expenses.
Other income (expense) 2023-2022 2023 2022 $ Chg % Chg Interest income $ 11,533 $ 233 $ 11,300 4850 % Gain from sale of asset 20,000 - 20,000 100 % Foreign currency loss (39,000 ) - (39,000 ) 100 % Investment-debt security reserve - (452,821 ) 452,821 -100 % Loan transaction costs - (1,147,456 ) 1,147,456 -100 % Change in fair value of convertible note 396,203 (396,203 ) 792,406 -200 % Interest expense (218,270 ) (10,462 ) (207,808 ) 1986 % $ 170,466 $ (2,006,709 ) $ 2,177,175 -108 % The amounts for other income (expense) for the year ended December 31, 2023 consisted of interest income of $11,533, a gain from the sale of a PistolStar domain asset, change in loan transactions costs for payment of the convertible note payable as we elected to value the convertible note under the fair value option, and interest expense of $218,270 on the convertible note payable and the government loan through the BBVA bank.
The amounts for the year ended December 31, 2023, consisted of interest income of $11,533, a gain from the sale of a PistolStar domain asset, change in loan transactions costs for payment of the convertible note payable as we elected to value the convertible note under the fair value option, and interest expense of $218,270 on the convertible note payable and the government loan through the BBVA bank.
For the year ended December 31, 2023 and 2022 license revenue decreased $242,042 or 5% to $4,342,010, due primarily to lower new customer orders. We expect do not expect this trend to continue into 2024. Hardware sales increased by $547,524, or 85%, to $1,194,010 in 2023 from $646,486 in 2022.
For the year ended December 31, 2024 and 2023 license revenue increased $847,360 or 20% to $5,189,370, as several long-term customers expanded their license deployments in addition to several new customer deployments. We expect this trend to continue into 2025. Hardware sales decreased by $562,315, or 47%, to $631,695 in 2024 from $1,194,010 in 2023.
Research, development and engineering 2023-2022 2023 2022 $ Chg % Chg $ 2,394,926 $ 3,252,236 $ (857,310 ) -26 % For the year ended December 31, 2023, research, development and engineering costs were $2,394,926 representing a 26% decrease from 2022. Included in the decrease were lower personnel costs associated with wages and benefits for engineering employees.
Research, development and engineering 2024-2023 2024 2023 $ Chg % Chg $ 2,511,080 $ 2,394,926 $ 116,154 5 % For the year ended December 31, 2024, research, development and engineering costs were $2,511,080 compared with $2,394,926 representing a 5% increase from 2023.
RESULTS OF OPERATIONS Consolidated Results of Operations Two Year % trend Years ended December 31, 2023 2022 Revenues Services 29 % 26 % License fees 56 % 65 % Hardware 15 % 9 % 100 % 100 % Costs and other expenses Cost of services 11 % 10 % Cost of license fees 15 % 13 % Cost of hardware 9 % 6 % Cost of hardware reserve 47 % 6 % 82 % 35 % Gross Profit 18 % 65 % Operating expenses Selling, general and administrative 101 % 133 % Research, development and engineering 31 % 46 % Reversal of earnout payable-Swivel acquisition 0 % -7 % Impairment of goodwill 0 % 34 % Total operating expenses 132 % 206 % Operating loss -114 % -141 % Other income (expense) Total other income (expense) 2 % -29 % Loss before provision for income tax benefit -112 % -170 % Provision for income tax benefit 2 % 0 % Net loss -110 % -170 % 21 Table of Contents Revenues and Costs and other expenses 2023-2022 2023 2022 $ Chg % Chg Revenues Services $ 2,218,885 $ 1,789,720 $ 429,165 24 % License fees 4,342,010 4,584,052 (242,042 ) -5 % Hardware 1,194,010 646,486 547,524 85 % Total Revenue $ 7,754,905 $ 7,020,258 $ 734,647 10 % Costs and other expenses Services $ 861,936 $ 722,152 $ 139,784 19 % License fees 1,174,919 906,417 268,502 30 % Hardware 700,231 411,001 289,230 70 % Hardware reserves 3,586,500 400,000 3,186,500 797 % Total Costs and other expenses $ 6,323,586 $ 2,439,570 $ 3,884,016 159 % Revenues Revenue increased $734,647 or 10% to $8,654,905 in 2023 as compared to $7,020,258 in 2022 due to the factors stated below.
RESULTS OF OPERATIONS Consolidated Results of Operations Two Year % trend Years ended December 31, 2024 2023 Revenues Services 16 % 29 % License fees 75 % 56 % Hardware 9 % 15 % 100 % 100 % Costs and other expenses Cost of services 6 % 11 % Cost of license fees 9 % 15 % Cost of hardware 7 % 9 % Cost of hardware reserve -3 % 46 % Total cost of goods sold 19 % 82 % Gross Profit 81 % 18 % Operating expenses Selling, general and administrative 103 % 101 % Research, development and engineering 36 % 31 % Total operating expenses 139 % 132 % Operating loss -58 % -114 % Other income (expense) Total other income (expense) -4 % 2 % Loss before provision for income tax benefit -62 % -112 % Provision for income tax benefit 0 % 2 % Net loss -62 % -110 % 21 Table of Contents Revenues and Costs and other expenses 2024-2023 2024 2023 $ Chg % Chg Revenues Services $ 1,108,506 $ 2,218,885 $ (1,110,379 ) -50 % License fees 5,189,370 4,342,010 847,360 20 % Hardware 631,695 1,194,010 (562,315 ) -47 % Total Revenue $ 6,929,571 $ 7,754,905 $ (825,334 ) -11 % Costs and other expenses Services $ 396,274 $ 861,936 $ (465,662 ) -54 % License fees 589,505 1,174,919 (585,414 ) -50 % Hardware 516,611 700,231 (183,620 ) -26 % Hardware reserves (213,005 ) 3,586,500 (3,799,505 ) -106 % Total Costs and other expenses $ 1,289,385 $ 6,323,586 $ (5,034,201 ) -80 % Revenues Revenue decreased $825,334 or 11% to $6,929,571 in 2024 as compared to $7,754,905 in 2023.
Liquidity Outlook At December 31, 2023, our total cash and cash equivalents were approximately $511,000, as compared to $2,600,000 at December 31, 2022. At December 31, 2023, we had working capital of approximately $(777,000) as a result of the allowance for doubtful accounts and reserve on inventory.
Liquidity Outlook At December 31, 2024, our total cash and cash equivalents were approximately $438,000, as compared to $511.000 at December 31, 2023. As of the date of this report, our total cash and cash equivalents are approximately $3,000,000.
Investing activities overview Net cash used in investing activities during the year December 21, 2023 was $1,000 for capital expenditures. Fi nancing activities overview Approximately $4,297,000 was provided by financing activities during the year ended December 31, 2023 consisting of the issuance of common stock and warrants in public and private securities offerings, and exercise of warrants.
Fi nancing activities overview Approximately $3,908,000 was provided by financing activities during the year ended December 31, 2024 consisting of the proceeds advanced under a secured note, proceeds from the exercise of warrants, and $3,740 from sales of common stock under our employee stock purchase plan.
Removed
These solutions include a patented one-time-code extraction technology, helping enterprises manage the increasing data security risks posed by cloud services and bring your own device policies. We operate a SaaS business model with customers subscribing to term use of our software for annual recurring revenue.
Added
Swivel Secure, now operates as BIO-key EMEA maintains a direct sales force with offices in Madrid, Spain and Lisbon, Portugal, and sells only BIO-key products. We operate a SaaS business model with customers subscribing to term use of our software for annual recurring revenue.
Removed
Non-recurring custom services increased 88% in 2023 due to increased new customer installations, Swivel Secure service fees, and conversion to the cloud platform. Although inflation has negatively impacted many industries, we have continued to see our pipeline increase for the cybersecurity protection software and services that we offer.
Added
This reduction was due largely to our exit from our distribution agreement with Swivel Secure Limited (SLL) and transition to selling BIO-key branded solutions in the EMEA market and to the factors discussed below.
Removed
We are continuing to explore other markets and opportunities to sell this inventory. 22 Table of Contents Selling, general and administrative 2023-2022 2023 2022 $ Chg % Chg $ 7,862,710 $ 9,364,887 $ (1,502,177 ) -16 % Selling, general and administrative costs for year ended December 31, 2023 were $7,862,710 representing a 16% decrease from 2022.
Added
Non-recurring custom services decreased 91% in 2024 due to a large product customization and upgrade for a Swivel Secure customer without a similar customization in 2024. We expect the service fees to increase from the current levels as we expand our deployments worldwide.
Removed
The decrease included lower sales and marketing expenses related to show participation and personnel costs, offset by an increase in allowance for doubtful accounts ofr $750,000 compared to $360,000 in 2022.
Added
We are continuing to explore other markets and opportunities to sell the slow-moving inventory. Gross Profit Gross profit increased to $5,640,186 in 2024 from $1,431,319 in 2023, due to a $3,000,000 hardware reserve taken in 2023, the impact of growth in higher-margin license sales, and a reduction in lower-margin services and hardware revenue.
Removed
Reversal of earnout payable – Swivel Secure acquisition 2023-2022 2023 2022 $ Chg % Chg $ - $ (500,000 ) $ 500,000 -100 % For the year ended December 31, 2022, we recognized income on the elimination of the earnout payable on the acquisition of Swivel Secure as the requirements for the payout were not achieved.
Added
Our strategic decision to exit the SSL agreement and offer only BIO-key branded solutions in the EMEA market contributed to lower costs to support deployments, including software license fees incurred in connection with sales of Swivel Secure offerings using SLL solutions rather than BIO-key’s internally developed software solutions. 2024 gross profit also benefited from the sale of $213,005 of fully reserved hardware inventory. 22 Table of Contents Selling, general and administrative 2024-2023 2024 2023 $ Chg % Chg $ 7,140,147 $ 7,862,710 $ (722,563 ) -9 % Selling, general and administrative costs for year ended December 31, 2024 were $7,140,147 in 2024 compared to $7,862,710 representing a 9% decrease from 2023.
Removed
Impairment of goodwill 2023-2022 2023 2022 $ Chg % Chg $ - $ 2,387,193 $ (2,387,193 ) -100 % For the year ended December 31, 2022, we recognized an impairment of our goodwill balances due to the decrease in market value of our common stock compared to the carrying value of our net assets.
Added
The decrease was due to proactive cost reductions including reductions in headquarters expenses, sales personnel costs, marketing show expenses, and audit fees which were partially offset by an increase in professional services, principally related to financing activities in 2024.
Removed
The amounts for the year ended December 31, 2022, consisted of interest income of $233, a write-off of the investment-debt security as we received the proceeds and the bond issuer defaulted on repayment, loan transactions costs expensed for the convertible note payable as we elected to value the convertible note payable under the fair value option, the change in the fair value of the convertible note, and interest expense of $10,462 on the convertible note and the government loan through the BBVA bank. 23 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Operating activities overview Net cash used for operations during the year ended December 31, 2023 was $3,793,456.
Added
Included in the increase were higher personnel costs associated with wages and benefits for engineering employees to support new product development.
Removed
In December 2022, we entered into and closed a securities purchase agreement (the “Purchase Agreement”) with AJB Capital Investments, LLC under which we issued a $2,200,000 principal amount senior secured promissory note (the “Note”). The principal amount of the Note was due six months following the date of issuance, subject to one six-month extension.
Added
Other income (expense) 2024-2023 2024 2023 $ Chg % Chg Interest income $ 110 $ 11,533 $ (11,423 ) -99 % Gain from sale of asset - 20,000 (20,000 ) 100 % Foreign currency loss (13,004 ) (39,000 ) 25,996 -67 % Loan transaction costs (124,000 ) - (124,000 ) 100 % Change in fair value of convertible note - 396,203 (396,203 ) -100 % Interest expense (175,755 ) (218,270 ) 42,515 -19 % $ (312,649 ) $ 170,466 $ (483,115 ) -283 % The amounts for other income (expense) for the year ended December 31, 2024 consisted of interest income of $110, interest expense of $175,755 on the note payable and the government loan through the BBVA bank, and a loan fee amortization amount of $124,000.
Removed
Interest under the Note accrued at a rate of 10% per annum, payable monthly through month six and at 12% per annum in months seven through twelve, payable monthly. The Note was secured by a lien on substantially all of our assets and properties. The Note was repaid in December 2022.
Added
Net Loss Reflecting increased gross profit and lower operating expenses, net loss improved to $(4,300,692) in 2024 from a net loss of $(8,521,837) in 2023. 23 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Operating activities overview Net cash used for operations during the year ended December 31, 2024 was $2,914,072.
Removed
In March 2022, in connection with the acquisition of Swivel Secure, we assumed a €500,000 government loan that was issued through BBVA Bank during the COVID-19 pandemic. The loan bears interest at the rate of 1.75% per annum and is payable in monthly installments of approximately $11,900 inclusive of interest from May 2022 through maturity in April 2026.
Added
Investing activities overview Net cash used in investing activities during the year December 31, 2024 was $13,047 for capital expenditures.
Removed
During 2023, we generated approximately $7,755,000 of revenue, which did not generate enough cash to fully fund our average monthly cash requirements. We expect that Swivel Secure Europe will continue to generate positive cash flow in 2024. We also have approximately $3.6 million of inventory (currently reserved) purchased for projects in Nigeria.
Added
We expect capital expenditures to be less than $100,000 during the next twelve months.
Added
The following sets forth our primary sources of capital during the previous two years: On January 15, 2025, we entered into a warrant exercise agreement with an existing institutional investor (the “Investor”) to exercise certain outstanding warrants to purchase an aggregate of 2,061,112 shares of common stock at an exercise price of $1.85 per share which were originally issued to the Investor on September 13, 2024.
Added
In consideration for the exercise of these warrants, we issued new warrants to the Investor to purchase an aggregate 3,091,668 shares of common stock at an exercise price of $2.15 per share. We realized gross proceeds of approximately $3.8 million, prior to deducting placement agent fees and estimated offering expenses.
Added
On September 12, 2024, we entered into a warrant exercise agreement with the Investor to exercise certain outstanding warrants to purchase an aggregate of 1,030,556 shares of common stock. The warrants were originally issued to the Investor on October 31, 2023 and had an original exercise price of $3.15 per share.
Added
In consideration for the immediate exercise of these warrants, we reduced the exercise price of the warrants to $1.85 per share and issued to the Investor additional warrants to purchase an aggregate of 2,061,112 shares of common stock at an exercise price of $1.85 per share.
Added
The forgoing transaction resulted in gross proceeds of approximately $1.9 million prior to deducting placement agent fees and estimated offering expenses. On June 24, 2024, we entered into and closed a note purchase agreement which provided for the issuance of a $2,360,000 principal amount senior secured promissory note (the "2024 Note").
Added
This resulted in gross proceeds of approximately $1,826,000 after deducting placement agent fees, estimated offering expenses, and the original issue discount.
Added
The 2024 Note is due eighteen months (18) following the date of issuance, accrues interest at a rate of nine percent (9%) per annum, and commencing six months after the date of issuance of, the lender shall have the right to redeem up to $270,000 of principal amount each month.
Added
In connection with the warrant exercise agreements described above, we prepaid approximately $762,600 of the amount due under the 2024 Note. Pursuant to a series of exchange agreements in January 2025, the lender exchanged $859,000 principal amount due under the 2024 Note for 504,605 shares of common stock.
Added
As of the date of this report, the outstanding principal amount due under the 2024 Note is $738,400. For a more complete description of the 2024 Note, please see Note J to Our Consolidated Financial Statements included in Part II Item 8 of this report.
Added
During 2024, we generated approximately $6,930,000 of revenue, which did not generate enough cash to fully fund our average monthly cash requirements. The 2024 Note is due on or about December 24, 2025 and we are subject to monthly redemptions request at the option of the lender.
Added
We also have approximately $3.4 million of inventory (currently reserved) purchased for projects in Nigeria.
Added
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our financial statements are prepared in accordance with accounting principles generally accepted in the United States.

Other BKYI 10-K year-over-year comparisons