10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

or

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT

For the Transition Period from              to

Commission file number 1-13463

BIO-KEY INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE	41-1741861
(State or Other Jurisdiction of Incorporation of Organization)	(IRS Employer Identification Number)

3349 HIGHWAY 138, BUILDING A, SUITE E, WALL, NJ  07719

(Address of Principal Executive Offices)

(732) 359-1100

(Issuer’s Telephone Number)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller Reporting Company ☒

Indicate by check mark whether the registrant is a shell company (as defined by rule 12b-2 of the Exchange Act)  Yes  ☐  No  ☒

Number of shares of Common Stock, $.0001 par value per share, outstanding as of August 13, 2015 is 66,001,260.

1

BIO-KEY INTERNATIONAL, INC.

INDEX

PART I. FINANCIAL INFORMATION
Item 1	—	Condensed Consolidated Financial Statements
		Balance sheets as of June 30, 2015 (unaudited) and December 31, 2014	3
		Statements of operations for the three and six months ended June 30, 2015 and 2014 (unaudited)	4
		Statements of cash flows for the six months ended June 30, 2015 and 2014 (unaudited)	5
		Notes to condensed consolidated financial statements	6
Item 2	—	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	13
Item 4	—	Controls and Procedures	21
PART II. OTHER INFORMATION
Item 2	—	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 6	—	Exhibits	22
Signatures			23

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PART I -- FINANCIAL INFORMATION

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2015			December 31, 2014
	(Unaudited)
ASSETS
Cash and cash equivalents	$	282,376		$	843,632
Accounts receivable, net of allowance for doubtful accounts of $20,526 at June 30, 2015 and December 31, 2014		133,985			625,341
Due from factor		1,542,184			76,657
Inventory		412,569			11,825
Prepaid expenses and other		74,220			236,429
Total current assets		2,445,334			1,793,884
Equipment and leasehold improvements, net		84,317			103,509
Deposits and other assets		8,712			8,712
Intangible assets—less accumulated amortization		154,541			161,344
Total non-current assets		247,570			273,565
TOTAL ASSETS	$	2,692,904		$	2,067,449
LIABILITIES
Accounts payable	$	869,114		$	347,311
Accrued liabilities		436,293			488,617
Deferred revenue		601,751			429,233
Warrant liabilities		28,974			43,227
Total current liabilities		1,936,132			1,308,388
TOTAL LIABILITIES		1,936,132			1,308,388
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock — authorized, 170,000,000 shares; issued and outstanding; 66,001,260 of $.0001 par value at June 30, 2015 and December 31, 2014		6,600			6,600
Additional paid-in capital		57,675,273			57,506,605
Accumulated deficit		(56,925,101	)		(56,754,144	)
TOTAL STOCKHOLDERS’ EQUITY		756,772			759,061
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,692,904		$	2,067,449

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

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BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Revenues
Services	$	255,269		$	281,711		$	505,622		$	530,942
License fees and other		2,017,535			121,078			2,416,008			1,239,369
		2,272,804			402,789			2,921,630			1,770,311
Costs and other expenses
Cost of services		56,905			113,105			123,968			152,280
Cost of license fees and other		88,489			48,146			160,782			126,195
		145,394			161,251			284,750			278,475
Gross Profit		2,127,410			241,538			2,636,880			1,491,836
Operating Expenses
Selling, general and administrative		979,861			895,147			2,020,542			1,752,143
Research, development and engineering		393,999			470,888			800,640			957,545
		1,373,860			1,366,035			2,821,182			2,709,688
Operating profit (loss)		753,550			(1,124,497	)		(184,302	)		(1,217,852	)
Other income (expenses)
Interest income		2			2			4			3
Gain (loss) on derivative liabilities		(406	)		98,209			14,253			(106,739	)
Income taxes		-			-			(912	)		(912	)
Total other income (expenses)		(404	)		98,211			13,345			(107,648	)
Net profit (loss)	$	753,146		$	(1,026,286	)	$	(170,957	)	$	(1,325,500	)
Basic and Diluted Earnings (Loss) per Common Share	$	0.01		$	(0.02	)	$	(0.00	)	$	(0.02	)
Weighted Average Shares Outstanding:
Basic and diluted		66,001,260			58,001,934			66,001,260			57,970,309

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

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BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2015			2014
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(170,957	)	$	(1,325,500	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation		21,270			20,016
Amortization
Intangible assets		6,803			6,803
Loss (gain) on derivative liabilities		(14,253	)		106,739
Share-based and warrant compensation		222,247			132,218
Exercise of stock options		-			14,651
Change in assets and liabilities:
Accounts receivable trade		491,356			(100,794	)
Due from factor, net		(1,465,527	)		(18,678	)
Inventory		(400,744	)		(12,873	)
Prepaid expenses and other		162,209			(709	)
Accounts payable		521,803			(188,850	)
Accrued liabilities		(52,324	)		39,324
Deferred revenue		172,518			(22,436	)
Net cash used for operating activities		(505,599	)		(1,350,089	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(2,078	)		(5,501	)
Net cash used for investing activities		(2,078	)		(5,501	)
CASH FLOW FROM FINANCING ACTIVITIES:
Repurchase of outstanding warrants		-			(150,000	)
Costs to issue common stock		(53,579	)		-
Net cash used for financing activities		(53,579	)		(150,000	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(561,256	)		(1,505,590	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		843,632			2,023,349
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	282,376		$	517,759

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

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BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015 (Unaudited)

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business

BIO-key International, Inc.was founded in 1993 as a fingerprint biometric technology company. Biometric technology is the science of analyzing specific human characteristics which are unique to each individual in order to identify a specific person from a broader population. We develop and market advanced fingerprint biometric identification and identity verification technologies, cryptographic authentication-transaction security technologies, as well as related identity management and credentialing software solutions. We sell our products and provide services primarily to commercial entities within highly regulated industries, like healthcare and financial services and the broader corporate enterprise.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key International, Inc. and its wholly-owned subsidiary (collectively, the “Company”) and are stated in conformity with accounting principles generally accepted in the United States of America ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. Significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented. The balance sheet at December 31, 2014 was derived from the audited financial statements, but does not include all of the disclosures required by accounting principles generally accepted in the United States of America. These unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (the “Form 10- K”), filed with the SEC on March 31, 2015.

Recently Issued Accounting Pronouncements

In January 2015, ASU No. 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary items” (“ASU 2015-01”) was issued. ASU 2015-01 eliminates from GAAP the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company is currently evaluating the effects of adopting ASU 2014-15 on its consolidated financial statements but the adoption is not expected to have a significant impact.

In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires debt issuance costs related to a debt liability measured at amortized cost to be reported in the balance sheet as a direct deduction from the face amount of the debt liability. ASU 2015-03 is effective for interim and annual periods beginning January 1, 2016 with early adoption permitted, and is applied on a retrospective basis. The adoption of ASU 2015-03 is not expected to materially impact the Company’s consolidated financial statements.

In July 2015 the FASB issued ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory" ("ASU 2015-11"). The amendments in ASU 2015-11 clarifies the measurement of inventoty to be the lower of cost or realizable value and would only apply to inventory valued using the FIFO or avergae costing methods. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The reporting entity should apply the amendments prospectively with earlier application permitted as of the beginning as of the beginning of an interim or annual reporting period. The Company is currently evaluating the effects of adopting ASU 2015-11 on its consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements.

2. GOING CONCERN

The Company has incurred significant losses to date and at June 30, 2015, had an accumulated deficit of approximately $57 million. In addition, broad commercial acceptance of the Company’s technology is critical to the Company’s success and ability to generate future revenues. At June 30, 2015, the Company’s total cash and cash equivalents were approximately $282,000, as compared to approximately $844,000 at December 31, 2014.

The Company has financed itself in the past through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. The Company estimates that it currently requires approximately $460,000 per month to conduct operations, a monthly amount that it has been unable to achieve consistently through revenue generation.

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If the Company is unable to generate sufficient revenue to meet its goals, it will need to obtain additional third-party financing to (i) conduct the sales, marketing and technical support necessary to execute its plan to substantially grow operations, increase revenue, and serve a significant customer base; and (ii) provide working capital. No assurance can be given that any form of additional financing will be available on terms acceptable to the Company, that adequate financing will be obtained by the Company, in order to meet its needs, or that such financing would not be dilutive to existing shareholders. 

The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern, and assumes continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The matters described in the preceding paragraphs raise substantial doubt about the Company’s ability to continue as a going concern. Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, and become profitable in its future operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

3. SHARE BASED COMPENSATION

The following table presents share-based compensation expenses included in the Company’s unaudited condensed interim consolidated statements of operations:

	Three Months ended June 30,		Three Months ended June 30,
	2015		2014
Selling, general and administrative	$	28,760	$	18,985
Research, development and engineering		5,611		27,460
	$	34,371	$	46,445

	Six Months ended June 30,		Six Months ended June 30,
	2015		2014
Selling, general and administrative	$	162,218	$	93,826
Research, development and engineering		34,372		38,392
	$	196,590	$	132,218

4. FACTORING

Due from factor consisted of the following as of:

	June 30,			December 31,
	2015			2014
Original invoice value	$	2,184,290		$	306,625
Factored amount		(315,739	)		(229,968	)
Due to factor		(326,367	)		-
Due from factor	$	1,542,184		$	76,657

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As of December 2011, the Company entered into a 24 month accounts receivable factoring arrangement with a financial institution (the “Factor”). Pursuant to the terms of the arrangement, the Company, from time to time, sells to the Factor certain of its accounts receivable balances on a non-recourse basis for credit approved accounts. The Factor remits 35% for foreign and 75% for domestic of the accounts receivable balance to the Company (the “Advance Amount”), with the remaining balance, less fees to be forwarded to the Company once the Factor collects the full accounts receivable balance from the customer. Factoring fees range from 2.75% to 21% of the face value of the invoice factored, and are determined by the number of days required for collection of the invoice. In April 2012, the terms were updated from monthly to quarterly, and the 24-month arrangement was extended to August 1, 2014.  In July of 2014, the arrangement was extended to July 31, 2016.

5. INVENTORY

Inventory is stated at the lower of cost, determined on a first in, first out basis, or market, and consists primarily of fabricated assemblies and finished goods. Inventory is comprised of the following as of:

	June 30,		December 31,
	2015		2014
Finished goods	$	40,588	$	11,825
Fabricated assemblies		371,981		-
Total inventory	$	412,569	$	11,825

6. EARNINGS (LOSS) PER SHARE COMMON STOCK (“EPS”)

The Company’s basic EPS is calculated using net income (loss) available to common stockholders and the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes the effect from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options and warrants and the assumed conversion of convertible notes and preferred stock.

The reconciliation of the numerators of the basic and diluted EPS calculations was as follows for both of the following three and six month periods ended June 30:

	Three Months ended June 30,					Six Months ended June 30,
	2015		2014			2015			2014
Basic Numerator:
Net income (loss) available to common stockholders	$	753,146	$	(1,026,286	)	$	(170,957	)	$	(1,325,500	)
Basic Denominator		66,001,260		58,001,934			66,001,260			57,970,309
Per Share Amount		0.01		(0.02	)		(0.00	)		(0.02	)

The following table sets forth the options and warrants which were excluded from the diluted per share calculation even though the exercise prices were less than the average market price of the common shares because the effect of including these potential shares was antidilutive for the three and six months ended June 30:

	Three Months ended June 30,				Six Months ended June 30,
	2015		2014		2015		2014
Stock options		-		1,469,162		34,349		1,034,736
Warrants		-		771,123		-		-
Total		-		2,240,285		34,349		1,034,736

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Items excluded from the diluted per share calculation because the exercise price was greater than the average market price of the common shares:

	Three Months ended June 30,				Six Months ended June 30,
	2015		2014		2015		2014
Stock options		3,475,000		205,000		3,087,500		205,000
Warrants		19,622,081		125,000		19,622,081		15,184,565
Total		23,097,081		330,000		22,709,581		15,389,565

7. STOCKHOLDERS’ EQUITY

Derivative Liabilities

In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative liability instruments under the provisions of FASB ASC 815, “Derivatives and Hedging.”

Securities Purchase Agreements dated October 25, 2013 and November 8, 2013

Pursuant to a series of Private Investors Securities Purchase Agreements (the “PI SPA”), on October 25, 2013 and November 8, 2013, the Company issued to certain private investors an aggregate of 12,323,668 units consisting of 12,323,668 post split shares of common stock (the “Shares”) and warrants to purchase an additional 12,323,668 post-split shares of common stock (the “Warrants”) for an aggregate purchase price of $3,697,100. The warrants are immediately exercisable at an exercise price of $0.50 per post-split share, have a term of three years, and were exercisable on a cashless basis if at any time following the nine month anniversary of the issuance date, there is not an effective registration statement covering the public resale of the shares of Common Stock underlying the warrants. The Company filed a registration statement on November 22, 2013 and such registration was declared effective on December 31, 2013.

In connection with the share issuances described above, and pursuant to a placement agency letter agreement, the Company paid the placement agent cash commissions equal to 8% of the gross proceeds of the offering, reimbursed the placement agent for its reasonable out of pocket expenses, and issued to the placement agent warrants (the “Placement Agent Warrants”) to purchase an aggregate of 985,893 post split shares of common stock. The Placement Agent Warrants have substantially the same terms as the warrants issued to the investors, except the Placement Agent Warrants are immediately exercisable on a cashless basis. 

The cashless exercise features contained in the warrants are considered to be derivatives and the Company recorded warrant liabilities on the consolidated balance sheet. The Company initially recorded the warrant liabilities equal to their estimated fair value of $325,891. Such amount was also recorded as a reduction of additional paid-in capital. The Company is required to mark-to-market the warrant liabilities at the end of each reporting period. For the quarter ended June 30, 2015, the Company recorded a loss on the change in fair value of the cashless exercise features of $406. For the six months ended June 30, 2015, the Company recorded a net gain on the change in fair value of the cashless exercise feature of $14,253. As of June 30, 2015, the fair value of the cashless exercise features was $28,974. The fair value of the cashless exercise features was $43,227 as of December 31, 2014.

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Securities Purchase Agreement dated November 13, 2014

Pursuant to a Securities Purchase Agreement, dated November 13, 2014, by and between the Company and a number of private and institutional investors (the “November 2014 Private Investor SPA”), the Company issued to certain private investors 7,974,999 post split shares of common stock and warrants to purchase an additional 11,962,501 post split shares of common stock for aggregate gross proceeds of $1,595,000. In addition, for each share purchased in this offering, the investors surrendered to the Company for cancellation a warrant to acquire one share of our common stock which we previously issued in a private placement transaction in November 2013. This resulted in the cancellation of warrants to purchase an aggregate of 7,974,999 post split shares of common stock.

The common stock has a purchase price reset feature. If at any time prior to the two year anniversary of the effective date of the registration statement covering the public resale of such shares, the Company sells or issues shares of common stock or securities that are convertible into common stock at a price lower than $0.20 per share, the Company will be required to issue additional shares of common stock for no additional consideration.

Based on an evaluation as discussed in FASB ASC 815-15, “Embedded Derivatives” and FASB ASC 815-40-15, “Contracts in Entity’s Own Equity - Scope and Scope Exceptions,” the Company determined that the purchase price reset feature in the common stock issued was not considered indexed to its own stock because neither the occurrence of a sale of equity securities by the issuer at market nor the issuance of another equity contract with a lower strike price is an input to the fair value of a fixed-for-fixed option or forward on equity shares. As such, the purchase price reset feature should be bifurcated from the common stock and accounted for as a derivative liability.

The Company valued the purchase price reset feature using a Monte Carlo simulation at the date of issuance, December 31, 2014, and June 30, 2015, and determined that the purchase price reset feature had no value as the calculated price of the common stock was not below $0.20 per share.

The warrants have a term of five years and an exercise price of $0.30 per post-split share. Warrants to purchase 5,981,251 post-split shares of common stock were immediately exercisable. The remaining warrants to purchase 5,981,250 post-split shares of common stock became exercisable on the completion of a 1 - for - 2 reverse split of the Company's common stock in February 2015.

The warrants have customary anti-dilution protections including a “full ratchet” anti-dilution adjustment provision which are triggered in the event the Company sells or grants any additional shares of common stock, options ,warrants or other securities that are convertible into common stock at a price lower than $0.30 per share, The anti-dilution adjustment provision is not triggered by certain “exempt issuances” which among other issuances, includes the issuance of shares of common stock, options or other securities to officers, employees, directors, consultants or service providers.

The warrants are exercisable on a cashless basis if at any time there is no effective registration statement covering the resale of the shares of common stock underlying the warrants. See below.

Based on an evaluation as discussed in FASB ASC 815-15, “Embedded Derivatives” and FASB ASC 815-40-15, “Contracts in Entity’s Own Equity - Scope and Scope Exceptions,” the Company determined that the full ratchet anti-dilution feature in the warrants issued were not considered indexed to its own stock because neither the occurrence of a sale of equity securities by the issuer at market nor the issuance of another equity contract with a lower strike price is an input to the fair value of a fixed-for-fixed option or forward on equity shares. As such, the full ratchet anti-dilution feature should be bifurcated from the warrants and accounted for as a derivative liability.

The Company did not value the derivative liability. One of the key determinants of the Company’s decision to not value the derivative liability was the high likelihood that a future financing would not occur that would trigger the down round feature. Whether a future equity financing would occur would be determined by the cash needs of the Company and management’s willingness to trigger the down round feature. The Company’s reasons were as follows:

1. The Company’s cash position.

2. The stock price of the Company’s common stock.

Under GAAP, the Company is required to mark-to-market the derivative liability at the end of each reporting period. The Company did not value the derivative liability at the date of issuance, December 31, 2014 or June 30, 2015. At such dates, the Company determined that it was highly unlikely that an equity financing would occur. Such conclusion was based upon the discussion noted above.

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The Company filed a registration statement on Form S-1 with the SEC to register the public resale of 13,956,250 of the shares of common stock issued in the November 2014 Private Investor SPA. The registration statement was declared effective on January 29, 2015. Post reverse split, the Company filed a registration statement on Form S-1 with the SEC to register the balance of the shares of common stock issued under the November 2014 Private Investor SPA which was declared effective on May 4, 2015.

Warrants

On March 9, 2015, the Company issued a warrant to purchase 575,000 shares of common stock to an independent contractor which vests 25% every three months and is exercisable at a strike price of $0.21 per share through March 8, 2020.  

Share based expense related to the value of the stock warrants is recorded over the requisite service period, which is generally the vesting period for each tranche. Stock warrants issued by the Company are valued using the Black-Scholes option-pricing model. For the three and six months ended June 30, 2015, the Company recorded an expense of $25,657 related to the stock warrants.

Issuances of Stock Options

During the three and six months ended June 30, 2015, the Company granted 0 and 75,000 stock options to new employees. The options are exercisable for a term of seven years and vest in equal installments over a three-year period commencing on the date of grant. The options are exercisable at $0.20 per share.

The fair value of the options was estimated on the date of grant at $12,047 using the Black-Scholes option-pricing model with the following assumptions: risk free interest rate – 1.5%, expected life of options in years – 5.5, expected dividends – 0, volatility of stock price – 118%.

8. SEGMENT INFORMATION

The Company has determined that its continuing operations are one discrete segment consisting of biometric products. Geographically, North American sales accounted for approximately 19% and 62% of the Company’s total sales for the three months ended June 30, 2015 and 2014, respectively, and were approximately 26% and 29% of the Company’s total sales for the six months ended June 30, 2015 and 2014, respectively.

9. FAIR VALUES OF FINANCIAL INSTRUMENTS

Cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and notes payable, are carried at, or approximate, fair value because of their short-term nature.

 The fair value of the warrant liabilities were measured using the following assumptions:

Risk-free interest rate	0.40	%	–		0.42	%
Expected term	1.32		–		1.36
Expected dividends				0
Volatility of stock price	78.5	%	–		78.9	%

The warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various assumptions about future activities and the Company’s stock prices and utilizes historical volatility as inputs.

Warrant issued under PI SPA
Fair value at January 1, 2015	$	43,227
Gain on derivative		(14,253	)
Balance, June 30, 2015	$	28,974

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10. MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

For the three months ended June 30, 2015 and 2014, one customer accounted for 81%, and two customers accounted for 55% of revenue, respectively. For the six months ended June 30, 2015 and 2014, one customer accounted for 63%, and two customers accounted for 73% of revenue, respectively.

At June 30, 2015, four customers accounted for 52% of accounts receivable.  At December 31, 2014, one customer accounted for 62% of accounts receivable.

11. CONTINGENCY

On or about March 13, 2014, LifeSouth Community Blood Centers, Inc. filed a lawsuit against us the Company in the Superior Court of Monmouth County, New Jersey (MON-L-1042-14) alleging a breach of a license agreement and seeking return of all amounts paid under the license in the amount of $718,500. The Company has denied all claims and asserted a counterclaim against LifeSouth for non-payment of support and maintenance service fees. Discovery has commenced and is proceeding.  The Company has filed a motion seeking summary judgment in its favor with respect to all claims. 

12. SUBSEQUENT EVENTS

The Company has reviewed subsequent events through the date of filing.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information contained in this Report on Form 10-Q and in other public statements by us and our officers include or may contain certain forward-looking statements. All statements other than statements of historical facts contained in this Report, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “will,” “may,” “future,” “plan,” “intend” and “expect” and similar expressions generally identify forward-looking statements. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Although we believe that our plans, intentions and expectations reflected in the forward-looking statements are reasonable, we cannot be sure that they will be achieved. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: 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 between us and other companies in the biometric technology industry; market acceptance of biometric products generally and our products under development; 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, 2014 filed with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Except as required by law, we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

OVERVIEW

We develop and market advanced fingerprint biometric identification and identity verification technologies, cryptographic authentication-transaction security technologies, as well as related identity management and credentialing software solutions. We were pioneers in developing automated, finger identification technology that supplements or compliments other methods of identification and verification, such as personal inspection identification, passwords, tokens, smart cards, ID cards, PKI, credit card, passports, driver’s licenses, OTP or other form of possession or knowledge-based credentialing.  Advanced BIO-key® technology has been and is used to improve both the accuracy and speed of competing finger-based biometrics.

In partnerships with OEMs, integrators, and solution providers, we provide biometric software solutions to private and public sector customers.  We provide the ability to positively identify and authenticate individuals before granting access to valuable corporate resources, web portals or applications in seconds.  Powered by our patented Vector Segment Technology™ or VST™, WEB-key® and BSP development kits are fingerprint biometric solutions that provide interoperability with all major reader manufacturers, enabling application developers and integrators to integrate fingerprint biometrics into their applications. 

We have developed what we believe is the most discriminating and effective commercially available finger-based biometric technology. Our primary focus is in marketing and selling this technology into commercial logical and physical privilege entitlement & access control markets.  Our primary market focus includes, among others, mobile payments & credentialing, online payments and credentialing, and healthcare record and payment data security.  Our secondary focus includes government markets, primarily law enforcement forensic investigation and Department of Homeland Security.

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STRATEGIC OUTLOOK

Historically, our largest market has been access control within highly regulated industries such as healthcare.  However, we believe the mass adoption of advanced smart-phone and hand-held wireless devices has caused commercial demand for advanced user authentication to emerge.  The introduction of smart-phone capabilities, like mobile payments and credentialing, could effectively require biometric user authentication on mobile devices to reduce risks of identity theft, payment fraud and other forms of fraud in the mobile or cellular-based world wide web. As more services and payment functionalities, such as mobile wallets and near field communication (NFC), migrate to smart-phones, the value and potential risk associated with such systems should grow and drive demand and adoption of advanced user authentication technologies, including fingerprint biometrics and BIO-key solutions.

In October 2013, Apple Computer Corporation released the Apple iPhone 5s smartphone (“5s”). We believe the 5s to be the first broadly distributed smartphone to incorporate fingerprint biometrics in the phone. Since that time, HTC Corporation has also released a fingerprint biometric enabled smartphone. We believe other smartphone, tablet, laptop and related smart-device manufacturers will additionally make fingerprint-enabled smart devices available for consumer applications. As devices with onboard fingerprint sensors continue to deploy to consumers, we expect that third party application developers will demand the ability to authenticate users of their respective applications with the onboard fingerprint biometric. We further believe that authentication will occur on the device itself for potentially low-value, and therefore low-risk, use-transactions and that user authentication for high-value transactions will migrate to the application provider’s authentication server, typically located within their supporting technology infrastructure, or cloud. We have developed our technology to enable on-device authentication as well as network or cloud-based authentication and believe we may be the only technology vendor capable of providing this flexibility and capability.

We believe there is potential for significant market growth in three key areas:

●  corporate network access control, including corporate campuses, computer networks and applications;

●  consumer mobile credentialing, including mobile payments, credit and payment card programs, data and application access, and commercial loyalty programs; and

●  government services and highly regulated industries, including Medicare, Medicaid, Social Security, drivers licenses, campus and school ID, passports/visas.

.

In the near-term, we expect to grow our business within government services and highly-regulated industries in which we have historically had a strong presence, such as the healthcare industry.  We believe that continued heightened security and privacy requirements in these industries will generate increased demand for security solutions, including biometrics.

Over the longer term, we intend to expand our business into the cloud and mobile computing industries. The emergence of cloud computing and mobile computing are primary drivers of commercial and consumer adoption of advanced authentication applications, including biometric and BIO-key authentication capabilities.  As the value of assets, services and transactions increases on such networks, we expect that security and user authentication demand should rise proportionately. Our integration partners include major web and network technology providers, who we believe will deliver our cloud-applicable solutions to interested service-providers. These service-providers could include, but are not limited to, financial institutions, web-service providers, consumer payment service providers, credit reporting services, consumer data service providers, healthcare providers and others. Additionally, our integration partners include major technology component providers and OEM manufacturers, who we believe will deliver our device-applicable solutions to interested hardware manufacturers. Such manufacturers could include cellular handset and smartphone manufacturers, tablet manufacturers, laptop and PC manufacturers, among other hardware manufacturers. 

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CRITICAL ACCOUNTING POLICIES

For detailed information regarding our critical accounting policies and estimates, see our financial statements and notes thereto included in this Report and in our Annual Report on Form 10-K, for the year ended December 31, 2014.  There have been no material changes to our critical accounting policies and estimates from those disclosed in our most recent Annual Report on Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

For detailed information regarding recent account pronouncements, see Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2015 AS COMPARED TO JUNE 30, 2014

Consolidated Results of Operations - Percent Trend

	Three Months Ended June 30,
	2015			2014
Revenues
Services		11	%		70	%
License fees and other		89	%		30	%
Total Revenues		100	%		100	%
Costs and other expenses
Cost of services		3	%		28	%
Cost of license fees and other		4	%		12	%
Total Cost of Goods Sold		6	%		40	%
Gross profit		93	%		60	%
Operating expenses
Selling, general and administrative		43	%		222	%
Research, development and engineering		17	%		117	%
Total Operating Expenses		60	%		339	%
Operating (loss) income		33	%		-279	%
Other income (expenses)		0	%		24	%
Net (loss) income		33	%		-255	%

Revenues and cost of goods sold

	Three months ended June 30,
	2015		2014		$ Change			% Change
Revenues
Service	$	255,269	$	281,711	$	(26,442	)		-9	%
License & other		2,017,535		121,078		1,896,457			1566	%
Total Revenue	$	2,272,804	$	402,789	$	1,870,015			464	%

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		Three months ended June 30,
		2015		2014		$ Change		% Change
Cost of Goods Sold
Service	$	56,905	$	113,105	$	(56,200	)	-50	%
License & other		88,489		48,146		40,343		84	%
Total COGS	$	145,394	$	161,251	$	(15,857	)	-10	%

Revenues

For the three months ended June 30, 2015 and 2014, service revenues included approximately $145,000 and $141,000, respectively, of recurring maintenance and support revenue, and approximately $110,000 and $141,000 respectively, of non-recurring custom services revenue.  Recurring service revenue increased 3% from 2014 to 2015 due to an expanded customer base. The non-recurring custom services decreased 22% for custom services revenue due to the completion of a customer project in December 2014.

For the three months ended June 30, 2015, license and other revenue (comprised of third party hardware and royalties) increased 1566% from the corresponding period ending June 30, 2014.  We realized an approximate $1,854,000 increase in our core software license revenue, due to an order from a single customer. Third-party hardware sales increased by approximately $43,000 (58%), as a result of an increase in existing OEM and customer deployments.  Our royalty income was derived from an OEM agreement and remained the same revenue of $20,584 for the three months ended June 30, 2015 and 2014.

Costs of goods sold

For the three months ended June 30, 2015, cost of service decreased 50%, due to costs associated with a decrease in custom services.  License and other costs for the three months ended June 30, 2015 increased approximately 84%. The increase is directly associated with the increase in third party hardware revenue.

Selling, general and administrative

	Three months ended June 30,
	2015		2014		$ Change		% Change
Selling, general and administrative	$	979,861	$	895,147	$	84,714		9	%

Selling, general and administrative costs for the three months ended June 30, 2015 increased 9% from the corresponding period in 2014. The increase is attributable to higher commissions, trade show attendance costs, travel expenses, channel marketing expenses, and factoring fees.

Research, development and engineering

	Three months ended June 30,
	2015		2014		$ Change			% Change
Research, development and engineering	$	393,999	$	470,888	$	(76,889	)		-16	%

For the three months ended June 30, 2015, research, development and engineering costs decreased 16% due to reduced expenses related to temporary outside services for various projects.

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Other income and expense

	Three months ended June 30,
	2015			2014		$ Change			% Change
Interest income	$	2		$	2	$	-			-
Gain (loss) on derivatives		(406	)		98,209		(98,615	)		-100	%
Total	$	(404	)	$	98,211	$	(98,615	)		-100	%

Interest income for the three months ended June 30, 2015 and June 30, 2014 consisted of bank interest.

During the fourth quarter of 2013, we issued various warrants that contained derivative liabilities. Such derivative liabilities are required to be marked-to-market each reporting period.

SIX MONTHS ENDED JUNE 30, 2015 AS COMPARED TO JUNE 30, 2014

Consolidated Results of Operations - Percent Trend

	Six Months Ended June 30,
	2015			2014
Revenues
Services		17	%		30	%
License fees and other		83	%		70	%
Total Revenues		100	%		100	%
Costs and other expenses
Cost of services		4	%		9	%
Cost of license fees and other		6	%		7	%
Total Cost of Goods Sold		10	%		16	%
Gross profit		90	%		84	%
Operating expenses
Selling, general and administrative		69	%		99	%
Research, development and engineering		27	%		54	%
Total Operating Expenses		96	%		153	%
Operating (loss) income		-6	%		-69	%
Other income (expenses)		0	%		-6	%
Net (loss) income		-6	%		-75	%

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Revenues and cost of goods sold

	Six months ended June 30,
	2015		2014		$ Change			% Change
Revenues
Service		505,622		530,942		(25,320	)		-5	%
License & other		2,416,008		1,239,369		1,176,639			95	%
Total Revenue	$	2,921,630	$	1,770,311	$	1,151,319			65	%
Cost of Goods Sold
Service		123,968		152,280		(28,312	)		-19	%
License & other		160,782		126,195		34,587			27	%
Total COGS	$	284,750	$	278,475	$	6,275			2	%

Revenues

For the six months ended June 30, 2015 and 2014, service revenues included approximately $277,000 and $292,000, respectively, of recurring maintenance and support revenue, and approximately $229,000 and $238,000, respectively, of non-recurring custom services revenue.  Recurring service revenue decreased 5% from 2014 as customers have been slow to renew existing maintenance agreements. The non-recurring custom services decreased 4% due to the completion of a customer project in December 2014.

For the six months ended June 30, 2015 and 2014, license and other revenue (comprised of third party hardware and royalties) increased as a result of several contributing factors.  We realized an approximate $1,121,000 increase (113%) in our core software license revenue primarily as a result of a single large order in 2015.  Third-party hardware sales increased by approximately $40,000 (19%), as a result of an increase in existing OEM and customer deployments.  Our royalty income was primarily derived from an OEM agreement, however the 39% increase in revenue from $41,168 to $57,168 for the six months ended June 30, 2015 is from a single new customer. As a result we do not expect this upward trend to continue.

Costs of goods sold

For the six months ended June 30, 2015, cost of service decreased approximately $28,000 from the corresponding period in 2014 due to decreased costs associated with non-recurring custom services revenue. License and other costs for the six months ended June 30, 2015 increased from the corresponding prior year period by approximately $35,000. The increase is directly associated with the increase in third party hardware revenue.

Selling, general and administrative

	Six months ended June 30,
	2015		2014		$ Change		% Change
Selling, general and administrative	$	2,020,542	$	1,752,143	$	268,399		15	%

 Selling, general and administrative costs for the six months ended June 30, 2015 increased 15% from the corresponding period in 2014.  Increases included commissions and channel marketing expense due to increased revenue, personnel and recruiting costs, trade show attendance, travel, factoring fees and non-cash compensation. 

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Research, development and engineering

	Six months ended June 30,
	2015		2014		$ Change			% Change
Research, development and engineering	$	800,640	$	957,545	$	(156,905	)		-16	%

For the six months ended June 30, 2015, research, development and engineering costs decreased 16% due to reduced expenses related to temporary outside services for a various projects.

Other income and expense

	Six months ended June 30,
	2015			2014			$ Change		% Change
Interest income (expenses)	$	4		$	3		$	1		33	%
Income Tax		(912	)		(912	)		-		0	%
Gain (loss) on derivatives		14,253			(106,739	)		120,992		-113	%
Total	$	13,345		$	(107,648	)	$	120,993		-112	%

Interest income for the six months ended June 30, 2015 and June 30, 2014 consisted of bank interest.

During the fourth quarter of 2013, we issued various warrants that contained derivative liabilities. Such derivative liabilities are required to be marked-to-market each reporting period.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Net cash used for operations during the six months ended June 30, 2015 was approximately $506,000. The cash used in operating activities was primarily attributable to the following items:

● Net positive cash flows related to adjustments to depreciation, amortization, share-based compensation and fair value adjustments of approximately $236,000.

● Net negative cash flows related to movements in factored receivables, accounts receivable, inventory, prepaid expenses, accounts payable, and accrued expenses of approximately $571,000 due to working capital management.

Net cash used for investing activities during the six months ended June 30, 2015 was approximately $2,000 and related to capital expenditures.

Net cash used for financing activities during the six months ended June 30, 2015 was approximately $54,000 and consisted of stock issuance costs.

Net working capital at June 30, 2015 was approximately $509,000 as compared to net working capital of approximately $485,000 at December 31, 2014.

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Capital Resources

Since our inception, our capital needs have been principally met through proceeds from the sale of equity and debt securities.  We expect capital expenditures to be less than $100,000 during the next twelve months.  We do not currently maintain a line of credit or term loan with any commercial bank or other financial institution.

The following sets forth our primary sources of capital since January 1, 2013:

As of December 2011, we entered into a 24-month accounts receivable factoring arrangement with a financial institution (the “Factor”). Pursuant to the terms of this arrangement, from time to time, we sell to the Factor certain of our accounts receivable balances on a non-recourse basis for credit approved accounts. The Factor remits 35% for foreign and 75% for domestic of the accounts receivable balance to us (the “Advance Amount”), with the remaining balance, less fees payable by us, once the Factor collects the full accounts receivable balance from the customer. Factoring fees range from 2.75% to 15% of the face value of the invoice factored and are determined by the number of days required for collection of the invoice. In April 2012, the terms were updated from monthly to quarterly, and the 24-month arrangement was extended to August 1, 2014.  In August of 2014, the 24-month arrangement was renewed. We expect to continue to use this factoring arrangement periodically to assist with our general working capital requirements due to contractual requirements.  

On February 26, 2013, we issued a promissory note in the principal amount of $497,307 (the “InterDigital Note”) to DRNC.  The InterDigital Note accrued interest at a rate of 7% per annum and was scheduled to mature on December 31, 2015.  A portion of the proceeds from the sale of the InterDigital Note was used to repay the Colatosti Note in full, and the remaining proceeds were used for general corporate purposes.  On November 22, 2013, we repaid in full the $497,307 balance due under the InterDigital Note.

On February 26, 2013, we issued 2,013,468 shares of common stock to DRNC for an aggregate purchase price of $402,693.  

On February 26, 2013, we also issued 2,500,000 shares of common stock to a limited number of investors for an aggregate purchase price of $500,000.

On July 23, 2013, we issued units to certain investors consisting of 1,750,003 shares of our common stock and warrants to purchase an additional 1,750,003 shares of our common stock at a purchase price $0.60 per unit, for an aggregate purchase price of $1,050,000.  The warrants were originally exercisable at $0.80 per share and expire five years after the date of the grant. On December 2, 2013, we agreed to reduce the exercise price of the warrants to $0.50 per share.

On October 25 and November 8, 2013, we issued an aggregate of 12,323,668 units consisting of 12,323,668 shares of common stock and warrants to purchase an additional 12,323,668 shares of common stock at a purchase price $0.30 per unit for an aggregate purchase price of $3,697,100 prior to a deduction for placement agent fees and expenses. The warrants are exercisable at $0.50 per share and expire three years after the date of the grant.

In November 2014, we issued an aggregate of 7,974,999 shares of our common stock and warrants to purchase an additional 11,962,501 shares of common stock for an aggregate purchase price of $1,595,000. The warrants have a term of five years and an exercise price of $0.30 per share.

Liquidity outlook

At June 30, 2015, our total cash and cash equivalents were approximately $282,000, as compared to approximately $844,000 at December 31, 2014.

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 recently through factoring receivables. We estimate that we currently require approximately $460,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. During the first six months of 2015, we generated approximately $2,922,000 of revenue, which is above our average monthly requirements. Excluding share based compensation, we met our monthly operation requirements through June 30, 2015.

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If we are unable to continue to generate sufficient revenue to meet our goals, we will need to obtain additional third-party financing to (i) conduct the sales, marketing and technical support necessary to execute our plan to substantially grow operations, increase revenue and serve a significant customer base; and (ii) provide working capital. We may, therefore, need to obtain additional financing through the issuance of debt or equity securities.

Due to several factors, including our history of losses and limited revenue, our independent auditors have included an explanatory paragraph in their opinion related to our annual financial statements as to the substantial doubt about our ability to continue as a going concern. Our long-term viability and growth will depend upon the successful commercialization of our technologies and our ability to obtain adequate financing. To the extent that we require such additional financing, no assurance can be given that any form of additional financing will be available on terms acceptable to us, that adequate financing will be obtained to meet our needs, or that such financing would not be dilutive to existing stockholders. 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 continue as a going concern.

ITEM 4.                  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2015. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of June 30, 2015, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the fiscal quarter ended June 30, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

1. During the first quarter of 2015, we issued options to purchase an aggregate of 75,000 shares of common stock to two new employees. The options are exercisable at $0.20 per share, have a term of seven years and vest in equal installments over a three-year period commencing on the date of grant.

2. During the first quarter of 2015, we issued a warrant to purchase 575,000 shares of common stock to a consultant in consideration of services. The warrant is exercisable at $0.21 per share, has a term of five years and vests in equal quarterly installments over a one-year period commencing on the date of grant.

The foregoing securities were issued in a private placement transaction pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, without general solicitation or advertising of any kind and without payment of brokerage commissions to any person.

ITEM 6. EXHIBITS

The exhibits listed in the Exhibits Index immediately preceding such exhibits are filed as part of this Report.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BIO-Key International, Inc.
Dated: August 14, 2015	/s/ Michael W. DePasquale
	Michael W. DePasquale
	Chief Executive Officer
Dated: August 14, 2015	/s/ Cecilia C. Welch
	Cecilia C. Welch
	Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
31.1	Certificate of CEO of Registrant required under Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended
31.2	Certificate of CFO of Registrant required under Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended
32.1	Certificate of CEO of Registrant required under 18 U.S.C. Section 1350
32.2	Certificate of CFO of Registrant required under 18 U.S.C. Section 1350
101.INS	XBRL Instance
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation
101.DEF	XBRL Taxonomy Extension Definition
101.LAB	XBRL Taxonomy Extension Labels
101.PRE	XBRL Taxonomy Extension Presentation

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael W. DePasquale, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BIO-key International, Inc. (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting;

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: August 14, 2015
	/s/ Michael W. DePasquale
	Michael W. DePasquale
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Cecilia Welch, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BIO-key International, Inc. (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting;

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: August 14, 2015
	/s/ Cecilia Welch
	Cecilia Welch
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BIO-key International, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael W. DePasquale, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

BIO-KEY INTERNATIONAL, INC.
By:	/s/ Michael W. DePasquale
	Michael W. DePasquale
	Chief Executive Officer
Date: August 14, 2015

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BIO-key International, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Cecilia Welch, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

BIO-KEY INTERNATIONAL, INC.
By:	/s/ Cecilia Welch
	Cecilia Welch
	Chief Financial Officer
Date: August 14, 2015

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Note 9 - Fair Values of Financial Instruments (Details) - Fair Value Measurements Using Significant Unobservable Inputs - Warrants Issued under PISPA [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Warrant issued under PI SPA
Fair value at January 1, 2015		$ 43,227
Gain on derivative	$ (14,253)
Balance, June 30, 2015	$ 28,974

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Note 4 - Factoring (Details) - Dec. 31, 2011	Total
Note 4 - Factoring (Details) [Line Items]
Factoring Arrangement Term	24 months
Foreign [Member]
Note 4 - Factoring (Details) [Line Items]
Percentage of Accounts Receivable Remitted by Factor	35.00%
UNITED STATES
Note 4 - Factoring (Details) [Line Items]
Percentage of Accounts Receivable Remitted by Factor	75.00%
Minimum [Member]
Note 4 - Factoring (Details) [Line Items]
Factoring Fees, Percent	2.75%
Maximum [Member]
Note 4 - Factoring (Details) [Line Items]
Factoring Fees, Percent	21.00%

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Note 4 - Factoring

6 Months Ended

Jun. 30, 2015

Factoring [Abstract]

Factoring [Text Block]

4. FACTORING

Due from factor consisted of the following as of:

	June 30,			December 31,
	2015			2014
Original invoice value	$	2,184,290		$	306,625
Factored amount		(315,739	)		(229,968	)
Due to factor		(326,367	)		-
Due from factor	$	1,542,184		$	76,657

As of December 2011, the Company entered into a 24 month accounts receivable factoring arrangement with a financial institution (the “Factor”). Pursuant to the terms of the arrangement, the Company, from time to time, sells to the Factor certain of its accounts receivable balances on a non-recourse basis for credit approved accounts. The Factor remits 35% for foreign and 75% for domestic of the accounts receivable balance to the Company (the “Advance Amount”), with the remaining balance, less fees to be forwarded to the Company once the Factor collects the full accounts receivable balance from the customer. Factoring fees range from 2.75% to 21% of the face value of the invoice factored, and are determined by the number of days required for collection of the invoice. In April 2012, the terms were updated from monthly to quarterly, and the 24-month arrangement was extended to August 1, 2014.  In July of 2014, the arrangement was extended to July 31, 2016.

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Note 6 - Earnings (Loss) Per Share Common Stock ("EPS") (Details) - Securities Excluded from the Diluted Per Share Calculation - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Exercise Price Less Than Market Price of Common Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive Securities		2,240,285	34,349	1,034,736
Exercise Price Less Than Market Price of Common Shares [Member] | Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive Securities		1,469,162	34,349	1,034,736
Exercise Price Less Than Market Price of Common Shares [Member] | Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive Securities		771,123
Exercise Price Greater Than Average Market Price of Common Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive Securities	23,097,081	330,000	22,709,581	15,389,565
Exercise Price Greater Than Average Market Price of Common Shares [Member] | Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive Securities	3,475,000	205,000	3,087,500	205,000
Exercise Price Greater Than Average Market Price of Common Shares [Member] | Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive Securities	19,622,081	125,000	19,622,081	15,184,565

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Note 6 - Earnings (Loss) Per Share Common Stock ("EPS") (Details) - Reconciliation of Numerator of Basic and Diluted EPS Calculations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Basic Numerator:
Net income (loss) available to common stockholders	$ 753,146	$ (1,026,286)	$ (170,957)	$ (1,325,500)
Basic Denominator	66,001,260	58,001,934	66,001,260	57,970,309
Per Share Amount	$ 0.01	$ (0.02)	$ 0.00	$ (0.02)

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Note 7 - Stockholders' Equity (Details) - USD ($)				1 Months Ended		3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 09, 2015	Nov. 13, 2014	Nov. 08, 2013	Feb. 28, 2015	Jan. 29, 2015	Jun. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Note 7 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, New Issues					13,956,250
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	575,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 0.21
Class of Warrant or Right, Vesting Percentage	25.00%
Class of Warrant or Right, Non-employee Compensation Expense (in Dollars)						$ 25,657	$ 25,657
New Employees [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						0	75,000
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term							7 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period							3 years
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)							$ 0.20
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value (in Dollars)						$ 12,047	$ 12,047
Fair Value Assumptions, Risk Free Interest Rate							1.50%
Fair Value Assumptions, Expected Term							5 years 6 months
Fair Value Assumptions, Expected Dividend Rate							0.00%
Fair Value Assumptions, Expected Volatility Rate							118.00%
Private Investor SPA [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, New Issues			12,323,668
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		11,962,501
Stock Issued During Period, Value, New Issues (in Dollars)		$ 1,595,000	$ 3,697,100
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)		$ 0.30
Term of Warrant		5 years	3 years
Warrant Exercisable on Cashless Basis Period Following Anniversary of Issuance Date			9 months
Stock Issued During Period, Shares, Conversion of Convertible Securities		1
Class of Warrant or Right, Number of Securities Cancelled		7,974,999
Stock Issued During Period, Shares, Reverse Stock Splits				2
Common Stock [Member] | Private Investor SPA [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, New Issues		7,974,999	12,323,668
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		5,981,251		5,981,250
Warrant [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Vesting Period	3 months
Warrant [Member] | Private Investor SPA [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			12,323,668
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)			$ 0.50
Placement Agent Warrants [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			985,893
Commissions and Fees, Percent of Gross Proceeds			8.00%
Warrants Issued under PISPA [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Issuances (in Dollars)								$ 43,227
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Gain (Loss) Included in Earnings (in Dollars)							$ (14,253)
Fair Value, Measurement with Unobservable Inputs Reconciliations, Recurring Basis, Liability Value (in Dollars)						28,974	28,974
Maximum [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price (in Dollars per share)		$ 0.20
Fair Value, Inputs, Level 3 [Member] | Warrants Issued under PISPA [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Issuances (in Dollars)			$ 325,891
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Gain (Loss) Included in Earnings (in Dollars)						(406)	14,253
Fair Value, Inputs, Level 3 [Member] | Placement Agent Warrants [Member]
Note 7 - Stockholders' Equity (Details) [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliations, Recurring Basis, Liability Value (in Dollars)						$ 28,974	$ 28,974	$ 43,227

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Note 8 - Segment Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Note 8 - Segment Information (Details) [Line Items]
Number of Reportable Segments			1
Sales Revenue, Net [Member] | Geographic Concentration Risk [Member] | North America [Member]
Note 8 - Segment Information (Details) [Line Items]
Concentration Risk, Percentage	19.00%	62.00%	26.00%	29.00%

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Note 3 - Share Based Compensation

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

3. SHARE BASED COMPENSATION

The following table presents share-based compensation expenses included in the Company’s unaudited condensed interim consolidated statements of operations:

	Three Months ended June 30,		Three Months ended June 30,
	2015		2014
Selling, general and administrative	$	28,760	$	18,985
Research, development and engineering		5,611		27,460
	$	34,371	$	46,445

	Six Months ended June 30,		Six Months ended June 30,
	2015		2014
Selling, general and administrative	$	162,218	$	93,826
Research, development and engineering		34,372		38,392
	$	196,590	$	132,218

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Note 9 - Fair Values of Financial Instruments (Details) - Fair Value Measurement of Warrant Liabilities and Derivative Liabilities - 6 months ended Jun. 30, 2015 - Warrant and Derivative Liabilities [Member]	Total
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Expected dividends	0.00%
Minimum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Risk-free interest rate	0.40%
Expected term	1 year 116 days
Volatility of stock price	78.50%
Maximum [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Risk-free interest rate	0.42%
Expected term	1 year 131 days
Volatility of stock price	78.90%

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Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
ASSETS
Cash and cash equivalents	$ 282,376	$ 843,632
Accounts receivable, net of allowance for doubtful accounts of $20,526 at June 30, 2015 and December 31, 2014	133,985	625,341
Due from factor	1,542,184	76,657
Inventory	412,569	11,825
Prepaid expenses and other	74,220	236,429
Total current assets	2,445,334	1,793,884
Equipment and leasehold improvements, net	84,317	103,509
Deposits and other assets	8,712	8,712
Intangible assets—less accumulated amortization	154,541	161,344
Total non-current assets	247,570	273,565
TOTAL ASSETS	2,692,904	2,067,449
LIABILITIES
Accounts payable	869,114	347,311
Accrued liabilities	436,293	488,617
Deferred revenue	601,751	429,233
Warrant liabilities	28,974	43,227
Total current liabilities	1,936,132	1,308,388
TOTAL LIABILITIES	1,936,132	1,308,388
STOCKHOLDERS’ EQUITY
Common stock — authorized, 170,000,000 shares; issued and outstanding; 66,001,260 of $.0001 par value at June 30, 2015 and December 31, 2014	6,600	6,600
Additional paid-in capital	57,675,273	57,506,605
Accumulated deficit	(56,925,101)	(56,754,144)
TOTAL STOCKHOLDERS’ EQUITY	756,772	759,061
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 2,692,904	$ 2,067,449

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Note 1 - Nature of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

Basis of Accounting [Text Block]

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business

BIO-key International, Inc.was founded in 1993 as a fingerprint biometric technology company. Biometric technology is the science of analyzing specific human characteristics which are unique to each individual in order to identify a specific person from a broader population. We develop and market advanced fingerprint biometric identification and identity verification technologies, cryptographic authentication-transaction security technologies, as well as related identity management and credentialing software solutions. We sell our products and provide services primarily to commercial entities within highly regulated industries, like healthcare and financial services and the broader corporate enterprise.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key International, Inc. and its wholly-owned subsidiary (collectively, the “Company”) and are stated in conformity with accounting principles generally accepted in the United States of America ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. Significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented. The balance sheet at December 31, 2014 was derived from the audited financial statements, but does not include all of the disclosures required by accounting principles generally accepted in the United States of America. These unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (the “Form 10- K”), filed with the SEC on March 31, 2015.

Recently Issued Accounting Pronouncements

In January 2015, ASU No. 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary items” (“ASU 2015-01”) was issued. ASU 2015-01 eliminates from GAAP the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company is currently evaluating the effects of adopting ASU 2014-15 on its consolidated financial statements but the adoption is not expected to have a significant impact.

In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires debt issuance costs related to a debt liability measured at amortized cost to be reported in the balance sheet as a direct deduction from the face amount of the debt liability. ASU 2015-03 is effective for interim and annual periods beginning January 1, 2016 with early adoption permitted, and is applied on a retrospective basis. The adoption of ASU 2015-03 is not expected to materially impact the Company’s consolidated financial statements.

In July 2015 the FASB issued ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory" ("ASU 2015-11"). The amendments in ASU 2015-11 clarifies the measurement of inventoty to be the lower of cost or realizable value and would only apply to inventory valued using the FIFO or avergae costing methods. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The reporting entity should apply the amendments prospectively with earlier application permitted as of the beginning as of the beginning of an interim or annual reporting period. The Company is currently evaluating the effects of adopting ASU 2015-11 on its consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements.

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Note 11 - Contingency (Details)	Mar. 13, 2014 USD ($)
LifeSouth [Member]
Note 11 - Contingency (Details) [Line Items]
Loss Contingency, Damages Sought, Value	$ 718,500

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Note 9 - Fair Values of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

Risk-free interest rate	0.40	%	–		0.42	%
Expected term	1.32		–		1.36
Expected dividends				0
Volatility of stock price	78.5	%	–		78.9	%

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

Warrant issued under PI SPA
Fair value at January 1, 2015	$	43,227
Gain on derivative		(14,253	)
Balance, June 30, 2015	$	28,974

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Note 3 - Share Based Compensation (Details) - Share-based Compensation Expenses for Continuing Operations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation expenses	$ 34,371	$ 46,445	$ 196,590	$ 132,218
Selling, General and Administrative Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation expenses	28,760	18,985	162,218	93,826
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation expenses	$ 5,611	$ 27,460	$ 34,372	$ 38,392

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Note 2 - Going Concern

6 Months Ended

Jun. 30, 2015

Going Concern [Abstract]

Going Concern [Text Block]

2. GOING CONCERN

The Company has incurred significant losses to date and at June 30, 2015, had an accumulated deficit of approximately $57 million. In addition, broad commercial acceptance of the Company’s technology is critical to the Company’s success and ability to generate future revenues. At June 30, 2015, the Company’s total cash and cash equivalents were approximately $282,000, as compared to approximately $844,000 at December 31, 2014.

The Company has financed itself in the past through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. The Company estimates that it currently requires approximately $460,000 per month to conduct operations, a monthly amount that it has been unable to achieve consistently through revenue generation.

If the Company is unable to generate sufficient revenue to meet its goals, it will need to obtain additional third-party financing to (i) conduct the sales, marketing and technical support necessary to execute its plan to substantially grow operations, increase revenue, and serve a significant customer base; and (ii) provide working capital. No assurance can be given that any form of additional financing will be available on terms acceptable to the Company, that adequate financing will be obtained by the Company, in order to meet its needs, or that such financing would not be dilutive to existing shareholders. 

The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern, and assumes continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The matters described in the preceding paragraphs raise substantial doubt about the Company’s ability to continue as a going concern. Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, and become profitable in its future operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Allowance for doubtful accounts (in Dollars)	$ 20,526	$ 20,526
Common stock, shares authorized	170,000,000	170,000,000
Common stock, shares issued	66,001,260	66,001,260
Common stock, shares outstanding	66,001,260	66,001,260
Common stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001

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Note 12 - Subsequent Events

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

12. SUBSEQUENT EVENTS

The Company has reviewed subsequent events through the date of filing.

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Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 13, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	BIO KEY INTERNATIONAL INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		66,001,260
Amendment Flag	false
Entity Central Index Key	0001019034
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2

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Note 3 - Share Based Compensation (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months ended June 30,		Three Months ended June 30,
	2015		2014
Selling, general and administrative	$	28,760	$	18,985
Research, development and engineering		5,611		27,460
	$	34,371	$	46,445

	Six Months ended June 30,		Six Months ended June 30,
	2015		2014
Selling, general and administrative	$	162,218	$	93,826
Research, development and engineering		34,372		38,392
	$	196,590	$	132,218

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues
Services	$ 255,269	$ 281,711	$ 505,622	$ 530,942
License fees and other	2,017,535	121,078	2,416,008	1,239,369
	2,272,804	402,789	2,921,630	1,770,311
Costs and other expenses
Cost of services	56,905	113,105	123,968	152,280
Cost of license fees and other	88,489	48,146	160,782	126,195
	145,394	161,251	284,750	278,475
Gross Profit	2,127,410	241,538	2,636,880	1,491,836
Operating Expenses
Selling, general and administrative	979,861	895,147	2,020,542	1,752,143
Research, development and engineering	393,999	470,888	800,640	957,545
	1,373,860	1,366,035	2,821,182	2,709,688
Operating profit (loss)	753,550	(1,124,497)	(184,302)	(1,217,852)
Other income (expenses)
Interest income	2	2	4	3
Gain (loss) on derivative liabilities	(406)	98,209	14,253	(106,739)
Income taxes			(912)	(912)
Total other income (expenses)	(404)	98,211	13,345	(107,648)
Net profit (loss)	$ 753,146	$ (1,026,286)	$ (170,957)	$ (1,325,500)
Basic and Diluted Earnings (Loss) per Common Share (in Dollars per share)	$ 0.01	$ (0.02)	$ 0.00	$ (0.02)
Weighted Average Shares Outstanding:
Basic and diluted (in Shares)	66,001,260	58,001,934	66,001,260	57,970,309

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Note 7 - Stockholders' Equity

6 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

7. STOCKHOLDERS’ EQUITY

Derivative Liabilities

In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative liability instruments under the provisions of FASB ASC 815, “Derivatives and Hedging.”

Securities Purchase Agreements dated October 25, 2013 and November 8, 2013

Pursuant to a series of Private Investors Securities Purchase Agreements (the “PI SPA”), on October 25, 2013 and November 8, 2013, the Company issued to certain private investors an aggregate of 12,323,668 units consisting of 12,323,668 post split shares of common stock (the “Shares”) and warrants to purchase an additional 12,323,668 post-split shares of common stock (the “Warrants”) for an aggregate purchase price of $3,697,100. The warrants are immediately exercisable at an exercise price of $0.50 per post-split share, have a term of three years, and were exercisable on a cashless basis if at any time following the nine month anniversary of the issuance date, there is not an effective registration statement covering the public resale of the shares of Common Stock underlying the warrants. The Company filed a registration statement on November 22, 2013 and such registration was declared effective on December 31, 2013.

In connection with the share issuances described above, and pursuant to a placement agency letter agreement, the Company paid the placement agent cash commissions equal to 8% of the gross proceeds of the offering, reimbursed the placement agent for its reasonable out of pocket expenses, and issued to the placement agent warrants (the “Placement Agent Warrants”) to purchase an aggregate of 985,893 post split shares of common stock. The Placement Agent Warrants have substantially the same terms as the warrants issued to the investors, except the Placement Agent Warrants are immediately exercisable on a cashless basis. 

The cashless exercise features contained in the warrants are considered to be derivatives and the Company recorded warrant liabilities on the consolidated balance sheet. The Company initially recorded the warrant liabilities equal to their estimated fair value of $325,891. Such amount was also recorded as a reduction of additional paid-in capital. The Company is required to mark-to-market the warrant liabilities at the end of each reporting period. For the quarter ended June 30, 2015, the Company recorded a loss on the change in fair value of the cashless exercise features of $406. For the six months ended June 30, 2015, the Company recorded a net gain on the change in fair value of the cashless exercise feature of $14,253. As of June 30, 2015, the fair value of the cashless exercise features was $28,974. The fair value of the cashless exercise features was $43,227 as of December 31, 2014.

Securities Purchase Agreement dated November 13, 2014

Pursuant to a Securities Purchase Agreement, dated November 13, 2014, by and between the Company and a number of private and institutional investors (the “November 2014 Private Investor SPA”), the Company issued to certain private investors 7,974,999 post split shares of common stock and warrants to purchase an additional 11,962,501 post split shares of common stock for aggregate gross proceeds of $1,595,000. In addition, for each share purchased in this offering, the investors surrendered to the Company for cancellation a warrant to acquire one share of our common stock which we previously issued in a private placement transaction in November 2013. This resulted in the cancellation of warrants to purchase an aggregate of 7,974,999 post split shares of common stock.

The common stock has a purchase price reset feature. If at any time prior to the two year anniversary of the effective date of the registration statement covering the public resale of such shares, the Company sells or issues shares of common stock or securities that are convertible into common stock at a price lower than $0.20 per share, the Company will be required to issue additional shares of common stock for no additional consideration.

Based on an evaluation as discussed in FASB ASC 815-15, “Embedded Derivatives” and FASB ASC 815-40-15, “Contracts in Entity’s Own Equity - Scope and Scope Exceptions,” the Company determined that the purchase price reset feature in the common stock issued was not considered indexed to its own stock because neither the occurrence of a sale of equity securities by the issuer at market nor the issuance of another equity contract with a lower strike price is an input to the fair value of a fixed-for-fixed option or forward on equity shares. As such, the purchase price reset feature should be bifurcated from the common stock and accounted for as a derivative liability.

The Company valued the purchase price reset feature using a Monte Carlo simulation at the date of issuance, December 31, 2014, and June 30, 2015, and determined that the purchase price reset feature had no value as the calculated price of the common stock was not below $0.20 per share.

The warrants have a term of five years and an exercise price of $0.30 per post-split share. Warrants to purchase 5,981,251 post-split shares of common stock were immediately exercisable. The remaining warrants to purchase 5,981,250 post-split shares of common stock became exercisable on the completion of a 1 - for - 2 reverse split of the Company's common stock in February 2015.

The warrants have customary anti-dilution protections including a “full ratchet” anti-dilution adjustment provision which are triggered in the event the Company sells or grants any additional shares of common stock, options ,warrants or other securities that are convertible into common stock at a price lower than $0.30 per share, The anti-dilution adjustment provision is not triggered by certain “exempt issuances” which among other issuances, includes the issuance of shares of common stock, options or other securities to officers, employees, directors, consultants or service providers.

The warrants are exercisable on a cashless basis if at any time there is no effective registration statement covering the resale of the shares of common stock underlying the warrants. See below.

Based on an evaluation as discussed in FASB ASC 815-15, “Embedded Derivatives” and FASB ASC 815-40-15, “Contracts in Entity’s Own Equity - Scope and Scope Exceptions,” the Company determined that the full ratchet anti-dilution feature in the warrants issued were not considered indexed to its own stock because neither the occurrence of a sale of equity securities by the issuer at market nor the issuance of another equity contract with a lower strike price is an input to the fair value of a fixed-for-fixed option or forward on equity shares. As such, the full ratchet anti-dilution feature should be bifurcated from the warrants and accounted for as a derivative liability.

The Company did not value the derivative liability. One of the key determinants of the Company’s decision to not value the derivative liability was the high likelihood that a future financing would not occur that would trigger the down round feature. Whether a future equity financing would occur would be determined by the cash needs of the Company and management’s willingness to trigger the down round feature. The Company’s reasons were as follows:

1. The Company’s cash position.

2. The stock price of the Company’s common stock.

Under GAAP, the Company is required to mark-to-market the derivative liability at the end of each reporting period. The Company did not value the derivative liability at the date of issuance, December 31, 2014 or June 30, 2015. At such dates, the Company determined that it was highly unlikely that an equity financing would occur. Such conclusion was based upon the discussion noted above.

The Company filed a registration statement on Form S-1 with the SEC to register the public resale of 13,956,250 of the shares of common stock issued in the November 2014 Private Investor SPA. The registration statement was declared effective on January 29, 2015. Post reverse split, the Company filed a registration statement on Form S-1 with the SEC to register the balance of the shares of common stock issued under the November 2014 Private Investor SPA which was declared effective on May 4, 2015.

Warrants

On March 9, 2015, the Company issued a warrant to purchase 575,000 shares of common stock to an independent contractor which vests 25% every three months and is exercisable at a strike price of $0.21 per share through March 8, 2020.  

Share based expense related to the value of the stock warrants is recorded over the requisite service period, which is generally the vesting period for each tranche. Stock warrants issued by the Company are valued using the Black-Scholes option-pricing model. For the three and six months ended June 30, 2015, the Company recorded an expense of $25,657 related to the stock warrants.

Issuances of Stock Options

During the three and six months ended June 30, 2015, the Company granted 0 and 75,000 stock options to new employees. The options are exercisable for a term of seven years and vest in equal installments over a three-year period commencing on the date of grant. The options are exercisable at $0.20 per share.

The fair value of the options was estimated on the date of grant at $12,047 using the Black-Scholes option-pricing model with the following assumptions: risk free interest rate – 1.5%, expected life of options in years – 5.5, expected dividends – 0, volatility of stock price – 118%.

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Note 6 - Earnings (Loss) Per Share Common Stock ("EPS")

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

6. EARNINGS (LOSS) PER SHARE COMMON STOCK (“EPS”)

The Company’s basic EPS is calculated using net income (loss) available to common stockholders and the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes the effect from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options and warrants and the assumed conversion of convertible notes and preferred stock.

The reconciliation of the numerators of the basic and diluted EPS calculations was as follows for both of the following three and six month periods ended June 30:

	Three Months ended June 30,					Six Months ended June 30,
	2015		2014			2015			2014
Basic Numerator:
Net income (loss) available to common stockholders	$	753,146	$	(1,026,286	)	$	(170,957	)	$	(1,325,500	)
Basic Denominator		66,001,260		58,001,934			66,001,260			57,970,309
Per Share Amount		0.01		(0.02	)		(0.00	)		(0.02	)

The following table sets forth the options and warrants which were excluded from the diluted per share calculation even though the exercise prices were less than the average market price of the common shares because the effect of including these potential shares was antidilutive for the three and six months ended June 30:

	Three Months ended June 30,				Six Months ended June 30,
	2015		2014		2015		2014
Stock options		-		1,469,162		34,349		1,034,736
Warrants		-		771,123		-		-
Total		-		2,240,285		34,349		1,034,736

Items excluded from the diluted per share calculation because the exercise price was greater than the average market price of the common shares:

	Three Months ended June 30,				Six Months ended June 30,
	2015		2014		2015		2014
Stock options		3,475,000		205,000		3,087,500		205,000
Warrants		19,622,081		125,000		19,622,081		15,184,565
Total		23,097,081		330,000		22,709,581		15,389,565

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Note 2 - Going Concern (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Going Concern [Abstract]
Retained Earnings (Accumulated Deficit)	$ (56,925,101)	$ (56,754,144)
Cash and Cash Equivalents, at Carrying Value	282,376	$ 843,632	$ 517,759	$ 2,023,349
Operational Costs	$ 460,000

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Note 4 - Factoring (Tables)

6 Months Ended

Jun. 30, 2015

Factored Accounts Receivable [Member]

Note 4 - Factoring (Tables) [Line Items]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	June 30,			December 31,
	2015			2014
Original invoice value	$	2,184,290		$	306,625
Factored amount		(315,739	)		(229,968	)
Due to factor		(326,367	)		-
Due from factor	$	1,542,184		$	76,657

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Note 10 - Major Customers and Accounts Receivables

6 Months Ended

Jun. 30, 2015

Risks and Uncertainties [Abstract]

Concentration Risk Disclosure [Text Block]

10. MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

For the three months ended June 30, 2015 and 2014, one customer accounted for 81%, and two customers accounted for 55% of revenue, respectively. For the six months ended June 30, 2015 and 2014, one customer accounted for 63%, and two customers accounted for 73% of revenue, respectively.

At June 30, 2015, four customers accounted for 52% of accounts receivable.  At December 31, 2014, one customer accounted for 62% of accounts receivable.

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Note 8 - Segment Information

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

8. SEGMENT INFORMATION

The Company has determined that its continuing operations are one discrete segment consisting of biometric products. Geographically, North American sales accounted for approximately 19% and 62% of the Company’s total sales for the three months ended June 30, 2015 and 2014, respectively, and were approximately 26% and 29% of the Company’s total sales for the six months ended June 30, 2015 and 2014, respectively.

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Note 9 - Fair Values of Financial Instruments

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

9. FAIR VALUES OF FINANCIAL INSTRUMENTS

Cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and notes payable, are carried at, or approximate, fair value because of their short-term nature.

 The fair value of the warrant liabilities were measured using the following assumptions:

Risk-free interest rate	0.40	%	–		0.42	%
Expected term	1.32		–		1.36
Expected dividends				0
Volatility of stock price	78.5	%	–		78.9	%

The warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various assumptions about future activities and the Company’s stock prices and utilizes historical volatility as inputs.

Warrant issued under PI SPA
Fair value at January 1, 2015	$	43,227
Gain on derivative		(14,253	)
Balance, June 30, 2015	$	28,974

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Note 11 - Contingency

6 Months Ended

Jun. 30, 2015

Disclosure Text Block Supplement [Abstract]

Commitments Disclosure [Text Block]

11. CONTINGENCY

On or about March 13, 2014, LifeSouth Community Blood Centers, Inc. filed a lawsuit against us the Company in the Superior Court of Monmouth County, New Jersey (MON-L-1042-14) alleging a breach of a license agreement and seeking return of all amounts paid under the license in the amount of $718,500. The Company has denied all claims and asserted a counterclaim against LifeSouth for non-payment of support and maintenance service fees. Discovery has commenced and is proceeding.  The Company has filed a motion seeking summary judgment in its favor with respect to all claims. 

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Note 10 - Major Customers and Accounts Receivables (Details) - Customer Concentration Risk [Member]	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Sales Revenue, Goods, Net [Member]
Note 10 - Major Customers and Accounts Receivables (Details) [Line Items]
Concentration Risk, Number of Major Customers	1	2	1	2
Concentration Risk, Percentage	81.00%	55.00%	63.00%	73.00%
Accounts Receivable [Member]
Note 10 - Major Customers and Accounts Receivables (Details) [Line Items]
Concentration Risk, Number of Major Customers			4		1
Concentration Risk, Percentage			52.00%		62.00%

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Note 6 - Earnings (Loss) Per Share Common Stock ("EPS") (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months ended June 30,					Six Months ended June 30,
	2015		2014			2015			2014
Basic Numerator:
Net income (loss) available to common stockholders	$	753,146	$	(1,026,286	)	$	(170,957	)	$	(1,325,500	)
Basic Denominator		66,001,260		58,001,934			66,001,260			57,970,309
Per Share Amount		0.01		(0.02	)		(0.00	)		(0.02	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months ended June 30,				Six Months ended June 30,
	2015		2014		2015		2014
Stock options		-		1,469,162		34,349		1,034,736
Warrants		-		771,123		-		-
Total		-		2,240,285		34,349		1,034,736

	Three Months ended June 30,				Six Months ended June 30,
	2015		2014		2015		2014
Stock options		3,475,000		205,000		3,087,500		205,000
Warrants		19,622,081		125,000		19,622,081		15,184,565
Total		23,097,081		330,000		22,709,581		15,389,565

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Note 4 - Factoring (Details) - Due from Factor - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Due from Factor [Abstract]
Original invoice value	$ 2,184,290	$ 306,625
Factored amount	(315,739)	(229,968)
Due to factor	(326,367)
Due from factor	$ 1,542,184	$ 76,657

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$ (170,957)	$ (1,325,500)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation	21,270	20,016
Amortization
Intangible assets	6,803	6,803
Loss (gain) on derivative liabilities	(14,253)	106,739
Share-based and warrant compensation	222,247	132,218
Exercise of stock options		14,651
Change in assets and liabilities:
Accounts receivable trade	491,356	(100,794)
Due from factor, net	(1,465,527)	(18,678)
Inventory	(400,744)	(12,873)
Prepaid expenses and other	162,209	(709)
Accounts payable	521,803	(188,850)
Accrued liabilities	(52,324)	39,324
Deferred revenue	172,518	(22,436)
Net cash used for operating activities	(505,599)	(1,350,089)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(2,078)	(5,501)
Net cash used for investing activities	(2,078)	(5,501)
CASH FLOW FROM FINANCING ACTIVITIES:
Repurchase of outstanding warrants		(150,000)
Costs to issue common stock	(53,579)
Net cash used for financing activities	(53,579)	(150,000)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(561,256)	(1,505,590)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	843,632	2,023,349
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 282,376	$ 517,759

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Note 5 - Inventory

6 Months Ended

Jun. 30, 2015

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

5. INVENTORY

Inventory is stated at the lower of cost, determined on a first in, first out basis, or market, and consists primarily of fabricated assemblies and finished goods. Inventory is comprised of the following as of:

	June 30,		December 31,
	2015		2014
Finished goods	$	40,588	$	11,825
Fabricated assemblies		371,981		-
Total inventory	$	412,569	$	11,825

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Note 5 - Inventory (Details) - Components of Inventory - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Components of Inventory [Abstract]
Finished goods	$ 40,588	$ 11,825
Fabricated assemblies	371,981
Total inventory	$ 412,569	$ 11,825

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Note 5 - Inventory (Tables)

6 Months Ended

Jun. 30, 2015

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

	June 30,		December 31,
	2015		2014
Finished goods	$	40,588	$	11,825
Fabricated assemblies		371,981		-
Total inventory	$	412,569	$	11,825