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, 2021

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

(Registrant’s telephone number, including area code)

Securities registered pursuance to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	BKYI	Nasdaq Capital Market

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒   No  ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller Reporting Company ☒
	Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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, 2021, is 7,824,971.

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION
Item 1	—	Condensed Consolidated Financial Statements (unaudited):
		Balance sheets as of June 30, 2021 (unaudited) and December 31, 2020 (audited)	3
		Statements of operations for the three and six months ended June 30, 2021 and 2020	4
		Statements of Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2021 and 2020	5
		Statements of cash flows for the six months ended June 30, 2021 and 2020	7
		Notes to condensed consolidated financial statements	9
Item 2	—	Management’s Discussion and Analysis of Financial Conditions and Results of Operations.	20
Item 4	—	Controls and Procedures.	28
PART II. OTHER INFORMATION
Item 6	—	Exhibits.	29
Signatures			30

PART I -- FINANCIAL INFORMATION

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2021			December 31, 2020
	(Unaudited)
ASSETS
Cash and cash equivalents	$	11,479,691		$	16,993,096
Accounts receivable, net		1,347,677			548,049
Due from factor		49,500			60,453
Note receivable		-			295,000
Inventory		2,290,628			330,947
Prepaid expenses and other		1,612,099			201,507
Investment – debt security		512,821			512,821
Total current assets		17,292,416			18,941,873
Resalable software license rights		53,873			58,882
Equipment and leasehold improvements, net		60,259			81,793
Capitalized contract costs, net		192,509			165,315
Deposits and other assets		8,712			8,712
Note receivable		295,000			-
Operating lease right-of-use assets		372,303			487,325
Intangible assets, net		1,406,112			1,514,146
Goodwill		1,262,526			1,262,526
Total non-current assets		3,651,294			3,578,699
TOTAL ASSETS	$	20,943,710		$	22,520,572
LIABILITIES
Accounts payable	$	864,847		$	244,158
Accrued liabilities		575,214			508,487
Note payable – PistolStar acquisition, net of debt discount		-			232,000
Deferred revenue, current portion		549,792			657,349
Operating lease liabilities, current portion		221,399			234,309
Total current liabilities		2,211,252			1,876,303
Deferred revenue, net of current portion		71,037			44,987
Operating lease liabilities, net of current portion		162,373			264,163
Total non-current liabilities		233,410			309,150
TOTAL LIABILITIES		2,444,662			2,185,453
Commitments and Contingencies
STOCKHOLDERS’ EQUITY
Common stock — authorized, 170,000,000 shares; issued and outstanding; 7,819,661 and 7,814,572 of $.0001 par value at June 30, 2021 and December 31, 2020, respectively		782			782
Additional paid-in capital		120,021,069			119,844,026
Accumulated deficit		(101,522,803	)		(99,509,689	)
TOTAL STOCKHOLDERS’ EQUITY		18,499,048			20,335,119
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	20,943,710		$	22,520,572

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

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

3

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
Revenues
Services	$	286,641		$	229,503		$	666,663		$	437,026
License fees		662,193			23,542			1,141,151			258,887
Hardware		43,256			54,097			1,072,914			133,714
Total revenues		992,090			307,142			2,880,728			829,627
Costs and other expenses
Cost of services		158,440			92,672			334,384			163,117
Cost of license fees		48,373			8,255			87,342			18,711
Cost of hardware		32,756			47,527			584,478			90,889
Total costs and other expenses		239,569			148,454			1,006,204			272,717
Gross profit		752,521			158,688			1,874,524			556,910
Operating Expenses
Selling, general and administrative		1,374,084			1,211,928			2,890,482			2,593,327
Research, development and engineering		490,952			318,573			932,603			655,462
Total Operating Expenses		1,865,036			1,530,501			3,823,085			3,248,789
Operating loss		(1,112,515	)		(1,371,813	)		(1,948,561	)		(2,691,879	)
Other income (expense)
Interest income		832			25,801			3,447			25,802
Government grant – Paycheck Protection Program		-			340,819			-			340,819
Loss on foreign currency transactions		(50,000	)		-			(50,000	)		-
Interest expense		-			(567,516	)		(18,000	)		(2,118,657	)
Loss on extinguishment of debt		-			-			-			(499,076	)
Total other income (expense), net		(49,168	)		(200,896	)		(64,553	)		(2,251,112	)
Net loss		(1,161,683	)		(1,572,709	)		(2,013,114	)		(4,942,991	)
Deemed dividends related to down-round features		-			-			-			(112,686	)
Net loss available to common stockholders	$	(1,161,683	)	$	(1,572,709	)	$	(2,013,114	)	$	(5,055,677	)
Basic and diluted loss per common share	$	(0.15	)	$	(0.60	)	$	(0.26	)	$	(2.24	)
Weighted Average Common Shares Outstanding:
Basic and diluted		7,776,190			2,608,108			7,774,946			2,253,867

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

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

4

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock					Additional Paid-in			Accumulated
	Shares			Amount		Capital			Deficit			Total
Balance as of January 1, 2021		7,814,572		$	782	$	119,844,026		$	(99,509,689	)	$	20,335,119
Issuance of common stock for directors’ fees		2,091			-		7,510			-			7,510
Legal and commitment fees		-			-		(2,709	)		-			(2,709	)
Issuance of restricted common stock to employees		1,250			-		-			-			-
Share-based compensation		-			-		133,638			-			133,638
Net loss		-			-		-			(851,431	)		(851,431	)
Balance as of March 31, 2021		7,817,913		$	782	$	119,982,465		$	(100,361,120	)	$	19,622,127
Issuance of common stock for directors’ fees		1,748			-		5,505			-			5,505
Legal and commitment fees		-			-		(2,519	)		-			(2,519	)
Issuance of restricted common stock to employees		1,250			-		-			-			-
Restricted stock forfeited		(1,250	)		-		-			-			-
Share-based compensation		-			-		35,618			-			35,618
Net loss		-			-		-			(1,161,683	)		(1,161,683	)
Balance as of June 30, 2021		7,819,661		$	782	$	120,021,069		$	(101,522,803	)	$	18,499,048

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

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

5

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

	Common Stock				Additional Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance as of January 1, 2020		1,812,483	$	182	$	87,437,661		$	(89,723,016	)	$	(2,285,173	)
Issuance of common stock pursuant to securities purchase agreements		87,500		8		1,032,492			-			1,032,500
Commitment fee adjustment		-		-		(900,000	)		-			(900,000	)
Beneficial conversion feature		-		-		641,215			-			641,215
Issuance of common stock pursuant to warrant conversion		121,500		12		1,457,988			-			1,458,000
Conversion of convertible note payable		288,461		29		1,499,971			-			1,500,000
Deemed dividends related to down-round features		-		-		112,686			(112,686	)		-
Share-based compensation		-		-		512,719			-			512,719
Net loss		-		-		-			(3,370,282	)		(3,370,282	)
Balance as of March 31, 2020		2,309,944	$	231	$	91,794,732		$	(93,205,984	)	$	(1,411,021	)
Issuance of common stock for directors’ fees		2,143		1		15,006			-			15,007
Issuance of common stock pursuant to securities purchase agreements		31,440		3		145,330			-			145,333
Conversion of convertible note payable		440,192		44		2,288,956			-			2,289,000
Warrants issued with convertible notes		-		-		1,388,339			-			1,388,339
Warrants issued for consulting fees		-		-		94,655			-			94,655
Share-based compensation		-		-		33,177			-			33,177
Legal and accounting		-		-		(199,328	)		-			(199,328	)
Net loss		-		-		-			(1,572,709	)		(1,572,709	)
Balance as of June 30, 2020		2,783,719	$	279	$	95,560,867			(94,778,693	)	$	782,453

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

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

6

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2021			2020
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(2,013,114	)	$	(4,942,991	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation		37,234			39,919
Amortization of intangible assets		108,034			12,189
Amortization of software license rights		5,009			-
Amortization of capitalized contract costs		48,997			73,660
Amortization of debt discount		18,000			398,929
Amortization of debt issuance costs		-			981,529
Operating leases right-of-use assets		115,022			92,632
Loss on extinguishment of debt		-			499,076
Loss on foreign currency transactions		50,000			-
Amortization of beneficial conversion feature		-			641,215
Interest expense capitalized to note payable		-			96,984
Share and warrant-based compensation for employees and consultants		169,256			640,551
Stock based directors’ fees		13,015			15,007
Change in assets and liabilities:
Accounts receivable		(849,628	)		(4,549	)
Due from factor		10,953			31,307
Capitalized contract costs		(76,191	)		(18,486	)
Inventory		(1,959,681	)		40,221
Resalable software license rights		-			5,028
Prepaid expenses and other		(1,410,592	)		19,241
Accounts payable		620,689			(298,797	)
Accrued liabilities		66,727			(192,917	)
Deferred revenue		(81,507	)		(9,601	)
Operating lease liabilities		(114,700	)		(89,787	)
Net cash used for operating activities		(5,242,477	)		(1,969,640	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of PistolStar		-			(2,000,000	)
Cash acquired from purchase of PistolStar		-			100,747
Proceeds from maturity of investment		-			512,821
Purchase of investment		-			(516,121	)
Capital expenditures		(15,700	)		(3,489	)
Net cash used for investing activities		(15,700	)		(1,906,042	)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes		-			3,958,000
Costs to issue convertible notes		(5,228	)		(398,412	)
Proceeds from warrant exercises		-			1,458,000
Repayment of convertible note		(250,000	)		(211,984	)
Net repayments of related party loans		-			(122,271	)
Net cash (used in) provided by financing activities		(255,228	)		4,683,333
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(5,513,405	)		807,651
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		16,993,096			79,013
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	11,479,691		$	886,664

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

7

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION

	Six Months Ended June 30,
	2021		2020
Cash paid for:
Interest	$	18,000	$	—
Noncash investing and financing activities
Accounts receivable acquired from PistolStar	$	—	$	184,792
Prepaid expenses acquired from PistolStar	$	—	$	9,485
Equipment acquired from PistolStar	$	—	$	36,467
Intangible assets acquired from PistolStar	$	—	$	2,005,000
Goodwill related to PistolStar acquisition	$	—	$	417,171
Issuance of note payable for PistolStar acquisition	$	—	$	500,000
Accrued expenses acquired from PistolStar	$	—	$	494
Deferred revenue acquired from PistolStar	$	—	$	253,168
Right-of-use asset addition under ASC 842	$	—	$	79,107
Operating lease liability addition under ASC 842	$	—	$	79,107
Issuance of common stock pursuant to securities purchase agreements	$	—	$	277,833
Warrants issued with convertible notes	$	—	$	1,388,339
Original issue discount related to convertible notes	$	—	$	551,250
Deemed dividends related to down-round features	$	—	$	112,686
Issuance of common stock for conversion of note payable	$	—	$	3,789,000
Beneficial conversion feature	$	—	$	641,215
Legal and commitment fees related to debt and equity included in accounts payable	$	—	$	122,714

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

8

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021 (Unaudited)

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business

The Company, founded in 1993, develops and markets proprietary fingerprint identification biometric technology and software solutions enterprise-ready identity access management solutions to commercial, government and education customers throughout the United States and internationally. The Company was a pioneer 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 cards, passports, driver’s licenses, OTP or other form of possession or knowledge-based credentialing. Additionally, advanced BIO-key® technology has been, and is, used to improve both the accuracy and speed of competing finger-based biometrics.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key International, Inc. and its wholly-owned subsidiaries (collectively, the “Company” or “BIO-key”) and are stated in conformity with accounting principles generally accepted in the United States of America, 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. 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, 2020 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, 2020, filed with the SEC on March 29, 2021. 

Effective November 20, 2020, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1-for-8. All share figures and results are reflected on a post-split basis.

Foreign Currency

The Company accounts for foreign currency transactions pursuant to ASC 830, Foreign Currency Matters ("ASC 830”). The functional currency of the Company is the U.S. dollar, which is the currency of the primary economic environment in which it operates. In accordance with ASC 830, monetary balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date.  For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. Gains or losses arising from changes in the exchange rates used in the translation of such transactions and from the remeasurement of the monetary balance sheet items are recorded as gain (loss) on foreign currency transactions.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), referred to herein as ASU 2016-13, which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies (quarter ending March 31, 2023 for the Company). Early adoption is permitted. The Company will evaluate the impact ASU 2016-13 will have on its consolidated financial statements in a future period closer to the date of adoption.

9

 

Effective January 1, 2021, the Company adopted ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”) to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of U.S. GAAP.  Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of ASU 2019-12 did not have a significant impact on the Company’s 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.

Reclassification

Reclassifications occurred to certain prior year amounts in order to conform to the current year classifications.  The reclassifications have no effect on the reported net loss. 

2. GOING CONCERN

The Company has historically financed its operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. The Company currently requires approximately $735,000 per month to conduct operations, a monthly amount that it has been unable to consistently achieve through revenue generation.  During the first half of 2021, the Company generated approximately $2,880,728 of revenue, which is below its average monthly cash requirements. The Company has also invested a considerable amount of cash in inventory, which it will need to sell to generate revenue for a profitable gross margin. Additionally, the ongoing threat of COVID-19 and its variation, may have an impact on future revenue and operations. During 2020, the Company raised approximately $24,000,000 from financing activities and at June 30, 2021 had $11,479,691 in cash. As of the date of this report, the Company believes it has enough cash for at least twelve months of operations from the date of the filing of this report.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:

● Identify the contract with a customer

● Identify the performance obligations in the contract

● Determine the transaction price

● Allocate the transaction price to performance obligations in the contract

● Recognize revenue when or as the Company satisfies a performance obligation

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three month periods ended June 30, 2021 and June 30, 2020:

	North America		Africa		EMESA*		Asia		June 30, 2021
Services	$	272,277	$	-	$	10,462	$	3,902	$	286,641
License fees		403,689		249,484		9,020		-		662,193
Hardware		43,175		-		-		81		43,256
Total Revenues	$	719,141	$	249,484	$	19,482	$	3,983	$	992,090

	North America		Africa		EMESA*		Asia		June 30, 2020
Services	$	209,846	$	-	$	11,309	$	8,348	$	229,503
License fees		23,542		-		-		-		23,542
Hardware		48,327		-		-		5,770		54,097
Total Revenues	$	281,715	$	-	$	11,309	$	14,118	$	307,142

10

 

The following table summarizes revenue from contracts with customers for the six month periods ended June 30, 2021 and June 30, 2020:

	North America		Africa		EMESA*		Asia		June 30, 2021
Services	$	631,891	$	-	$	28,350	$	6,422	$	666,663
License fees		772,489		249,484		51,528		67,650		1,141,151
Hardware		91,970		684,839		265,995		30,110		1,072,914
Total Revenues	$	1,496,350	$	934,323	$	345,873	$	104,182	$	2,880,728

	North America		Africa		EMESA*		Asia		June 30, 2020
Services	$	406,162	$	-	$	15,451	$	15,413	$	437,026
License fees		188,777		-		-		70,110		258,887
Hardware		104,681		-		-		29,033		133,714
Total Revenues	$	699,620	$	-	$	15,451	$	114,556	$	829,627

*EMESA – Europe, Middle East, South America

Software licenses

Software license revenue consist of fees for perpetual and subscription licenses for one or more of the Company’s biometric fingerprint solutions or identity access management solutions. Revenue is recognized at a point in time once the software is available to the customer for download. Software license contracts are generally invoiced in full on execution of the arrangement.

Hardware

Hardware revenue consists of fees for associated equipment sold with or without a software license arrangement, such as servers, locks and fingerprint readers. Customers are not obligated to buy third party hardware from the Company and may procure these items from a number of suppliers. Revenue is recognized at a point in time once the hardware is shipped to the customer. Hardware items are generally invoiced in full on execution of the arrangement.

Support and Maintenance

Support and maintenance revenue consists of fees for unspecified upgrades, telephone assistance and bug fixes. The Company satisfies its support and maintenance performance obligation by providing “stand-ready” assistance as required over the contract period. The Company records deferred revenue (contract liability) at time of prepayment until the term of the contract ends. Revenue is recognized over time on a ratable basis over the contract term. Support and maintenance contracts are up to one to five years in length and are generally invoiced in advance at the beginning of the term. Support and maintenance revenue for subscription licenses is carved out of the total license cost at 18% and recognized on a ratable basis over the license term.

Professional Services

Professional services revenues consist primarily of fees for deployment and optimization services, as well as training. The majority of the Company’s consulting contracts are billed on a time and materials basis, and revenue is recognized based on the amount billable to the customer in accordance with practical expedient ASC 606-10-55-18. For other professional services contracts, the Company utilizes an input method and recognizes revenue based on labor hours expended to date relative to the total labor hours expected to be required to satisfy its performance obligation.

Contracts with Multiple Performance Obligations

Some contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis.  The standalone selling prices are determined based on overall pricing objectives, taking into consideration market conditions and other factors, including the value of the contracts, the cloud applications sold, customer demographics, geographic locations, and the number and types of users within the contracts.

11

 

The Company considered several factors in determining that control transfers to the customer upon shipment of hardware and availability of download of software.  These factors include that legal title transfers to the customer, the Company has a present right to payment, and the customer has assumed the risks and rewards of ownership upon shipment of hardware and availability of download of software.

Accounts receivable from customers are typically due within 30 days of invoicing.  The Company does not record a reserve for product returns or warranties as amounts are deemed immaterial based on historical experience.

Costs to Obtain and Fulfill a Contract

Costs to obtain and fulfill a contract are predominantly sales commissions earned by the sales force and are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit determined to be four years. These costs are included as capitalized contract costs on the balance sheet. The period of benefit was determined by taking into consideration customer contracts, technology, and other factors based on historical evidence. Amortization expense is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Transaction Price Allocated to the Remaining Performance Obligations

ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2021. The guidance provides certain practical expedients that limit this requirement, which the Company’s contracts meet as follows:

● The performance obligation is part of a contract that has an original expected duration of one year or less, in accordance with ASC 606-10-50-14.

At June 30, 2021, deferred revenue represents the Company’s remaining performance obligations related to prepaid support and maintenance, all of which is expected to be recognized from one to five years. 

All of the Company's performance obligations, and associated revenue, are generally transferred to customers at a point in time, with the exception of support and maintenance, and professional services, which are generally transferred to the customer over time.

Deferred Revenue 

Deferred revenue includes customer advances and amounts that have been paid by customer for which the contractual maintenance terms have not yet occurred. The majority of these amounts are related to maintenance contracts for which the revenue is recognized ratably over the applicable term, which generally is 12-60 months. Maintenance revenue which would be recognized based on contract periods subsequent to 12 months from the balance sheet date, is segregated as long term deferred revenue. Maintenance contracts include provisions for unspecified when-and-if available product updates and customer telephone support services. At June 30, 2021 and December 31, 2020, amounts in deferred revenue were approximately $621,000 and $702,000, respectively. Revenue recognized during the three and six-months ended June 30, 2021 from amounts included in deferred revenue at the beginning of the period was approximately $124,000 and $430,000, respectively. The Company did not recognize any revenue from performance obligations satisfied in prior periods.  

4. PISTOLSTAR, INC. ACQUISITION

On  June 30, 2020, the Company acquired PistolStar, Inc., a private company based in the United States, which provides enterprise-ready identity access management solutions, including multi-factor authentication, identity-as-a-service, single sign-on and self-service password reset to commercial, government and education customers throughout the United States and internationally.

From April 10, 2020 until the Company acquired PistolStar, it licensed PortalGuard®, PistolStar’s authentication software, which the Company combines with its biometric authentication solutions offered to existing and prospective customers.

The total purchase price of $2.5 million included cash payment of $2.0 million and the issuance of a $500,000 promissory note.

The promissory note, which was issued to the previous owner of PistolStar, accrued interest at 4% per annum and was payable in four installments over the 12-month period following the closing. The balance of the note at December 31, 2020 was $232,000, net of the unamortized debt discount. On January 21, 2021, the Company paid the $250,000 balance due on the note.

The fair value of the assets acquired and liabilities assumed was less than the purchase price, resulting in the recognition of goodwill. The goodwill reflected the value of the synergies the Company expected to realize and the assembled workforce.

12

5. ACCOUNTS RECEIVABLE

Accounts receivable are carried at original amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful receivables by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. Accounts receivable are written off when deemed uncollectible.

Accounts receivable at June 30, 2021 and December 31, 2020 consisted of the following: 

	June 30,			December 31,
	2021			2020
Accounts receivable - current	$	1,411,462		$	561,834
Loss on foreign currency		(50,000	)		-
Allowance for doubtful account		(13,785	)		(13,785	)
Accounts receivable, net of allowances for doubtful accounts	$	1,347,677		$	548,049

6. 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,
	2021		2020
Selling, general and administrative	$	30,704	$	140,328
Research, development and engineering		10,419		2,511
	$	41,123	$	142,839

	Six Months Ended June 30,
	2021		2020
Selling, general and administrative	$	159,648	$	581,636
Research, development and engineering		22,623		73,922
	$	182,271	$	655,558

7. FACTORING

Due from factor consisted of the following as of: 

	June 30,			December 31,
	2021			2020
Original invoice value	$	99,000		$	241,715
Factored amount		(49,500	)		(181,262	)
Due from factor	$	49,500		$	60,453

13

 

The Company entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to October 31, 2021. Pursuant to the terms of the arrangement, the Company, from time to time, sells to the Factor a minimum of $150,000 per quarter of certain of its accounts receivable balances on a non-recourse basis for credit approved accounts. The Factor remits 35% of the foreign and 75% of the domestic accounts receivable balance to the Company (the “Advance Amount”), with the remaining balance, less fees, forwarded to the Company once the Factor collects the full accounts receivable balance from the customer. In addition, the Company, from time to time, receives over advances from the Factor. 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. The cost of factoring is included in selling, general and administrative expenses. The cost of factoring was as follows:  

	Three Months ended June 30,
	2021		2020
Factoring fees	$	18,900	$	33,230

	Six Months ended June 30,
	2021		2020
Factoring fees	$	32,247	$	65,230

8. NOTE RECEIVABLE

During the third quarter of 2020, the Company loaned $295,000 as an advance to Technology Transfer Institute (“TTI”) to aid in fulfilling the African contracts. The note does not bear any interest if paid within the nine (9) monthly installments beginning December 31, 2020.  The note bears a default rate of 5%. Currently, TTI is in the process of raising capital to repay the loan, and fulfil the African contracts. The note is currently in default and as such, has been classified as noncurrent as of June 30, 2021. No payments were received from TTI during the six months ended June 30, 2021. The Company is currently renegotiating the payment terms of the note, as the deployment of projects in Africa has been delayed due to COVID and the establishment of bank regulations for payments to vendors and contractors.

9. PREPAID EXPENSES AND OTHER

Included in prepaid expense and other at June 30, 2021 was $1.4 million relating to deposits for a range of hardware devices. These devices were ordered in conjunction with the Company securing the recent license contracts in Africa and are expected to be delivered over the next few quarters as the hardware is deployed. Additional deposits are sometimes required before shipment of the inventory, and prepaid may increase before the inventory is received, while other orders have extended payment terms.

	June 30,		December 31,
	2021		2020
Deposit for inventory	$	1,446,471	$	66,995
Other prepaid expenses		107,786		64,178
Insurance		16,428		45,468
Software licenses		41,414		24,866
Total prepayments	$	1,612,099	$	201,507

10. INVENTORY

Inventory is stated at the lower of cost, determined on a first in, first out basis, or net realizable value, Inventory is comprised of the following as of: 

	June 30,		December 31,
	2021		2020
Finished goods	$	2,092,622	$	221,130
Fabricated assemblies		198,006		109,817
Total inventory	$	2,290,628	$	330,947

11. RESALABLE SOFTWARE LICENSE RIGHTS

On December 31, 2015, the Company purchased third-party software licenses in the amount of $180,000 in anticipation of a large pending deployment that has yet to materialize. The Company is amortizing the total cost over the greater of actual unit cost of licenses sold or the straight line method over 10 years with the greater of the two approaches being the actual unit cost per license sold. A total of $2,488 and $0 was charged to cost of sales during the three month periods ended June 30, 2021 and 2020, respectively. A total of $5,009 and $5,028 was charged to cost of sales during the six month periods ended June 30, 2021 and 2020, respectively. Since the license purchase, the cumulative amount of $126,127 has been charged to cost of sales, with a carrying balance of $53,873 and $58,882 as of June 30, 2020 and December 31, 2020, respectively.

14

12. INVESTMENT IN DEBT SECURITY

The Company purchased a 4,000,000 Hong Kong dollar denominated Bond Certificate with a financial institution in Hong Kong in June 2020. The Bond Certificate translated to $512,821 U.S. Dollars, based on the exchange rate at the purchase date. The Company can invest up to 20,000,000 Hong Kong dollars under the terms of the certificate, bearing interest at 5% per annum. The investment is recorded at amortized cost which approximates fair value and was held to maturity.

13. COMMITMENT

Sales Incentive Agreement with TTI

On March 25, 2020, the Company entered into a sales incentive agreement with TTI. Terms of the agreement include the following:

1. The original term of the agreement was one year unless notice to terminate (as defined) was given.  The agreement is automatically extended for additional one-year terms unless terminated.

2. For each $5,000,000 in revenue (up to a maximum of $20,000,000) TTI generates during the first year that generates net income of at least 20% (as defined), the Company will pay TTI a sales incentive fee of $500,000 payable by the issuance of 62,500 shares of common stock.

3. In the event that TTI generates revenue in excess of $20,000,000 during the first year, the Company will issue TTI a five-year warrant to purchase 12,500 shares of Common Stock at an exercise price of $12.00 per share for each $1,000,000 of revenue in excess of $20,000,000 (up to a maximum of $25,000,000).

In no event will the Company be obligated to issue more than 250,000 shares of common stock or warrants to purchase more than 62,500 shares of common stock pursuant to this agreement.

There has been no revenue generated or sales incentive fees paid during the six months ended June 30, 2021 and 2020.

14. CONVERTIBLE NOTES PAYABLE

There was no balance outstanding for convertible notes payable as of June 30, 2021 and December 31, 2020. Details for Notes that were either converted or redeemed during the 2020 fiscal year were as follows:

Securities Purchase Agreement dated July 10, 2019

On July 10, 2019, the Company issued a $3,060,000 principal amount senior secured convertible note (the “Original Note”). At closing, a total of $2,550,000 was funded. The original issue discount was $510,000. The principal amount due of the Original Note was due and payable as follows: $918,000 was due 180 days after funding, $1,071,000 was due 270 days after funding, and the remaining balance due 12 months after the date of funding.

The Original Note was secured by a lien on substantially all of the Company’s assets and properties and was convertible at the option of the Investor in shares of common stock at a fixed conversion price of $12.00 per share.

In connection with the closing of the Original Note, the Company issued a five-year warrant to the Investor to purchase 250,000 shares of common stock at a fixed exercise price of $12.00 per share, paid a $50,000 commitment fee, and issued 33,334 shares of common stock in payment of a $400,000 due diligence fee. The Company also paid banker fees of $193,500 and legal fees of $71,330. The valuation of the warrant of $595,662 was recorded to debt discount and was amortized over the life of the Original Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount are included in interest expense on the statement of operations.

On March 12, 2020, the Company issued a $3,789,000 principal amount senior secured convertible note (the “Amended Note”), which replaced the Original Note and included an additional $729,000 in interest due to the debt restructuring. The principal amount was due and payable in full on April 13, 2020. The Amended Note was secured by a lien on substantially all of the Company’s assets and properties and was convertible at the option of the Investor into shares of common stock at a fixed conversion price of $5.20 per share. The Company accounted for the transaction as a debt extinguishment and, therefore, the balance of the fees and unamortized discount associated with the Original Note were written off and included as loss on extinguishment of debt. On the day of the amendment, the closing stock price for the day was $6.08, which resulted in a beneficial conversion of $0.88 per share outstanding or $641,215 to be amortized to interest expense over the term of the Amended Note, as adjusted for any debt conversion.

On April 12, 2020, and May 6, 2020, the Company entered into amendments (the “Amendments”) to the Amended Note. The Amendments extended the maturity date to June 12, 2020 and extended the Investor’s right to convert the Amended Note into shares of the Company’s common stock at a price of $5.20 per share through June 12, 2020. All other provisions of the Amended Note remained the same.

15

 

Until the second anniversary of the closing, the investor had the right to purchase up to 20% of the securities the Company issues in any future private placement, subject to certain exceptions for, among other things, strategic investments.

On June 10, 2020, the investor converted the last of the remaining principal into shares of common stock for payment in full, and the remaining principal balance was $0. The Amended Note amount of $3,789,000 was converted into 728,654 shares of common stock in 2020.

January 2020 Note

On January 13, 2020, the Company issued a $157,000 principal amount secured 10% convertible redeemable note (the “January 2020 Note”) to an institutional investor with a maturity date of June 13, 2020 which was convertible into common stock at a conversion price of $12.00 per share. At the closing, the Company agreed to issue 81,250 shares of common stock in lieu of payment of a $75,000 commitment fee which was reduced to 6,250 shares as the January 2020 Note was repaid prior to the maturity date.

On June 12, 2020, the January 2020 Note was paid in full by payment of $211,984. The 75,000 shares were returned to the Company in July 2020.

February 2020 Note

On February 13, 2020, the Company issued a $126,000 principal amount secured 10% convertible redeemable note (the “February 2020 Note”) to an institutional investor with a maturity date of July 13, 2020 which was convertible into common stock at a conversion price of $9.20 per share.  On March 12, 2020, the Original Note was amended to reduce the conversion price to $5.20 per share, which reduced the conversion price of the February Note to $5.20 and resulted in a deemed dividend of $70,998. The February 2020 Note was redeemable at any time by payment of a premium to the principal balance starting at 10% and increasing to 30%.   The Company issued 6,250 shares of common stock to the investor in lieu of payment of a $57,500 commitment fee. The Company paid $6,000 of legal fees in connection with the issuance of February 2020 Note.

The February 2020 Note was paid in full on July 10, 2020 by payment of $170,442.

May 2020 Note

On May 6, 2020, the Company issued a $2,415,000 principal amount senior secured convertible note (the “May 2020 Note”). At closing, $2,100,000 was funded. The principal amount was due and payable in five equal monthly installments of $268,333 beginning seven months after the funding date with the remaining balance due on the twelfth month after the date of funding. The May 2020 Note was convertible at a fixed convertible price of $9.28 per share. In connection with the issuance of the May 2020 Note, the Company paid a $133,333 due diligence fee by issuing 14,368 shares of common stock to the Investor priced at $9.28 per share. The Company also paid a placement fee of 7% of the gross proceeds to a placement agent. In connection with the closing of the May 2020 Note, the Company issued a five-year warrant to the investor to purchase 237,500 shares of common stock at a fixed exercise price of $9.28 and was immediately exercisable. The valuation of the warrant of $876,937 was recorded to debt discount and was amortized over the life of the May 2020 Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in-capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount were included in the interest expense on the statement of operations.

Following the completion of the underwritten offering in July 2020, the principal balance of $2,415,000 was paid in full during the third quarter of 2020.  As a result of the repayment, the Company expensed the remaining debt discounts and issuance costs of $1,218,163 in July 2020.

June 2020 Note

On June 29, 2020, the Company issued a $1,811,250 principal amount senior secured convertible note (the “June 2020 Note”).  At closing, $1,575,000 was funded. The principal amount was due and payable in nine equal monthly installments of $201,250 beginning four months after the funding date with the remaining balance due on the twelfth month after the date of funding. The June 2020 Note was convertible at a fixed convertible price of $9.28 per share. In connection with the issuance of the June 2020 Note, the Company paid a $100,000 due diligence fee by issuing 17,071 shares to the Investor priced at $5.86 per share. The Company also paid a placement fee of 7% of the gross proceeds to a placement agent.

In connection with the closing of the June 2020 Note, the Company issued a five-year warrant to the Investor to purchase 178,125 shares of common stock at a fixed exercise price of $9.28 per share and was immediately exercisable. The valuation of the warrant of $511,402 was recorded to debt discount and is was amortized over the life of the June 2020 Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount are included in interest expense on the statement of operations.

16

 

Following the completion of the underwritten offering in July 2020, the principal balance of $1,811,250 was paid in full during the third quarter of 2020. As a result of the repayment, the Company expensed the remaining debt discounts and issuance costs of $957,919 in July 2020.

15. LEASES

The Company leases office space in New Jersey, Hong Kong, Minnesota, and New Hampshire with lease termination dates of 2023, 2020, 2022, and 2022, respectively. The leases include non-lease components with variable payments. The following tables present the components of lease expense and supplemental balance sheet information related to the operating leases, for the three and six months ended as of:

	3 Months ended June 30,		6 Months ended June 30,
	2021		2021
Lease cost
Operating lease cost	$	63,973	$	127,946
Total lease cost	$	63,973	$	127,946
Balance sheet information
Operating ROU assets			$	372,303
Operating lease liabilities, current portion			$	221,399
Operating lease liabilities, non-current portion				162,373
Total operating lease liabilities			$	383,772
Weighted average remaining lease term (in years) – operating leases				1.83
Weighted average discount rate – operating leases				5.50	%

Supplemental cash flow information related to leases were as follows, for the six months ended June 30, 2021:

Cash paid for amounts included in the measurement of operating lease liabilities $ 119,225

Maturities of operating lease liabilities were as follows:

2021 (remaining six months)	$	129,352
2022		187,594
2023		89,226
Total future lease payments	$	406,172
Less: imputed interest		(22,400	)
Total	$	383,772

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

The Company’s basic EPS is calculated using net loss available to common shareholders 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.

The reconciliation of the numerator of the basic and diluted EPS calculations was as follows for both of the following three and six month periods ended June 30, 2021 and 2020:

	Three Months ended June 30,						Six Months ended June 30,
	2021			2020			2021			2020
Basic and Diluted Numerator:
Net loss	$	(1,161,683	)	$	(1,572,709	)	$	(2,013,114	)	$	(4,942,991	)
Deemed dividends related to down-round features		-			-			-			(112,686	)
Net loss available to common stockholders (basic and diluted)	$	(1,161,683	)	$	(1,572,709	)	$	(2,013,114	)	$	(5,055,677	)

17

 

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,
	2021		2020		2021		2020
Stock options		212,545		1,603,054		212,545		1,603,054
Warrants		4,689,387		5,651,889		4,689,387		5,651,889
Total		4,901,932		7,254,943		4,901,932		7,254,943

The following table summarizes the weighted average securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to the net losses for the three and six months ended June 30, 2021, and 2020:

	Three Months ended June 30,				Six Months ended June 30,
	2021		2020		2021		2020
Stock options		-		1,326		-		748
Warrants		-		80,797		-		49,818
Convertible notes		-		3,837,165		-		3,837,165
Total		-		3,919,288		-		3,887,731

17. STOCKHOLDERS’ EQUITY

1. Preferred Stock

Within the limits and restrictions provided in the Company’s Certificate of Incorporation, the Board of Directors has the authority, without further action by the shareholders, to issue up to 5,000,000 shares of preferred stock, $.0001 par value per share, in one or more series, and to fix, as to any such series, any dividend rate, redemption price, preference on liquidation or dissolution, sinking fund terms, conversion rights, voting rights, and any other preference or special rights and qualifications.

2. Common Stock

Effective November 20, 2020, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1-for-8. The number of authorized shares and the par value of the Company's common stock and preferred stock were not affected by the reverse stock split. Stockholders who otherwise would be entitled to receive fractional shares were rounded up to the nearest whole share. The reverse stock split became effective at the opening of trading on November 20, 2020.

Holders of common stock have equal rights to receive dividends when, as and if declared by the Board of Directors, out of funds legally available therefor. Holders of common stock have one vote for each share held of record and do not have cumulative voting rights.

Holders of common stock are entitled, upon liquidation of the Company, to share ratably in the net assets available for distribution, subject to the rights, if any, of holders of any preferred stock then outstanding. Shares of common stock are not redeemable and have no preemptive or similar rights. All outstanding shares of common stock are fully paid and nonassessable.

Issuances of Common Stock

On March 30, 2020, the Company issued 121,500 shares of common stock upon exercise of warrants at $12.00 per share, resulting in proceeds of $1,458,000 to the Company.

See Note 14 Convertible Notes Payable for common stock issuances related to conversion of convertible notes payable and shares of common stock issued for fees in connection with the agreements during fiscal 2020.

18

 

Issuances of Nonvested Stock

Nonvested stock consists of shares of common stock that are subject to restrictions on transfer and risk of forfeiture until the fulfillment of specified conditions. The fair value of nonvested shares is determined based on the market price of the Company's common stock on the grant date. Nonvested stock is expensed ratably over the term of the restriction period.

The Company issued 2,500 shares of restricted common stock to certain employees of the Company and 1,250 of shares of restricted common stock were forfeited during the six month period ended June 30, 2021. These shares vest in equal annual installments over a three-year period from the date of grant and had a fair value on the date of issuance of $8,425.

Nonvested stock compensation for the three and six-month periods ended June 30, 2021, was $16,346 and $33,721, respectively.

There were no shares of nonvested stock issued in the three and six-month periods ended June 30, 2020.

Issuances to Directors, Executive Officers & Consultants

During the three and six-month period ended June 30, 2021, the Company issued 1,748 and 3,839 shares of common stock to its directors in lieu of payment of board and committee fees valued at $5,505 and $13,015, respectively. There were 2,143 shares of common stock issued to directors in the three and six-month period ended June 30, 2020, valued at $15,007.

Employees’ exercise options

During the three and six-month periods ended June 30, 2021 and 2020, no employee stock options were exercised.

3. Warrants

During the three months ended June 30, 2020, the Company issued a warrant valued at $94,655 to an investor to purchase 125,000 shares for a business referral. There were no warrants issued during the three and six-month periods ended June 30, 2021.

See Note 14 Convertible Notes Payable for warrants issued with convertible notes in connection with the agreements during fiscal 2020.

4.  Securities Purchase Agreement dated September 23, 2015

On September 23, 2015, the Company issued warrants (the “2015 Warrants”) to purchase 8,681 shares of common stock in connection with the issuance of a promissory note. The warrants were immediately exercisable at an initial exercise price of $28.80 per share and had a term of five years.  The 2015 Warrants expired in September 2020.

The 2015 Warrants had a “full ratchet” anti-dilution adjustment provision.  The anti-dilution adjustment provision was triggered in the first quarter of 2020 from the February 2020 Note and amendments to the Original Note. As a result of the forgoing transactions, the number of shares of common stock issuable upon the full exercise of the 2015 Warrants increased to 48,078, the exercise was reduced to $5.20 per share, and the Company recorded a non-cash deemed dividend in amount of $41,688. 

18. FAIR VALUES OF FINANCIAL INSTRUMENTS

Cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and due from factor, are carried at, or approximate, fair value because of their short-term nature. The carrying values of the Company’s notes payable and operating lease liabilities approximated their fair values as of June 30, 2021, and December 31, 2020, as the interest rates approximated market.

19. MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

For the three months ended June 30, 2021, and 2020, two customers accounted for 36% and one customer accounted for 41% of revenue, respectively. For the six months ended June 30, 2021, and 2020, two customers accounted for 34% and three customers accounted for 60% of revenue, respectively.

Two customers accounted for 47%, and 19% of current accounts receivable, respectively as of June 30, 2021. At December 31, 2020, one customer accounted for 31% of current accounts receivable.

20. SUBSEQUENT EVENTS

On August 12, 2021, the Company issued 1,560 shares of common stock to its directors in payment of meeting fees. Additionally, the Company issued an aggregate of 3,750 shares of restricted stock with three-year vesting period to five new employees. 

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

19

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical facts contained in this Report on Form 10-Q, 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; our ability to execute and deliver on contracts in Africa, our ability to expand into Asia, Africa and other foreign markets; our ability to integrate the operations and personnel of PistolStar into our business, the duration and severity of the current coronavirus COVID-19 pandemic and its effect on our business operations, sales cycles, personnel, and the geographic markets in which we operate; delays in the development of products and statements of assumption underlying any of the foregoing as well as other factors set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 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.

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to and should be read in conjunction with our unaudited condensed consolidated financial statements and related information contained herein and our audited financial statements as of December 31, 2020.

OVERVIEW

We are a leading identity access management (IAM) platform provider for the enterprise and large-scale customer and civil ID solutions.  Built to leverage BIO-key’s world-class biometric core platform among 14 other strong authentication factors, BIO-key PortalGuard® and hosted PortalGuard IDaaS (identity as a service) are platforms that enable our customers to securely and easily assure that only the right people can access the right systems.  PortalGuard goes beyond traditional multifactor authentication (MFA) solutions by addressing sizeable gaps, such as allowing roving users to biometrically authenticate at any workstation without using their phones or tokens, eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification. 

Millions use BIO-key every day to securely access a variety of cloud, mobile and web applications, on-premise and cloud-based hypervisor servers from all of their devices. Employees, contractors, students and faculty sign in through PortalGuard to seamlessly and securely access the applications they need to do their work, without relying on personal phone use or per-user tokens. Organizations use our platform to securely collaborate with their supply chain and partners, and to provide their customers with flexible, resilient user experiences online or in-person.

Large-scale customer and civil ID customers use our scalable biometric management platform and FBI-certified scanner hardware to manage enrollment, de-duplication and authentication for millions of users.  One large bank has enrolled and identifies over 10 million of their customers in branches on a daily basis. 

We sell our branded biometric and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution.  We do not mandate BIO-key hardware and our NIST-certified biometric platform is unique in that it supports interoperable mixing and matching combinations of fingerprint scanners regardless of manufacturer, so that the right scanner can be deployed for the right use case, without mandating the user of a particular scanner.

Security-conscious developers leverage our platform APIs and federation interfaces to securely and efficiently embed biometric and MFA identity capabilities into their software.   Our approach to IDaaS allows our customers to efficiently scale their security and identity infrastructures to protect both internal cloud workforce- and external customer-facing applications.

20

We operate a SaaS business model with customers subscribing to a term use of our software for annual recurring revenue. We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners including resellers, system integrators, master agents and other distribution partners. Our subscription fees include a term license of hosted or on-premise product and technical support and maintenance of our platform. We base subscription fees primarily on the products used and the number of users enrolled in our platform. We generate subscription fees pursuant to noncancelable contracts with a weighted average duration of approximately one year. 

PortalGuard is used by our customers to manage and secure IT access by their employees, contractors and partners, which we call workforce identity. PortalGuard is also used to manage and secure the identities of an organization’s customers through integration of APIs we have developed and industry-standard federation standards, which we call customer identity. We invoice customers in advance in annual and multi-year prepaid installments for subscriptions to our platforms.

Strategic Outlook and Recent Developments

Historically, our largest market has been access control within highly regulated industries such as government, financial services, and healthcare.  In 2019, we became the go-to biometric authentication provider for board of election offices as eight offices deployed our hardware and software to secure internal access to the voter registration database. We will seek to extend this footprint in 2021 and beyond.

In 2020, we announced that we had secured two of the largest contracts in our history, with our partner Technology Transfer Institute.  The contracts, valued at a combined $75,000,000, are for large-scale identification projects in Africa and Nigeria. Under the first contract, we will provide biometric authentication to support the infrastructure of a new e-commerce project developed with the expectation to generate more than one million jobs in Nigeria. The second contract provides for BIO-key hardware and software to be used by a leading African telecommunications company to secure internal access to customer data. Currently Africa and the surrounding regions are receiving government funding to expand the use of biometric authentication solutions to help establish trustworthy government programs and reduce fraud.  We received our first purchase order under these contracts in the fourth quarter of 2020. We received new orders in the first quarter of 2021 from a new customer in connection with the large-scale identification project, which we shipped in March 2021.  The COVID-19 pandemic has and may continue to delay the rollout of these programs.

We plan to have a more significant role in the IAM market which continues to expand. We plan to offer customers a suite of authentication options that complement our biometric solutions. The more well-rounded offerings of authentication options will allow customers to customize their approach to authentication all under one umbrella.

We expect to grow our business within government services and highly regulated industries in which we have historically had a strong presence including financial services, higher education, and healthcare.  We believe that continued heightened security and privacy requirements in these industries, and as colleges and universities continue operating in remote environments, we will generate increased demand for security solutions, including biometrics. In addition, we expect that the compatible, yet superior portable biometric user experience offered by our technology for Windows 10 users will accelerate the demand for our computer network log-on solutions and fingerprint readers.  Through value add-offerings via direct sales, resellers, and strategic partnerships with leading higher education platform providers, we expect to continue to grow our installed base. 

Our primary sales strategies are focused on (i) increased marketing efforts into the IAM market, (ii) dedicated pursuit of large-scale identification projects across the globe, and (iii) growing our channel alliance program which currently includes more than one hundred participants and is starting to generate incremental revenues.

A second component of our growth strategy is to pursue strategic acquisitions of select businesses and assets in the IAM space.  In furtherance of this strategy, we are active in the industry and regularly evaluate businesses that we believe will either provide an entry into new market verticals or be synergistic with our existing operations and in either case, be accretive to earnings.  We cannot provide any assurance as to whether we will be able to complete any acquisition and if completed, successfully integrate any business we acquire into our operations. 

The outbreak of a novel strain of the coronavirus, COVID-19, has been recognized as a pandemic by the World Health Organization. This outbreak has severely restricted the level of economic activity around the world. In response to this coronavirus outbreak the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, including imposing restrictions on travel and business operations and requiring individuals to limit time outside of their homes. Given the uncertainty regarding the spread of this coronavirus, the related financial impact cannot be reasonably estimated at this time.

The complications caused by COVID-19 have forced organizations to quickly adapt to a work from home remote business model. This increases the risk of unauthorized users, phishing attacks, and hackers who are eager to take advantage of the challenges of securing remote workers. We believe that biometrics should play a key role in remote user authentication.

21

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, 2020.  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, 2021 AS COMPARED TO JUNE 30, 2020

Consolidated Results of Operations - Percent Trend

	Three Months Ended June 30,
	2021			2020
Revenues
Services		29	%		75	%
License fees		67	%		8	%
Hardware		4	%		17	%
Total Revenues		100	%		100	%
Costs and other expenses
Cost of services		16	%		30	%
Cost of license fees		5	%		3	%
Cost of hardware		3	%		15	%
Total Cost of Goods Sold		24	%		48	%
Gross profit		76	%		52	%
Operating expenses
Selling, general and administrative		139	%		395	%
Research, development and engineering		49	%		104	%
Total Operating Expenses		188	%		498	%
Operating loss		-112	%		-447	%
Other expense		-5	%		-65	%
Net loss		-117	%		-512	%

Revenues and cost of goods sold

	Three months ended June 30,
	2021		2020		$ Change			% Change
Revenues
Service	$	286,641	$	229,503	$	57,138			25	%
License		662,193		23,542		638,651			2,713	%
Hardware		43,256		54,097		(10,841	)		-20	%
Total Revenue	$	992,090	$	307,142	$	684,948			223	%

	Three months ended June 30,
	2021		2020		$ Change			% Change
Cost of Goods Sold
Service	$	158,440	$	92,672	$	65,768			71	%
License		48,373		8,255		40,118			486	%
Hardware		32,756		47,527		(14,771	)		-31	%
Total COGS	$	239,569	$	148,454	$	91,115			61	%

22

Revenues

For the three months ended June 30, 2021, and 2020, service revenues included approximately $226,000 and $205,000, respectively, of recurring maintenance and support revenue, and approximately $61,000 and $25,000 respectively, of non-recurring custom services revenue.  Recurring service revenue increased $21,000 or 10% in 2021 which was due largely to the additional service revenue from PistolStar customers and a three-year contract extension from a Fortune 500 telecommunications customer. Non-recurring custom services increased 144% due to additional new customer installations and upgrades from on-premise to cloud deployments. As our customer base continues to grow, we expect the service revenue to increase in future periods.

For the three months ended June 30, 2021, license revenue increased substantially from the corresponding period in 2020. We increased both the variation and number of customers, including additional revenue from the PistolStar software and cloud migrations, primarily in the higher education market.  Growth was also due to the fact during the three months ended June 30 2020 our sales pipeline was adversely impacted by the COVID-19 pandemic.

For the three months ended June 30, 2021, hardware sales decreased by 20%. The decrease was due to smaller orders in 2021 as compared to 2020.

Costs of goods sold

For the three months ended June 30, 2021, cost of service increased approximately $66,000 or 71% to $158,440 due to the increased revenue and support for the PortalGuard installations, compared to the three months ended June 30, 2020. For the three months ended June 30, 2021, license fees increased to $48,373 from $8,255 during the three months ended June 30, 2020, due largely to an increase in revenue. For the three months ended June 30, 2021, hardware costs decreased to $32,756 from $47,527 during the three months ended June 30, 2020, related to lower costs associated with less hardware revenue.

Selling, general and administrative

	Three months ended June 30,
	2021		2020		$ Change		% Change
Selling, general and administrative	$	1,374,084	$	1,211,928	$	162,156		13	%

Selling, general and administrative costs for the three months ended June 30, 2021, increased 13% from the corresponding period in 2020. There were increases in sales and marketing costs, Delaware franchise taxes, shareholder expenses for the annual meeting, and administrative expenses for our African subsidiary.  These amounts were offset by decreases in contractors and temporary labor, factoring fees, professional fees, personnel restructuring charges in our Hong Kong subsidiary, and non-cash compensation expenses.

Research, development and engineering

	Three months ended June 30,
	2021		2020		$ Change		% Change
Research, development, and engineering	$	490,952	$	318,573	$	172,379		54	%

For the three months ended June 30, 2021, research, development, and engineering costs increased 54% to $490,952 as compared to $318,573 for the corresponding period in 2020. Included in the increase were personnel costs associated with PistolStar, increased expenses of our Hong Kong subsidiary in connection with the development of our newly introduced USB-C connector fingerprint readers, and increased amortization related to intangible assets acquired from PistolStar.

23

Other income (expense)

	Three months ended
	June 30,
	2021			2020			$ Change			% Change
Other income (expense)
Interest income	$	832		$	25,801		$	(24,969	)		-97	%
Government grant – Paycheck Protection Program		-			340,819			(340,819	)		-100	%
Loss on foreign currency transactions		(50,000	)		-			(50,000	)		-100
Interest expense		-			(567,516	)		567,516			100	%
Other expense	$	(49,168	)	$	(200,896	)	$	151,728			-76	%

The amounts for the three months ended June 30, 2021, related to interest income of $832, offset by the foreign currency adjustment to an accounts receivable invoice. Other income (expense) for the 2020 related to approximately $567,000 of interest expense, which included the amortization of a beneficial conversion feature, and amortization of debt discounts and debt issuance costs relating to the convertible notes, partially offset by amounts expended under the Payment Protection Program of approximately $341,000 and interest income of approximately $26,000.

24

SIX MONTHS ENDED JUNE 30, 2021 AS COMPARED TO JUNE 30, 2020

Consolidated Results of Operations - Percent Trend

	Six Months Ended June 30,
	2021			2020
Revenues
Services		23	%		53	%
License fees		40	%		31	%
Hardware		37	%		16	%
Total Revenues		100	%		100	%
Costs and other expenses
Cost of services		12	%		20	%
Cost of license fees		3	%		2	%
Cost of hardware		20	%		11	%
Total Cost of Goods Sold		35	%		33	%
Gross profit		65	%		67	%
Operating expenses
Selling, general and administrative		100	%		313	%
Research, development and engineering		32	%		79	%
Total Operating Expenses		133	%		392	%
Operating loss		-68	%		-324	%
Other expense		-2	%		-271	%
Net loss		-70	%		-596	%

Revenues and cost of goods sold

	Six months ended June 30,
	2021		2020		$ Change		% Change
Revenues
Service	$	666,663	$	437,026	$	229,637		53	%
License		1,141,151		258,887		882,264		341	%
Hardware		1,072,914		133,714		939,200		702	%
Total Revenue	$	2,880,728	$	829,627	$	2,051,101		247	%
Cost of Goods Sold
Service		334,384		163,117		171,267		105	%
License		87,342		18,711		68,631		367	%
Hardware		584,478		90,889		493,589		543	%
Total COGS	$	1,006,204	$	272,717	$	733,487		269	%

Revenues

For the six months ended June 30, 2021, and 2020, service revenues included approximately $573,000 and $410,000, respectively, of recurring maintenance and support revenue, and approximately $93,000 and $27,000, respectively, of non-recurring custom services revenue.  Recurring service revenue increased 40% from 2020 which was due largely to the additional service revenue from PistolStar customers and a three-year contract extension from a Fortune 500 telecommunications customer. Non-recurring custom services increased 244% due to additional new customer installations and upgrades from on-premise to cloud deployments. As our customer base continues to grow, we expect the service revenue to increase in future periods.

For the six months ended June 30, 2021, license revenue increased 341% from the corresponding period in 2020. We increased both the variation and number of customers, including additional revenue from the PistolStar software and cloud migrations, primarily in the higher education market.  Growth was also due to the fact that during the six months ended June 30, 2020 our sales pipeline was adversely impacted by the COVID-19 pandemic.

25

Hardware sales increased $939,200 during the six months ended June 30, 2021, to $1,072,914 from $133,714 during the six months ended June 30, 2020. The increase was attributable largely to sales in Nigeria for an international government agency.

Costs of goods sold

For the six months ended June 30, 2021, cost of service increased approximately $171,000 or 105% to approximately $334,000 as a result of PistolStar personnel supporting service revenue, compared to the six months ended June 30, 2020 before PistolStar was acquired. For the six months ended June 30, 2021, license fees increased to $87,342 from $18,711 during the six months ended June 30, 2020, due largely to the increase in revenue. For the six months ended June 30, 2021, hardware costs increased to $584,478 from $90,889 during the six months ended June 30, 2020, due to increased hardware revenue.

Selling, general and administrative

	Six months ended June 30,
	2021		2020		$ Change		% Change
Selling, general and administrative	$	2,890,482	$	2,593,327	$	297,155		11	%

Selling, general and administrative costs for the six months ended June 30, 2021 increased 11% from the corresponding period in 2020 as a result of increases in marketing expenses, Delaware franchise taxes, shareholder relation expenses, and administrative personnel expenses, offset by the reduction in non-cash employee and vendor compensation, factoring fees, contractors and temporary labor. Additionally, there were no non-cash warrant issuance costs and personnel restructuring charges related to our Hong Kong operations, as there were in the six months ended June 30, 2020.

Research, development and engineering

	Six months ended June 30,
	2021		2020		$ Change		% Change
Research, development and engineering	$	932,603	$	655,462	$	277,141		42	%

For the six months ended June 30, 2021, research, development and engineering costs increased 42% from approximately $655,000 to approximately $933,000. Included in the increase were personnel costs associated with PistolStar, and increased amortization of intangible assets acquired from PistolStar.

Other income (expense)

	Six months ended
	June 30,
	2021			2020			$ Change			% Change
Interest income (expense)
Interest income	$	3,447		$	25,802		$	(22,355	)		-87	%
Government grant – Paycheck Protection Program		-			340,819			(340,819	)		-100	%
Loss on foreign currency transactions		(50,000	)		-			(50,000	)		-100	%
Interest expense		(18,000	)		(2,118,657	)		2,100,657			99	%
Loss on extinguishment of debt		-			(499,076	)		499,076			100	%
Other expense	$	(64,553	)	$	(2,251,112	)	$	2,186,559			-97	%

Other expense for the 2021 period related to interest expense from the amortization of debt discounts and a foreign currency adjustment to an accounts receivable invoice, offset by interest income. Other income and expenses for the 2020 period related to the interest expense, which included the amortization of a beneficial conversion feature, and amortization of debt discounts and debt issuance costs relating to the convertible notes of approximately $2,119,000, a loss on the extinguishment of a convertible debt financing in an approximate amount of $500,000, partially offset by amounts received under the Payment Protection Program of approximately $341,000 and interest income of approximately $26,000.

26

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Operating activities overview

Net cash used by operations during the six months ended June 30, 2021 was approximately $5,242,000. Items of note included:

● Net positive cash flows related to adjustments for non-cash expenses of approximately $565,000. 

● Net positive cash flows related to accounts payable and accruals of approximately $687,000. 

● Negative cash flows related to changes in accounts receivable, inventory, prepayments and deferred revenue of approximately $4,301,000, due to working capital management.

Investing activities overview

Approximately $16,000 was used for capital expenditures during the three months ended June 30, 2021.

Financing activities overview

Approximately $255,000 was used for financing activities during the three months ended June 30, 2021 due to the repayment of notes payable.

Liquidity and 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.  

Between January and June 2020, we issued four convertible notes with principal amount totaling approximately $4,500,000.  All amounts were repaid in June and July 2020, primarily from the proceeds of the underwritten public offering, discussed below.

On April 20, 2020, we entered into a Paycheck Protection Program Term Note (the “SVB Note”) with Silicon Valley Bank (“SVB”). We received total proceeds of approximately $341,000 which was used in accordance with the requirements of the CARES Act. The full amount of the SVB Note has been forgiven.

On July 23, 2020, we completed an underwritten public offering of shares of common stock and warrants resulting in net proceeds of approximately $22.7 million, inclusive of the over-allotment and after deducting underwriting discounts, commissions and estimated offering expenses. We used approximately $4.2 million of the net proceeds to repay all outstanding amounts due under outstanding convertible promissory notes at that time. During the six months ended June 30, 2021, we have invested approximately $4 million in deposits for and receipt of inventory to support our African contracts. The balance is being used for working capital purposes.

Liquidity outlook

At June 30, 2021, our total cash and cash equivalents were approximately $11,500,000, as compared to approximately $17,000,000 at December 31, 2020.

As discussed above, we have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $735,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation.  During for the first six months of 2021, we generated $2,880,728 of revenue, which is below our average monthly requirements.  If we are unable to generate sufficient revenue to fund current operations and execute our business plan, we may need to obtain additional third-party financing. As of the date of this report, we do not expect that we will need to obtain additional financing during the next twelve months.

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 in the extreme case, not continue as a going concern.

27

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are in the opinion of management reasonably likely to have, a current or future effect on our financial condition or results of operations.

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, 2021. 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, 2021, 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, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

28

  ITEM 6. EXHIBITS

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	Inline XBRL Instance
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation
101.DEF	Inline XBRL Taxonomy Extension Definition
101.LAB	Inline XBRL Taxonomy Extension Labels
101.PRE	Inline XBRL Taxonomy Extension Presentation
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

29

SIGNATURES

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

	BIO-Key International, Inc.
Dated: August 16, 2021	/s/ Michael W. DePasquale
	Michael W. DePasquale
	Chief Executive Officer
	(Principal Executive Officer)
Dated: August 16, 2021	/s/ Cecilia C. Welch
	Cecilia C. Welch
	Chief Financial Officer
	(Principal Financial Officer)

30

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.

Dated: August 16, 2021
	/s/ Michael W. DePasquale
	Michael W. DePasquale
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Cecilia C. 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.

Dated: August 16, 2021
	/s/ Cecilia C. Welch
	Cecilia C. 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, 2021, 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 to my knowledge:

(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
Dated: August 16, 2021

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, 2021, 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 to my knowledge:

(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 C. Welch
	Cecilia C. Welch
	Chief Financial Officer
Dated: August 16, 2021

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Aug. 13, 2021
Document Information [Line Items]
Entity Central Index Key	0001019034
Entity Registrant Name	BIO KEY INTERNATIONAL INC
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2021
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	1-13463
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	41-1741861
Entity Address, Address Line One	3349 HIGHWAY 138, BUILDING A, SUITE E
Entity Address, City or Town	WALL
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	07719
City Area Code	732
Local Phone Number	359-1100
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	BKYI
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		7,824,971

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
ASSETS
Cash and cash equivalents	$ 11,479,691	$ 16,993,096
Accounts receivable, net	1,347,677	548,049
Due from factor	49,500	60,453
Financing Receivable, after Allowance for Credit Loss, Current, Total	0	295,000
Inventory	2,290,628	330,947
Prepaid expenses and other	1,612,099	201,507
Investment – debt security	512,821	512,821
Total current assets	17,292,416	18,941,873
Resalable software license rights	53,873	58,882
Equipment and leasehold improvements, net	60,259	81,793
Capitalized contract costs, net	192,509	165,315
Deposits and other assets	8,712	8,712
Note receivable	295,000	0
Operating lease right-of-use assets	372,303	487,325
Intangible assets, net	1,406,112	1,514,146
Goodwill	1,262,526	1,262,526
Total non-current assets	3,651,294	3,578,699
TOTAL ASSETS	20,943,710	22,520,572
LIABILITIES
Accounts payable	864,847	244,158
Accrued liabilities	575,214	508,487
Note payable – PistolStar acquisition, net of debt discount	0	232,000
Deferred revenue, current portion	549,792	657,349
Operating lease liabilities, current portion	221,399	234,309
Total current liabilities	2,211,252	1,876,303
Deferred revenue, net of current portion	71,037	44,987
Operating lease liabilities, net of current portion	162,373	264,163
Total non-current liabilities	233,410	309,150
TOTAL LIABILITIES	2,444,662	2,185,453
Commitments and Contingencies
STOCKHOLDERS’ EQUITY
Common stock — authorized, 170,000,000 shares; issued and outstanding; 7,819,661 and 7,814,572 of $.0001 par value at June 30, 2021 and December 31, 2020, respectively	782	782
Additional paid-in capital	120,021,069	119,844,026
Accumulated deficit	(101,522,803)	(99,509,689)
TOTAL STOCKHOLDERS’ EQUITY	18,499,048	20,335,119
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 20,943,710	$ 22,520,572

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Jun. 30, 2021	Dec. 31, 2020
Common stock, shares authorized (in shares)	170,000,000	170,000,000
Common stock, shares issued (in shares)	7,819,661	7,814,572
Common stock, shares outstanding (in shares)	7,819,661	7,814,572
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues
Revenue from Contract with Customer, Including Assessed Tax	$ 992,090	$ 307,142	$ 2,880,728	$ 829,627
Costs and other expenses
Costs and other expenses	239,569	148,454	1,006,204	272,717
Gross profit	752,521	158,688	1,874,524	556,910
Operating Expenses
Selling, general and administrative	1,374,084	1,211,928	2,890,482	2,593,327
Research, development and engineering	490,952	318,573	932,603	655,462
Total Operating Expenses	1,865,036	1,530,501	3,823,085	3,248,789
Operating loss	(1,112,515)	(1,371,813)	(1,948,561)	(2,691,879)
Other income (expense)
Interest income	832	25,801	3,447	25,802
Government grant – Paycheck Protection Program	0	340,819	0	340,819
Loss on foreign currency transactions	(50,000)	0	(50,000)	0
Interest expense	0	(567,516)	(18,000)	(2,118,657)
Loss on extinguishment of debt	0	0	0	(499,076)
Total other income (expense), net	(49,168)	(200,896)	(64,553)	(2,251,112)
Net loss	(1,161,683)	(1,572,709)	(2,013,114)	(4,942,991)
Deemed dividends related to down-round features	0	0	0	(112,686)
Net loss available to common stockholders	$ (1,161,683)	$ (1,572,709)	$ (2,013,114)	$ (5,055,677)
Basic and diluted loss per common share (in dollars per share)	$ (0.15)	$ (0.60)	$ (0.26)	$ (2.24)
Basic and diluted (in shares)	7,776,190	2,608,108	7,774,946	2,253,867
Service [Member]
Revenues
Revenue from Contract with Customer, Including Assessed Tax	$ 286,641	$ 229,503	$ 666,663	$ 437,026
Costs and other expenses
Costs and other expenses	158,440	92,672	334,384	163,117
License [Member]
Revenues
Revenue from Contract with Customer, Including Assessed Tax	662,193	23,542	1,141,151	258,887
Costs and other expenses
Costs and other expenses	48,373	8,255	87,342	18,711
Hardware [Member]
Revenues
Revenue from Contract with Customer, Including Assessed Tax	43,256	54,097	1,072,914	133,714
Costs and other expenses
Costs and other expenses	$ 32,756	$ 47,527	$ 584,478	$ 90,889

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Warrants Issued in Connection with Convertible Notes [Member] Common Stock [Member]	Warrants Issued in Connection with Convertible Notes [Member] Additional Paid-in Capital [Member]	Warrants Issued in Connection with Convertible Notes [Member] Retained Earnings [Member]	Warrants Issued in Connection with Convertible Notes [Member]	Warrants Issued for Consulting Fees [Member] Common Stock [Member]	Warrants Issued for Consulting Fees [Member] Additional Paid-in Capital [Member]	Warrants Issued for Consulting Fees [Member] Retained Earnings [Member]	Warrants Issued for Consulting Fees [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2019									1,812,483
Balance at Dec. 31, 2019									$ 182	$ 87,437,661	$ (89,723,016)	$ (2,285,173)
Share-based compensation									0	512,719	0	512,719
Net loss									$ 0	0	(3,370,282)	(3,370,282)
Issuance of common stock pursuant to securities purchase agreements (in shares)									87,500
Issuance of common stock pursuant to securities purchase agreements									$ 8	1,032,492	0	1,032,500
Commitment fee adjustment									0	(900,000)	0	(900,000)
Beneficial conversion feature									$ 0	641,215	0	641,215
Issuance of common stock pursuant to warrant conversion (in shares)									121,500
Issuance of common stock pursuant to warrant conversion									$ 12	1,457,988	0	1,458,000
Conversion of convertible note payable (in shares)									288,461
Conversion of convertible note payable									$ 29	1,499,971	0	1,500,000
Deemed dividends related to down-round features									$ 0	112,686	(112,686)	0
Balance (in shares) at Mar. 31, 2020									2,309,944
Balance at Mar. 31, 2020									$ 231	91,794,732	(93,205,984)	(1,411,021)
Balance (in shares) at Dec. 31, 2019									1,812,483
Balance at Dec. 31, 2019									$ 182	87,437,661	(89,723,016)	(2,285,173)
Net loss												(4,942,991)
Balance (in shares) at Jun. 30, 2020									2,783,719
Balance at Jun. 30, 2020									$ 279	95,560,867	(94,778,693)	782,453
Balance (in shares) at Mar. 31, 2020									2,309,944
Balance at Mar. 31, 2020									$ 231	91,794,732	(93,205,984)	(1,411,021)
Issuance of common stock for directors’ fees (in shares)									2,143
Issuance of common stock for directors’ fees									$ 1	15,006	0	15,007
Legal and commitment fees									0	199,328	0	199,328
Share-based compensation									0	33,177	0	33,177
Net loss									$ 0	0	(1,572,709)	(1,572,709)
Issuance of common stock pursuant to securities purchase agreements (in shares)									31,440
Issuance of common stock pursuant to securities purchase agreements									$ 3	145,330	0	145,333
Conversion of convertible note payable (in shares)									440,192
Conversion of convertible note payable									$ 44	2,288,956	0	2,289,000
Warrants issued	$ 0	$ 1,388,339	$ 0	$ 1,388,339	$ 0	$ 94,655	$ 0	$ 94,655
Legal and accounting									$ 0	(199,328)	0	(199,328)
Balance (in shares) at Jun. 30, 2020									2,783,719
Balance at Jun. 30, 2020									$ 279	95,560,867	(94,778,693)	782,453
Balance (in shares) at Dec. 31, 2020									7,814,572
Balance at Dec. 31, 2020									$ 782	119,844,026	(99,509,689)	20,335,119
Issuance of common stock for directors’ fees (in shares)									2,091
Issuance of common stock for directors’ fees									$ 0	7,510	0	7,510
Legal and commitment fees									$ 0	(2,709)	0	(2,709)
Issuance of restricted common stock to employees (in shares)									1,250
Issuance of restricted common stock to employees									$ 0	0	0	0
Share-based compensation									0	133,638	0	133,638
Net loss									0	0	(851,431)	(851,431)
Legal and accounting									$ (0)	2,709	(0)	2,709
Balance (in shares) at Mar. 31, 2021									7,817,913
Balance at Mar. 31, 2021									$ 782	119,982,465	(100,361,120)	19,622,127
Balance (in shares) at Dec. 31, 2020									7,814,572
Balance at Dec. 31, 2020									$ 782	119,844,026	(99,509,689)	20,335,119
Net loss												(2,013,114)
Balance (in shares) at Jun. 30, 2021									7,819,661
Balance at Jun. 30, 2021									$ 782	120,021,069	(101,522,803)	18,499,048
Balance (in shares) at Mar. 31, 2021									7,817,913
Balance at Mar. 31, 2021									$ 782	119,982,465	(100,361,120)	19,622,127
Issuance of common stock for directors’ fees (in shares)									1,748
Issuance of common stock for directors’ fees									$ 0	5,505	0	5,505
Legal and commitment fees									$ 0	(2,519)	0	(2,519)
Issuance of restricted common stock to employees (in shares)									1,250
Issuance of restricted common stock to employees									$ 0	0	0	0
Share-based compensation									0	35,618	0	35,618
Net loss									$ 0	0	(1,161,683)	(1,161,683)
Restricted stock forfeited (in shares)									(1,250)
Restricted stock forfeited									$ 0	0	0	0
Legal and accounting									$ (0)	2,519	(0)	2,519
Balance (in shares) at Jun. 30, 2021									7,819,661
Balance at Jun. 30, 2021									$ 782	$ 120,021,069	$ (101,522,803)	$ 18,499,048

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$ (1,161,683)	$ (851,431)	$ (1,572,709)	$ (3,370,282)	$ (2,013,114)	$ (4,942,991)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation					37,234	39,919
Amortization of intangible assets					108,034	12,189
Amortization of software license rights					5,009	0
Amortization of capitalized contract costs					48,997	73,660
Amortization of debt discount					18,000	398,929
Amortization of debt issuance costs					0	981,529
Operating leases right-of-use assets					115,022	92,632
Loss on extinguishment of debt	0		0		0	499,076
Loss on foreign currency transactions	50,000		0		50,000	0	$ 0
Amortization of beneficial conversion feature					0	641,215
Interest expense capitalized to note payable					0	96,984
Share and warrant-based compensation for employees and consultants					169,256	640,551
Stock based directors’ fees					13,015	15,007
Change in assets and liabilities:
Accounts receivable					(849,628)	(4,549)
Due from factor					10,953	31,307
Capitalized contract costs					(76,191)	(18,486)
Inventory					(1,959,681)	40,221
Resalable software license rights					0	5,028
Prepaid expenses and other					(1,410,592)	19,241
Accounts payable					620,689	(298,797)
Accrued liabilities					66,727	(192,917)
Deferred revenue					(81,507)	(9,601)
Operating lease liabilities					(114,700)	(89,787)
Net cash used for operating activities					(5,242,477)	(1,969,640)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of PistolStar					0	(2,000,000)
Cash acquired from purchase of PistolStar					0	100,747
Proceeds from maturity of investment					0	512,821
Purchase of investment					0	(516,121)
Capital expenditures					(15,700)	(3,489)
Net cash used for investing activities					(15,700)	(1,906,042)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes					0	3,958,000
Costs to issue convertible notes					(5,228)	(398,412)
Proceeds from warrant exercises					0	1,458,000
Repayment of convertible note					(250,000)	(211,984)
Net repayments of related party loans					0	(122,271)
Net cash (used in) provided by financing activities					(255,228)	4,683,333	24,000,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					(5,513,405)	807,651
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		$ 16,993,096		$ 79,013	16,993,096	79,013	79,013
CASH AND CASH EQUIVALENTS, END OF PERIOD	11,479,691		886,664		11,479,691	886,664	$ 16,993,096
Cash paid for:
Interest					18,000	0
Noncash investing and financing activities
Accounts receivable acquired from PistolStar					0	184,792
Prepaid expenses acquired from PistolStar					0	9,485
Equipment acquired from PistolStar					0	36,467
Intangible assets acquired from PistolStar					0	2,005,000
Goodwill related to PistolStar acquisition					0	417,171
Issuance of note payable for PistolStar acquisition					0	500,000
Accrued expenses acquired from PistolStar					0	494
Deferred revenue acquired from PistolStar					0	253,168
Operating lease liability addition under ASC 842					0	79,107
Issuance of common stock pursuant to securities purchase agreements					0	277,833
Warrants issued with convertible notes					0	1,388,339
Original issue discount related to convertible notes					0	551,250
Deemed dividends related to down-round features	$ (0)		$ (0)		(0)	112,686
Issuance of common stock for conversion of note payable					0	3,789,000
Beneficial conversion feature					0	641,215
Legal and commitment fees related to debt and equity included in accounts payable					0	122,714
Accounting Standards Update 2016-02 [Member]
Noncash investing and financing activities
Right-of-use asset addition under ASC 842					$ 0	$ 79,107

XML

Note 1 - Nature of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Business Description and Accounting Policies [Text Block]

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business

The Company, founded in 1993, develops and markets proprietary fingerprint identification biometric technology and software solutions enterprise-ready identity access management solutions to commercial, government and education customers throughout the United States and internationally. The Company was a pioneer 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 cards, passports, driver’s licenses, OTP or other form of possession or knowledge-based credentialing. Additionally, advanced BIO-key® technology has been, and is, used to improve both the accuracy and speed of competing finger-based biometrics.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key International, Inc. and its wholly-owned subsidiaries (collectively, the “Company” or “BIO-key”) and are stated in conformity with accounting principles generally accepted in the United States of America, 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. 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, 2020 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, 2020, filed with the SEC on March 29, 2021. 

Effective November 20, 2020, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1-for-8. All share figures and results are reflected on a post-split basis.

Foreign Currency

The Company accounts for foreign currency transactions pursuant to ASC 830, Foreign Currency Matters ("ASC 830”). The functional currency of the Company is the U.S. dollar, which is the currency of the primary economic environment in which it operates. In accordance with ASC 830, monetary balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date.  For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. Gains or losses arising from changes in the exchange rates used in the translation of such transactions and from the remeasurement of the monetary balance sheet items are recorded as gain (loss) on foreign currency transactions.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), referred to herein as ASU 2016-13, which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies (quarter ending March 31, 2023 for the Company). Early adoption is permitted. The Company will evaluate the impact ASU 2016-13 will have on its consolidated financial statements in a future period closer to the date of adoption.

Effective January 1, 2021, the Company adopted ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”) to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of U.S. GAAP.  Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of ASU 2019-12 did not have a significant impact on the Company’s 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.

Reclassification

Reclassifications occurred to certain prior year amounts in order to conform to the current year classifications.  The reclassifications have no effect on the reported net loss. 

XML

Note 2 - Going Concern

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Substantial Doubt about Going Concern [Text Block]

2. GOING CONCERN

The Company has historically financed its operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. The Company currently requires approximately $735,000 per month to conduct operations, a monthly amount that it has been unable to consistently achieve through revenue generation.  During the first half of 2021, the Company generated approximately $2,880,728 of revenue, which is below its average monthly cash requirements. The Company has also invested a considerable amount of cash in inventory, which it will need to sell to generate revenue for a profitable gross margin. Additionally, the ongoing threat of COVID-19 and its variation, may have an impact on future revenue and operations. During 2020, the Company raised approximately $24,000,000 from financing activities and at June 30, 2021 had $11,479,691 in cash. As of the date of this report, the Company believes it has enough cash for at least twelve months of operations from the date of the filing of this report.

XML

Note 3 - Revenue From Contracts With Customers

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:

● Identify the contract with a customer

● Identify the performance obligations in the contract

● Determine the transaction price

● Allocate the transaction price to performance obligations in the contract

● Recognize revenue when or as the Company satisfies a performance obligation

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three month periods ended June 30, 2021 and June 30, 2020:

	North America		Africa		EMESA*		Asia		June 30, 2021
Services	$	272,277	$	-	$	10,462	$	3,902	$	286,641
License fees		403,689		249,484		9,020		-		662,193
Hardware		43,175		-		-		81		43,256
Total Revenues	$	719,141	$	249,484	$	19,482	$	3,983	$	992,090

	North America		Africa		EMESA*		Asia		June 30, 2020
Services	$	209,846	$	-	$	11,309	$	8,348	$	229,503
License fees		23,542		-		-		-		23,542
Hardware		48,327		-		-		5,770		54,097
Total Revenues	$	281,715	$	-	$	11,309	$	14,118	$	307,142

The following table summarizes revenue from contracts with customers for the six month periods ended June 30, 2021 and June 30, 2020:

	North America		Africa		EMESA*		Asia		June 30, 2021
Services	$	631,891	$	-	$	28,350	$	6,422	$	666,663
License fees		772,489		249,484		51,528		67,650		1,141,151
Hardware		91,970		684,839		265,995		30,110		1,072,914
Total Revenues	$	1,496,350	$	934,323	$	345,873	$	104,182	$	2,880,728

	North America		Africa		EMESA*		Asia		June 30, 2020
Services	$	406,162	$	-	$	15,451	$	15,413	$	437,026
License fees		188,777		-		-		70,110		258,887
Hardware		104,681		-		-		29,033		133,714
Total Revenues	$	699,620	$	-	$	15,451	$	114,556	$	829,627

*EMESA – Europe, Middle East, South America

Software licenses

Software license revenue consist of fees for perpetual and subscription licenses for one or more of the Company’s biometric fingerprint solutions or identity access management solutions. Revenue is recognized at a point in time once the software is available to the customer for download. Software license contracts are generally invoiced in full on execution of the arrangement.

Hardware

Hardware revenue consists of fees for associated equipment sold with or without a software license arrangement, such as servers, locks and fingerprint readers. Customers are not obligated to buy third party hardware from the Company and may procure these items from a number of suppliers. Revenue is recognized at a point in time once the hardware is shipped to the customer. Hardware items are generally invoiced in full on execution of the arrangement.

Support and Maintenance

Support and maintenance revenue consists of fees for unspecified upgrades, telephone assistance and bug fixes. The Company satisfies its support and maintenance performance obligation by providing “stand-ready” assistance as required over the contract period. The Company records deferred revenue (contract liability) at time of prepayment until the term of the contract ends. Revenue is recognized over time on a ratable basis over the contract term. Support and maintenance contracts are up to one to five years in length and are generally invoiced in advance at the beginning of the term. Support and maintenance revenue for subscription licenses is carved out of the total license cost at 18% and recognized on a ratable basis over the license term.

Professional Services

Professional services revenues consist primarily of fees for deployment and optimization services, as well as training. The majority of the Company’s consulting contracts are billed on a time and materials basis, and revenue is recognized based on the amount billable to the customer in accordance with practical expedient ASC 606-10-55-18. For other professional services contracts, the Company utilizes an input method and recognizes revenue based on labor hours expended to date relative to the total labor hours expected to be required to satisfy its performance obligation.

Contracts with Multiple Performance Obligations

Some contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis.  The standalone selling prices are determined based on overall pricing objectives, taking into consideration market conditions and other factors, including the value of the contracts, the cloud applications sold, customer demographics, geographic locations, and the number and types of users within the contracts.

The Company considered several factors in determining that control transfers to the customer upon shipment of hardware and availability of download of software.  These factors include that legal title transfers to the customer, the Company has a present right to payment, and the customer has assumed the risks and rewards of ownership upon shipment of hardware and availability of download of software.

Accounts receivable from customers are typically due within 30 days of invoicing.  The Company does not record a reserve for product returns or warranties as amounts are deemed immaterial based on historical experience.

Costs to Obtain and Fulfill a Contract

Costs to obtain and fulfill a contract are predominantly sales commissions earned by the sales force and are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit determined to be four years. These costs are included as capitalized contract costs on the balance sheet. The period of benefit was determined by taking into consideration customer contracts, technology, and other factors based on historical evidence. Amortization expense is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Transaction Price Allocated to the Remaining Performance Obligations

ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2021. The guidance provides certain practical expedients that limit this requirement, which the Company’s contracts meet as follows:

● The performance obligation is part of a contract that has an original expected duration of one year or less, in accordance with ASC 606-10-50-14.

At June 30, 2021, deferred revenue represents the Company’s remaining performance obligations related to prepaid support and maintenance, all of which is expected to be recognized from one to five years. 

All of the Company's performance obligations, and associated revenue, are generally transferred to customers at a point in time, with the exception of support and maintenance, and professional services, which are generally transferred to the customer over time.

Deferred Revenue 

Deferred revenue includes customer advances and amounts that have been paid by customer for which the contractual maintenance terms have not yet occurred. The majority of these amounts are related to maintenance contracts for which the revenue is recognized ratably over the applicable term, which generally is 12-60 months. Maintenance revenue which would be recognized based on contract periods subsequent to 12 months from the balance sheet date, is segregated as long term deferred revenue. Maintenance contracts include provisions for unspecified when-and-if available product updates and customer telephone support services. At June 30, 2021 and December 31, 2020, amounts in deferred revenue were approximately $621,000 and $702,000, respectively. Revenue recognized during the three and six-months ended June 30, 2021 from amounts included in deferred revenue at the beginning of the period was approximately $124,000 and $430,000, respectively. The Company did not recognize any revenue from performance obligations satisfied in prior periods.  

XML

Note 4 - PistolStar, Inc. Acquisition

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Business Combination Disclosure [Text Block]

4. PISTOLSTAR, INC. ACQUISITION

On  June 30, 2020, the Company acquired PistolStar, Inc., a private company based in the United States, which provides enterprise-ready identity access management solutions, including multi-factor authentication, identity-as-a-service, single sign-on and self-service password reset to commercial, government and education customers throughout the United States and internationally.

From April 10, 2020 until the Company acquired PistolStar, it licensed PortalGuard®, PistolStar’s authentication software, which the Company combines with its biometric authentication solutions offered to existing and prospective customers.

The total purchase price of $2.5 million included cash payment of $2.0 million and the issuance of a $500,000 promissory note.

The promissory note, which was issued to the previous owner of PistolStar, accrued interest at 4% per annum and was payable in four installments over the 12-month period following the closing. The balance of the note at December 31, 2020 was $232,000, net of the unamortized debt discount. On January 21, 2021, the Company paid the $250,000 balance due on the note.

The fair value of the assets acquired and liabilities assumed was less than the purchase price, resulting in the recognition of goodwill. The goodwill reflected the value of the synergies the Company expected to realize and the assembled workforce.

XML

Note 5 - Accounts Receivable

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

5. ACCOUNTS RECEIVABLE

Accounts receivable are carried at original amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful receivables by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. Accounts receivable are written off when deemed uncollectible.

Accounts receivable at June 30, 2021 and December 31, 2020 consisted of the following: 

	June 30,			December 31,
	2021			2020
Accounts receivable - current	$	1,411,462		$	561,834
Loss on foreign currency		(50,000	)		-
Allowance for doubtful account		(13,785	)		(13,785	)
Accounts receivable, net of allowances for doubtful accounts	$	1,347,677		$	548,049

XML

Note 6 - Share Based Compensation

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

6. 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,
	2021		2020
Selling, general and administrative	$	30,704	$	140,328
Research, development and engineering		10,419		2,511
	$	41,123	$	142,839

	Six Months Ended June 30,
	2021		2020
Selling, general and administrative	$	159,648	$	581,636
Research, development and engineering		22,623		73,922
	$	182,271	$	655,558

XML

Note 7 - Factoring

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Factoring [Text Block]

7. FACTORING

Due from factor consisted of the following as of: 

	June 30,			December 31,
	2021			2020
Original invoice value	$	99,000		$	241,715
Factored amount		(49,500	)		(181,262	)
Due from factor	$	49,500		$	60,453

The Company entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to October 31, 2021. Pursuant to the terms of the arrangement, the Company, from time to time, sells to the Factor a minimum of $150,000 per quarter of certain of its accounts receivable balances on a non-recourse basis for credit approved accounts. The Factor remits 35% of the foreign and 75% of the domestic accounts receivable balance to the Company (the “Advance Amount”), with the remaining balance, less fees, forwarded to the Company once the Factor collects the full accounts receivable balance from the customer. In addition, the Company, from time to time, receives over advances from the Factor. 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. The cost of factoring is included in selling, general and administrative expenses. The cost of factoring was as follows:  

	Three Months ended June 30,
	2021		2020
Factoring fees	$	18,900	$	33,230

	Six Months ended June 30,
	2021		2020
Factoring fees	$	32,247	$	65,230

XML

Note 8 - Note Receivable

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Notes Receivable [Text Block]

8. NOTE RECEIVABLE

During the third quarter of 2020, the Company loaned $295,000 as an advance to Technology Transfer Institute (“TTI”) to aid in fulfilling the African contracts. The note does not bear any interest if paid within the nine (9) monthly installments beginning December 31, 2020.  The note bears a default rate of 5%. Currently, TTI is in the process of raising capital to repay the loan, and fulfil the African contracts. The note is currently in default and as such, has been classified as noncurrent as of June 30, 2021. No payments were received from TTI during the six months ended June 30, 2021. The Company is currently renegotiating the payment terms of the note, as the deployment of projects in Africa has been delayed due to COVID and the establishment of bank regulations for payments to vendors and contractors.

XML

Note 9 - Prepaid Expenses and Other

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Prepaid Expenses and Other [Text Block]

9. PREPAID EXPENSES AND OTHER

Included in prepaid expense and other at June 30, 2021 was $1.4 million relating to deposits for a range of hardware devices. These devices were ordered in conjunction with the Company securing the recent license contracts in Africa and are expected to be delivered over the next few quarters as the hardware is deployed. Additional deposits are sometimes required before shipment of the inventory, and prepaid may increase before the inventory is received, while other orders have extended payment terms.

	June 30,		December 31,
	2021		2020
Deposit for inventory	$	1,446,471	$	66,995
Other prepaid expenses		107,786		64,178
Insurance		16,428		45,468
Software licenses		41,414		24,866
Total prepayments	$	1,612,099	$	201,507

XML

Note 10 - Inventory

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Inventory Disclosure [Text Block]

10. INVENTORY

Inventory is stated at the lower of cost, determined on a first in, first out basis, or net realizable value, Inventory is comprised of the following as of: 

	June 30,		December 31,
	2021		2020
Finished goods	$	2,092,622	$	221,130
Fabricated assemblies		198,006		109,817
Total inventory	$	2,290,628	$	330,947

XML

Note 11 - Resalable Software License Rights

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Research, Development, and Computer Software Disclosure [Text Block]

11. RESALABLE SOFTWARE LICENSE RIGHTS

On December 31, 2015, the Company purchased third-party software licenses in the amount of $180,000 in anticipation of a large pending deployment that has yet to materialize. The Company is amortizing the total cost over the greater of actual unit cost of licenses sold or the straight line method over 10 years with the greater of the two approaches being the actual unit cost per license sold. A total of $2,488 and $0 was charged to cost of sales during the three month periods ended June 30, 2021 and 2020, respectively. A total of $5,009 and $5,028 was charged to cost of sales during the six month periods ended June 30, 2021 and 2020, respectively. Since the license purchase, the cumulative amount of $126,127 has been charged to cost of sales, with a carrying balance of $53,873 and $58,882 as of June 30, 2020 and December 31, 2020, respectively.

XML

Note 12 - Investment in Debt Security

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

12. INVESTMENT IN DEBT SECURITY

The Company purchased a 4,000,000 Hong Kong dollar denominated Bond Certificate with a financial institution in Hong Kong in June 2020. The Bond Certificate translated to $512,821 U.S. Dollars, based on the exchange rate at the purchase date. The Company can invest up to 20,000,000 Hong Kong dollars under the terms of the certificate, bearing interest at 5% per annum. The investment is recorded at amortized cost which approximates fair value and was held to maturity.

XML

Note 13 - Commitment

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Commitments Disclosure [Text Block]

13. COMMITMENT

Sales Incentive Agreement with TTI

On March 25, 2020, the Company entered into a sales incentive agreement with TTI. Terms of the agreement include the following:

1. The original term of the agreement was one year unless notice to terminate (as defined) was given.  The agreement is automatically extended for additional one-year terms unless terminated.

2. For each $5,000,000 in revenue (up to a maximum of $20,000,000) TTI generates during the first year that generates net income of at least 20% (as defined), the Company will pay TTI a sales incentive fee of $500,000 payable by the issuance of 62,500 shares of common stock.

3. In the event that TTI generates revenue in excess of $20,000,000 during the first year, the Company will issue TTI a five-year warrant to purchase 12,500 shares of Common Stock at an exercise price of $12.00 per share for each $1,000,000 of revenue in excess of $20,000,000 (up to a maximum of $25,000,000).

In no event will the Company be obligated to issue more than 250,000 shares of common stock or warrants to purchase more than 62,500 shares of common stock pursuant to this agreement.

There has been no revenue generated or sales incentive fees paid during the six months ended June 30, 2021 and 2020.

XML

Note 14 - Convertible Notes Payable

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Debt Disclosure [Text Block]

14. CONVERTIBLE NOTES PAYABLE

There was no balance outstanding for convertible notes payable as of June 30, 2021 and December 31, 2020. Details for Notes that were either converted or redeemed during the 2020 fiscal year were as follows:

Securities Purchase Agreement dated July 10, 2019

On July 10, 2019, the Company issued a $3,060,000 principal amount senior secured convertible note (the “Original Note”). At closing, a total of $2,550,000 was funded. The original issue discount was $510,000. The principal amount due of the Original Note was due and payable as follows: $918,000 was due 180 days after funding, $1,071,000 was due 270 days after funding, and the remaining balance due 12 months after the date of funding.

The Original Note was secured by a lien on substantially all of the Company’s assets and properties and was convertible at the option of the Investor in shares of common stock at a fixed conversion price of $12.00 per share.

In connection with the closing of the Original Note, the Company issued a five-year warrant to the Investor to purchase 250,000 shares of common stock at a fixed exercise price of $12.00 per share, paid a $50,000 commitment fee, and issued 33,334 shares of common stock in payment of a $400,000 due diligence fee. The Company also paid banker fees of $193,500 and legal fees of $71,330. The valuation of the warrant of $595,662 was recorded to debt discount and was amortized over the life of the Original Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount are included in interest expense on the statement of operations.

On March 12, 2020, the Company issued a $3,789,000 principal amount senior secured convertible note (the “Amended Note”), which replaced the Original Note and included an additional $729,000 in interest due to the debt restructuring. The principal amount was due and payable in full on April 13, 2020. The Amended Note was secured by a lien on substantially all of the Company’s assets and properties and was convertible at the option of the Investor into shares of common stock at a fixed conversion price of $5.20 per share. The Company accounted for the transaction as a debt extinguishment and, therefore, the balance of the fees and unamortized discount associated with the Original Note were written off and included as loss on extinguishment of debt. On the day of the amendment, the closing stock price for the day was $6.08, which resulted in a beneficial conversion of $0.88 per share outstanding or $641,215 to be amortized to interest expense over the term of the Amended Note, as adjusted for any debt conversion.

On April 12, 2020, and May 6, 2020, the Company entered into amendments (the “Amendments”) to the Amended Note. The Amendments extended the maturity date to June 12, 2020 and extended the Investor’s right to convert the Amended Note into shares of the Company’s common stock at a price of $5.20 per share through June 12, 2020. All other provisions of the Amended Note remained the same.

Until the second anniversary of the closing, the investor had the right to purchase up to 20% of the securities the Company issues in any future private placement, subject to certain exceptions for, among other things, strategic investments.

On June 10, 2020, the investor converted the last of the remaining principal into shares of common stock for payment in full, and the remaining principal balance was $0. The Amended Note amount of $3,789,000 was converted into 728,654 shares of common stock in 2020.

January 2020 Note

On January 13, 2020, the Company issued a $157,000 principal amount secured 10% convertible redeemable note (the “January 2020 Note”) to an institutional investor with a maturity date of June 13, 2020 which was convertible into common stock at a conversion price of $12.00 per share. At the closing, the Company agreed to issue 81,250 shares of common stock in lieu of payment of a $75,000 commitment fee which was reduced to 6,250 shares as the January 2020 Note was repaid prior to the maturity date.

On June 12, 2020, the January 2020 Note was paid in full by payment of $211,984. The 75,000 shares were returned to the Company in July 2020.

February 2020 Note

On February 13, 2020, the Company issued a $126,000 principal amount secured 10% convertible redeemable note (the “February 2020 Note”) to an institutional investor with a maturity date of July 13, 2020 which was convertible into common stock at a conversion price of $9.20 per share.  On March 12, 2020, the Original Note was amended to reduce the conversion price to $5.20 per share, which reduced the conversion price of the February Note to $5.20 and resulted in a deemed dividend of $70,998. The February 2020 Note was redeemable at any time by payment of a premium to the principal balance starting at 10% and increasing to 30%.   The Company issued 6,250 shares of common stock to the investor in lieu of payment of a $57,500 commitment fee. The Company paid $6,000 of legal fees in connection with the issuance of February 2020 Note.

The February 2020 Note was paid in full on July 10, 2020 by payment of $170,442.

May 2020 Note

On May 6, 2020, the Company issued a $2,415,000 principal amount senior secured convertible note (the “May 2020 Note”). At closing, $2,100,000 was funded. The principal amount was due and payable in five equal monthly installments of $268,333 beginning seven months after the funding date with the remaining balance due on the twelfth month after the date of funding. The May 2020 Note was convertible at a fixed convertible price of $9.28 per share. In connection with the issuance of the May 2020 Note, the Company paid a $133,333 due diligence fee by issuing 14,368 shares of common stock to the Investor priced at $9.28 per share. The Company also paid a placement fee of 7% of the gross proceeds to a placement agent. In connection with the closing of the May 2020 Note, the Company issued a five-year warrant to the investor to purchase 237,500 shares of common stock at a fixed exercise price of $9.28 and was immediately exercisable. The valuation of the warrant of $876,937 was recorded to debt discount and was amortized over the life of the May 2020 Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in-capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount were included in the interest expense on the statement of operations.

Following the completion of the underwritten offering in July 2020, the principal balance of $2,415,000 was paid in full during the third quarter of 2020.  As a result of the repayment, the Company expensed the remaining debt discounts and issuance costs of $1,218,163 in July 2020.

June 2020 Note

On June 29, 2020, the Company issued a $1,811,250 principal amount senior secured convertible note (the “June 2020 Note”).  At closing, $1,575,000 was funded. The principal amount was due and payable in nine equal monthly installments of $201,250 beginning four months after the funding date with the remaining balance due on the twelfth month after the date of funding. The June 2020 Note was convertible at a fixed convertible price of $9.28 per share. In connection with the issuance of the June 2020 Note, the Company paid a $100,000 due diligence fee by issuing 17,071 shares to the Investor priced at $5.86 per share. The Company also paid a placement fee of 7% of the gross proceeds to a placement agent.

In connection with the closing of the June 2020 Note, the Company issued a five-year warrant to the Investor to purchase 178,125 shares of common stock at a fixed exercise price of $9.28 per share and was immediately exercisable. The valuation of the warrant of $511,402 was recorded to debt discount and is was amortized over the life of the June 2020 Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount are included in interest expense on the statement of operations.

Following the completion of the underwritten offering in July 2020, the principal balance of $1,811,250 was paid in full during the third quarter of 2020. As a result of the repayment, the Company expensed the remaining debt discounts and issuance costs of $957,919 in July 2020.

XML

Note 15 - Leases

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

15. LEASES

The Company leases office space in New Jersey, Hong Kong, Minnesota, and New Hampshire with lease termination dates of 2023, 2020, 2022, and 2022, respectively. The leases include non-lease components with variable payments. The following tables present the components of lease expense and supplemental balance sheet information related to the operating leases, for the three and six months ended as of:

	3 Months ended June 30,		6 Months ended June 30,
	2021		2021
Lease cost
Operating lease cost	$	63,973	$	127,946
Total lease cost	$	63,973	$	127,946
Balance sheet information
Operating ROU assets			$	372,303
Operating lease liabilities, current portion			$	221,399
Operating lease liabilities, non-current portion				162,373
Total operating lease liabilities			$	383,772
Weighted average remaining lease term (in years) – operating leases				1.83
Weighted average discount rate – operating leases				5.50	%

Supplemental cash flow information related to leases were as follows, for the six months ended June 30, 2021:

Cash paid for amounts included in the measurement of operating lease liabilities $ 119,225

Maturities of operating lease liabilities were as follows:

2021 (remaining six months)	$	129,352
2022		187,594
2023		89,226
Total future lease payments	$	406,172
Less: imputed interest		(22,400	)
Total	$	383,772

XML

Note 16 - Earnings Per Share ("EPS") - Common Stock ("EPS")

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Earnings Per Share [Text Block]

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

The Company’s basic EPS is calculated using net loss available to common shareholders 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.

The reconciliation of the numerator of the basic and diluted EPS calculations was as follows for both of the following three and six month periods ended June 30, 2021 and 2020:

	Three Months ended June 30,						Six Months ended June 30,
	2021			2020			2021			2020
Basic and Diluted Numerator:
Net loss	$	(1,161,683	)	$	(1,572,709	)	$	(2,013,114	)	$	(4,942,991	)
Deemed dividends related to down-round features		-			-			-			(112,686	)
Net loss available to common stockholders (basic and diluted)	$	(1,161,683	)	$	(1,572,709	)	$	(2,013,114	)	$	(5,055,677	)

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,
	2021		2020		2021		2020
Stock options		212,545		1,603,054		212,545		1,603,054
Warrants		4,689,387		5,651,889		4,689,387		5,651,889
Total		4,901,932		7,254,943		4,901,932		7,254,943

The following table summarizes the weighted average securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to the net losses for the three and six months ended June 30, 2021, and 2020:

	Three Months ended June 30,				Six Months ended June 30,
	2021		2020		2021		2020
Stock options		-		1,326		-		748
Warrants		-		80,797		-		49,818
Convertible notes		-		3,837,165		-		3,837,165
Total		-		3,919,288		-		3,887,731

XML

Note 17 - Stockholders' Equity

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

17. STOCKHOLDERS’ EQUITY

1. Preferred Stock

Within the limits and restrictions provided in the Company’s Certificate of Incorporation, the Board of Directors has the authority, without further action by the shareholders, to issue up to 5,000,000 shares of preferred stock, $.0001 par value per share, in one or more series, and to fix, as to any such series, any dividend rate, redemption price, preference on liquidation or dissolution, sinking fund terms, conversion rights, voting rights, and any other preference or special rights and qualifications.

2. Common Stock

Effective November 20, 2020, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1-for-8. The number of authorized shares and the par value of the Company's common stock and preferred stock were not affected by the reverse stock split. Stockholders who otherwise would be entitled to receive fractional shares were rounded up to the nearest whole share. The reverse stock split became effective at the opening of trading on November 20, 2020.

Holders of common stock have equal rights to receive dividends when, as and if declared by the Board of Directors, out of funds legally available therefor. Holders of common stock have one vote for each share held of record and do not have cumulative voting rights.

Holders of common stock are entitled, upon liquidation of the Company, to share ratably in the net assets available for distribution, subject to the rights, if any, of holders of any preferred stock then outstanding. Shares of common stock are not redeemable and have no preemptive or similar rights. All outstanding shares of common stock are fully paid and nonassessable.

Issuances of Common Stock

On March 30, 2020, the Company issued 121,500 shares of common stock upon exercise of warrants at $12.00 per share, resulting in proceeds of $1,458,000 to the Company.

See Note 14 Convertible Notes Payable for common stock issuances related to conversion of convertible notes payable and shares of common stock issued for fees in connection with the agreements during fiscal 2020.

Issuances of Nonvested Stock

Nonvested stock consists of shares of common stock that are subject to restrictions on transfer and risk of forfeiture until the fulfillment of specified conditions. The fair value of nonvested shares is determined based on the market price of the Company's common stock on the grant date. Nonvested stock is expensed ratably over the term of the restriction period.

The Company issued 2,500 shares of restricted common stock to certain employees of the Company and 1,250 of shares of restricted common stock were forfeited during the six month period ended June 30, 2021. These shares vest in equal annual installments over a three-year period from the date of grant and had a fair value on the date of issuance of $8,425.

Nonvested stock compensation for the three and six-month periods ended June 30, 2021, was $16,346 and $33,721, respectively.

There were no shares of nonvested stock issued in the three and six-month periods ended June 30, 2020.

Issuances to Directors, Executive Officers & Consultants

During the three and six-month period ended June 30, 2021, the Company issued 1,748 and 3,839 shares of common stock to its directors in lieu of payment of board and committee fees valued at $5,505 and $13,015, respectively. There were 2,143 shares of common stock issued to directors in the three and six-month period ended June 30, 2020, valued at $15,007.

Employees’ exercise options

During the three and six-month periods ended June 30, 2021 and 2020, no employee stock options were exercised.

3. Warrants

During the three months ended June 30, 2020, the Company issued a warrant valued at $94,655 to an investor to purchase 125,000 shares for a business referral. There were no warrants issued during the three and six-month periods ended June 30, 2021.

See Note 14 Convertible Notes Payable for warrants issued with convertible notes in connection with the agreements during fiscal 2020.

4.  Securities Purchase Agreement dated September 23, 2015

On September 23, 2015, the Company issued warrants (the “2015 Warrants”) to purchase 8,681 shares of common stock in connection with the issuance of a promissory note. The warrants were immediately exercisable at an initial exercise price of $28.80 per share and had a term of five years.  The 2015 Warrants expired in September 2020.

The 2015 Warrants had a “full ratchet” anti-dilution adjustment provision.  The anti-dilution adjustment provision was triggered in the first quarter of 2020 from the February 2020 Note and amendments to the Original Note. As a result of the forgoing transactions, the number of shares of common stock issuable upon the full exercise of the 2015 Warrants increased to 48,078, the exercise was reduced to $5.20 per share, and the Company recorded a non-cash deemed dividend in amount of $41,688. 

XML

Note 18 - Fair Values of Financial Instruments

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Fair Value Disclosures [Text Block]

18. FAIR VALUES OF FINANCIAL INSTRUMENTS

Cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and due from factor, are carried at, or approximate, fair value because of their short-term nature. The carrying values of the Company’s notes payable and operating lease liabilities approximated their fair values as of June 30, 2021, and December 31, 2020, as the interest rates approximated market.

XML

Note 19 - Major Customers and Accounts Receivable

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

19. MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

For the three months ended June 30, 2021, and 2020, two customers accounted for 36% and one customer accounted for 41% of revenue, respectively. For the six months ended June 30, 2021, and 2020, two customers accounted for 34% and three customers accounted for 60% of revenue, respectively.

Two customers accounted for 47%, and 19% of current accounts receivable, respectively as of June 30, 2021. At December 31, 2020, one customer accounted for 31% of current accounts receivable.

XML

Note 20 - Subsequent Events

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Subsequent Events [Text Block]

20. SUBSEQUENT EVENTS

On August 12, 2021, the Company issued 1,560 shares of common stock to its directors in payment of meeting fees. Additionally, the Company issued an aggregate of 3,750 shares of restricted stock with three-year vesting period to five new employees. 

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

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key International, Inc. and its wholly-owned subsidiaries (collectively, the “Company” or “BIO-key”) and are stated in conformity with accounting principles generally accepted in the United States of America, 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. 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, 2020 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, 2020, filed with the SEC on March 29, 2021. 

Effective November 20, 2020, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1-for-8. All share figures and results are reflected on a post-split basis.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency

The Company accounts for foreign currency transactions pursuant to ASC 830, Foreign Currency Matters ("ASC 830”). The functional currency of the Company is the U.S. dollar, which is the currency of the primary economic environment in which it operates. In accordance with ASC 830, monetary balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date.  For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. Gains or losses arising from changes in the exchange rates used in the translation of such transactions and from the remeasurement of the monetary balance sheet items are recorded as gain (loss) on foreign currency transactions.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), referred to herein as ASU 2016-13, which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments. Under ASU 2016-13 credit impairment is recognized as an allowance for credit losses, rather than as a direct write-down of the amortized cost basis of a financial asset. The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset. Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date. The new guidance provides no threshold for recognition of impairment allowance. Therefore, entities must also measure expected credit losses on assets that have a low risk of loss. For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016-13. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies (quarter ending March 31, 2023 for the Company). Early adoption is permitted. The Company will evaluate the impact ASU 2016-13 will have on its consolidated financial statements in a future period closer to the date of adoption.

Effective January 1, 2021, the Company adopted ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”) to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of U.S. GAAP.  Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of ASU 2019-12 did not have a significant impact on the Company’s 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.

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassification

Reclassifications occurred to certain prior year amounts in order to conform to the current year classifications.  The reclassifications have no effect on the reported net loss. 

XML

Note 3 - Revenue From Contracts With Customers (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Disaggregation of Revenue [Table Text Block]

	North America		Africa		EMESA*		Asia		June 30, 2021
Services	$	272,277	$	-	$	10,462	$	3,902	$	286,641
License fees		403,689		249,484		9,020		-		662,193
Hardware		43,175		-		-		81		43,256
Total Revenues	$	719,141	$	249,484	$	19,482	$	3,983	$	992,090

	North America		Africa		EMESA*		Asia		June 30, 2020
Services	$	209,846	$	-	$	11,309	$	8,348	$	229,503
License fees		23,542		-		-		-		23,542
Hardware		48,327		-		-		5,770		54,097
Total Revenues	$	281,715	$	-	$	11,309	$	14,118	$	307,142

	North America		Africa		EMESA*		Asia		June 30, 2021
Services	$	631,891	$	-	$	28,350	$	6,422	$	666,663
License fees		772,489		249,484		51,528		67,650		1,141,151
Hardware		91,970		684,839		265,995		30,110		1,072,914
Total Revenues	$	1,496,350	$	934,323	$	345,873	$	104,182	$	2,880,728

	North America		Africa		EMESA*		Asia		June 30, 2020
Services	$	406,162	$	-	$	15,451	$	15,413	$	437,026
License fees		188,777		-		-		70,110		258,887
Hardware		104,681		-		-		29,033		133,714
Total Revenues	$	699,620	$	-	$	15,451	$	114,556	$	829,627

XML

Note 5 - Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

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

	June 30,			December 31,
	2021			2020
Accounts receivable - current	$	1,411,462		$	561,834
Loss on foreign currency		(50,000	)		-
Allowance for doubtful account		(13,785	)		(13,785	)
Accounts receivable, net of allowances for doubtful accounts	$	1,347,677		$	548,049

XML

Note 6 - Share Based Compensation (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]

	Three Months Ended June 30,
	2021		2020
Selling, general and administrative	$	30,704	$	140,328
Research, development and engineering		10,419		2,511
	$	41,123	$	142,839

	Six Months Ended June 30,
	2021		2020
Selling, general and administrative	$	159,648	$	581,636
Research, development and engineering		22,623		73,922
	$	182,271	$	655,558

XML

Note 7 - Factoring (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

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

	June 30,			December 31,
	2021			2020
Accounts receivable - current	$	1,411,462		$	561,834
Loss on foreign currency		(50,000	)		-
Allowance for doubtful account		(13,785	)		(13,785	)
Accounts receivable, net of allowances for doubtful accounts	$	1,347,677		$	548,049

Factoring Fees [Table Text Block]

	Three Months ended June 30,
	2021		2020
Factoring fees	$	18,900	$	33,230

	Six Months ended June 30,
	2021		2020
Factoring fees	$	32,247	$	65,230

Factored Accounts Receivable [Member]

Notes Tables

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

	June 30,			December 31,
	2021			2020
Original invoice value	$	99,000		$	241,715
Factored amount		(49,500	)		(181,262	)
Due from factor	$	49,500		$	60,453

XML

Note 9 - Prepaid Expenses and Other (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block]

	June 30,		December 31,
	2021		2020
Deposit for inventory	$	1,446,471	$	66,995
Other prepaid expenses		107,786		64,178
Insurance		16,428		45,468
Software licenses		41,414		24,866
Total prepayments	$	1,612,099	$	201,507

XML

Note 10 - Inventory (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	June 30,		December 31,
	2021		2020
Finished goods	$	2,092,622	$	221,130
Fabricated assemblies		198,006		109,817
Total inventory	$	2,290,628	$	330,947

XML

Note 15 - Leases (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Lessee, Operating Lease, Costs, Assets and Liabilities [Table Text Block]

	3 Months ended June 30,		6 Months ended June 30,
	2021		2021
Lease cost
Operating lease cost	$	63,973	$	127,946
Total lease cost	$	63,973	$	127,946
Balance sheet information
Operating ROU assets			$	372,303
Operating lease liabilities, current portion			$	221,399
Operating lease liabilities, non-current portion				162,373
Total operating lease liabilities			$	383,772
Weighted average remaining lease term (in years) – operating leases				1.83
Weighted average discount rate – operating leases				5.50	%

Lessee, Operating Lease, Supplemental Cash Flow Information [Table Text Block]

Cash paid for amounts included in the measurement of operating lease liabilities $ 119,225

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

2021 (remaining six months)	$	129,352
2022		187,594
2023		89,226
Total future lease payments	$	406,172
Less: imputed interest		(22,400	)
Total	$	383,772

XML

Note 16 - Earnings Per Share ("EPS") - Common Stock ("EPS") (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

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

	Three Months ended June 30,						Six Months ended June 30,
	2021			2020			2021			2020
Basic and Diluted Numerator:
Net loss	$	(1,161,683	)	$	(1,572,709	)	$	(2,013,114	)	$	(4,942,991	)
Deemed dividends related to down-round features		-			-			-			(112,686	)
Net loss available to common stockholders (basic and diluted)	$	(1,161,683	)	$	(1,572,709	)	$	(2,013,114	)	$	(5,055,677	)

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

	Three Months ended June 30,				Six Months ended June 30,
	2021		2020		2021		2020
Stock options		212,545		1,603,054		212,545		1,603,054
Warrants		4,689,387		5,651,889		4,689,387		5,651,889
Total		4,901,932		7,254,943		4,901,932		7,254,943

	Three Months ended June 30,				Six Months ended June 30,
	2021		2020		2021		2020
Stock options		-		1,326		-		748
Warrants		-		80,797		-		49,818
Convertible notes		-		3,837,165		-		3,837,165
Total		-		3,919,288		-		3,887,731

XML

Note 1 - Nature of Business and Basis of Presentation (Details Textual)	Nov. 20, 2020
Reverse Stock Split [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio	8

XML

Note 2 - Going Concern (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Monthly Cash Requirement to Conduct Operations and Pay Dividend Obligations			$ 735,000
Revenue from Contract with Customer, Including Assessed Tax	$ 992,090	$ 307,142	2,880,728	$ 829,627
Net Cash Provided by (Used in) Financing Activities, Total			(255,228)	$ 4,683,333	$ 24,000,000
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 11,479,691		$ 11,479,691		$ 16,993,096

XML

Note 3 - Revenue From Contracts With Customers (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2021	Dec. 31, 2020
Percentage of Support and Maintenance Revenue to License Cost		18.00%
Capitalized Contract Cost, Amortization Period (Year)		4 years
Contract with Customer, Liability, Total	$ 621,000		$ 621,000	$ 702,000
Contract with Customer, Liability, Revenue Recognized	$ 124,000		$ 430,000

XML

Note 3 - Revenue From Contracts With Customers - Disaggregation of Revenue (Details) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue from Contract with Customer, Including Assessed Tax		$ 992,090	$ 307,142	$ 2,880,728	$ 829,627
Service [Member]
Revenue from Contract with Customer, Including Assessed Tax		286,641	229,503	666,663	437,026
License [Member]
Revenue from Contract with Customer, Including Assessed Tax		662,193	23,542	1,141,151	258,887
Hardware [Member]
Revenue from Contract with Customer, Including Assessed Tax		43,256	54,097	1,072,914	133,714
North America [Member]
Revenue from Contract with Customer, Including Assessed Tax		719,141	281,715	1,496,350	699,620
North America [Member] | Service [Member]
Revenue from Contract with Customer, Including Assessed Tax		272,277	209,846	631,891	406,162
North America [Member] | License [Member]
Revenue from Contract with Customer, Including Assessed Tax		403,689	23,542	772,489	188,777
North America [Member] | Hardware [Member]
Revenue from Contract with Customer, Including Assessed Tax		43,175	48,327	91,970	104,681
South America [Member]
Revenue from Contract with Customer, Including Assessed Tax		249,484	0	934,323	0
South America [Member] | Service [Member]
Revenue from Contract with Customer, Including Assessed Tax		0	0	0	0
South America [Member] | License [Member]
Revenue from Contract with Customer, Including Assessed Tax		249,484	0	249,484	0
South America [Member] | Hardware [Member]
Revenue from Contract with Customer, Including Assessed Tax		0	0	684,839	0
EMEA [Member]
Revenue from Contract with Customer, Including Assessed Tax	[1]	19,482	11,309	345,873	15,451
EMEA [Member] | Service [Member]
Revenue from Contract with Customer, Including Assessed Tax		10,462	11,309	28,350	15,451
EMEA [Member] | License [Member]
Revenue from Contract with Customer, Including Assessed Tax	[1]	9,020	0	51,528	0
EMEA [Member] | Hardware [Member]
Revenue from Contract with Customer, Including Assessed Tax	[1]	0	0	265,995	0
Asia [Member]
Revenue from Contract with Customer, Including Assessed Tax		3,983	14,118	104,182	114,556
Asia [Member] | Service [Member]
Revenue from Contract with Customer, Including Assessed Tax		3,902	8,348	6,422	15,413
Asia [Member] | License [Member]
Revenue from Contract with Customer, Including Assessed Tax		0	0	67,650	70,110
Asia [Member] | Hardware [Member]
Revenue from Contract with Customer, Including Assessed Tax		$ 81	$ 5,770	$ 30,110	$ 29,033

[1] EMESA – Europe, Middle East, South America

XML

Note 4 - PistolStar, Inc. Acquisition (Details Textual) - PistolStar [Member] - USD ($)	Jan. 21, 2021	Jun. 30, 2020	Dec. 31, 2020
Business Combination, Consideration Transferred, Total		$ 2,500,000
Payments to Acquire Businesses, Net of Cash Acquired, Total		2,000,000.0
Business Combination, Consideration Transferred, Liabilities Incurred		$ 500,000
Promissory Note [Member]
Debt Instrument, Interest Rate, Stated Percentage		4.00%
Debt Instrument, Number of Installments		4
Debt Instrument, Term (Month)		12 months
Notes Payable, Total			$ 232,000
Repayments of Notes Payable	$ 250,000

XML

Note 5 - Accounts Receivable - Summary of Accounts Receivable (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Accounts receivable - current	$ 1,411,462		$ 1,411,462		$ 561,834
Loss on foreign currency transactions	(50,000)	$ 0	(50,000)	$ 0	0
Allowance for doubtful account	(13,785)		(13,785)		(13,785)
Accounts receivable, net of allowances for doubtful accounts	$ 1,347,677		$ 1,347,677		$ 548,049

XML

Note 6 - Share Based Compensation - Expenses for Continuing Operations (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Share-based compensation expense	$ 41,123	$ 142,839	$ 182,271	$ 655,558
Selling, General and Administrative Expenses [Member]
Share-based compensation expense	30,704	140,328	159,648	581,636
Research and Development Expense [Member]
Share-based compensation expense	$ 10,419	$ 2,511	$ 22,623	$ 73,922

XML

Note 7 - Factoring (Details Textual)	6 Months Ended
	Jun. 30, 2021 USD ($)
Factoring Arrangement, Minimum Amount of Accounts Receivable Per Quarter	$ 150,000
Minimum [Member]
Factoring Fees Percent	2.75%
Maximum [Member]
Factoring Fees Percent	15.00%
Geographic Distribution, Foreign [Member]
Percentage Of Accounts Receivable Remitted By Factor	35.00%
Geographic Distribution, Domestic [Member]
Percentage Of Accounts Receivable Remitted By Factor	75.00%

XML

Note 7 - Factoring - Due From Factor (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Original invoice value	$ 99,000	$ 241,715
Factored amount	(49,500)	(181,262)
Due from factor	$ 49,500	$ 60,453

XML

Note 7 - Factoring - Fees (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Factoring fees	$ 18,900	$ 33,230	$ 32,247	$ 65,230

XML

Note 8 - Note Receivable (Details Textual) - USD ($)	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020	Sep. 30, 2020
Financing Receivable, after Allowance for Credit Loss, Current, Total	$ 0	$ 295,000	$ 295,000
Receivable with Imputed Interest, Effective Yield (Interest Rate)	5.00%

XML

Note 9 - Prepaid Expenses and Other (Details Textual) $ in Millions	Jun. 30, 2021 USD ($)
Prepaid Deposit for Hardware Devices [Member]	$ 1.4

XML

Note 9 - Prepaid Expenses and Other - Prepaid Expenses (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Deposit for inventory	$ 1,446,471	$ 66,995
Other prepaid expenses	107,786	64,178
Insurance	16,428	45,468
Software licenses	41,414	24,866
Total prepayments	$ 1,612,099	$ 201,507

XML

Note 10 - Inventory - Components of Inventory (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Finished goods	$ 2,092,622	$ 221,130
Fabricated assemblies	198,006	109,817
Total inventory	$ 2,290,628	$ 330,947

XML

Note 11 - Resalable Software License Rights (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	Dec. 31, 2015	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Amortization of Intangible Assets, Total				$ 108,034	$ 12,189
Software License Rights [Member]
Payments to Acquire Software	$ 180,000
Finite-Lived Intangible Asset, Useful Life (Year)	10 years
Amortization of Intangible Assets, Total		$ 2,488	$ 0	5,009	$ 5,028
Software License Rights [Member] | Cost of Sales [Member]
Amortization of Intangible Assets, Total				126,127
The 2015 Software License [Member]
Software License Rights		$ 53,873		$ 53,873		$ 58,882

XML

Note 12 - Investment in Debt Security (Details Textual)	Jun. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2020 HKD ($)
Debt Securities, Held-to-maturity, Current	$ 512,821	$ 512,821
Debt Security, Corporate, Non-US [Member]
Debt Securities, Held-to-maturity, Current			$ 512,821	$ 4,000,000
Limit of Bond				$ 20,000,000
Investment in Held-to-maturity Debt Securities, Interest Rate			5.00%	5.00%

XML

Note 13 - Commitment (Details Textual) - USD ($)		6 Months Ended
	Mar. 25, 2020	Jun. 30, 2021	Jun. 30, 2020	Mar. 30, 2020	Sep. 23, 2015
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)					8,681
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)				$ 12.00	$ 28.80
Technology Transfer Institute [Member] | Sales Incentive Agreement With TTI [Member]
Related Party Agreement, Term (Year)	1 year
Related Party Transaction, Revenue Needed to Trigger Payment of Sales Incentive Fee	$ 5,000,000
Related Party Transaction, Revenue to Trigger Payment of Sales Incentive Fee, Percent of Net Income, Minimum	20.00%
Related Party Transaction, Sales Incentive Fee For Each 5 Million Revenue	$ 500,000
Stock Issuable for Sales Incentive Fee Per Each 5 Million Revenue (in shares)	62,500
Related Party Transaction, Maximum Revenue, Warrants Issuable	$ 25,000,000
Revenue from Related Parties		$ 0	$ 0
Technology Transfer Institute [Member] | Sales Incentive Agreement With TTI [Member] | Warrants Issuable for Each 1 Million Revenue in Excess of 20 Million [Member]
Warrants and Rights Outstanding, Term (Year)	5 years
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)	12,500
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)	$ 12.00
Technology Transfer Institute [Member] | Sales Incentive Agreement With TTI [Member] | Maximum [Member]
Related Party Transaction, Maximum Revenue to Trigger Payment of Sales Incentive Fee	$ 20,000,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)	62,500
Stock Issuable for Sales Incentive Agreement (in shares)	250,000

XML

Note 14 - Convertible Notes Payable (Details Textual) - USD ($)										1 Months Ended	3 Months Ended	6 Months Ended
	Jul. 10, 2020	Jun. 29, 2020	Jun. 12, 2020	Jun. 10, 2020	May 06, 2020	Mar. 12, 2020	Feb. 13, 2020	Jan. 13, 2020	Jul. 10, 2019	Jul. 31, 2020	Sep. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Mar. 30, 2020	Sep. 23, 2015
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)															8,681
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)														$ 12.00	$ 28.80
Payments of Stock Issuance Costs, Commitment Fees									$ 50,000
Stock Issued During Period, Shares, Issued for Due Diligence Fee (in shares)		17,071			14,368				33,334
Stock Issued During Period, Value, Issued for Due Diligence Fee		$ 100,000			$ 133,333				$ 400,000
Payments of Stock Issuance Costs, Banker Fees									193,500
Payments of Stock Issuance Costs, Legal Fees									71,330
Class of Warrant or Right, Recorded as Debt Discount									$ 595,662
Share Price (in dollars per share)			$ 5.20			$ 6.08
Repayments of Convertible Debt												$ 250,000	$ 211,984
Stock Returned During the Period, Shares, Commitment Fee (in shares)										75,000
Shares Issued, Price Per Share (in dollars per share)		$ 5.86			$ 9.28
Conversion of Senior Secured Convertible Note to Common Stock [Member]
Debt Conversion, Original Debt, Amount				$ 3,789,000
Debt Conversion, Converted Instrument, Shares Issued (in shares)				728,654
Investor Warrant [Member]
Warrants and Rights Outstanding, Term (Year)		5 years			5 years				5 years
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)		178,125			237,500				250,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)		$ 9.28			$ 9.28				$ 12.00
Repayments of Convertible Debt										$ 2,415,000
Warrants and Rights Outstanding		$ 511,402			$ 876,937
Payments of Debt Issuance Costs										1,218,163
Secured Redeemable Convertible Note [Member] | February 2020 Note [Member]
Debt Instrument, Convertible, Conversion Price (in dollars per share)						$ 5.20	$ 9.20
The Note [Member] | Senior Secured Convertible Note [Member]
Debt Instrument, Face Amount									$ 3,060,000
Proceeds from Debt, Net of Issuance Costs									2,550,000
Debt Instrument, Unamortized Discount, Total									510,000
Debt Instrument, Periodic Payment, Principal due in 180 Days									918,000
Debt Instrument, Periodic Payment, Principal due in 270 Days									$ 1,071,000
Debt Instrument, Convertible, Conversion Price (in dollars per share)									$ 12.00
Amended Note [Member] | Senior Secured Convertible Note [Member]
Debt Instrument, Face Amount						$ 3,789,000
Debt Instrument, Unamortized Discount, Total						$ 641,215
Debt Instrument, Convertible, Conversion Price (in dollars per share)						$ 5.20
Interest Expense, Debt, Total						$ 729,000
Debt Instrument, Convertible, Beneficial Conversion Feature, Per Share (in dollars per share)						$ 0.88
Long-term Debt, Total				$ 0
January 2020 Note [Member] | Secured Redeemable Convertible Note [Member]
Debt Instrument, Face Amount								$ 157,000
Debt Instrument, Convertible, Conversion Price (in dollars per share)								$ 12.00
Debt Instrument, Interest Rate, Stated Percentage								10.00%
Stock Issued During Period, Shares, Commitment Fees (in shares)								81,250
Debt Instrument, Fee Amount								$ 75,000
Debt Instrument, Covenant, Shares to be Paid, Commitment Fee, Repaid Prior to Maturity (in shares)								6,250
Repayments of Convertible Debt			$ 211,984
February 2020 Note [Member] | Secured Redeemable Convertible Note [Member]
Debt Instrument, Face Amount							$ 126,000
Debt Instrument, Interest Rate, Stated Percentage							10.00%
Stock Issued During Period, Shares, Commitment Fees (in shares)							6,250
Debt Instrument, Fee Amount							$ 57,500
Repayments of Convertible Debt	$ 170,442
Debt Instrument, Deemed Dividend Expense						$ 70,998
Legal Fees							$ 6,000
February 2020 Note [Member] | Secured Redeemable Convertible Note [Member] | Minimum [Member]
Debt Instrument, Convertible, Premium Payment Percentage							10.00%
February 2020 Note [Member] | Secured Redeemable Convertible Note [Member] | Maximum [Member]
Debt Instrument, Convertible, Premium Payment Percentage							30.00%
May 2020 Note [Member] | Secured Redeemable Convertible Note [Member]
Debt Instrument, Face Amount					2,415,000
Proceeds from Debt, Net of Issuance Costs					$ 2,100,000
Debt Instrument, Convertible, Conversion Price (in dollars per share)					$ 9.28
Debt Instrument, Periodic Payment, Principal					$ 268,333
Placement Fee, Percent of Aggregate Gross Proceeds					7.00%
June 2020 Note [Member] | Secured Redeemable Convertible Note [Member]
Debt Instrument, Face Amount		1,811,250
Proceeds from Debt, Net of Issuance Costs		$ 1,575,000
Debt Instrument, Convertible, Conversion Price (in dollars per share)		$ 9.28
Repayments of Convertible Debt											$ 1,811,250
Debt Instrument, Periodic Payment, Principal		$ 201,250
Placement Fee, Percent of Aggregate Gross Proceeds		7.00%
Amortization of Debt Issuance Costs and Discounts, Total										$ 957,919

XML

Note 15 - Leases - Operating Lease Balance Sheet Information (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021	Dec. 31, 2020
Operating lease cost	$ 63,973	$ 127,946
Total lease cost	63,973	127,946
Operating ROU assets	372,303	372,303	$ 487,325
Operating lease liabilities, current portion	221,399	221,399	234,309
Operating lease liabilities, non-current portion	162,373	162,373	$ 264,163
Total operating lease liabilities	$ 383,772	$ 383,772
Weighted average remaining lease term (in years) – operating leases (Year)	1 year 9 months 29 days	1 year 9 months 29 days
Weighted average discount rate – operating leases	5.50%	5.50%

XML

Note 15 - Leases - Supplemental Cash Flow Information Related to Leases (Details)	6 Months Ended
	Jun. 30, 2021 USD ($)
Cash paid for amounts included in the measurement of operating lease liabilities	$ 119,225

XML

Note 15 - Leases - Operating Lease Liability Maturity (Details)	Jun. 30, 2021 USD ($)
2021 (remaining six months)	$ 129,352
2022	187,594
2023	89,226
Total future lease payments	406,172
Less: imputed interest	(22,400)
Total	$ 383,772

XML

Note 16 - Earnings Per Share ("EPS") - Common Stock ("EPS") - Reconciliation of Numerator of Basic and Diluted EPS Calculations (Details) - USD ($)		3 Months Ended				6 Months Ended
	Sep. 23, 2015	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Net loss		$ (1,161,683)	$ (851,431)	$ (1,572,709)	$ (3,370,282)	$ (2,013,114)	$ (4,942,991)
Deemed dividends related to down-round features	$ (41,688)	0		0		0	(112,686)
Net loss available to common stockholders		$ (1,161,683)		$ (1,572,709)		$ (2,013,114)	$ (5,055,677)

XML

Note 16 - Earnings Per Share ("EPS") - Common Stock ("EPS") - Securities Excluded from the Diluted Per Share Calculation (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Exercise Price Less Than Average Market Price Of Common Shares [Member]
Antidilutive securities (in shares)	4,901,932	7,254,943	4,901,932	7,254,943
Exercise Price Greater Than Average Market Price Of Common Shares [Member]
Antidilutive securities (in shares)	0	3,919,288	0	3,887,731
Share-based Payment Arrangement, Option [Member] | Exercise Price Less Than Average Market Price Of Common Shares [Member]
Antidilutive securities (in shares)	212,545	1,603,054	212,545	1,603,054
Share-based Payment Arrangement, Option [Member] | Exercise Price Greater Than Average Market Price Of Common Shares [Member]
Antidilutive securities (in shares)	0	1,326	0	748
Warrant [Member] | Exercise Price Less Than Average Market Price Of Common Shares [Member]
Antidilutive securities (in shares)	4,689,387	5,651,889	4,689,387	5,651,889
Warrant [Member] | Exercise Price Greater Than Average Market Price Of Common Shares [Member]
Antidilutive securities (in shares)	0	80,797	0	49,818
Convertible Debt Securities [Member] | Exercise Price Greater Than Average Market Price Of Common Shares [Member]
Antidilutive securities (in shares)	0	3,837,165	0	3,837,165

XML

Note 17 - Stockholders' Equity (Details Textual)				3 Months Ended			6 Months Ended
	Nov. 20, 2020	Mar. 30, 2020 USD ($) $ / shares shares	Sep. 23, 2015 USD ($) $ / shares shares	Jun. 30, 2021 USD ($) $ / shares shares	Mar. 31, 2021 USD ($) shares	Jun. 30, 2020 USD ($) shares	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2020 USD ($) shares
Preferred Stock, Shares Authorized (in shares)				5,000,000			5,000,000
Preferred Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares				$ 1			$ 1
Stock Issued During Period, Shares, Warrants Exercises (in shares)		121,500
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares		$ 12.00	$ 28.80
Proceeds from Warrant Exercises | $		$ 1,458,000					$ 0	$ 1,458,000
Share-based Payment Arrangement, Expense | $				$ 41,123		$ 142,839	$ 182,271	$ 655,558
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture, Total | $				$ 5,505	$ 7,510	$ 15,007
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)				0		0	0	0
Class of Warrant or Right, Issued During Period (in shares)				0			0
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)			8,681
Dividends, Paid-in-kind, Total | $			$ 41,688	$ (0)		$ (0)	$ (0)	$ 112,686
Referral Fee Warrants [Member]
Class of Warrant or Right, Issued During Period (in shares)						94,655
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)						125,000		125,000
September 2015 Warrants [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares			$ 5.20
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)			48,078
Warrants and Rights Outstanding, Term (Year)			5 years
Common Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures, Total (in shares)				1,250	1,250
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited (in shares)				1,250
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture, Total (in shares)				1,748	2,091	2,143
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture, Total | $				$ 0	$ 0	$ 1
Director [Member] | Common Stock [Member]
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture, Total (in shares)				1,748		2,143	3,839	2,143
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture, Total | $				$ 5,505		$ 15,007	$ 13,015	$ 15,007
Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures, Total (in shares)							2,500
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited (in shares)							1,250
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)							3 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Fair Value | $							$ 8,425
Share-based Payment Arrangement, Expense | $				$ 16,346		$ 0	$ 33,721	$ 0
Reverse Stock Split [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio	8

XML

Note 19 - Major Customers and Accounts Receivable (Details Textual) - Customer Concentration Risk [Member]	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Revenue Benchmark [Member]
Concentration Risk, Number of Major Customers	2	1	2	3
Revenue Benchmark [Member] | Two Customers [Member]
Concentration Risk, Percentage	36.00%
Revenue Benchmark [Member] | One Customer [Member]
Concentration Risk, Percentage		41.00%	34.00%
Revenue Benchmark [Member] | Three Customers [Member]
Concentration Risk, Percentage				60.00%
Current Accounts Receivable [Member]
Concentration Risk, Number of Major Customers			2		1
Current Accounts Receivable [Member] | Two Customers [Member]
Concentration Risk, Percentage			19.00%
Current Accounts Receivable [Member] | One Customer [Member]
Concentration Risk, Percentage			47.00%		31.00%

XML

Note 20 - Subsequent Events (Details Textual) - shares		6 Months Ended
	Aug. 12, 2021	Jun. 30, 2021
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)		3 years
Subsequent Event [Member] | Restricted Stock [Member] | Share-based Payment Arrangement, Employee [Member]
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture, Total (in shares)	3,750
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	3 years
Subsequent Event [Member] | Director [Member]
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture, Total (in shares)	1,560