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 March 31, 2024

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)

101 CRAWFORDS CORNER ROAD, SUITE 4116, HOLMDEL, NJ 07733

(Address of Principal Executive Offices) (Zip Code)

(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 June 12, 2024 is 1,814,228

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION	3
Item 1— Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023	3
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023 (Unaudited)	4
Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023 (Unaudited)	5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited)	7
Notes to Condensed Consolidated Financial Statements	9
Item 2—Management’s Discussion and Analysis of Financial Conditions and Results of Operations.	17
Item 3—Quantitative and Qualitative Disclosures about Market Risk.	23
Item 4—Controls and Procedures.	23
PART II. OTHER INFORMATION	24
Item 1—Legal Proceedings.	24
Item 1A—Risk Factors.	24
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds.	24
Item 3—Defaults upon Senior Securities.	24
Item 4—Mine Safety Disclosures.	24
Item 5—Other Information.	24
Item 6—Exhibits.	24
Signatures	25

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2024			2023
	(Unaudited)
ASSETS
Cash and cash equivalents	$	690,449		$	511,400
Accounts receivable, net		701,776			1,201,526
Due from factor		8,250			99,320
Inventory		440,194			445,740
Prepaid expenses and other		427,685			364,171
Total current assets		2,268,354			2,622,157
Equipment and leasehold improvements, net		198,238			220,177
Capitalized contract costs, net		349,145			229,806
Operating lease right-of-use assets		23,220			36,905
Intangible assets, net		1,329,985			1,407,990
Total non-current assets		1,900,588			1,894,878
TOTAL ASSETS	$	4,168,942		$	4,517,035
LIABILITIES
Accounts payable	$	1,212,071		$	1,316,014
Accrued liabilities		1,189,520			1,305,848
Government loan – BBVA Bank, current portion		135,835			138,730
Deferred revenue, current		755,405			414,968
Operating lease liabilities, current portion		23,797			37,829
Total current liabilities		3,316,628			3,213,389
Deferred revenue, long term		143,727			28,296
Deferred tax liability		22,998			22,998
Government loan – BBVA Bank – net of current portion		149,861			188,787
Total non-current liabilities		316,586			240,081
TOTAL LIABILITIES		3,633,214			3,453,470
Commitments and Contingencies
STOCKHOLDERS’ EQUITY
Common stock — authorized, 170,000,000 shares; issued and outstanding; 1,814,414 and 1,032,777 of $.0001 par value at March 31, 2024 and December 31, 2023, respectively		181			103
Additional paid-in capital		126,092,496			126,047,851
Accumulated other comprehensive loss		(39,454	)		22,821
Accumulated deficit		(125,517,495	)		(125,007,210	)
TOTAL STOCKHOLDERS’ EQUITY		535,728			1,063,565
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,168,942		$	4,517,035

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements.

3

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended
	March 31,
	2024			2023
Revenues
Services	$	213,122		$	532,522
License fees		1,950,434			1,578,556
Hardware		17,647			72,689
Total revenues		2,181,203			2,183,767
Costs and other expenses
Cost of services		138,849			154,801
Cost of license fees		148,221			620,881
Cost of hardware		12,573			44,592
Cost of hardware - reserve		-			500,000
Total costs and other expenses		299,643			1,320,274
Gross profit		1,881,560			863,493
Operating Expenses
Selling, general and administrative		1,782,973			1,931,732
Research, development and engineering		607,521			690,159
Total Operating Expenses		2,390,494			2,621,891
Operating loss		(508,934	)		(1,758,398	)
Other income (expense)
Interest income		5			4
Loss on foreign currency transactions		-			(15,000	)
Change in fair value of convertible note		-			141,991
Interest expense		(1,356	)		(56,919	)
Total other income (expense), net		(1,351	)		70,076
Loss before provision for income tax		(510,285	)		(1,688,322	)
Provision for (income tax) tax benefit		-			-
Net loss	$	(510,285	)	$	(1,688,322	)
Comprehensive loss:
Net loss	$	(510,285	)	$	(1,688,322	)
Other comprehensive income (loss) – Foreign currency translation adjustment		(62,275	)		72,146
Comprehensive loss	$	(572,560	)	$	(1,616,176	)
Basic and Diluted Loss per Common Share	$	(0.32	)	$	(3.51	)
Weighted Average Common Shares Outstanding:
Basic and diluted		1,615,323			480,833

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements. 

4

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

									Accumulated
						Additional			Other
	Common Stock					Paid-in			Comprehensive			Accumulated
				Amount								Deficit			Total
Balance as of January 1, 2024		1,032,777		$	103	$	126,047,851		$	22,821		$	(125,007,210	)	$	1,063,565
Issuance of common stock for directors’ fees		4,287			-		9,003			-			-			9,003
Issuance of common stock to employees		-			-		-			-			-			-
Restricted stock forfeited		(316	)		-		-			-			-			-
Exercise of warrants		777,666			78		1,322			-			-			1,400
Foreign currency translation adjustment		-			-					(62,275	)		-			(62,275	)
Share-based compensation		-			-		47,790			-			-			47,790
Issuance costs		-			-		(13,470	)		-			-			(13,470	)
Net loss		-			-		-			-			(510,285	)		(510,285	)
Balance as of March 31, 2024		1,814,414		$	181	$	126,092,496		$	(39,454	)	$	(125,517,495	)	$	535,728

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements. 

5

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

									Accumulated
						Additional			Other
	Common Stock					Paid-in			Comprehensive			Accumulated
				Amount								Deficit			Total
Balance as of January 1, 2023		552,739		$	55	$	122,029,476		$	(242,602	)	$	(116,485,373	)	$	5,301,556
Issuance of common stock for directors’ fees		855			-		12,002			-			-			12,002
Issuance of common stock to employees		2,222			-		4			-			-			4
Restricted stock forfeited		(1,102	)		-		(3,105	)		-			-			(3,105	)
Foreign currency translation adjustment		-			-		-			72,146			-			72,146
Share-based compensation		-			-		62,474			-			-			62,474
Net loss		-			-		-			-			(1,688,322	)		(1,688,322	)
Balance as of March 31, 2023		554,714		$	55	$	122,100,851		$	(170,456	)	$	(118,173,695	)	$	3,756,755

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements.

6

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2024			2023
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(510,285	)	$	(1,688,322	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation		23,808			13,242
Amortization of intangible assets		78,005			81,237
Change in fair value of convertible note		-			(141,991	)
Amortization of capitalized contract costs		38,665			37,529
Reserve for inventory		-			500,000
Operating leases right-of-use assets		13,686			66,132
Share and warrant-based compensation for employees and consultants		47,790			59,373
Stock based directors’ fees		9,003			12,002
Bad debts		100,000			-
Change in assets and liabilities:
Accounts receivable		399,749			(898,881	)
Due from factor		91,070			(33,000	)
Capitalized contract costs		(158,005	)		(8,739	)
Inventory		5,545			6,554
Prepaid expenses and other		(63,513	)		2,219
Accounts payable		(116,012	)		88,040
Accrued liabilities		(104,257	)		(135,417	)
Deferred revenue		455,868			178,755
Operating lease liabilities		(14,033	)		(67,544	)
Net cash provided by (used in) operating activities		297,084			(1,928,811	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(1,869	)		-
Net cash used in investing activities		(1,869	)		-
CASH FLOW FROM FINANCING ACTIVITIES:
Offering costs		(13,470	)		-
Proceeds for exercise of warrants		1,400			-
Repayment of government loan		(41,821	)		(34,289	)
Net cash used in financing activities		(53,891	)		(34,289	)
Effect of exchange rate changes		(62,275	)		49,913
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		179,049			(1,913,187	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		511,400			2,635,522
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	690,449		$	722,335

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements. 

7

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

SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION

	Three Months Ended March 31,
	2024		2023
Cash paid for:
Interest	$	1,356	$	56,919

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

See accompanying notes to the condensed consolidated financial statements. 

8

BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024 (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 (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. 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 March 31, 2024 was derived from the audited financial statements, but does not include all of the disclosures required by GAAP. 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, 2023, filed with the SEC on May 31, 2024.

Foreign Currencies

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, all assets and liabilities are translated into U. S. dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. All transaction gains and losses from the measurement of monetary balance sheet items denominated in Euros are reflected in the statement of operations as appropriate. Translation adjustments are included in accumulated other comprehensive income (loss).

Recently Issued Accounting Pronouncements

Effective January 1, 2023, the Company adopted 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. The adoption of ASU 2016-13 had a material effect on the consolidated financial statements of the Company. 

9

 

In August 2020, the Financial Accounting Standards Board issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 was effective for the Company on January 1, 2024 and should be applied on a full or modified retrospective basis. The adoption of ASU 2016-13 did not have a material effect on the consolidated financial statements of the Company. 

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

2. GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which contemplate continuation of the Company as a going concern, and assumes continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has suffered substantial net losses and negative cash flows from operations in recent years and is dependent on debt and equity financing to fund its operations all of which raise substantial doubt about the Company’s ability to continue as a going concern. Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Company’s ability to increase its revenue and meet its financing requirements on a continuing basis and become profitable in its future operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

As of the date of this report, the Company does not have enough cash for twelve months of operations. The history of significant losses, the negative cash flow from operations, the limited cash resources on hand and the dependence by the Company on its ability to obtain additional financing to fund its operations after the current cash resources are exhausted raises substantial doubt about the Company's ability to continue as a going concern. In recent periods, the Company has reduced its marketing, research and development, and rent expenses. In addition, the Company has purchased inventory for projects in Nigeria, which have been delayed in deployment, and is currently exploring other markets and opportunities to sell or return the product to generate additional cash.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three month periods ended March 31, 2024 and March 31, 2023:

	North								March 31,
	America		Africa		EMESA*		Asia		2024
License fees	$	519,244	$	1,266,553	$	164,637	$	-	$	1,950,434
Hardware		17,408		-		239		-		17,647
Services		191,481		20,254		1,387		-		213,122
Total Revenues	$	728,133	$	1,286,807	$	166,263	$	-	$	2,181,203

	North								March 31,
	America		Africa		EMESA*		Asia		2023
License fees	$	408,530	$	552,630	$	546,746	$	70,650	$	1,578,556
Hardware		24,781		-		47,008		900		72,689
Services		263,858		23,787		239,927		4,950		532,522
Total Revenues	$	697,169	$	576,417	$	833,681	$	76,500	$	2,183,767

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*EMESA – Europe, Middle East, South America

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. Contracts greater than 12 months are segregated as long term deferred revenue. Maintenance contracts include provisions for unspecified when-and-if available product updates and customer telephone support services. At March 31, 2024 and December 31, 2023, amounts in deferred revenue were approximately $899,000 and $443,000, respectively. Revenue recognized during the three months ended March 31, 2024 and March 31, 2023 from amounts included in deferred revenue at the beginning of the period was approximately $274,000 and $223,000, respectively. The Company did not recognize any revenue from performance obligations satisfied in prior periods.

4. ACCOUNTS RECEIVABLE

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

Accounts receivable at March 31, 2024 and December 31, 2023 consisted of the following: 

	March 31,			December 31,
	2024			2023
Accounts receivable	$	1,607,561		$	2,207,311
Allowance for credit losses		(905,785	)		(1,005,785	)
Accounts receivable, net of allowances for credit losses	$	701,776		$	1,201,526

Bad debt expenses are recorded in selling, general, and administrative expense.

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5. 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 March 31,
	2024		2023
Selling, general and administrative	$	47,642	$	55,453
Research, development and engineering		9,151		15,922
	$	56,793	$	71,375

6. INVENTORY

Inventory is stated at the lower of cost, determined on a first in, first out basis, or realizable value. The Company periodically evaluates inventory items and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow moving goods, and for other impairment of value based upon assumptions of future demand and market conditions. Approximately $3,300,000 of the reserve on inventory is due to slow moving inventory purchased for projects in Nigeria, and the balance for other slow-moving inventory. The Company is exploring other markets and opportunities to sell the product. Inventory is comprised of the following as at March 31, 2024 and December 31, 2023:

	March 31,			December 31,
	2024			2023
Finished goods	$	4,367,510		$	4,373,056
Fabricated assemblies		59,184			59,184
Reserve on finished goods		(3,986,500	)		(3,986,500	)
Total inventory	$	440,194		$	445,740

7. COMMITMENTS AND CONTINGENCIES

Distribution Agreement

Swivel Secure has a distribution agreement with Swivel Secure Limited (“SSL”). Terms of the agreement include the following:

1. The initial term of the agreement ends on January 31, 2027 and will be automatically extended for additional one-year terms thereafter unless either party provides written notice to the other party not later than 30 days before the end of the term that it does not wish to extend the term.

2. SSL appoints Swivel Secure as the exclusive distributor of SSL’s products, to market, sell and distribute in the EMEA (Europe, Middle East and Africa), excluding the United Kingdom and Republic of Ireland, for a defined discount on the sale price.

3. Swivel Secure is expected to generate a certain minimum level of orders of SSL products each year during the term of the agreement. If Swivel Secure fails to meet such minimum level of orders in any year, the exclusive distribution rights will terminate and Swivel Secure will serve as a non-exclusive distributer of SSL Products.

The Company expects the revenue targets to continue to be met based on historical performance and increasing distribution by Swivel Secure.

Litigation

From time to time, the Company may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of March 31, 2024, the Company was not a party to any pending lawsuits.

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8. LEASES

The Company’s leases office space in New Jersey, Minnesota, New Hampshire, Madrid and Hong-Kong with lease termination dates in 2024. On August 11, 2023, the Company signed a new one-year lease starting September 1, 2023 for office space in New Jersey. The property leased in China is paid monthly as used, without a formal agreement. The following tables present the components of lease expense and supplemental balance sheet information related to the operating leases were:

	3 Months ended		3 Months ended
	March 31,		March 31,
	2024		2023
Lease cost
Total lease cost	$	14,553	$	63,973

	March 31,			December 31,
Balance sheet information	2024			2023
Operating right-of-use assets	$	23,220		$	36,905
Operating lease liabilities, current portion	$	23,797		$	37,829
Operating lease liabilities, non-current portion		-			-
Total operating lease liabilities	$	23,797		$	37,829
Weighted average remaining lease term (in years) – operating leases		0.42			0.67
Weighted average discount rate – operating leases		5.50	%		5.50	%
Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2024 and 2023:	$	22,613		$	69,821

Maturities of operating lease liabilities were as follows as of March 31, 2024:

2024 (5 months remaining)	$	24,255
2025		-
Total future lease payments	$	24,255
Less: imputed interest		(458	)
Total	$	23,797

9. CONVERTIBLE NOTE PAYABLE

Securities Purchase Agreement dated December 22, 2022

On December 22, 2022, the Company entered into and closed a securities purchase agreement (the “Purchase Agreement”) and issued a $2,200,000 principal amount senior secured promissory note (the “Note”). At closing, a total of $2,002,000 was funded, with the proceeds to be used for general working capital.

The principal amount of the Note was due six months following the date of issuance, subject to one six-month extension by the Company. Interest under the Note accrues at a rate of 10% per annum, payable monthly through month six and at the rate of 12% per annum in months seven through twelve, payable monthly. The Note is secured by a lien on substantially all of the Company’s assets and properties can be prepaid in whole or in part without penalty at any time.

In connection with the issuance of the Note, the Company issued to the investor 38,889 shares of Common Stock (the “Commitment Shares”) valued at $18.00 per share and a warrant (the “Warrant”) to purchase 11,112 shares of common stock (the “Warrant Shares”) at an exercise price of $54.00 per share, exercisable commencing on the date of issuance with a term of five years. The warrant was valued at $94,316.

13

 

On October 31, 2023 the Company repaid $1,400,000 of principal due under the Note, and on December 21, 2023 the Company repaid the remaining principal balance of $800,000 due under the Note.

As of  December 31, 2023, the Note was paid in full.

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

The Company’s basic EPS is calculated using net income (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 preferred stock.

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.

	Years ended December 31,
	2023		2022
Stock options		-		-
Warrants		126,131		-
Total		126,131		-

The following table sets forth options and warrants which were 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
	March 31,
	2024		2023
Stock options		9,236		11,313
Warrants		1,722,695		270,672
Total		1,731,931		281,985

11. STOCKHOLDERS’ EQUITY

Issuances of Common Stock

During the three-month periods ended March 31, 2024, and 2023, there have not been any shares of common stock issued, except as noted below under Issuances to Directors, Executive Officers & Consultants

Issuances of Restricted Stock

Restricted 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.

During the three-month periods ended March 31, 2024 and 2023, the Company issued 0 and 2,222 shares of restricted common stock, respectively, to certain employees. 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 $0 and $31,200, respectively.

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During the three-month periods ended March 31, 2024 and 2023, 316 and 1,102 shares of restricted common stock were forfeited, respectively.

Share based compensation for the three-month periods ended March 31, 2024 and 2023, was $47,791 and $62,474, respectively.

Issuances to Directors

During the three-month periods ended March 31, 2024, and 2023 the Company issued 4,287 and 855 shares of common stock to its directors in lieu of payment of board and committee fees valued at $9,003 and $12,002, respectively. 

Employees’ exercise options

During the three-month periods ended March 31, 2024 and 2023, no employee stock options were exercised.

3. Warrants

There were no warrants issued during the three-month periods ended March 31, 2024 and 2023.  There were 777,666 prefunded warrants exercised during the three-month period ended March 31, 2024.

12. FAIR VALUES OF FINANCIAL INSTRUMENTS

Cash and cash equivalents, accounts receivable, due from factor, accounts payable and accrued liabilities are carried at, or approximate, fair value because of their short-term nature. The carrying value of the Company’s government loan payable approximates fair value as the interest rate related to the financial instruments approximated market.

15

 

13. MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

During each of the three month periods ended March 31, 2024, and 2023, one customer accounted for 59% and one customer accounted for 19% of the revenue, respectively. For the three month periods ended March 31, 2024, and 2023, two customers accounted for 70% and two customers accounted for 56% of revenue, respectively.

Three customers accounted for 77% of current accounts receivable at March 31, 2024. At December 31, 2023, one customer accounted for 35% of current accounts receivable.

14. INCOME TAXES

United States, Hong Kong and Nigeria

The Company recorded no income tax expense for the three months ended March 31, 2024 and 2023 because the estimated annual effective tax rate was zero. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.

As of March 31, 2024 and December 31, 2023, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

Spain

Due to the current loss for the three months ended March 31, 2024, the Company did not record income taxes.  The deferred tax liability presented on the condensed consolidated balance sheet relates to intangible assets from the acquisition of Swivel Secure.

15 SUBSEQUENT EVENTS

On May 6, 2024, 186 shares of restricted common stock were forfeited by an employee who left the Company before the lapse of the restriction period applicable to such shares.

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

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical facts contained in this Quarterly 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,” “should,” “estimate,” “will,” “may,” “future,” “plan,” “intend” and “expect” and similar expressions generally identify forward-looking statements. These statements are not guarantees of future performance or events and are subject to risks and uncertainties that may cause actual results to differ materially from those included within or implied by such forward-looking statements. These risks and uncertainties include, without limitation, our history of losses and limited revenue; our ability to raise additional capital to satisfy debt repayment obligations and working capital needs; our ability to continue as a going concern; our ability to protect our intellectual property; changes in business conditions; changes in our sales strategy and product development plans; changes in the marketplace; continued services of our executive management team; security breaches; competition in the biometric technology and identity access management industries; market acceptance of biometric products generally and our products under development; our ability to convert sales opportunities to customer contracts; our ability to expand into Asia, Africa and other foreign markets; our ability to integrate the operations and personnel of Swivel Secure into our business; fluctuations in foreign currency and exchange rates; the duration and extent of continued hostilities in Ukraine and its impact on our European customers; delays in the development of products, the commercial, reputational and regulatory risks to our business that may arise as a consequence the restatement of our financial statements, including any consequences of non-compliance with Securities and Exchange Commission (“SEC”) and Nasdaq periodic reporting requirements; our temporary loss of the use of a Registration Statement on Form S-3 to register securities in the future; any disruption to our business that may occur on a longer-term basis should we be unable to remediate during fiscal year 2024 certain material weaknesses in our internal controls over financial reporting, statements of assumption underlying any of the foregoing, and numerous other matters of national, regional and global scale, including those set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and other filings with the SEC. These factors are not intended to represent a complete list of the general or specific factors that may affect us. It should be recognized that other factors, including general economic factors and business strategies, may be significant, presently or in the future. Except as required by law, we undertake no obligation to update 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, 2023.

Overview

BIO-key International, Inc. (the “Company,” “BIO-key,” “we,” or “us”) is a leading identity and access management, or IAM, platform provider enabling secure work-from-anywhere for enterprise, education, and government customers. Our vision is to enable any organization to secure streamlined and passwordless workforce, employee, customer, student and citizen access to any online service, workstation, or mobile application, without a requirement to use tokens or phones. Our products include PortalGuard® and PortalGuard Identity-as-a-Service (IDaaS) enterprise IAM, AuthControl Sentry, AuthControl Enterprise, AuthControl MSP, WEB-key® biometric civil and large-scale ID infrastructure, and accessory hardware to provide a complete solution for our customers.

Millions of people use BIO-key multi-factor-authentication, or MFA, solutions every day to securely access a variety of cloud, mobile and web applications, on-premise and cloud-based servers from all of their devices. We go beyond passwordless to offer phone-less and token-less authentication methods. This critical differentiator is particularly effective for retail, call center, manufacturing, shop-floor, and healthcare environments which utilize roving workers and shared workstations. Unlike most digital identity solutions, BIO-key also plays a role in securing in-person identity. For example, a banking customer has enrolled over 21.7 million of its customers’ biometrics with BIO-key as part of their know your customer, or KYC process, and then uses BIO-key fingerprint technology each time their customers access bank services to ensure positive identification before transacting with them.

BIO-key PortalGuard and hosted PortalGuard IDaaS authentication platforms enable our customers to assure that only the right people can access the right systems by utilizing our world-class biometric capabilities, among 17 other available authentication methods. PortalGuard goes beyond traditional MFA solutions by allowing roving users to biometrically authenticate at any workstation without using their phones or tokens which addresses sizeable security gaps, including eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification. 

Our customers use PortalGuard to manage and secure digital systems 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. By using PortalGuard, our customers can securely collaborate with their supply chain and partners, and provide their customers with flexible, resilient user experiences online or in-person.

In 2022, we expanded our product offerings and customer base when we acquired Swivel Secure Europe, a Madrid, Spain based provider of IAM solutions. Swivel Secure Europe is the exclusive distributer of the AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland. These solutions include PINsafe, a patented one-time-code extraction technology, helping enterprises manage the increasing data security risks posed by cloud services and “bring your own device” policies.

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. 

We sell our branded USB fingerprint 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. Our fingerprint biometric platform is certified by NIST and unique among fingerprint platforms in that it supports mixing and matching of different manufactures’ fingerprint scanners in a deployment. This provides our customers with the flexibility to select the right scanner for their specific use case, without mandating the use of a particular scanner.

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We operate a SaaS business model with customers subscribing to 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.

Strategic Outlook

We plan to have a more significant role in the IAM market which continues to expand.  With the adoption of MFA as a cybersecurity requirement, nearly all enterprises are beginning to adopt MFA for their user bases. We plan to continue to offer customers a suite of authentication options that complement our biometric solutions. Our ability to add value to or replace the first-generation MFA solutions deployed by these enterprises with our phone-less and token-less biometrics sets us apart from a crowded field of phone- and token-based MFA solutions. We believe that as enterprises experience the lifecycle costs associated with managing tokens and passwords, they will have an economic incentivize to consider adding BIO-key PortalGuard to their IAM solution. PortalGuard will allow them to continue to use their existing FIDO devices, while selectively augmenting their authentication options with tokenless and phoneless biometric choices.

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 will continue to grow our installed base. Through Swivel Secure Europe, we also expect to grow our business in EMEA.

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 we have grown to more than one hundred and fifty participants and continues 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.

Recent Developments

The current trend of continued remote work environments increases the risk of unauthorized users, phishing attacks, and hackers who are eager to take advantage of the challenges of securing remote workers. A growing trend of security incidents that highlight potential cybersecurity vulnerabilities, additional regulatory requirements, and increasingly stringent Cyber Insurance underwriting standards that mandate enhanced security solutions has resulted in many businesses requiring MFA for their employees, partners and customers to access their business systems and data.  We believe that biometrics should continue to play a key role in remote user authentication.

Critical Accounting Policies and Estimates

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, 2023.  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.

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RESULTS OF OPERATIONS

THREE MONTHS ENDED March 31, 2024 AS COMPARED TO March 31, 2023

Consolidated Results of Operations - Percent Trend

	Three Months Ended March 31,
	2024			2023
Revenues
Services		10	%		25	%
License fees		89	%		72	%
Hardware		1	%		3	%
Total Revenues		100	%		100	%
Costs and other expenses
Cost of services		6	%		7	%
Cost of license fees		7	%		28	%
Cost of hardware		1	%		2	%
Cost of hardware - reserve		0	%		23	%
Total Cost of Goods Sold		14	%		60	%
Gross profit		86	%		40	%
Operating expenses
Selling, general and administrative		81	%		88	%
Research, development and engineering		28	%		32	%
Total Operating Expenses		109	%		120	%
Operating loss		-23	%		-80	%
Other expense		0	%		3	%
Loss before provision for income tax		-23	%		-77	%
Provision for income tax		0	%		0	%
Net loss		-23	%		-77	%

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Revenues and cost of goods sold

	Three Months Ended
	March 31,
	2024		2023		$ Change			% Change
Revenues
Service	$	213,122	$	532,522	$	(319,400	)		-60	%
License		1,950,434		1,578,556		371,878			24	%
Hardware		17,647		72,689		(55,042	)		-76	%
Total Revenue	$	2,181,203	$	2,183,767	$	(2,564	)		0	%

	Three Months Ended
	March 31,
	2024		2023		$ Change			% Change
Cost of Goods Sold
Service	$	138,849	$	154,801	$	(15,952	)		-10	%
License		148,221		620,881		(472,660	)		-76	%
Hardware		12,573		44,592		(32,019	)		-72	%
Hardware - reserve		-		500,000		(500,000	)		-100	%
Total COGS	$	299,643	$	1,320,274	$	(1,020,631	)		-77	%

Revenues

For the three months ended March 31, 2024, and 2023, service revenues included approximately $194,000 and $292,000, respectively, of recurring maintenance and support revenue, and approximately $19,000 and $240,000 respectively, of non-recurring custom services revenue.  Recurring service revenue decreased $98,000 or 24% in 2024 which was due to the loss of one large customer service agreement. Non-recurring custom services decreased 92% due to loss of one large customer for Swivel Secure customizations and upgrades. We expect the service revenue to remain at the current lower rate in future periods.

For the three months ended March 31, 2024, license revenue increased 371,878 or 24% to $1,950,434 from $1,578,556 in the corresponding period in 2023. We received one large customer order that contributed to the increase. 

For the three months ended  March 31, 2024, hardware sales decreased 76% to $17,647 from $72,689 in the corresponding period in  2023. The decrease was due largely to reduced add-on orders from an existing customer in  2024, compared to increased new hardware deployments in  2023.

Costs of goods sold

For the three months ended March 31, 2024, cost of service decreased approximately $16,000 or 10% to $138,849 from $154,801 in the three months ended March 31, 2023, due to reduced costs to support the PortalGuard and Swivel Secure deployments. For the three months ended March 31, 2024, license fees decreased to $148,221 from $620,881 in the three months ended March 31, 2023, due largely to a decrease in license fees for third-party software included in our Swivel Secure offerings. For the three months ended March 31, 2024, hardware costs decreased to $12,573 from $44,592 in the three months ended March 31, 2023, related to costs associated with decreased hardware revenue.

Selling, general and administrative

	Three Months Ended
	March 31,
	2024		2023		$ Change			% Change
Selling, general and administrative	$	1,782,973	$	1,931,732	$	(148,759	)		-8	%

Selling, general and administrative expenses for the three months ended March 31, 2024, decreased 8% from $1,931,732 in the corresponding period in 2023 to $1,782,973 in the current quarter.  The decreases included reductions in administration, sales personnel costs and marketing show expenses.

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Research, development and engineering

	Three Months Ended
	March 31,
	2024		2023		$ Change			% Change
Research, development, and engineering	$	607,521	$	690,159	$	(82,638	)		-12	%

For the three months ended March 31, 2024, research, development, and engineering costs decreased 12% to $607,521 compared to $690,159 in the corresponding period in 2023. The decrease consisted primarily of reductions in personnel costs and reductions in outside services. 

Other income (expense)

	Three Months Ended
	March 31,
	2024			2023			$ Change			% Change
Interest income	$	5		$	4		$	1			25	%
Loss on foreign currency transactions		-			(15,000	)		15,000			100	%
Change in fair value of convertible note		-			141,991			(141,991	)		100	%
Interest expense		(1,356	)		(56,919	)		55,563			98	%
Other income (expense)	$	(1,351	)	$	70,076		$	(71,427	)		102	%

Other income (expense) for the three months ended March 31, 2024 consisted of interest income of $5 and interest expense of $1,356 on the government loan through the BBVA bank net of interest. Other income (expense) for the three months ended March 31, 2023 consisted of interest income of $4, a change on foreign currency in the amount of $15,000, interest expense of $1,920 on the government loan through the BBVA bank and $54,999 on the secured note payable, which amounts were offset by a change in fair value of $141,991 on our secured convertible note payable.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Operating activities overview

Net cash provided by operations during the three months ended March 31, 2024 was $297,085. Items of note included:

● Net positive cash flows related to adjustments for non-cash expenses of approximately $311,000. 

● Net positive cash flows related to inventory, accounts receivable, amount due from factor, and deferred revenue of approximately $952,000. 

● Negative cash flows related to changes in prepaid expenses, accrued liabilities and accounts payable of approximately $456,000, due to working capital management.

Financing activities overview

Net cash used for financing activities during the three months ended March 31, 2024 was $41,841 for repayment of the government loan through the BBVA bank and $13,470 for offering costs. Net cash received from financing activities during the three months ended March 31, 2024  was $1,400 of proceeds for the exercise of prefunded warrants.

Investing activities overview

Net cash used in investing activities during the three months ended March 31, 2024 was $1,869 for capital expenditures.

Liquidity and Capital Resources

Since our inception, our capital needs have been met through proceeds from the sale of equity and debt securities, and revenue. We expect capital expenditures to be less than $100,000 during the next twelve months.  

The following sets forth our investment sources of capital during the previous two years:

On November 20, 2023, we completed a private placement of shares of common stock and warrants resulting in net proceeds of approximately $435,000, after deducting placement agent fees and estimated offering expenses. 

On October 30, 2023, we completed a public offering of units consisting of shares of common stock, pre-funded warrants to purchase shares of common stock, and warrants to purchase share of common stock.  Each Unit was sold at a public offering price of $0.175. resulting in net proceeds of $3.3 million, after deducting the placement agent fees and offering expenses.

In December 2022, we entered into and closed a securities purchase agreement with AJB Capital Investments, LLC under which we issued a $2,200,000 principal amount senior secured promissory note (the “Note”). The principal amount of the Note was due six months following the date of issuance, subject to one six-month extension. Interest under the Note accrued at a rate of 10% per annum, payable monthly through month six and at 12% per annum in months seven through twelve, payable monthly. The Note was secured by a lien on substantially all of our assets and properties.  The Note was repaid in December 2023.

22

We entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to October 31, 2024 and may be discontinued at that time. Pursuant to the terms of the arrangement, from time to time, we sell to the Factor a minimum of $150,000 per quarter of certain of our 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 us (the “Advance Amount”), with the remaining balance, less fees, forwarded to us once the Factor collects the full accounts receivable balance from the customer. In addition, from time to time, we receive 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. We expect to continue to use this factoring arrangement periodically to assist with our general working capital requirements due to contractual requirements.

Liquidity outlook

At March 31, 2024, our total cash and cash equivalents were $690,449, as compared to $511,00 at December 31, 2023.  At March 31, 2024, we had negative working capital of approximately $1,048,000.

As discussed above, we have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $732,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. We also have approximately $3.6 million of inventory (currently reserved) purchased for projects in Nigeria. We are exploring other markets and opportunities to sell the product to generate additional cash.

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. Unless we generate sufficient positive cash flow from operations or liquidation of existing inventory, we expect that we will need to obtain additional financing during the next twelve months to support operations.

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.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of 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 March 31, 2024. 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 March 31, 2024, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were not effective. 

As previously reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, in connection with the audit of our financial statements as of and for the year ended December 31, 2023, our management identified a lack of control over properly assessing revenue, allowances for accounts receivable and certain reserves for inventory. This resulted in certain errors in the manner in which we recognized revenue generated by our European subsidiary, Swivel Secure Europe, SA, in the first quarter of 2023. In addition, certain allowances for accounts receivable and certain reserves for inventory were understated. We are currently working to implement appropriate corrective actions to remediate the material weakness to strengthen our internal controls over the recording of revenues. This has included thoroughly accessing all accounts for potential adjustments required for proper presentation of the value of the accounts.

Changes in Internal Control Over Financial Reporting

Other than as described above, there have been no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this report, we are not a party to any pending lawsuits.

ITEM 1A.  RISK FACTORS

As a smaller reporting company, we are not required to provide the information required by this Item.

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

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications

During the three months ended March 31, 2024, none of our directors or “officers” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Securities and Exchange Commission Regulation S-K.

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).

24

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: June 14, 2024	/s/ Michael W. DePasquale
	Michael W. DePasquale
	Chief Executive Officer
	(Principal Executive Officer)
Dated: June 14, 2024	/s/ Cecilia C. Welch
	Cecilia C. Welch
	Chief Financial Officer
	(Principal Financial Officer)

25

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: June 14, 2024
	/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: June 14, 2024
	/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 March 31, 2024, 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: June 14, 2024

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 March 31, 2024, 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: June 14, 2024

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2024	Jun. 12, 2024
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	Q1
Document Fiscal Year Focus	2024
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2024
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	101 CRAWFORDS CORNER ROAD, SUITE 4116
Entity Address, City or Town	HOLMDEL
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	07733
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		1,814,228

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
ASSETS
Cash and cash equivalents	$ 690,449	$ 511,400
Accounts receivable, net	701,776	1,201,526
Due from factor	8,250	99,320
Inventory	440,194	445,740
Prepaid expenses and other	427,685	364,171
Total current assets	2,268,354	2,622,157
Equipment and leasehold improvements, net	198,238	220,177
Capitalized contract costs, net	349,145	229,806
Operating lease right-of-use assets	23,220	36,905
Intangible assets, net	1,329,985	1,407,990
Total non-current assets	1,900,588	1,894,878
TOTAL ASSETS	4,168,942	4,517,035
LIABILITIES
Accounts payable	1,212,071	1,316,014
Accrued liabilities	1,189,520	1,305,848
Government loan – BBVA Bank, current portion	135,835	138,730
Deferred revenue, current	755,405	414,968
Operating lease liabilities, current portion	23,797	37,829
Total current liabilities	3,316,628	3,213,389
Deferred revenue, long term	143,727	28,296
Deferred tax liability	22,998	22,998
Government loan – BBVA Bank – net of current portion	149,861	188,787
Total non-current liabilities	316,586	240,081
TOTAL LIABILITIES	3,633,214	3,453,470
Commitments and Contingencies
STOCKHOLDERS’ EQUITY
Common stock — authorized, 170,000,000 shares; issued and outstanding; 1,814,414 and 1,032,777 of $.0001 par value at March 31, 2024 and December 31, 2023, respectively	181	103
Additional paid-in capital	126,092,496	126,047,851
Accumulated other comprehensive loss	(39,454)	22,821
Accumulated deficit	(125,517,495)	(125,007,210)
TOTAL STOCKHOLDERS’ EQUITY	535,728	1,063,565
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 4,168,942	$ 4,517,035

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2024	Dec. 31, 2023
Common stock, shares authorized (in shares)	170,000,000	170,000,000
Common stock, shares issued (in shares)	1,814,414	1,032,777
Common stock, shares outstanding (in shares)	1,814,414	1,032,777
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Revenues
Revenues	$ 2,181,203	$ 2,183,767
Costs and other expenses
Costs and other expenses	299,643	1,320,274
Gross profit	1,881,560	863,493
Operating Expenses
Selling, general and administrative	1,782,973	1,931,732
Research, development and engineering	607,521	690,159
Total Operating Expenses	2,390,494	2,621,891
Operating loss	(508,934)	(1,758,398)
Other income (expense)
Interest income	5	4
Loss on foreign currency transactions	0	(15,000)
Change in fair value of convertible note	0	(141,991)
Change in fair value of convertible note	0	141,991
Interest expense	(1,356)	(56,919)
Total other income (expense), net	(1,351)	70,076
Loss before provision for income tax	(510,285)	(1,688,322)
Provision for (income tax) tax benefit	0	0
Net loss	(510,285)	(1,688,322)
Comprehensive loss:
Net loss	(510,285)	(1,688,322)
Other comprehensive income (loss) – Foreign currency translation adjustment	(62,275)	72,146
Comprehensive loss	$ (572,560)	$ (1,616,176)
Basic and Diluted Loss per Common Share (in dollars per share)	$ (0.32)	$ (3.51)
Weighted Average Common Shares Outstanding:
Basic and diluted (in shares)	1,615,323	480,833
Service [Member]
Revenues
Revenues	$ 213,122	$ 532,522
Costs and other expenses
Costs and other expenses	138,849	154,801
License [Member]
Revenues
Revenues	1,950,434	1,578,556
Costs and other expenses
Costs and other expenses	148,221	620,881
Hardware [Member]
Revenues
Revenues	17,647	72,689
Costs and other expenses
Costs and other expenses	12,573	44,592
Hardware Reserve [Member]
Costs and other expenses
Costs and other expenses	$ 0	$ 500,000

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2022	552,739
Balance at Dec. 31, 2022	$ 55	$ 122,029,476	$ (242,602)	$ (116,485,373)	$ 5,301,556
Issuance of common stock for directors’ fees (in shares)	855
Issuance of common stock for directors’ fees	$ 0	12,002	0		12,002
Issuance of common stock to employees	$ 0	4	0	0	4
Restricted stock forfeited (in shares)	(1,102)
Restricted stock forfeited	$ (0)	3,105	(0)	(0)	3,105
Other comprehensive income (loss) – Foreign currency translation adjustment	0	0	72,146	0	72,146
Share-based compensation	0	62,474	0	0	62,474
Net loss	$ 0	0	0	(1,688,322)	(1,688,322)
Issuance of common stock to employees (in shares)	2,222
Restricted stock forfeited	$ 0	(3,105)	0	0	(3,105)
Balance (in shares) at Mar. 31, 2023	554,714
Balance at Mar. 31, 2023	$ 55	122,100,851	(170,456)	(118,173,695)	3,756,755
Balance (in shares) at Dec. 31, 2023	1,032,777
Balance at Dec. 31, 2023	$ 103	126,047,851	22,821	(125,007,210)	1,063,565
Issuance of common stock for directors’ fees (in shares)	4,287
Issuance of common stock for directors’ fees	$ 0	9,003	0		9,003
Issuance of common stock to employees	$ 0	0	0	0	0
Restricted stock forfeited (in shares)	(316)
Restricted stock forfeited	$ 0	0	0	0	0
Exercise of warrants (in shares)	777,666
Exercise of warrants	$ 78	1,322	0	0	1,400
Other comprehensive income (loss) – Foreign currency translation adjustment	0		(62,275)	0	(62,275)
Share-based compensation	0	47,790	0	0	47,790
Issuance costs	0	(13,470)	0	0	(13,470)
Net loss	0	0	0	(510,285)	(510,285)
Restricted stock forfeited	$ 0	0	0	0	0
Balance (in shares) at Mar. 31, 2024	1,814,414
Balance at Mar. 31, 2024	$ 181	$ 126,092,496	$ (39,454)	$ (125,517,495)	$ 535,728

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$ (510,285)	$ (1,688,322)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation	23,808	13,242
Amortization of intangible assets	78,005	81,237
Change in fair value of convertible note	0	(141,991)
Amortization of capitalized contract costs	38,665	37,529
Reserve for inventory	0	500,000
Operating leases right-of-use assets	13,686	66,132
Share and warrant-based compensation for employees and consultants	47,790	59,373
Stock based directors’ fees	9,003	12,002
Bad debts	100,000	0
Change in assets and liabilities:
Accounts receivable	399,749	(898,881)
Due from factor	91,070	(33,000)
Capitalized contract costs	(158,005)	(8,739)
Inventory	5,545	6,554
Prepaid expenses and other	(63,513)	2,219
Accounts payable	(116,012)	88,040
Accrued liabilities	(104,257)	(135,417)
Deferred revenue	455,868	178,755
Operating lease liabilities	(14,033)	(67,544)
Net cash provided by (used in) operating activities	297,084	(1,928,811)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(1,869)	0
Net cash used in investing activities	(1,869)	0
CASH FLOW FROM FINANCING ACTIVITIES:
Offering costs	(13,470)	0
Proceeds for exercise of warrants	1,400	0
Repayment of government loan	(41,821)	(34,289)
Net cash used in financing activities	(53,891)	(34,289)
Effect of exchange rate changes	(62,275)	49,913
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	179,049	(1,913,187)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	511,400	2,635,522
CASH AND CASH EQUIVALENTS, END OF PERIOD	690,449	722,335
Cash paid for:
Interest	$ 1,356	$ 56,919

XML

Note 1 - Nature of Business and Basis of Presentation

3 Months Ended

Mar. 31, 2024

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 (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. 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 March 31, 2024 was derived from the audited financial statements, but does not include all of the disclosures required by GAAP. 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, 2023, filed with the SEC on May 31, 2024.

Foreign Currencies

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, all assets and liabilities are translated into U. S. dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. All transaction gains and losses from the measurement of monetary balance sheet items denominated in Euros are reflected in the statement of operations as appropriate. Translation adjustments are included in accumulated other comprehensive income (loss).

Recently Issued Accounting Pronouncements

Effective January 1, 2023, the Company adopted 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. The adoption of ASU 2016-13 had a material effect on the consolidated financial statements of the Company. 

In August 2020, the Financial Accounting Standards Board issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 was effective for the Company on January 1, 2024 and should be applied on a full or modified retrospective basis. The adoption of ASU 2016-13 did not have a material effect on the consolidated financial statements of the Company. 

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

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Note 2 - Going Concern

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Substantial Doubt about Going Concern [Text Block]

2. GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which contemplate continuation of the Company as a going concern, and assumes continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has suffered substantial net losses and negative cash flows from operations in recent years and is dependent on debt and equity financing to fund its operations all of which raise substantial doubt about the Company’s ability to continue as a going concern. Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Company’s ability to increase its revenue and meet its financing requirements on a continuing basis and become profitable in its future operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

As of the date of this report, the Company does not have enough cash for twelve months of operations. The history of significant losses, the negative cash flow from operations, the limited cash resources on hand and the dependence by the Company on its ability to obtain additional financing to fund its operations after the current cash resources are exhausted raises substantial doubt about the Company's ability to continue as a going concern. In recent periods, the Company has reduced its marketing, research and development, and rent expenses. In addition, the Company has purchased inventory for projects in Nigeria, which have been delayed in deployment, and is currently exploring other markets and opportunities to sell or return the product to generate additional cash.

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Note 3 - Revenue From Contracts With Customers

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three month periods ended March 31, 2024 and March 31, 2023:

	North								March 31,
	America		Africa		EMESA*		Asia		2024
License fees	$	519,244	$	1,266,553	$	164,637	$	-	$	1,950,434
Hardware		17,408		-		239		-		17,647
Services		191,481		20,254		1,387		-		213,122
Total Revenues	$	728,133	$	1,286,807	$	166,263	$	-	$	2,181,203

	North								March 31,
	America		Africa		EMESA*		Asia		2023
License fees	$	408,530	$	552,630	$	546,746	$	70,650	$	1,578,556
Hardware		24,781		-		47,008		900		72,689
Services		263,858		23,787		239,927		4,950		532,522
Total Revenues	$	697,169	$	576,417	$	833,681	$	76,500	$	2,183,767

*EMESA – Europe, Middle East, South America

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. Contracts greater than 12 months are segregated as long term deferred revenue. Maintenance contracts include provisions for unspecified when-and-if available product updates and customer telephone support services. At March 31, 2024 and December 31, 2023, amounts in deferred revenue were approximately $899,000 and $443,000, respectively. Revenue recognized during the three months ended March 31, 2024 and March 31, 2023 from amounts included in deferred revenue at the beginning of the period was approximately $274,000 and $223,000, respectively. The Company did not recognize any revenue from performance obligations satisfied in prior periods.

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Note 4 - Accounts Receivable

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

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

4. ACCOUNTS RECEIVABLE

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

Accounts receivable at March 31, 2024 and December 31, 2023 consisted of the following: 

	March 31,			December 31,
	2024			2023
Accounts receivable	$	1,607,561		$	2,207,311
Allowance for credit losses		(905,785	)		(1,005,785	)
Accounts receivable, net of allowances for credit losses	$	701,776		$	1,201,526

Bad debt expenses are recorded in selling, general, and administrative expense.

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Note 5 - Share Based Compensation

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

5. 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 March 31,
	2024		2023
Selling, general and administrative	$	47,642	$	55,453
Research, development and engineering		9,151		15,922
	$	56,793	$	71,375

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Note 6 - Inventory

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Inventory Disclosure [Text Block]

6. INVENTORY

Inventory is stated at the lower of cost, determined on a first in, first out basis, or realizable value. The Company periodically evaluates inventory items and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow moving goods, and for other impairment of value based upon assumptions of future demand and market conditions. Approximately $3,300,000 of the reserve on inventory is due to slow moving inventory purchased for projects in Nigeria, and the balance for other slow-moving inventory. The Company is exploring other markets and opportunities to sell the product. Inventory is comprised of the following as at March 31, 2024 and December 31, 2023:

	March 31,			December 31,
	2024			2023
Finished goods	$	4,367,510		$	4,373,056
Fabricated assemblies		59,184			59,184
Reserve on finished goods		(3,986,500	)		(3,986,500	)
Total inventory	$	440,194		$	445,740

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Note 7 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Commitments Disclosure [Text Block]

7. COMMITMENTS AND CONTINGENCIES

Distribution Agreement

Swivel Secure has a distribution agreement with Swivel Secure Limited (“SSL”). Terms of the agreement include the following:

1. The initial term of the agreement ends on January 31, 2027 and will be automatically extended for additional one-year terms thereafter unless either party provides written notice to the other party not later than 30 days before the end of the term that it does not wish to extend the term.

2. SSL appoints Swivel Secure as the exclusive distributor of SSL’s products, to market, sell and distribute in the EMEA (Europe, Middle East and Africa), excluding the United Kingdom and Republic of Ireland, for a defined discount on the sale price.

3. Swivel Secure is expected to generate a certain minimum level of orders of SSL products each year during the term of the agreement. If Swivel Secure fails to meet such minimum level of orders in any year, the exclusive distribution rights will terminate and Swivel Secure will serve as a non-exclusive distributer of SSL Products.

The Company expects the revenue targets to continue to be met based on historical performance and increasing distribution by Swivel Secure.

Litigation

From time to time, the Company may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of March 31, 2024, the Company was not a party to any pending lawsuits.

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Note 8 - Leases

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

8. LEASES

The Company’s leases office space in New Jersey, Minnesota, New Hampshire, Madrid and Hong-Kong with lease termination dates in 2024. On August 11, 2023, the Company signed a new one-year lease starting September 1, 2023 for office space in New Jersey. The property leased in China is paid monthly as used, without a formal agreement. The following tables present the components of lease expense and supplemental balance sheet information related to the operating leases were:

	3 Months ended		3 Months ended
	March 31,		March 31,
	2024		2023
Lease cost
Total lease cost	$	14,553	$	63,973

	March 31,			December 31,
Balance sheet information	2024			2023
Operating right-of-use assets	$	23,220		$	36,905
Operating lease liabilities, current portion	$	23,797		$	37,829
Operating lease liabilities, non-current portion		-			-
Total operating lease liabilities	$	23,797		$	37,829
Weighted average remaining lease term (in years) – operating leases		0.42			0.67
Weighted average discount rate – operating leases		5.50	%		5.50	%
Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2024 and 2023:	$	22,613		$	69,821

Maturities of operating lease liabilities were as follows as of March 31, 2024:

2024 (5 months remaining)	$	24,255
2025		-
Total future lease payments	$	24,255
Less: imputed interest		(458	)
Total	$	23,797

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Note 9 - Convertible Note Payable

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Debt Disclosure [Text Block]

9. CONVERTIBLE NOTE PAYABLE

Securities Purchase Agreement dated December 22, 2022

On December 22, 2022, the Company entered into and closed a securities purchase agreement (the “Purchase Agreement”) and issued a $2,200,000 principal amount senior secured promissory note (the “Note”). At closing, a total of $2,002,000 was funded, with the proceeds to be used for general working capital.

The principal amount of the Note was due six months following the date of issuance, subject to one six-month extension by the Company. Interest under the Note accrues at a rate of 10% per annum, payable monthly through month six and at the rate of 12% per annum in months seven through twelve, payable monthly. The Note is secured by a lien on substantially all of the Company’s assets and properties can be prepaid in whole or in part without penalty at any time.

In connection with the issuance of the Note, the Company issued to the investor 38,889 shares of Common Stock (the “Commitment Shares”) valued at $18.00 per share and a warrant (the “Warrant”) to purchase 11,112 shares of common stock (the “Warrant Shares”) at an exercise price of $54.00 per share, exercisable commencing on the date of issuance with a term of five years. The warrant was valued at $94,316.

On October 31, 2023 the Company repaid $1,400,000 of principal due under the Note, and on December 21, 2023 the Company repaid the remaining principal balance of $800,000 due under the Note.

As of  December 31, 2023, the Note was paid in full.

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Note 10 - Earnings (Loss) Per Share - Common Stock ("EPS")

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Earnings Per Share [Text Block]

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

The Company’s basic EPS is calculated using net income (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 preferred stock.

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.

	Years ended December 31,
	2023		2022
Stock options		-		-
Warrants		126,131		-
Total		126,131		-

The following table sets forth options and warrants which were 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
	March 31,
	2024		2023
Stock options		9,236		11,313
Warrants		1,722,695		270,672
Total		1,731,931		281,985

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Note 11 - Stockholders' Equity

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Equity [Text Block]

11. STOCKHOLDERS’ EQUITY

Issuances of Common Stock

During the three-month periods ended March 31, 2024, and 2023, there have not been any shares of common stock issued, except as noted below under Issuances to Directors, Executive Officers & Consultants

Issuances of Restricted Stock

Restricted 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.

During the three-month periods ended March 31, 2024 and 2023, the Company issued 0 and 2,222 shares of restricted common stock, respectively, to certain employees. 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 $0 and $31,200, respectively.

During the three-month periods ended March 31, 2024 and 2023, 316 and 1,102 shares of restricted common stock were forfeited, respectively.

Share based compensation for the three-month periods ended March 31, 2024 and 2023, was $47,791 and $62,474, respectively.

Issuances to Directors

During the three-month periods ended March 31, 2024, and 2023 the Company issued 4,287 and 855 shares of common stock to its directors in lieu of payment of board and committee fees valued at $9,003 and $12,002, respectively. 

Employees’ exercise options

During the three-month periods ended March 31, 2024 and 2023, no employee stock options were exercised.

3. Warrants

There were no warrants issued during the three-month periods ended March 31, 2024 and 2023.  There were 777,666 prefunded warrants exercised during the three-month period ended March 31, 2024.

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Note 12 - Fair Values of Financial Instruments

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Fair Value Disclosures [Text Block]

12. FAIR VALUES OF FINANCIAL INSTRUMENTS

Cash and cash equivalents, accounts receivable, due from factor, accounts payable and accrued liabilities are carried at, or approximate, fair value because of their short-term nature. The carrying value of the Company’s government loan payable approximates fair value as the interest rate related to the financial instruments approximated market.

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Note 13 - Major Customers and Accounts Receivable

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

13. MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

During each of the three month periods ended March 31, 2024, and 2023, one customer accounted for 59% and one customer accounted for 19% of the revenue, respectively. For the three month periods ended March 31, 2024, and 2023, two customers accounted for 70% and two customers accounted for 56% of revenue, respectively.

Three customers accounted for 77% of current accounts receivable at March 31, 2024. At December 31, 2023, one customer accounted for 35% of current accounts receivable.

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Note 14 - Income Taxes

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

14. INCOME TAXES

United States, Hong Kong and Nigeria

The Company recorded no income tax expense for the three months ended March 31, 2024 and 2023 because the estimated annual effective tax rate was zero. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.

As of March 31, 2024 and December 31, 2023, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

Spain

Due to the current loss for the three months ended March 31, 2024, the Company did not record income taxes.  The deferred tax liability presented on the condensed consolidated balance sheet relates to intangible assets from the acquisition of Swivel Secure.

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Note 15 - Subsequent Events

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Subsequent Events [Text Block]

15 SUBSEQUENT EVENTS

On May 6, 2024, 186 shares of restricted common stock were forfeited by an employee who left the Company before the lapse of the restriction period applicable to such shares.

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

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Insider Trading Arrangements

3 Months Ended

Mar. 31, 2024

Insider Trading Arr Line Items

Material Terms of Trading Arrangement [Text Block]

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications

During the three months ended March 31, 2024, none of our directors or “officers” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Securities and Exchange Commission Regulation S-K.

Rule 10b5-1 Arrangement Adopted [Flag]

false

Non-Rule 10b5-1 Arrangement Adopted [Flag]

false

Rule 10b5-1 Arrangement Terminated [Flag]

false

Non-Rule 10b5-1 Arrangement Terminated [Flag]

false

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2024

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 (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. 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 March 31, 2024 was derived from the audited financial statements, but does not include all of the disclosures required by GAAP. 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, 2023, filed with the SEC on May 31, 2024.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currencies

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, all assets and liabilities are translated into U. S. dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. All transaction gains and losses from the measurement of monetary balance sheet items denominated in Euros are reflected in the statement of operations as appropriate. Translation adjustments are included in accumulated other comprehensive income (loss).

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements

Effective January 1, 2023, the Company adopted 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. The adoption of ASU 2016-13 had a material effect on the consolidated financial statements of the Company. 

In August 2020, the Financial Accounting Standards Board issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 was effective for the Company on January 1, 2024 and should be applied on a full or modified retrospective basis. The adoption of ASU 2016-13 did not have a material effect on the consolidated financial statements of the Company. 

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

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Note 3 - Revenue From Contracts With Customers (Tables)

3 Months Ended

Mar. 31, 2024

Notes Tables

Disaggregation of Revenue [Table Text Block]

	North								March 31,
	America		Africa		EMESA*		Asia		2024
License fees	$	519,244	$	1,266,553	$	164,637	$	-	$	1,950,434
Hardware		17,408		-		239		-		17,647
Services		191,481		20,254		1,387		-		213,122
Total Revenues	$	728,133	$	1,286,807	$	166,263	$	-	$	2,181,203

	North								March 31,
	America		Africa		EMESA*		Asia		2023
License fees	$	408,530	$	552,630	$	546,746	$	70,650	$	1,578,556
Hardware		24,781		-		47,008		900		72,689
Services		263,858		23,787		239,927		4,950		532,522
Total Revenues	$	697,169	$	576,417	$	833,681	$	76,500	$	2,183,767

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Note 4 - Accounts Receivable (Tables)

3 Months Ended

Mar. 31, 2024

Notes Tables

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

	March 31,			December 31,
	2024			2023
Accounts receivable	$	1,607,561		$	2,207,311
Allowance for credit losses		(905,785	)		(1,005,785	)
Accounts receivable, net of allowances for credit losses	$	701,776		$	1,201,526

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Note 5 - Share Based Compensation (Tables)

3 Months Ended

Mar. 31, 2024

Notes Tables

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

	Three Months Ended March 31,
	2024		2023
Selling, general and administrative	$	47,642	$	55,453
Research, development and engineering		9,151		15,922
	$	56,793	$	71,375

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Note 6 - Inventory (Tables)

3 Months Ended

Mar. 31, 2024

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31,			December 31,
	2024			2023
Finished goods	$	4,367,510		$	4,373,056
Fabricated assemblies		59,184			59,184
Reserve on finished goods		(3,986,500	)		(3,986,500	)
Total inventory	$	440,194		$	445,740

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Note 8 - Leases (Tables)

3 Months Ended

Mar. 31, 2024

Notes Tables

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

	3 Months ended		3 Months ended
	March 31,		March 31,
	2024		2023
Lease cost
Total lease cost	$	14,553	$	63,973

	March 31,			December 31,
Balance sheet information	2024			2023
Operating right-of-use assets	$	23,220		$	36,905
Operating lease liabilities, current portion	$	23,797		$	37,829
Operating lease liabilities, non-current portion		-			-
Total operating lease liabilities	$	23,797		$	37,829
Weighted average remaining lease term (in years) – operating leases		0.42			0.67
Weighted average discount rate – operating leases		5.50	%		5.50	%
Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2024 and 2023:	$	22,613		$	69,821

2024 (5 months remaining)	$	24,255
2025		-
Total future lease payments	$	24,255
Less: imputed interest		(458	)
Total	$	23,797

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Note 10 - Earnings (Loss) Per Share - Common Stock ("EPS") (Tables)

3 Months Ended

Mar. 31, 2024

Notes Tables

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

	Years ended December 31,
	2023		2022
Stock options		-		-
Warrants		126,131		-
Total		126,131		-

	Three Months ended
	March 31,
	2024		2023
Stock options		9,236		11,313
Warrants		1,722,695		270,672
Total		1,731,931		281,985

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Note 3 - Revenue From Contracts With Customers (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Contract with Customer, Liability	$ 899,000		$ 443,000
Contract with Customer, Liability, Revenue Recognized	$ 274,000	$ 223,000
Minimum [Member]
Capitalized Contract Cost, Amortization Period (Month)	12 months
Maximum [Member]
Capitalized Contract Cost, Amortization Period (Month)	60 months

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Note 3 - Revenue From Contracts With Customers - Disaggregation of Revenue (Details) - USD ($)		3 Months Ended
		Mar. 31, 2024	Mar. 31, 2023
Revenues		$ 2,181,203	$ 2,183,767
North America [Member]
Revenues		728,133	697,169
South America [Member]
Revenues		1,286,807	576,417
EMESA [Member]
Revenues	[1]	166,263	833,681
Asia [Member]
Revenues		0	76,500
License [Member]
Revenues		1,950,434	1,578,556
License [Member] | North America [Member]
Revenues		519,244	408,530
License [Member] | South America [Member]
Revenues		1,266,553	552,630
License [Member] | EMESA [Member]
Revenues	[1]	164,637	546,746
License [Member] | Asia [Member]
Revenues		0	70,650
Hardware [Member]
Revenues		17,647	72,689
Hardware [Member] | North America [Member]
Revenues		17,408	24,781
Hardware [Member] | South America [Member]
Revenues		0	0
Hardware [Member] | EMESA [Member]
Revenues	[1]	239	47,008
Hardware [Member] | Asia [Member]
Revenues		0	900
Service [Member]
Revenues		213,122	532,522
Service [Member] | North America [Member]
Revenues		191,481	263,858
Service [Member] | South America [Member]
Revenues		20,254	23,787
Service [Member] | EMESA [Member]
Revenues		1,387	239,927
Service [Member] | Asia [Member]
Revenues		$ 0	$ 4,950

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

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Note 4 - Accounts Receivable - Summary of Accounts Receivable (Details) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Accounts receivable	$ 1,607,561	$ 2,207,311
Allowance for credit losses	(905,785)	(1,005,785)
Accounts receivable, net of allowances for credit losses	$ 701,776	$ 1,201,526

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Note 5 - Share Based Compensation - Expenses for Continuing Operations (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Share-based compensation expense	$ 56,793	$ 71,375
Selling, General and Administrative Expenses [Member]
Share-based compensation expense	47,642	55,453
Research and Development Expense [Member]
Share-based compensation expense	$ 9,151	$ 15,922

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Note 6 - Inventory (Details Textual)	Mar. 31, 2024 USD ($)
NIGERIA
Inventory Valuation Reserves	$ 3,300,000

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Note 6 - Inventory - Components of Inventory (Details) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Finished goods	$ 4,367,510	$ 4,373,056
Fabricated assemblies	59,184	59,184
Reserve on finished goods	(3,986,500)	(3,986,500)
Total inventory	$ 440,194	$ 445,740

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Note 8 - Leases (Details Textual)	Aug. 11, 2023
Office Space in New Jersey [Member]
Lessee, Operating Lease, Term of Contract (Year)	1 year

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Note 8 - Leases - Operating Lease Balance Sheet Information (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Total lease cost	$ 14,553	$ 63,973
Operating lease right-of-use assets	23,220		$ 36,905
Operating lease liabilities, current portion	23,797		37,829
Operating lease liabilities, non-current portion	0		$ 0
Total operating lease liabilities	$ 23,797
Weighted average remaining lease term (in years) – operating leases (Year)	5 months 1 day		8 months 1 day
Weighted average discount rate – operating leases	5.50%		5.50%
Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2024 and 2023:	$ 22,613		$ 69,821
2024 (5 months remaining)	24,255
2025	0
Total future lease payments	24,255
Less: imputed interest	(458)
Total	23,797
Approximation [Member]
Operating lease right-of-use assets	23,220		36,905
Total operating lease liabilities	23,797		37,829
Total	$ 23,797		$ 37,829

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Note 9 - Convertible Note Payable (Details Textual) - USD ($)				3 Months Ended
	Dec. 21, 2023	Oct. 31, 2023	Dec. 22, 2022	Mar. 31, 2024	Mar. 31, 2023
Class of Warrant or Right, Issued During Period (in shares)				0	0
Warrants Issued in Connection with Convertible Notes [Member]
Class of Warrant or Right, Issued During Period (in shares)			11,112
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)			$ 54
Warrants and Rights Outstanding, Term (Year)			5 years
Warrants and Rights Outstanding			$ 94,316
The Note [Member]
Repayments of Notes Payable	$ 800,000	$ 1,400,000
The Note [Member] | Senior Secured Promissory Note [Member]
Debt Instrument, Face Amount			2,200,000
Proceeds from Debt, Net of Issuance Costs			$ 2,002,000
Debt Instrument, Interest Rate, Stated Percentage			10.00%	12.00%
The Note [Member] | Senior Secured Convertible Note [Member]
Stock Issued During Period, Shares, Commitment Fees (in shares)			38,889
Shares Issued, Price Per Share (in dollars per share)			$ 18

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Note 10 - Earnings (Loss) Per Share - Common Stock ("EPS") - Securities Excluded From the Diluted Per Share Calculation (Details) - shares	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023	Dec. 31, 2022
Exercise Price Less Than Average Market Price Of Common Shares [Member]
Antidilutive securities (in shares)			126,131
Exercise Price Less Than Average Market Price Of Common Shares [Member] | Share-Based Payment Arrangement, Option [Member]
Antidilutive securities (in shares)
Exercise Price Less Than Average Market Price Of Common Shares [Member] | Warrant [Member]
Antidilutive securities (in shares)			126,131
Exercise Price Greater Than Average Market Price Of Common Shares [Member]
Antidilutive securities (in shares)	1,731,931	281,985
Exercise Price Greater Than Average Market Price Of Common Shares [Member] | Share-Based Payment Arrangement, Option [Member]
Antidilutive securities (in shares)	9,236	11,313
Exercise Price Greater Than Average Market Price Of Common Shares [Member] | Warrant [Member]
Antidilutive securities (in shares)	1,722,695	270,672

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Note 11 - Stockholders' Equity (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Share-Based Payment Arrangement, Expense	$ 56,793	$ 71,375
Shares Issued, Value, Share-Based Payment Arrangement, after Forfeiture	$ 9,003	$ 12,002
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period (in shares)	0	0
Class of Warrant or Right, Issued During Period (in shares)	0	0
Common Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures (in shares)		2,222
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited (in shares)	316	1,102
Shares Issued, Shares, Share-Based Payment Arrangement, after Forfeiture (in shares)	4,287	855
Shares Issued, Value, Share-Based Payment Arrangement, after Forfeiture	$ 0	$ 0
Common Stock [Member] | Director [Member]
Shares Issued, Shares, Share-Based Payment Arrangement, after Forfeiture (in shares)	4,287	855
Shares Issued, Value, Share-Based Payment Arrangement, after Forfeiture	$ 9,003	$ 12,002
Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures (in shares)	0	2,222
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	$ 0	$ 31,200
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited (in shares)	316	1,102
Share-Based Payment Arrangement, Expense	$ 47,791	$ 62,474

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Note 13 - Major Customers and Accounts Receivable (Details Textual) - Customer Concentration Risk [Member]	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Revenue Benchmark [Member] | One Customer [Member]
Concentration Risk, Number of Major Customers	1	1
Concentration Risk, Percentage	59.00%	19.00%
Revenue Benchmark [Member] | Two Customers [Member]
Concentration Risk, Number of Major Customers	2	2
Concentration Risk, Percentage	70.00%	56.00%
Accounts Receivable [Member] | One Customer [Member]
Concentration Risk, Number of Major Customers			1
Concentration Risk, Percentage			35.00%
Accounts Receivable [Member] | Three Customers [Member]
Concentration Risk, Number of Major Customers	3
Concentration Risk, Percentage	77.00%

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Note 14 - Income Taxes (Details Textual) - USD ($) Pure in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Income Tax Expense (Benefit)	$ 0	$ 0
Effective Income Tax Rate Reconciliation, Percent	0.00%	0.00%
SPAIN
Income Tax Expense (Benefit)	$ 0

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Note 15 - Subsequent Events (Details Textual)	May 06, 2024 shares
Restricted Stock [Member] | Share-Based Payment Arrangement, Employee [Member] | Subsequent Event [Member]
Shares Issued, Shares, Share-Based Payment Arrangement, Forfeited (in shares)	186