| Business Description and Accounting Policies [Text Block] | NOTE A —THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company, founded in 1993, Basis of Presentation The Company has incurred significant losses to date, and at December 31, 2016, $62.8 December 31, 2016, $1,061,000, $4,321,000 December 31, 2015. As discussed below, the Company has financed itself in the past through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. The Company currently requires approximately $592,000 If the Company is unable to generate sufficient revenue to meet our goals, it will need to obtain additional third 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 matters described in the preceding paragraphs raise substantial doubt about the Company’s ability to continue as a going concern. Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, and become profitable in its future operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Effective February 3, 2015, 1 2 December 29, 2016, 1 12 Summary of Significant Accounting Policies A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows: 1. Basis of Consolidation The accompanying consolidated financial statements include the accounts of BIO-key International, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). Intercompany accounts and transactions have been eliminated in consolidation. 2. Use of Estimates Our consolidated financial statements are prepared in accordance with GAAP as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) and consider the various staff accounting bulletins and other applicable guidance issued by the U.S. Securities and Exchange Commission (SEC). These accounting principles require us to make certain estimates, judgments and assumptions. The Company believes that the estimates, judgments and assumptions upon which it relies are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, its consolidated financial statements will be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. 3. Revenue Recognition Revenues from software licensing are recognized in accordance with ASC 985 605, The Company intends to enter into arrangements with end users for items which may Multiple-Element Arrangements: For multiple-element arrangements, the Company applies the residual method in accordance with ASC 985 605. License Revenues: Amounts allocated to license revenues are recognized at the time of delivery of the software and all other revenue recognition criteria discussed above have been met. Revenue from licensing software, which requires significant customization and modification, is recognized using the percentage of completion method, based on the hours of effort incurred by the Company in relation to the total estimated hours to complete. In instances where third third may Service Revenues: Revenues from services are comprised of maintenance and consulting and implementation services. Maintenance revenues include providing for unspecified when-and-if available product updates and customer telephone support services, and are recognized ratably over the term of the service period. Consulting services are generally sold on a time-and-materials basis and include a range of services including installation of software and assisting in the design of interfaces to allow the software to operate in customized environments. Services are generally separable from other elements under the arrangement since performance of the services are not essential to the functionality of any other element of the transaction and are described in the contract such that the total price of the arrangement would be expected to vary as the result of the inclusion or exclusion of the services. Revenues from services are generally recognized as the services are performed. The Company provides customers, free of charge or at a minimal cost, testing kits which potential licensing customers may Costs and other expenses: Includes professional compensation and other direct contract expenses, as well as costs attributable to the support of client service professional staff, depreciation and amortization costs related to assets used in revenue-generating activities, and other costs attributable to serving the Company’s client base. Professional compensation consists of payroll costs and related benefits including stock-based compensation and bonuses. Other direct contract expenses include costs directly attributable to client engagements, such as out-of-pocket costs including travel and subsistence for client service professional staff, costs of hardware and software and costs of subcontractors. The allocation of lease and facilities charges for occupied offices is included in costs of service. The Company accounts for its warranties under the FASB ASC 450, one one third 4. Cash Equivalents Cash equivalents consist of liquid investments with original maturities of three December 31, 2016 2015, 5. Accounts Receivable Accounts receivable are carried at original amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful receivables by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. Accounts receivable are written off when deemed uncollectible. During the quarter ended September 30, 2016, may December 31, 2016, $500,000 24% Recoveries of accounts receivable previously written off are recorded when received. Accounts receivable at December 31, 2016 2015 December 31, 2016 2015 Accounts receivable - current $ 1,577,031 $ 3,405,190 Accounts receivable - non current 2,070,000 - 3,647,031 3,405,190 Allowance for doubtful accounts - current (13,785 ) (13,785 ) Allowance for doubtful accounts - non current (500,000 ) - Accounts receivable, net of allowances for doubtful accounts $ 3,133,246 $ 3,391,405 The allowance for doubtful accounts for the years ended December 31, 2016 2015 Balance at Beginning of Year Charged to Costs and Expenses Deductions From Reserves Balance at End of Year Year Ended December 31, 2016 Allowance for Doubtful Accounts $ 13,785 $ 500,000 $ - $ 513,785 Year Ended December 31, 2015 Allowance for Doubtful Accounts $ 20,526 $ - $ (6,741 ) $ 13,785 The bad debt expense is recorded in selling, general, and administrative expense. 6. Software License Rights Software license rights acquired for re-sale to end users are recorded as assets when purchased and are stated at the lower of cost or estimated net realizable value. The cost of the software license rights has been initially allocated pro-rata to the maximum number of resalable end-user licenses in the rights contract. Licenses are amortized to cost of sales over the greater of the following: 1) 10 2) ten 3) twelve The rights are also evaluated by management on a periodic basis to determine if estimated future net revenues, on a per sub-license basis, support the recorded basis of each license. If the estimated net revenues are less than the current carrying value of the capitalized software license rights, the Company will reduce the rights to their net realizable value. 7. Equipment and Leasehold Improvements, Intangible Assets and Depreciation and Amortization Equipment and leasehold improvements are stated at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over the estimated service lives, principally using straight-line methods. Leasehold improvements are amortized over the shorter of the life of the improvement or the lease term, using the straight-line method. The estimated useful lives used to compute depreciation and amortization for financial reporting purposes are as follows: Years Equipment and leasehold improvements Equipment (years) 3 - 5 Furniture and fixtures (years) 3 - 5 Software (years) 3 Leasehold improvements life or lease term Intangible assets consist of patents. Patent costs are capitalized until patents are awarded. Upon award, such costs are amortized using the straight-line method over their respective economic lives. If a patent is denied, all costs are charged to operations in that year. 8. Impairment or Disposal of Long Lived Assets, including Intangible Assets The Company reviews long-lived assets, including intangible assets subject to amortization, whenever events or changes in circumstances indicate that the carrying amount of such an asset may may 9. Advertising Expense The Company expenses the costs of advertising as incurred. Advertising expenses for 2016 2015 $299,000 $339,000, 10. Deferred Revenue Deferred revenue includes customer advances and amounts that have been billed per the contractual terms but have not been recognized as revenue. 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 11. Research and Development Expenditures Research and development expenses include costs directly attributable to the conduct of research and development programs primarily related to the development of our software products and improving the efficiency and capabilities of our existing software. Such costs include salaries, payroll taxes, employee benefit costs, materials, supplies, depreciation on research equipment, services provided by outside contractors, and the allocable portions of facility costs, such as rent, utilities, insurance, repairs and maintenance, depreciation and general support services. All costs associated with research and development are expensed as incurred. 12. Earnings Per Share of Common Stock (“EPS”) The Company’s EPS is calculated by dividing net income (loss) applicable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted EPS includes the effect from potential issuances of common stock, such as stock issuable pursuant to the conversion of preferred stock, exercise of stock options and warrants, when the effect of their inclusion is dilutive. See Note S - Earnings Per Share “EPS” for additional information. 13. Accounting for Stock-Based Compensation The Company accounts for share based compensation in accordance with the provisions of ASC 718 10, three four may The following table presents share-based compensation expenses included in the Company’s consolidated statements of operations: Year ended December 31, 2016 2015 Selling, general and administrative $ 265,555 $ 202,073 Research, development and engineering 74,786 139,042 $ 340,341 $ 341,115 Valuation Assumptions for Stock Options For 2016 2015, 27,087 119,000 Year ended December 31, 2016 2015 Weighted average Risk free interest rate 1.11 % 1.46 % Expected life of options (in years) 4.5 4.5 Expected dividends 0 % 0 % Weighted average Volatility of stock price 93 % 117 % The stock volatility for each grant is determined based on the review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term. The expected term was determined using the simplified method for estimating expected option life, which qualify as “plain-vanilla” options; and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. 14. Derivative Liabilities In connection with the issuances of equity instruments or debt, the Company may may may may 815, 15. Deferred Costs Costs incurred with obtaining and executing debt arrangements are capitalized and amortized to interest expense using the effective interest method over the term of the related debt. 16. Income Taxes The provision for, or benefit from, income taxes includes deferred taxes resulting from the temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from the differences in the carrying value of assets and liabilities. Future realization of deferred income tax assets requires sufficient taxable income within the carryback, carryforward period available under tax law. The Company evaluates, on a quarterly basis whether, based on all available evidence, if it is probable that the deferred income tax assets are realizable. Valuation allowances are established when it is more likely than not that the tax benefit of the deferred tax asset will not be realized. The evaluation, as prescribed by ASC 740 10, may The Company accounts for uncertain tax provisions in accordance with ASC 740 10 05, 17. Recent Accounting Pronouncements In May 2014, 2014 09, two one one December 15, 2017 August 2015, 2015 14, 606): 2015 14") 2014 09 one 2014 09 December 15, 2017 In April 2015, 2015 03, 835 30): 2015 03 2015 03 January 1, 2016 2015 03 In July 2015 2015 11, 330): 2015 11"). 2015 11 2015 11 December 15, 2016, In September 2015, 2015 16, 2015 16”). 2015 16 2015 16 January 1, 2016 In November 2015, 2015 17, 2015 17”). 2015 17 December 15, 2016. may In the fourth 2015, In January 2016, 2016 01, 2016 01”). 2016 01 December 15, 2017. 2016 01 In February 2016, 2016 02, 12 December 15, 2018, In March 2016, 2016 09, 2016 09”). 2016 09 2016 09 December 15, 2016. The Company does not believe that this will have a material impact on its consolidated financial statements. Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements. 18. Reclassifications occurred to certain prior year amounts in order to conform to the current year classifications. The reclassifications have no effect on the reported net loss. |
