| 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, Going Concern and Basis of Presentation We have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $735,000 2020, $2,837,000 2020, $24,000,000 December 31, 2020 $17,000,000 twelve eighteen no Effective November 20, 2020, 1 8. 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. Principles 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. Certain significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, accounts receivable, inventory, intangible assets and long-lived assets, and income taxes. 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 not 3. Revenue Recognition In accordance with ASC 606, five ● Identify the contract with a customer ● Identify the performance obligations in the contract ● Determine the transaction price ● Allocate the transaction price to performance obligations in the contract ● Recognize revenue when or as the Company satisfies a performance obligation All of the Company's performance obligations, and associated revenues, are generally transferred to customers at a point in time, with the exception of support and maintenance, and professional services, which are generally transferred to the customer over time. Software licenses Software license revenue consist of fees for perpetual and subscription licenses for one Hardware Hardware revenue consists of fees for associated equipment sold with or without a software license arrangement, such as servers, locks and fingerprint readers. Customers are not third may Support and Maintenance Support and maintenance revenue consists of fees for unspecified upgrades, telephone assistance and bug fixes. The Company satisfies its support and maintenance performance obligation by providing “stand-ready” assistance as required over the contract period. The Company records deferred revenue (contract liability) at time of prepayment until the contracts term occurs. Revenue is recognized over time on a ratable basis over the contract term. Support and maintenance contracts are up to one five 18% Professional Services Professional services revenues consist primarily of fees for deployment and optimization services, as well as training. The majority of the Company's consulting contracts are billed on a time and materials basis, and revenue is recognized based on the amount billable to the customer in accordance with practical expedient ASC 606 10 55 18. Contracts with Multiple Performance Obligations Some contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The standalone selling prices are determined based on overall pricing objectives, taking into consideration market conditions and other factors, including the value of the contracts, the cloud applications sold, customer demographics, geographic locations, and the number and types of users within the contracts. The Company considered several factors in determining that control transfers to the customer upon shipment of hardware and availability of download of software. These factors include that legal title transfers to the customer, the Company has a present right to payment, and the customer has assumed the risks and rewards of ownership. Accounts receivable from customers are typically due within 30 not Costs to Obtain and Fulfill a Contract Costs to obtain and fulfill a contract are predominantly sales commissions earned by the sales force and are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit determined to be four Deferred Revenue Deferred revenue includes customer advances and amounts that have been paid by customer for which the contractual maintenance terms have not 12 60 12 December 31, 2020 2019, $702,000 $359,000, 4. Business Combinations In accordance with ASC 805, Business Combinations 805 The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair value. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net acquisition date fair value of the assets acquired and the liabilities assumed and represents the expected future economic benefits arising from other assets acquired that are not may may may may one 5. Goodwill and acquired intangible assets Goodwill is not may not December 31st not Intangible assets acquired in a business combination are recorded at their estimated fair values at the date of acquisition. The Company amortizes acquired definite-lived intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis. 6. Cash Equivalents Cash equivalents consist of liquid investments with original maturities of three December 31, 2020 2019, 7. 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. As a result of the payment delays for a large customer, the Company has reserved $1,720,000 December 31, 2020 2019, 100% December 2018. 606 $1.1 2018. December 31, 2019, second $555,555 $555,555 March 2019, not Accounts receivable at December 31, 2020 2019 December 31, 2020 2019 Accounts receivable - current $ 561,834 $ 139,785 Accounts receivable - non current 1,720,000 1,720,000 2,281,834 1,859,785 Allowance for doubtful accounts - current (13,785 ) (13,785 ) Allowance for doubtful accounts - non current (1,720,000 ) (1,720,000 ) (1,733,785 ) (1,733,785 ) Accounts receivable, net of allowances for doubtful accounts $ 548,049 $ 126,000 The allowance for doubtful accounts for the years ended December 31, 2020 2019 Balance at Beginning of Year Charged to Costs and Expenses Deductions From Reserves Balance at End of Year Year Ended December 31, 2020 Allowance for Doubtful Accounts $ 1,733,785 $ - $ - $ 1,733,785 Year Ended December 31, 2019 Allowance for Doubtful Accounts $ 1,733,785 $ - $ - $ 1,733,785 Bad debt expenses (if any) are recorded in selling, general, and administrative expense. 8. 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 other than goodwill consist of patents, trade name, proprietary software, and customer relationships. 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. Trade names, proprietary software, and customer relationships are amortized over the economic useful life. 9. 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 not may 2019 10. Advertising Expense The Company expenses the costs of advertising as incurred. Advertising expenses for 2020 2019 $494,000 $317,000, 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. 13. Accounting for Stock-Based Compensation The Company accounts for share based compensation in accordance with the provisions of ASC 718 10, three four not may 718. The following table presents share-based compensation expenses included in the Company's consolidated statements of operations: Year ended December 31, 2020 2019 Selling, general and administrative $ 705,971 $ 828,981 Research, development and engineering 86,124 118,739 $ 792,095 $ 947,720 Valuation Assumptions for Stock Options For 2020 2019, 28,440 30,167 Year ended December 31, 2020 2019 Weighted average Risk free interest rate 0.30 % 2.33 % Expected life of options (in years) 4.50 4.50 Expected dividends 0 % 0 % Weighted average Volatility of stock price 115 % 84 % 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 July 2017, 2017 11, 260 480 815 2017 11, not no 15. 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 not 740 10, may The Company accounts for uncertain tax provisions in accordance with ASC 740 10 05, 16 . Leases In accordance with ASC 842, Lease 842 12 At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present and the classification of the lease including whether the contract involves the use of a distinct identified asset, whether the Company obtains the right to substantially all the economic benefit from the use of the asset, and whether the Company has the right to direct the use of the asset. Leases with a term greater than one not one 842 20 25 2. not Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The implicit rate within our operating leases are generally not An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain we will exercise that option. An option to terminate is considered unless it is reasonably certain we will not 17. Recent Accounting Pronouncements In June 2016, 2016 13, Financial Instruments-Credit Losses 326 2016 13, not 2016 13 2016 13 no not may not 2016 13. 2016 13 December 15, 2022 2016 13 Management does not not |
