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Item 5. Market for Registrant’s Common Equity

2022-04-01 compared with 2021-03-29 · 91 added, 112 removed, 92 unchanged (69% of the section changed)

MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock currently trades on the Nasdaq Capital Market under the symbol “BKYI”.

MARKET FOR REGISTRANT ’

S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock currently trades on the Nasdaq Capital Market under the symbol “BKYI”.

As of March 29, 2022, the number of stockholders of record of our common stock was 126.

We have not paid any cash dividends on our common stock to-date and have no intention of paying any cash dividends on our common stock in the foreseeable future.

The declaration and payment of dividends on our common stock is also subject to the discretion of our Board of Directors and certain limitations imposed under the Delaware General Corporation Law.

The timing, amount, and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors.

The declaration and payment of dividends on our common stock is also subject to the discretion of our Board of Directors and certain limitations imposed under the Delaware General Corporation Law. 

The timing, amount, and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors.

Securities Authorized for Issuance under Equity Compensation Plans

For information on securities authorized for issuance under the Company’s equity compensation plans, see “Item 12 - Security Ownership of Certain Beneficial Owners and Related Stockholder Matters.”

Unregistered Sales of Equity Securities

There were no unregistered sales of the Company’s equity securities during 2020 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

There were no unregistered sales of the Company’s equity securities during 2021 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

Rule 10b-18 Transactions

SELECTED FINANCIAL DATA

Not Applicable.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other parts of this Report contain forward-looking statements that involve risks and uncertainties.

MANAGEMENT ’

S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other parts of this Report contain forward-looking statements that involve risks and uncertainties.

All forward-looking statements included in this Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in the section captioned “ RISK FACTORS ” in Item 1A and elsewhere in this Report.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand our Company.

This discussion is provided as a supplement to and should be read in conjunction with our consolidated financial statements for the years ended December 31, 2020 and 2019 and the accompanying notes included elsewhere in this Report.

Effective November 20, 2020, we implemented a reverse stock split of our outstanding common stock at a ratio of 1-for-8.

All share figures are reflected on a post-split basis.

We are a leading identity access management (IAM) platform provider for the enterprise and large-scale customer and civil ID solutions.

Built to leverage BIO-key’s world-class biometric core platform among 14 other strong authentication factors, BIO-key PortalGuard and hosted PortalGuard IDaaS are platforms that enable our customers to securely and easily assure that only the right people can access the right systems.

PortalGuard goes beyond traditional multifactor authentication (MFA) solutions by addressing sizeable gaps, such as allowing roving users to biometrically authenticate at any workstation without using their phones or tokens, eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification.

Millions use BIO-key every day to securely access a variety of cloud, mobile and web applications, on-premise and cloud-based hypervisor servers from all of their devices.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in the section captioned “

RISK FACTORS ”

in Item 1A and elsewhere in this Report.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand our Company.

This discussion is provided as a supplement to and should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021 and 2020 and the accompanying notes included elsewhere in this Report.

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

We are a leading identity access management (IAM) platform provider for the enterprise and large-scale customer and civil ID solutions. 

Built to leverage BIO-key’s world-class biometric core platform among 16 other strong authentication factors, BIO-key PortalGuard and hosted PortalGuard IDaaS are platforms that enable our customers to securely and easily assure that only the right people can access the right systems. 

Millions of people use BIO-key every day to securely access a variety of cloud, mobile and web applications, on-premise and cloud-based servers from all of their devices.

Employees, contractors, students and faculty sign in through PortalGuard to seamlessly and securely access the applications they need to do their important work, without relying on personal phone use or per-user tokens.

Organizations use our platform to securely collaborate with their supply chain and partners, and to provide their customers with flexible, resilient user experiences online or in-person.

One large bank has enrolled and identifies over 10 million of their customers in branches on a daily basis.

We sell our branded biometric and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution.

We do not mandate BIO-key hardware and our NIST-certified biometric platform is unique in that it supports interoperable mixing and matching combinations of fingerprint scanners regardless of manufacturer, so that the right scanner can be deployed for the right use case, without mandating the user of a particular scanner.

Security-conscious developers leverage our platform APIs and federation interfaces to securely and efficiently embed biometric and MFA identity capabilities into their software.

Large-scale customer and civil ID customers use our scalable biometric management platform and FBI-certified scanner hardware to manage enrollment, de-duplication and authentication for millions of users. One large bank has enrolled and identifies over 19 million of their customers in branches on a daily basis. 

We sell our branded biometric and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution. We do not mandate the use of BIO-key hardware with our software and services.

Our NIST-certified fingerprint biometric platform is unique in that it supports interoperable mixing and matching combinations of different manufactures’

fingerprint scanners in a deployment, so that the right scanner can be selected for the right use case, without mandating the user of a particular scanner.

Security-conscious software developers leverage our platform APIs and federation interfaces to securely and efficiently embed biometric and MFA identity capabilities into their software.  

Our approach to IDaaS allows our customers to efficiently scale their security and identity infrastructures to protect both internal cloud workforce- and external customer-facing applications.

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We base subscription fees primarily on the products used and the number of users enrolled in our platform.

We generate subscription fees pursuant to noncancelable contracts with a weighted average duration of approximately one year.

PortalGuard is used by our customers to manage and secure IT access by their employees, contractors and partners, which we call workforce identity.

PortalGuard is also used to manage and secure the identities of an organization’s customers through integration of APIs we have developed and industry-standard federation standards, which we call customer identity.

We invoice customers in advance in annual and multi-year prepaid installments for subscriptions to our platforms.

Strategic Outlook

Historically, our largest market has been access control within highly regulated industries such as government, financial services, and healthcare.

In 2019 we became the go-to biometric authentication provider for board of election offices as eight offices deployed our hardware and software to secure internal access to the voter registration database.

We will seek to extend this footprint in 2021 and beyond.

In 2020, we announced that we had secured two of the largest contracts in our history, with our partner Technology Transfer Institute.

The contracts, valued at a combined $75,000,000, are for large-scale identification projects in Africa and Nigeria.

Historically, our largest market has been access control within highly regulated industries such as government, financial services, and healthcare.  In 2019 we became the go-to biometric authentication provider for board of election offices which continue to deploy our hardware and software to secure internal access to the voter registration database.

We have and expect to continue  to extend this footprint in 2022 and beyond.

In 2020, we announced that we had secured two contracts with our partner Technology Transfer Institute. The contracts are for large-scale identification projects in Africa and Nigeria.

Under the first contract, we will provide biometric authentication to support the infrastructure of a new e-commerce project developed with the expectation to generate more than one million jobs in Nigeria.

The second contract provides for BIO-key hardware and software to be used by a leading African telecommunications company to secure internal access to customer data.

We received our first purchase order under these contracts in the fourth quarter of 2020 which we expect to ship in the first half of 2021 upon receipt of prepayment for the order.

Currently Africa and the surrounding regions are receiving government funding to expand the use of biometric authentication solutions to help establish trustworthy government programs and reduce fraud. We received our first purchase order related to these contracts in the fourth quarter of 2020 which we shipped in the first quarter of 2021.

The COVID-19 pandemic has and may continue to delay the rollout of these programs.

We plan to have a more significant role in the IAM market which continues to expand.

We plan to offer customers a suite of authentication options that complement our biometric solutions.

We plan to offer customers a suite of authentication options that complement our biometric solutions.

The more well-rounded offerings of authentication options will allow customers to customize their approach to authentication all under one umbrella.

We expect to grow our business within government services and highly-regulated industries in which we have historically had a strong presence including financial services, higher education, and healthcare.

We 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.

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 forty participants and is starting to generate incremental revenues.

A second component of our growth strategy is to pursue strategic acquisitions of select businesses and assets in the IAM space.

In furtherance of this strategy, we are active in the industry and regularly evaluate businesses that we believe will either provide an entry into new market verticals or be synergistic with our existing operations and in either case, be accretive to earnings.

We cannot provide any assurance as to whether we will be able to complete any acquisition and if completed, successfully integrate any business we acquire into our operations.

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. 

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. 

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

As discussed under “Item 1A.

Risk Factors” above, an outbreak of a novel strain of the coronavirus, COVID-19, has been recognized as a pandemic by the World Health Organization.

This outbreak has severely restricted the level of economic activity around the world.

In response to this coronavirus outbreak the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, including imposing restrictions on travel and business operations and requiring individuals to limit time outside of their homes.

Given the uncertainty regarding the spread of this coronavirus, the related financial impact cannot be reasonably estimated at this time.

As discussed under “Item 1A.

Risk Factors”

given the uncertainty of the duration and severity of the current COVID-19 pandemic and the conflict between Ukraine and Russia and their effects on our business operations, sales cycles, personnel, and the geographic markets in which we operate, and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature, the related financial impact cannot be reasonably estimated at this time.

The complications caused by COVID-19 has forced organizations to quickly adapt to a work from home remote business model.

This increases the risk of unauthorized users, phishing attacks, and hackers who are eager to take advantage of the challenges of securing remote workers.

We believe that biometrics should play a key role in remote user authentication.

We believe that biometrics should continue to play a key role in remote user authentication.

On March 8, 2022, we expanded our sales and support operation into Europe, Africa and the Middle East (“EMEA”) by acquiring Swivel Secure Europe, SA for up to $2.25 million.

Swivel Secure Europe is a Madrid, Spain based provider of IAM solutions serving  over 300 customers through a network of  channel partners throughout EMEA.

Swivel Secure the exclusive distributer of AuthControl Sentry, AuthControl Enterprise and AuthControl MSP product line in Europe, Middle East, and Africa, excluding the United Kingdom.

Swivel Secure maintains a direct sales force with offices in Madrid, Spain and Lisbon, Portugal.

There can be no assurance that we will be able to manage Swivel Secure Europe, SA’s business or successfully integrate the business with our historic operations without substantial costs, delays or other operational or financial problems. 

RESULTS OF OPERATIONS

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Cost of hardware

Gross Profit (Loss)

Operating expenses

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Research, development and engineering

Total operating expenses before impairment

Impairment of resalable software license rights

Total operating expenses

Operating loss

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Total Costs and other expenses

Revenue increased $569,254 or 25% to $2,836,782 in 2020 as compared to $2,267,528 in 2019 due to the factors stated below.

For the years ended December 31, 2020 and 2019, service revenues included approximately $1,383,000 and $904,000, respectively, of recurring maintenance and support revenue, and approximately $49,000 and $21,000, respectively, of non-recurring custom services revenue.

Recurring service revenue increased 53% from 2019 to 2020 which is due largely to the additional service revenue from PistolStar customers in the last six months of 2020.

Non-recurring custom services increased 134% due to increased new customer installations.

Revenue increased $2,277,707 or 80% to $5,114,489 in 2021 as compared to $2,836,782 in 2020 due to the factors stated below. 

For the years ended December 31, 2021, and 2020, service revenues included approximately $1,100,000 and $1,383,000, respectively, of recurring maintenance and support revenue, and approximately $173,000 and $49,000, respectively, of non-recurring custom services revenue. 

Recurring service revenue decreased 20% from 2020 to 2021  due largely to the decreased maintenance as PistolStar acquired customer maintenance agreements expired by June 30, 2021.

Non-recurring custom services increased 252% due to increased new customer installations and conversion to the cloud platform.

As our customer base continues to grow, we expect the service revenue to increase in future periods.

For the years ended December 31, 2020 and 2019, license revenue increased approximately $519,000 or 117% to $962,038.

We increased both the variation and number of customers, including additional revenue from the PistolStar acquisition in the last six months of 2020.

Hardware sales decreased by approximately $457,000, or 51%, to $442,516 in 2020 as a result of fewer large customer deployments, and reduced lock sales.

Fingerprint reader sales decreased approximately $412,000, or 48%, while the biometric locks decreased approximately $45,000, or 98% from 2019.

For the years ended December 31, 2021 and 2020, license revenue increased approximately $1,594,000 or 166% to $2,555,809, due primarily to  new customer orders and cloud conversion customers, in addition to existing recurring revenue contracts.

Hardware sales increased by approximately $843,000, or 190%, to $1,285,326 in 2021 from $442,516 in 2020.

The increase was attributable largely to sales in Nigeria for an international government agency during the first quarter of 2021.

Costs of goods sold

For the year ended December 31, 2020, cost of service increased approximately 84% to $502,214, due to the increased revenue and the direct support for the PortalGuard installations.

License costs for the year ended December 31, 2020 decreased approximately 95% to $49,891.

The decrease was attributable primarily to the amortization and actual deployments of the software rights of approximately $15,000 in 2020 compared to $884,000 in 2019.

Hardware costs for the year ended December 31, 2020 decreased approximately 81% to $242,721.

The decrease was attributable primarily to the write down of lock inventory and parts as a result of the discontinuance of lock sales in the US in 2019 and reduction of hardware sales.

For the year ended December 31, 2021, cost of service increased approximately 37% to $686,175, due to the increased revenue and the direct support for the PortalGuard installations.

License costs for the year ended December 31, 2021 increased $133,308, or approximately 267%, to $183,199 related to increased license revenue and the resale of associated third party software.

Hardware costs for the year ended December 31, 2021 increased $560,834, or approximately 231%, to $803,555.

The increase was associated with the increased hardware sales and hardware mix.

Selling, general and administrative

Selling, general and administrative costs for year ended December 31, 2020 were $5,848,687 representing a 16% increase over 2019.

The increase included expenses associated with new marketing personnel and web-site integration of PistolStar, additional costs associated with the PistolStar office staff and expenses, one-time integration costs incurred in connection the acquisition of PistolStar, increased accounting and legal fees incurred in connection with financing transactions, and costs associated with establishing our African subsidiary.

These amounts were offset in part by a decrease in travel, bad debt expense, factor fees, and non-cash compensation.

Selling, general and administrative costs for year ended December 31, 2021 were $6,028,360 representing 3% increase from 2020.

The increase included higher administrative personnel expenses, marketing expenses, Delaware franchise taxes, and bad debt expense related to the reserve on the note receivable of $100,000 and an allowance for doubtful accounts of $200,000.

These were  offset by lower factoring fees, contract and temporary labor, non-cash compensation, the absence of one-time expenses incurred in 2020 for integration costs incurred in connection the acquisition of Pistol Star, as well as accounting and legal fees. 

Research, development and engineering

For the year ended December 31, 2020, research, development and engineering costs were $1,396,436 representing a 5% increase over 2019, as a result of an increase in recruiting expenses and the addition of PistolStar expenses.

These amounts were offset by a decrease in contracting services and non-cash compensation.

Impairment of resalable software license rights

Impairment of assets relates to the write-down of the FingerQ resalable software license rights to zero in the fourth quarter of 2019.

For the year ended December 31, 2021, research, development and engineering costs were $2,355,056 representing a 69% increase over 2020.

Included in the increase were personnel costs associated with PistolStar, new hires and recruiting fees, increased professional fees, and increased amortization of intangible assets acquired from PistolStar.

These amounts were offset by a decrease and non-cash compensation.

Other income (expense)

Interest income

Government grant

Foreign currency loss

Investment-debt security reserve

Government grant –

Paycheck Protection Program

Interest expense

Loss of extinguishment of debt

Other expense for 2021 consisted of interest expense from the amortization of debt discounts of $18,000, a reserve on the investment-debt security as adjustment for collections of such security of $60,000, and a foreign currency adjustment to an accounts receivable invoice of $50,000, offset by interest income of $4,075.

Interest expense for 2020 related to the amortization of debt discounts and debt issuance costs relating to convertible notes of approximately $3,574,000, as well as the amortization of a beneficial conversion feature of approximately $641,000.

Also included in other income (expense) for 2020 was a loss on the extinguishment of a convertible note in the approximate amount of $500,000 resulting from the issuance of an amended and restated convertible note, for which the issuer did not grant a concession.

These amounts were partially offset by amounts received under the Payment Protection Program (the “Program”) the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S.

Small Business Administration of approximately $341,000 and interest income of approximately $31,000.

The 2019 total includes the write-off of unamortized discount and debt issuance costs related to the April 2019 and June 2019 notes repaid prior to maturity.

LIQUIDITY AND CAPITAL RESOURCES

Operating activities overview

Net cash used for operations during the year ended December 31, 2020 was approximately $4,950,000.

Net cash used for operations during the year ended December 31, 2021 was approximately $8,942,000.

Items of note included:

Net positive cash flows related to non-cash expenses of approximately $1,367,000.

Net negative cash flows related to changes in accounts receivable, prepayments, accounts payable, accruals, lease liabilities, and deferred revenue of approximately $1,457,000 and our net loss for the period.

Net negative cash flows related to changes in accounts receivable, prepayments, inventory, accruals, lease liabilities, and deferred revenue in the aggregate amount of approximately $5,601,000 and our net loss for the period.

Investing activities overview

Approximately $2,230,000 was used for investing activities during the year ended December 31, 2020 and related primarily to the acquisition of PistolStar.

Approximately $42,000 was used for investing in capital expenditures during the year ended December 31, 2021.

Financing activities overview

Approximately $24,094,000 was provided by financing activities during the year ended December 31, 2020 consisting of the issuance of common stock and warrants in our underwritten public offering, exercise of warrants and issuance of convertible notes.

These amounts were offset by repayment of convertible notes, repayment of notes payable and other related party debt, debt service fees, and costs associated with the issuance of our securities.

Approximately $219,000 was used in financing activities during the year ended December 31, 2021 consisting of repayment of notes payable, and costs associated with the issuance of our securities, net of proceeds from common stock sold to employees under the Company's employee stock purchase plan.

Sources of Liquidity

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

We entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to October 31, 2021 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.

We entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to October 31, 2022 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.

On April 4, 2019, we issued a $550,000 secured convertible debenture to an institutional investor with a maturity date of November 15, 2019 which was convertible into common stock at a conversion price of $12.00 per share.

On July 10, 2019, this debenture was redeemed and repaid in full in connection with the financing described below.

On June 14, 2019, we issued a $157,000 principal amount convertible note to an institutional investor with a maturity date of November 14, 2019 which was convertible into common stock at a conversion price of $12.00 per share.

On July 10, 2019, this note was redeemed and repaid in full in connection with the financing described below.

On July 10, 2019, we issued a $3,060,000 principal amount senior secured convertible note (the “Original Note”) to an institutional investor.

At closing, $2,550,000 was funded.

The Original Note was secured by a lien on substantially all of our assets and properties and was convertible into shares of our common stock at a fixed conversion price of $12.00 per share.

Pursuant to amendments in the first and second quarter of 2020, we amended the Original Note to increase the principal amount to $3,789,000 as a result of interest and penalties, accelerated the maturity date to June 13, 2020, and reduced the conversion price to $5.20 per share (the “Amended Note”).

The full balance of the Amended Note has been converted into common stock.

On January 13, 2020, we issued a $157,000 principal amount convertible note to an institutional investor with a maturity date of June 13, 2020 which was convertible into common stock at a conversion price of $12.00 per share.

This note was paid in full on June 12, 2020 by payment of $211,984.

On February 13, 2020, we issued a $126,000 principal amount convertible note to an institutional investor with a maturity date of July 13, 2020 which was convertible into common stock at a conversion price of $9.20 per share.

This note was paid in full on July 10, 2020 by payment of $170,442.

On April 20, 2020, we entered into a Paycheck Protection Program Term Note (the “SVB Note”) with Silicon Valley Bank (“SVB”) pursuant to the Program.

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.   

On April 20, 2020, we entered into a Paycheck Protection Program Term Note (the “SVB Note”) with Silicon Valley Bank (“SVB”) pursuant to the Program.

We received total proceeds of approximately $341,000 which was used in accordance with the requirements of the CARES Act.

The full amount of the SVB Note has been forgiven.

On May 6, 2020, we issued a $2,415,000 principal amount senior secured convertible note.

The principal amount was due and payable in five equal monthly installments of $268,333 beginning seven months after the funding date with the remaining balance due twelve months after the date of funding.

Following the completion of the underwritten offering consummated in July 2020 discussed below, all outstanding amounts relating this note were paid in full.

On June 29, 2020, we issued a $1,811,250 principal amount senior secured convertible note.

The principal amount was due and payable in nine equal monthly installments of $201,250 beginning four months after the funding date.

Following the completion of the underwritten offering consummated in July 2020 discussed below, all outstanding amounts relating this note were paid in full.

The full amount of the SVB Note was forgiven.

On July 23, 2020, we completed an underwritten public offering of shares of common stock and warrants resulting in net proceeds of approximately $22.7 million, inclusive of the over-allotment and after deducting underwriting discounts and commissions and estimated offering expenses.

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Liquidity Outlook

At December 31, 2020, our total cash and cash equivalents were approximately $17,000,000, as compared to approximately $79,000 at December 31, 2019.

At December 31, 2020 we had working capital of approximately $17,000,000.

At December 31, 2021, our total cash and cash equivalents were approximately $7,800,000, as compared to $16,993,096 at December 31, 2020. 

At December 31, 2021, we had working capital of approximately $12,013,000. 

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 $735,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation.

During 2020, we generated approximately $2,837,000 of revenue, which is below our average monthly requirements.

We currently require approximately $735,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation.  During 2021, we generated approximately $5,114,000 of revenue, which is below our average monthly requirements.

We expect that Swivel Secure Europe will generate positive cash flow in 2022.

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.

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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.

OFF-BALANCE SHEET ARRANGEMENTS

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Our actual results may differ significantly from these estimates under different assumptions or conditions.

There have been no material changes to these estimates for the periods presented in this Annual Report on Form 10-K.

We believe that of our significant accounting policies, which are described in Note A of the notes to our consolidated financial statements included in this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity.

There have been no material changes to these estimates for the periods presented in this Annual Report on Form 10-K.

We believe that of our significant accounting policies, which are described in Note A of the notes to our consolidated financial statements included in this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity.

Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations, as listed below:

Revenue Recognition

Business Combinations

Goodwill and acquired intangible assets

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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See financial statements appearing at pages 37-66 of this Annual Report on Form 10-K.

See financial statements appearing at pages 37-64 of this Annual Report on Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity