Mikey runs the company to the brink of bankruptcy then in the eleventh hour raises $1.4M.
With very few details, Fundo and the other pumpers are proclaiming what a great deal this is. I guess it is a great deal when you consider the alternatives.
How is this deal any better than the $2M Mikey got from Sagem? Sagem was buying biometric companies left and right at the time but their interest in BKYI was limited to accessing some IP for their FBI deal. I was scoffed and ridiculed by Fundo, et el., when I suggested the $2M Sagem deal might be a one-time deal. Barker even proclaimed at the time that the Sagem deal guaranteed BKYI 40 quarters of profitability. So, what ever happened to the millions and millions that the pumpers promised from Sagem? How long after the Sagem deal before BKYI was broke again? The Sagem deal drove the stock up to .29 before it started its long downward slope as investors slowly realized the expected millions were not coming.
So now InterDigital passes on buying BKYI but makes a modest investment to #$%$ some of BKYI’s IP.
BKYI apparently has some interesting underlying IP. However, I don’t think the business model Mikey build on this IP is of interest to potential buyers. I think InterDigital, like Sagem, is willing to make a modest investment to get to the IP without taking over the money losing business model built by Mikey.
There are many unanswered questions about this deal. How much new stock was issued and what is the dilution to existing stockholders? What was the price on the new stock? What are the T&C’s on InterDigital’s secured note? How much interest and how will it be paid?
Of course, a big question is where will the $1.4M go? It will be interesting to see if the Chairman of the Board Tom Colatosti takes his $350K reward from the Shaar deal off the top. If TC takes it and puts that money in his pocket, it will say a lot about his commitment to BKYI.
The last available balance sheet is for 3Q12. At that time, their current debts exceeded their current assets by almost $2M even after excluding the $350K Shaar reward to TC. Even if the 4Q was profitable and even if Mikey collects some more of his questionable debt, it looks like $1.4M will not go much further than catching up on their bills.
It looks like InterDigital set up a no-lose deal for themselves. If Mikey can turn things around, they win as a stockholder and their secured note will be repaid. If Mikey drives BKYI over the cliff, as a secured note holder they will get the IP for a very modest investment. Given what InterDigital would gain if BKYI goes over the cliff, I would not expect them to keep BKYI on life support like Shaar did in order to get their investment back.
Maybe IDCC is worth some DD.
Johnny likes to assert how he has been right and forced to endure ridicule, but fails to admit how many times he's been wrong. He's been asserting bankruptcy was imminent or not so imminent since 2005. He claimed BKYI would never make it past the debts owed and that the Aether purchase was a failure, yet missed were the $7M in unfunded receivables which kept the business going, and Johnnie was on to bigger and better things when the sale of the LE division at the height of stimulus hype was announced allowing repayment of institutional debt. He said Longviews suit would end in BIO-key's demise and that they were the smart money. Longview took a $900K haircut and dismissed their suit. He said the international contract backlogged receivables were gone forever, also shown to be a falsehood in the last 10Q.
Further, his duplicity is clear. First he attacks BKYI as not having institutional investors, now he attacks them for getting them. He stated that no institution would go near BIO-key with a ten-foot pole and all the existing institutions are gone (a falsehood of course), but now he says cynically it's a "no lose" proposition for the institutions to invest in BIO-key. He argued that BKYI would never win on NGI pointing to old and first cut NIST results, while touting his favorite Neurotechnology, but then claimed that a $2M influx, once again saving the company, and their Sagem/FBI win was in fact a failure because millions in additional revenue never arrived. He attacks a 3-year downtrend in the stock, while discounting a 2-year high in the stock made in 15 weeks RIGHT NOW. But let me quote him directly: "If Mikey had any credibility in the 'Investment Community', this stock would have soared. I don’t see a couple of $20,000 trading days as an indication of INSTITIONAL support and/or accumulation..." I guess 3X in 15 weeks is still not soaring and now institutional support is not institutional support. In the last 15 weeks, I calculate over $1M has moved into the stock, pushing it up 3X, but Johnnie has dismissed this as a "bunch of small retail investors…passing the stock back and forth between themselves."
Johnnie asks what the difference is between Sagem and IDC. Sagem bought integration and a ton of licenses, that's it. IDC is buying equity, and entering into a research collaboration. Sagem was in a competitive and fading government space, IDC is the IP leader in the mobile wireless commercial space, a space with the explosive potential of the internet in the 90s. Sagem was simply licensing the best software out there to win highly competitive and politically risky government contracts, IDC is looking at developing "disruptive innovation" in an exploding commercial mobile space. But for Johnnie there's no difference.
No, it's JOHNNIE'S business model for the biometric industry that is flawed. He believes there is utterly no chance for web-based biometrics, and that toy-only local fingerprint biometric software will suffice for the duration of this universe.
Yet here's what IDC says about this:
" 'InterDigital is committed to driving disruptive innovation across the mobile ecosystem through in-house development, partnerships, collaborations and acquisitions. Our collaboration with BIO-key is consistent with InterDigital's newly formed Innovation Partners group, which is focused on expanding InterDigital's reach within the mobile ecosystem,' stated Scott McQuilkin, Senior Executive Vice President, Innovation."
And here's what IDC says about the Innovation program:
"On Oct-23-2012, IDCC issued a press release detailing this group
"Innovation Partners, a new sourcing model based around partnerships with leading inventors and research organizations, as well as the acquisition of technology and patent portfolios that align with InterDigital's roadmap."
So who do you believe? Johnnie and his forever local view of fingerprint biometrics, or IDC and institutions that are betting at least an initial $1.4M on a roadmap that calls for device and platform independent cloud-based global mobile authentication?
The bigger question for johnny is "why do you care"? You have no position in BKYI, or do you??? Did you miss the opportunity to buy at $.07 and got blind sided at the news? And another question, why did IDCC only buy 12% of the company. With $350 million net in cash, why screw around, just buy the whoke company. I would speculate that they wanted more but settled for the 12% in an effort to get their foot in the door and buy more later. BKYI mgmt did not sell out the shareholders.
Bottom line, you lost johnny/elite. Bkyi survived and you two bashers were 1000% wrong. This relationship with I#DCC will place BKYI in a great deal of wireless applications.
I am looking forward to t5he new ad campaign, "BIO-key Inside".
I think that covers it chumpboy.
Jq- Go easy on him. Just think of the years of antidepressants and therapy he'll need when he ultimately will see the return Biokey investors will get compared to what he DIDN'T get with Cogent and L1
Nice story, but you left out this- why did IDCC not just let BKYI founder now, and buy what they wanted out of a bankruptcy? Why risk the capital now to keep this afloat for a few more years?
Per the last 10Q, BKYI’s assets secure Tom Colatosti’s note. A bankruptcy prior to this deal would give all of BKYI’s assets to TC, they would not be available to the court to sell.
How/where is IDCC’s capital at risk? With just a $900K investment, they get the IP they are interested in no matter what happens going forward.
The thing I am most interested in seeing is what happens with TC’s $350K note. If I was IDCC, I would not be making a $900K investment if the first $350K was going into the COB’s pocket. If I were IDCC, I would insist TC put most of the $350K back into the company. That would explain where much of the additional $500K is coming from.
In any case, TC’s secured note must be satisfied for IDCC to become the senior secured note holder. So while BKYI can claim raising $1.4M, the first $350K will go to satisfying TC’s note, leaving $1.05M.
Good questions, and just maybe you answered it yourself! Possibly IDCC sees BKYI as surviving and making it? If not, than you are correct and they just gave away the money! I THINK NOT!
Sentiment: Strong Buy