BIO KEY INTERNATIONAL INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES   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 December 31, 2021. 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 December 31, 2021, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.   Management ’ s Annual Report on Internal Control Over Financial Reporting   Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, the risk. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   Under the supervision and with the participation of our management, including our CEO and CFO, we have conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021, based upon the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2021.   As we are a smaller reporting company, this annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report on Form 10-K.   Changes in Internal Control Over Financial Reporting   No change in our internal control over financial reporting occurred during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.     ITEM 9B. OTHER INFORMATION   None.   24     ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS   Not Applicable.     PART   III   ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   The following sets forth certain information about each director and executive officer of the Company.   NAME   AGE   POSITIONS HELD Michael W. DePasquale     67   Chairman of the Board of Directors and Chief Executive Officer Thomas E. Bush, III (a)* (c)     69   Director Robert J. Michel (a) (b)*     65   Director Thomas Gilley (c)*     62   Director Wong Kwok Fong (Kelvin)     58   Director and Vice-Chairman of the Board of Directors Pieter Knook (b)     61   Director Emmanual Alia (Manny) (b)     54   Director Cecilia C. Welch     62   Chief Financial Officer Mira K. LaCous     59   Chief Technology Officer James D. Sullivan     54   Vice President of Strategy and Compliance, Chief Legal Officer     (a) Compensation Committee Member     (b) Audit Committee Member     (c) Nominating Committee Member     * Indicates chair of committee   Set forth below is a brief description of the background and business experience of our directors and executive officers for the past five years.    25     Directors   Michael W. DePasquale has served as our Chief Executive Officer and a Director since January 3, 2003, and Chairman of the Board since January 29, 2014. He served as Co-Chief Executive Officer of the Company from July 2005 to August 2006. Mr. DePasquale brings more than 30 years of executive management, sales and marketing experience to the Company. Prior to joining us, Mr. DePasquale served as the President and Chief Executive Officer of Prism eSolutions, Inc., a Pennsylvania-based provider of professional consulting services and online solutions for ISO-9001/14000 certification for customers in manufacturing, healthcare and government markets, since February 2001. From December 1999 through December 2000, Mr. DePasquale served as Group Vice President for WRC Media, a New York-based distributor of supplemental education products and software. From January 1996 until December 1999, Mr. DePasquale served as Senior Vice President of Jostens Learning Corp., a California-based provider of multimedia curriculum. Prior to Jostens, Mr. DePasquale held sales and marketing management positions with McGraw-Hill and Digital Equipment Corporation. Mr. DePasquale earned a Bachelor of Science degree from the New Jersey Institute of Technology. He serves as the Vice Chairman on the Board of Directors of the International Biometrics and Identification Industry Association. We believe Mr. DePasquale’s qualifications to sit on the board of directors include his extensive executive management experience in the technology sector and biometric industry expertise which strengthen the board’s collective qualifications, skills and experience.      Thomas E. Bush, III has served as a Director of the Company since January 29, 2014. Since 2009, Mr. Bush has provided business consulting services through his firm, Tom Bush Consulting. Prior to that, Mr. Bush served with the Federal Bureau of Investigation for over 33 years. Mr. Bush joined the FBI in September 1975, ultimately becoming the Director of the CJIS division, with over 2,500 employees and a budget of approximately one billion dollars. Mr. Bush is known for providing critical services in support of the criminal justice community, including two significant IT projects, Next Generation Identification and N-Dex, which were awarded by CJIS during his tenure at the FBI. Mr. Bush has received many awards during his career, most notably a Presidential Rank Award for Meritorious Service in 2007. We believe Mr. Bush’s qualifications to sit on the board of directors include his extensive experience in law enforcement, security matters, and the use of biometric technologies in the government sector, which provide the board with a unique perspective on security and public sector matters.    Robert J. Michel  has served as a Director of the Company since April 10, 2017. He has over 30 years of accounting and financial management experience. Since September, 2018, he has served as the Chief Financial Officer of Daxor Corporation (Nasdaq: DXR), a medical device manufacturing company specializing in blood volume analysis. Prior to Daxor, from November, 2017 until September 2018, Mr. Michel served as the CFO of Roadway Moving, Inc., a transportation, moving and storage company located in New York City. Immediately prior to Roadway Moving, Inc., Mr. Michel served as a consultant with Feuer & Orlando, LLP, a New York City based CPA firm, from May, 2016 until November 2017. From 2009 until March, 2016, Mr. Michel was the Chief Financial Officer of Asta Funding, Inc. (Nasdaq: ASFI), a diversified financial services company where he was responsible for all financial matters and SEC reporting. From 2004 until 2009, Mr. Michel served as the Controller and the Director of Financial Reporting and Compliance for Asta Funding. Mr. Michel is a certified public accountant, earned a MBA in Taxation from St. John’s University, and a BS in Business Administration from Villanova University. Mr. Michel gained his public accounting experience at PricewaterhouseCoopers in New York.  We believe Mr. Michel’s qualifications to sit on the board of directors include his substantial experience in accounting and financial management for public companies which provide the board with a deep knowledge of financial and SEC reporting and strengthen the board’s collective qualifications, skills, and experience.   Thomas Gilley has served as a Director of the Company since January 29, 2014. Mr. Gilley is an entrepreneur, investor and advisor in the connected product Internet of Things (IoT) industry with 37 patents. Since founding his Enterprise Software IoT company in 2012 and selling it in 2016, Mr. Gilley invests in technology companies, serves as growth strategy advisor, and independent board member to companies in the connected industry. Mr. Gilley was previously employed at Apple Computer, in the Advance Technology Group, Portable Products Group and Strategy Advisor. Before and after Apple, Mr. Gilley founded several successful companies including PicoStar, a Silicon Valley incubator-technology investment company, and an on-demand web media company he sold to Vignette. Mr. Gilley acted as CTO throughout the transaction until the company’s ultimate acquisition by OpenText. We believe Mr. Gilley’s qualifications to sit on the board of directors include his substantial experience in starting, operating and financing technology companies which provides the board with a deep knowledge of the sales and development cycles applicable to growth businesses in the technology industry.   Wong Kwok Fong (Kelvin)  has served as a Director of the Company since December 4, 2015, as Managing Director of our Hong Kong Subsidiary since August 2016, and as Vice-Chairman of the Board of Directors since March 2019. He is the co-founder of China Goldjoy Group (previously World Wide Touch Technology Holdings Limited), a company listed on The Stock Exchange of Hong Kong. From 1997 until August, 2015, Mr. Wong served as the Chairman of China Goldjoy Group and served as its Chief Technology Officer through October 2016. During this time, Kelvin played a significant role in the substantial growth of the business. Kelvin brings over 20 years of senior management experience in manufacturing, supply chain, and marketing functions in the electronics and technology industries, including establishing manufacturing plants in Hong Kong and China, and building an extensive network in the electronics and technology industries. We believe Kelvin’s qualifications to sit on the board of directors include his substantial experience in the technology industry, including biometrics and payment systems, and serving the Asian markets, which broaden and strengthen the board’s collective qualifications, skills, and experience.   26     Pieter Knook , has served as a Director of the Company since May 2, 2016. Mr. Knook has over 30 years of experience in mobility and software technology in Europe, Asia and the United States. Since 2010, Mr. Knook has served on the boards of a number of private equity backed and publicly traded early stage technology companies, including Altitude Angel in Reading, the London Internet Exchange, BroadHorizon in the Netherlands and Telenor in Norway. Mr. Knook served as the Director of Internet Services at Vodafone Group in London from March 2008 through October 2010. Prior to joining Vodafone, Mr. Knook spent 18 years at Microsoft. As President of Microsoft Asia from 1997 to 2001, Mr. Knook led the company’s efforts in opening and expanding Asian markets. He subsequently served as Senior Vice President of Microsoft’s mobile communication business from 2001 through 2008. We believe Mr. Knook’s qualifications to sit on the board of directors include his extensive technology industry experience, which further broaden and strengthen the board’s collective qualifications, skills, and experience.   Emmanual Alia (Manny) , was appointed Director of the Company on April 3, 2020. Since 2018 Mr. Alia has been providing management consulting services as an advisor to businesses seeking market entry strategies to emerging markets such as Africa and the Caribbean. From 2011 to 2018, Mr. Alia served as an Executive Director at the Corporate and Investment division of JPMorgan, and as a Senior Vice-President at CHASE Bank’s Consumer and Community Banking specializing in the financial and banking services industry and opportunities in Africa. During Mr. Alia’s tenure with JPMorgan, he served as head of WholeSale Operations in the Receivables Operations of the Global banking operations in the US and Canada, head of Retail Banking in the Greater Detroit area, and head of branches in the New York and New Jersey areas. For two years Mr. Alia was co-chair of the Black Organizational Leadership Development, an employee networking group in JPMorgan that works with firm’s leadership to strengthen the firm’s message, strategies and community outreach globally. Mr. Alia received a Bachelor of Arts in Accounting from SouthEastern University and a Master’s of Business Administration (MBA) from Cornell University. We believe Mr. Alia’s qualifications to sit on the board of directors include his extensive industry experience and connection and networking abilities in the African communities and markets which further broaden and strengthen the board’s collective qualifications, skills, and experience.   Non-director Executive Officers   Cecilia C. Welch  has served as the Chief Financial Officer of the Company since December 21, 2009. Ms. Welch joined the Company in 2007 as Corporate Controller. Prior to joining the Company, from January 2006 to December 2006, she was the Controller for Savaje Technologies (acquired by Sun Microsystems), a developer of advanced mobile telephone software. From October 2004 to January 2006, she was Controller for Crystal Systems, a manufacturer of sapphire crystals used for industrial, semiconductor, defense, and medical applications. From December 1988 to July 2004, she was the Controller for ATN Microwave (acquired by Agilent Technologies), a manufacturer of automated test equipment. Ms. Welch has a Bachelor’s degree in Accounting from Franklin Pierce University.   Mira K. LaCous  has served as Chief Technology Officer of the Company since March 13, 2014. Prior to her appointment as Chief Technology Officer, she served as Senior Vice President of Technology & Development since 2012, and as our Vice President of Technology and Development since 2000. Ms. LaCous has over 35 years of product/project management, solution architecture, software development, team leadership and customer relations experience, with a background that includes successfully bringing numerous innovative products and technologies to market, including automated voice response systems, automated building control systems, software piracy protection, internet training materials and testing, page layout and design software, image scanning software and systems, biometric security systems, automated national ID systems using biometrics, and biometric algorithms.  Ms. LaCous has been a speaker at multiple events/conferences and has worked with teams around the globe bringing biometric technology deployments to life.  Ms. LaCous is the author of eight (8) US patented technologies, multiple international patents and lead the engineering team in developing other patents and inventive technologies.  Ms. LaCous has a Bachelor’s in Computer Science, with mathematics and physics from North Dakota State University.   James D. Sullivan  has served as BIO-key’s Senior Vice President of Strategy and Compliance and BIO-key’s Chief Legal Officer since February 2020, as Senior Vice President of Strategy and Business Development from April 2012 through December 2018, and the dual role as Senior Vice President of Global Sales from August 2015 through December of 2016. Mr. Sullivan is a recognized expert in biometric authentication, cyberlaw and privacy for consumer and mobile applications. During over 18 years with the Company, Mr. Sullivan has directly worked with dozens of the Company’s customers, including AT&T, Israel Defense Forces, LexisNexis, NCR and Omnicell, as well as large-scale biometric-centered identity management projects that interface daily with millions of corporate and consumer users. Mr. Sullivan earned a Juris Doctor cum laude from Georgia State University College of Law, is a member of the Georgia Bar, and enrolled to practice before the IRS. Mr. Sullivan has an undergraduate degree in Computer Science from Brown University and has over 25 years of experience in IT projects and implementation, including directly working with security and identity management solutions at the Company, Computer Associates, Platinum Technology, and Memco Software.   27     Committees of the Board of Directors   Audit Committe e   Our audit committee is comprised of Robert J. Michel (Chair), Pieter Knook, and Emmanual Alia, all of whom meet the independence standards for purposes of serving on an audit committee established by NASDAQ and under the Exchange Act. Our audit committee (i) assists the board of directors in its oversight of the integrity of our financial statements, compliance with legal and regulatory requirements, and corporate policies and controls, (ii) has the sole authority to retain and terminate our independent registered public accounting firm, approve all auditing services and related fees and the terms thereof, and pre-approve any non-audit services to be rendered by our independent registered public accounting firm, and (iii) is responsible for confirming the independence and objectivity of our independent registered public accounting firm. Our independent registered public accounting firm has unrestricted access to our audit committee. Our board of directors has determined that Robert J. Michel qualifies as an “audit committee financial expert,” as such term is defined in Item 407 of Regulation S-K.   Our audit committee operates under a written charter that is reviewed annually. The charter is available on our website at  www.bio-key.com .   Compensation Committee   Our compensation committee is comprised of Thomas Bush, III (Chair) and Robert Michel, both of whom meet the independence standards established by NASDAQ and under the Exchange Act. The compensation committee’s duties include overseeing our overall compensation philosophy, policies and programs. This includes reviewing and analyzing the design and function of our various compensation components, establishing salaries, incentives and other forms of compensation for officers and non-employee directors, and administering our equity incentive plan. In fulfilling its responsibilities, the compensation committee has the authority to delegate any or all of its responsibilities to a subcommittee of the compensation committee.   Our compensation committee operates under a written charter that is reviewed annually. The charter is available on our website at  www.bio-key.com .   Code of Ethics   We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our Code of Ethics is designed to deter wrongdoing and promote: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules, and regulations; (iv) the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and (v) accountability for adherence to the code.  We intend to disclose amendments or waivers of the Code of Ethics on our website within four business days.  Any person may obtain a copy of our Code of Ethics free of charge by sending a written request for such to the attention of the Chief Financial Officer of the Company, 3349 Highway 138, Building A Suite E, Wall, NJ 07719.     Term of Office   Our directors are elected at the annual meeting of stockholders and hold office until the annual meeting of the stockholders next succeeding his or her election, or until his or her prior death, resignation or removal in accordance with our bylaws. Our officers are appointed by the Board and hold office until the annual meeting of the Board next succeeding his or her election, and until his or her successor shall have been duly elected and qualified, subject to earlier termination by his or her death, resignation or removal.   Delinquent Section 16(a) Reports   Reports of all transactions in our common stock by officers, directors and ten percent (10%) stockholders are required to be filed with the SEC pursuant to Section 16(a) of the Exchange Act. Based solely on our review of copies of the reports received, or representations of such reporting persons, we believe that during the year ended December 31, 2021, all Section 16(a) filing requirements applicable to our officers, directors and ten percent (10%) stockholders were satisfied in a timely fashion, except for one late Form 4 filing by Mr. Sullivan reporting an open market purchase.   28     ITEM 11. EXECUTIVE COMPENSATION   The following table sets forth a summary of the compensation paid to or accrued by our chief executive officer and the two most highly compensated executive officers other than our chief executive officer, for the fiscal years ended December 31, 2021 and 2020:   SUMMARY COMPENSATION TABLE Name and Principal Position Fiscal Year   Salary ($)     Bonus ($)     Stock Awards ($) (1)     All Other Compensation ($) (2)     Total ($)                                               Michael W. DePasquale 2021     275,000       -       -       1,944       276,944   Chief Executive Officer 2020     275,000       50,000       21,450       2,219       348,669                                               Mira K. LaCous 2021     216,333       -       -       3,092       219,425   Chief Technology Officer 2020     213,000       -       21,450       2,493       236,943                                               James Sullivan 2021     225,000       -       -       10,241  (3)     235,241   Chief Legal Officer 2020     150,000       35,000       21,450       137,238  (4)     343,688     (1) The aggregate grant date fair value of the restricted shares is calculated by the multiplying the quantity of shares issued by the closing trading price of the shares on the date of issuance calculated under FASB ASC 718. (2) Consists of life insurance premiums paid by the Company except as otherwise noted. (3) (4) Consists of $8,987 of sales commissions and $1,254 of life insurance premiums paid by the Company. Consists of $135,383 of sales commissions and $1,855 of life insurance premiums paid by the Company.   Narrative Disclosure to Summary Compensation Table   Compensation for our executives is comprised of three main components: base salary, annual performance-based cash bonus, and long-term equity awards. We do not target a specific weighting of these three components or use a prescribed formula to establish pay levels. Rather, the board of directors and compensation committee considers changes in the business, external market factors and our financial position each year when determining pay levels and allocating between long-term and current compensation for the named executive officers.   Cash compensation is comprised of base salary and an annual performance-based cash bonus opportunity. The compensation committee generally seeks to set a named executive officer’s targeted total cash compensation opportunity within a range that is the average of the applicable peer company and/or general industry compensation survey data, adjusted as appropriate for individual performance and internal pay equity and labor market conditions.   In setting cash compensation levels, we favor a balance in which base salaries are generally targeted at slightly below the peer average and a bonus opportunity that is targeted at slightly above the average. The base salary of our CEO has not been increased since 2018. Effective January 1, 2021, we increased the base salary of Mr. Sullivan to $225,000 to compensate for the fact that in connection with his promotion to Chief Legal Officer, he would be limited to sales commissions on only three of his existing long term accounts.     Performance-based bonuses have historically been based upon the achievement of certain revenue milestones established by the compensation committee. The committee believes that this higher emphasis on performance-based cash bonuses places an appropriate linkage between a named executive officer’s pay, his or her individual performance, and the achievement of specific business goals by placing a higher proportion of annual cash compensation at risk, thereby aligning executive opportunity with the interests of stockholders.   In 2020, due to extraordinary efforts in maintaining operations during the pandemic, acquiring PistolStar, and the completing an underwritten public offering, Mr. DePasquale and Mr. Sullivan were awarded cash bonuses of $50,000 and $35,000, respectively.   We also include an equity component as part of our compensation package because we believe that equity-based compensation aligns the long-term interests of our named executive officers with those of stockholders. In August 2020, we issued 4,125 shares of restricted stock to Mr. DePasquale, Mr. Sullivan, and Ms. LaCous. These shares vest in equal annual installments over a three-year period from the date of grant. We did not issue any stock options or restricted shares to our named executive officers in 2021.   These cash and equity compensation components of pay are supplemented by various benefit plans that provide health, life, accident, disability and severance benefits, most of which are the same as the benefits provided to all of our US based employees.   Employment Agreements   On March 26, 2010, we entered into an employment agreement, effective as of March 25, 2010, with Michael W. DePasquale to serve as our Chief Executive Officer until March 24, 2011. The agreement automatically renews for subsequent one-year terms, unless the employment relationship is terminated by either party, or modified in accordance with the terms and conditions of the agreement. Since 2018, Mr. DePasquale’s annual base salary has been $275,000, subject to adjustment by the compensation committee. In addition to the base salary, a “Performance Bonus” may be awarded to Mr. DePasquale on the basis of the Company achieving certain corporate and strategic performance goals, as determined by the compensation committee in its sole discretion. The employment agreement contains standard and customary confidentiality, non-solicitation and “work made for hire” provisions as well as a covenant not to compete which prohibits Mr. DePasquale from doing business with any current or prospective customer of the Company or engaging in a business competitive with that of the Company during the term of his employment and for the one-year period thereafter. This agreement also contains a number of termination and change in control provisions as described under the captions “ Termination Arrangements ” and “ Change in Control Arrangements ” below.   29     On April 5, 2017, we entered into an employment agreement with James Sullivan. The agreement automatically renews for subsequent one-year terms, unless terminated by the Company upon at least two months prior written notice which is treated as termination without cause. Since 2021, Mr. Sullivan’s annual base salary has been $225,000, subject to adjustment by the compensation committee. The agreement contains standard and customary confidentiality, technical invention provisions as well as non-competition and non-solicitation covenants which prohibit Mr. Sullivan from doing business with any current or prospective customer of the Company or engaging in any business competitive with that of the Company during the term or his employment and for the one-year period thereafter. The agreement also contains a number of termination provisions as described under the caption “ Termination Agreements ” below.   On November 20, 2001, we entered into an employment agreement with Mira LaCous. The agreement automatically renews for subsequent one-year terms, unless terminated by the Company upon at least one-month prior written notice which is treated as termination without cause and provides for a discretionary bonus which shall not exceed 50% of base salary. The agreement contains standard and customary confidentiality, technical invention provisions as well as non-competition and non-solicitation covenants which prohibit Ms. LaCous from doing business with any current or prospective customer of the Company or engaging in any business competitive with that of the Company during the term or her employment and for the one-year period thereafter. The agreement also contains a number of termination provisions as described under the caption “ Termination Agreements ” below.   Stock Option Grants and Restricted Stock Awards   In the event of any change in the outstanding shares of our common stock by reason of a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, transfer of assets, reorganization, conversion or what the board deems to be similar circumstances, the number and kind of shares subject to outstanding options and restricted stock awards, and the exercise price of such options shall be appropriately adjusted. Restricted Furthermore, option agreements and restricted stock award agreements contain change of control provisions as described under the caption “ Change in Control Provisions ” below.    30     OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END   DECEMBER 31, 2021   The following table sets forth for each named executive officer, information regarding outstanding equity awards as at December 31, 2021. The option awards and per share amounts for all periods reflect our 1-for-8 reverse stock split, which was effective November 20, 2020.       Option Awards   Stock Awards   Name   Number of securities underlying unexercised options exercisable (#)     Number of securities underlying unexercised options unexercisable (#)     Option exercise price ($)   Option expiration date   Number of shares or units of stock that have not vested (#)     Market value of shares of units of stock that have not vested ($)(1)                                               Michael W. DePasquale     2,605               17.27   8/13/2022     2,750       6,078         31,250               21.20   3/16/2024                       4,167               15.68   3/23/2025                       2,778       1,389 (2)     9.44   3/21/2026                                                             Mira LaCous     1,042               17.27   8/13/2022     2,750       6,078         12,500               21.20   3/16/2024                       1,563               15.68   3/23/2025                       1,042       521 (2)     9.44   3/21/2026                                                             James Sullivan     2,084               17.27   8/13/2022     2,750       6,078         12,500               21.20   3/16/2024                       3,125               15.68   3/23/2025                       2,084       1,041 (2)     9.44   3/21/2026                     (1) Calculated based on the closing market price of the Company’s common stock on December 31, 2021 of $2.21 per share.   (2) The options vest equally in three annual installments commencing March 21, 2020.   Narrative Disclosure to Outstanding Equity Awards at Fiscal Year End Table   The following are the material terms of each agreement, contract, plan or arrangement that provide for payments to one or more of our named executive officers at, following or pursuant to their resignation, retirement or termination, or in connection with a change in control of the Company.   Termination Arrangements   We may terminate our employment agreement with Mr. DePasquale at any time with or without cause. In the event of termination by us without cause, we will continue to pay Mr. DePasquale his then current base salary for the greater of nine months from the date of such termination or the number of months remaining until the end of the term of the agreement.   We may terminate our employment agreement with Mr. Sullivan at any time with or without cause. In the event of termination by us without cause, we will continue to pay Mr. Sullivan his then current base salary, plus earned commissions, for the greater of six months from the date of such termination or the number of months remaining until the end of the term of the agreement.   We may terminate our employment agreement with Ms. LaCous at any time with or without cause. In the event of termination by us without cause, we will continue to pay Ms. LaCous her then current base salary for nine months from the date of such termination.   31     Change in Control Provisions   Our 2015 Equity Incentive Plan (the “Plan”) provides for the acceleration of vesting of unvested options and termination of any restriction or forfeiture provisions applicable to restricted stock awards upon a “Change in Control” of the Company. A Change in Control is defined in the Plans to include (i) a sale or transfer of substantially all of the Company’s assets; (ii) the dissolution or liquidation of the Company; (iii) a merger or consolidation to which the Company is a party and after which the prior stockholders of the Company hold less than 50% of the combined voting power of the surviving corporation’s outstanding securities; (iv) the incumbent directors cease to constitute at least a majority of the Board of Directors; or (v) a change in control of the Company which would otherwise be reportable under Section 13 or 15(d) of the Exchange Act. In the event of a “Change In Control” the Plan provides for the immediate vesting of all options issued thereunder and termination of all forfeiture provisions applicable to restricted stock award issued thereunder. Options issued to executive officers outside of the Plans contain change in control provisions substantially similar to those contained in the Plans.   Our employment agreement with Mr. DePasquale contains a change in control provision that is triggered if Mr. DePasquale is not offered continued employment with us or any successor, or within five years following such Change of Control, we or any successor terminate Mr. DePasquale’s employment without cause. If this occurs, then we will pay Mr. DePasquale his base salary and benefits earned but unpaid through the date of termination, and any prorated bonus earned during the then current bonus year, plus two times his then current base salary.     DIRECTOR COMPENSATION FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021   The following table sets forth for each director, information regarding their compensation for the year ended December 31, 2021:   Name (1)   Stock Awards ($) (2)     Total ($)   Thomas E. Bush, III (3)     4,505       4,505   Thomas Gilley (3)     3,505       3,505   Pieter Knook (4)     6,009       6,009   Robert J Michel (4)     6,009       6,009   Emmanual Alia (5)     5,508       5,508       (1) Mr. DePasquale and Kelvin Wong have been omitted from the above table because they do not receive any additional compensation for serving on our Board of Directors.   (2) The aggregate fair value of the common stock issued was calculated based on the closing price of our common stock on the date of issuance in accordance with FASB ASC 718.   (3) At December 31, 2021, Messrs. Bush and Gilley each held options to purchase 2,325 shares of common stock.   (4) At December 31, 2021, Messrs. Knook and Michel each held options to purchase 2,064 shares of common stock.   (5) At December 31, 2021, Mr. Alia held options to purchase 313 shares of common stock.   Narrative Disclosure to Director Compensation Table   During 2021, we had a policy to pay to each non-employee director $3,000 per board meeting, $1,000 per telephonic board meeting, and $500 per board committee meeting attended. Fees for attendance at regular quarterly board meetings held during the first three quarters of each fiscal year are paid through the issuance of common stock and payments for the last meeting of the year are paid in cash or, at the option of the director, in shares of common stock. All of our directors elected to receive payment in common stock for the last board meeting in 2021. We recently revised our policy regarding non-employee director fees to provide for payment of $3,000 per board meeting and $1,000 per board committee meeting attended payable in the manner described above. All directors will be indemnified by us for actions associated with being a director to the fullest extent permitted under Delaware law. We reimburse each of our non-employee directors for their reasonable expenses incurred in connection with attending meetings of the board of directors and related committees.    ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   The following table sets forth, as of March 29, 2022, information with respect to the securities holdings of all persons that we, pursuant to filings with the SEC and our stock transfer records, have reason to believe may be deemed the beneficial owner of more than 5% of our common stock. The following table also sets forth, as of such date, the beneficial ownership of our common stock by all of our current officers and directors, both individually and as a group.   32     The beneficial owners and amount of securities beneficially owned have been determined in accordance with Rule 13d-3 under the Exchange Act and, in accordance therewith, include all shares of our common stock that may be acquired by such beneficial owners within 60 days of March 29, 2022 upon the exercise or conversion of any options, warrants or other convertible securities. This table has been prepared based on 8,405,209 shares of common stock outstanding on March 28, 2022.   Name and Address of Beneficial Owner (1)   Amount and Nature of Beneficial Ownership     Percentage of Class                     Michael W. DePasquale     103,258 (2)      1.2 % Cecilia Welch     56,626 (3)     *   Mira LaCous     30,272 (4)     *   James Sullivan     79,293 (5)     *   Thomas Gilley     13,283 (6)     *   Robert J. Michel     14,110 (7)     *   Thomas E. Bush, III     13,591 (8)     *   Pieter Knook     13,122 (9)     *   Emmanual Alia     8,793 (10)     *   Wong Kwok Fong (Kelvin)     583,659 (11)     6.9 % All officers and directors as a group ten (10) persons     916,007       10.9 %                   Lind Global Micro Fund, LP     833,125 (12)     9.9 %   * Less than 1%   (1) Unless otherwise indicated, the address of each person listed below is c/o BIO-key International, Inc., 3349 Highway 138, Building A, Suite E, Wall, NJ 07719.   (2) Includes 40,800 shares issuable on exercise of options and 39,125 shares of restricted stock of which 37,750 remain subject to vesting. Does not include 1,389 shares issuable upon exercise of options subject to vesting.   (3) Includes 22,501 of shares issuable upon exercise of options and 34,125 shares of restricted stock of which 32,750 remain subject to vesting. Does not include 1,041 shares issuable upon exercise of options subject to vesting.   (4) Includes 16,147 of shares issuable upon exercise of options and 11,625 shares of restricted stock of which 10,250 remain subject to vesting. Does not include 521 shares issuable upon exercise of options subject to vesting.   (5) Includes 19,793 of shares issuable on exercise of options and 34,125 shares of restricted stock of which 32,750 remain subject to vesting. Does not include 1,041 shares issuable upon exercise of options subject to vesting.   (6) Includes 2,013 of shares issuable on exercise of options and 5,000 shares of restricted stock which  remain subject to vesting. Does not include 312 shares issuable upon exercise of options subject to vesting.   (7) Includes 1,752 of shares issuable on exercise of options and 5,000 shares of restricted stock which  remain subject to vesting. Does not include 312 shares issuable upon exercise of options subject to vesting.   (8) Includes 2,013 of shares issuable on exercise of options and 5,000 shares of restricted stock which remain subject to vesting. Does not include 312 shares issuable upon exercise of options subject to vesting.   (9) Includes 1,752 of shares issuable on exercise of options and 5,000 shares of restricted stock which 5, remain subject to vesting. Does not include 312 shares issuable upon exercise of options subject to vesting.   (10) Includes 105 of shares issuable on exercise of options and 5,000 shares of restricted stock  which  remain subject to vesting. Does not include 208 shares issuable upon exercise of options subject to vesting.   (11) Includes 25,695 of shares issuable on exercise of options and 9,125 shares of restricted stock of which 7,750 remain subject to vesting. Does not include 1,389 shares issuable upon exercise of options subject to vesting.The address of Kelvin is Flat C, 27/F, Block 5, Grand Pacific Views, Siu Lam, Hong Kong N7.   (12) Consists of shares issuable upon exercise of warrants. The address of Lind Global Capital Micro Fund, LP is 444 Madison Ave, Floor 41, New York, NY 10022   33     EQUITY COMPENSATION PLAN INFORMATION   The following table sets forth, as of December 31, 2021, information with respect to securities authorized for issuance under equity compensation plans. The shares and per share amounts reflect BIO-key’s 1-for-8 reverse stock split, which was effective November 20, 2020.   On January 27, 2016, the stockholders approved the 2015 Equity Incentive Plan, which was amended on June 13, 2019 by vote of stockholders, and amended and restated by vote of stockholders on June 18, 2021 (as amended and restated, the “2015 Plan”). The 2015 Plan reserves 789,000 shares of common stock for issuance of options, restricted stock, and other equity based awards to employees, officers, directors, and consultants of the Company. Options are issued at exercise prices which may not be below 100-110% of fair market value and have terms not to exceed ten years. Options issued under the 2015 Plan vest pursuant to the terms of stock option agreements with the recipients. In the event of a change in control, certain stock awards issued under this plan may be subject to additional acceleration of vesting as may be provided in the participants’ written agreement. The 2015 Plan expires in December 2025.   In addition to options issued under the 2015 Plan, we have issued options to purchase common stock to employees, officers, directors and consultants outside of the plan. As of December 31, 2021, there were outstanding non-plan options to purchase 121,653 shares of common stock. The terms of these outstanding options are substantially similar to the provisions of the 2015 Plan and options issued thereunder.  In the event of change in control, as defined, certain of the non-plan options outstanding vest immediately.   On June 18, 2021, the stockholders approved the 2021 Employee Stock Purchase Plan (“ESPP”). Under the terms of this plan, 789,000 shares of common stock are reserved for issuance and sale to employees and officers of the Company at a purchase price equal to 85% of the lower of the closing price of our common stock as reported on the Nasdaq Capital Market on the first day or the last day of the offering period. Eligible employees are granted an option to purchase shares of common stock funded by payroll deductions. The Board may suspend or terminate the plan at any time, otherwise the plan expires June 17, 2031.   Plan Category   Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)     Weighted- average exercise price of outstanding options, warrants and rights (b)     Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)   Equity compensation plans approved by security holders     90,808 (1)(2)       11.01       1,391,260 (3)   Equity compensation plans not approved by security holders     121,653     $ 18.44       —   Total     212,461 (1)(2)     $ 16.65       1,391,260 (3)     (1) Consists of shares of common stock issuable upon the exercise of options outstanding as of December 31, 2021 under the 2015 Plan.   (2) Excludes employee stock purchase rights accruing under the ESPP.   (3) Amount includes 621,744 shares of common stock available as of December 31, 2021 for future issuance under the 2015 Plan and 769,516 shares of common stock available as of December 31, 2021 for future issuance under the ESPP.   34     ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE   Standstill Agreement with Principal Stockholder   Pursuant to separate securities purchase agreements dated October 29, 2015 and November 11, 2015 with each of Wong Kwok Fong (Kelvin), Micron, and Giant Leap we issued and sold shares of series A-1 stock to Kelvin and shares of series B-1 stock to Micron and Giant Leap, which were subsequently converted into shares of our common stock. The forgoing agreements contain a standstill provision (the “Standstill”) which prohibits each of these investors either alone or together with any other person, from acquiring additional shares of our common stock or any of our assets, soliciting proxies, or seeking representation on our board of directors. Kelvin is the Co-Chairman of the board of directors, and an executive officer.   Loans from Wong Kwok Fong (Kelvin)     Between March 2019 and February 2020, we received a series of non-interest-bearing advances from Mr. Wong Kwok Fong (Kelvin) in the aggregate amount of $217,360 to pay current liabilities. The amounts were repaid in their entirety during the 2020 fiscal year. Mr. Wong is the Vice-Chairman of the Board, an executive officer, and a principal stockholder of the Company.   Loans from Michael W. DePasquale   In December 2019, we received two non-interest-bearing advances from Michael DePasquale in the aggregate amount of $114,000 to pay current liabilities. The amounts were repaid in their entirety during the 2020 fiscal year. Mr. DePasquale serves as the Chairman of the Board and Chief Executive Officer of the Company.     Sales Incentive Agreement with Technology Transfer Institute ( “ TTI ” )   On March 25, 2020, we entered into a sales incentive agreement TTI. The agreement provides that for each $5,000,000 in revenue (up to a maximum of $20,000,000), TTI generates for the Company during the first year that generate net income (calculated under U.S. generally accepted accounting principles) of at least 20%, we will pay TTI a sales incentive fee of $500,000 payable by the issuance of 62,500 shares of common stock. In the event that TTI generates revenue for the Company in excess of $20,000,000 during first year, we will issue TTI a five-year warrant to purchase 12,500 shares of Common Stock at an exercise price of $12.00 per share for each $1,000,000 of revenue in excess of $20,000,000 (up to a maximum of $25,000,000). In no event will we be obligated to issue more than 250,000 shares of common stock or warrants to purchase more than 62,500 shares of common stock pursuant to this agreement. Emmanual Alia, a member of our board of directors, served as the Chief Executive Officer of TTI until August 12, 2020.   Director Independence   As required under the NASDAQ Marketplace Rules, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Our board considered certain relationships between our directors and us when determining each director’s status as an “independent director” under Rule 5605(a)(2) of the NASDAQ Marketplace Rules. Based upon such definition and SEC regulations, we have determined that Robert Michel, Pieter Knook, Emmanual Alia, Thomas Bush, III, and Thomas Gilley are “independent” under NASDAQ standards.    35     ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES   The following table shows fees for professional services and quarterly audit fees billed to us by Rotenberg Meril Solomon Bertiger & Guttilla, P.C. (“RMSBG”) for the audit of our annual consolidated financial statements for the years ended December 31, 2021 and 2020:         2021     2020                     Audit Fees   $ 123,900     $ 151,584   Audit-Related Fees     9,795       76,925   Tax Fees     17,000       20,053                     Total Fees   $ 150,695     $ 248,562     Audit Fees  consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by our auditors in connection with statutory and regulatory filings or engagements.   Audit-Related Fees  consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and which are not reported under audit fees. These fees relate primarily to services provided in connection with registration of securities and review of documents filed with the SEC.   Tax Fees  consist of fees billed for professional services for tax compliance assistance rendered during the fiscal year.   Audit Committee Pre-Approval Procedures   The audit committee of our board of directors consists of Robert J. Michel (Chairman), Pieter Knook, and Emmanual Alia. The audit committee approves the engagement of our independent auditors to render audit and non-audit services before they are engaged. All of the fees for 2021 and 2020 shown above were pre-approved by the audit committee.   The audit committee pre-approves all audit and other permitted non-audit services provided by our independent auditors. Pre-approval is generally provided for up to one year, is detailed as to the particular category of services and is subject to a monetary limit. Our independent auditors and senior management periodically report to the audit committee the extent of services provided by the independent auditors in accordance with the pre-approval, and the fees for the services performed to date. The audit committee may also pre-approve particular services on a case-by-case basis.   Our audit committee will not approve engagements of our independent registered public accounting firm to perform non-audit services for us if doing so will cause our independent registered public accounting firm to cease to be independent within the meaning of applicable SEC rules. In addition, our audit committee considers, among other things, whether our independent registered public accounting firm is able to provide the required services in a more or less effective and efficient manner than other available service providers.   PART IV   ITEM 15. – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES   (a)       The following documents are filed as part of this Report. Portions of Item 15 are submitted as separate sections of this Report:     (1)  Financial statements filed as part of this Report:       Report of Independent Registered Public Accounting Firm ( Rotenberg Meril Solomon Bertiger & Guttilla, P.C. , Saddle Brook, NJ , PCAOB ID: 361       Consolidated Balance Sheets as at December 31, 2021 and 2020       Consolidated Statements of Operations—Years ended December 31, 2021 and 2020       36       Consolidated Statements of Stockholders’ Equity (Deficit)—Years ended December 31, 2021 and 2020       Consolidated Statements of Cash Flows—Years ended December 31, 2021 and 2020       Notes to Consolidated Financial Statements—December 31, 2021 and 2020   (b)       The exhibits listed in the Exhibits Index immediately preceding such exhibits are filed as part of this Report   37     ITEM 16. – FORM 10-K SUMMARY   None.   FINANCIAL STATEMENTS   The following financial statements of BIO-key International, Inc. are included herein at the indicated page numbers:   Report of Independent Registered Public Accounting Firm (Rotenberg Meril Solomon Bertiger & Guttilla, P.C., Saddle Brook, NJ, PCAOB ID:361 39 Consolidated Balance Sheets as at December 31, 2021 and 2020 41 Consolidated Statements of Operations—Years ended December 31, 2021 and 2020 42 Consolidated Statements of Stockholders’ Equity (Deficit) —Years ended December 31, 2021 and 2020 43 Consolidated Statements of Cash Flows—Years ended December 31, 2021 and 2020 44   45 Notes to the Consolidated Financial Statements—December 31, 2021 and 2020 46   38     Report of Independent Registered Public Accounting Firm   To the Shareholders and Board of Directors of BIO-key International, Inc. Wall, NJ   Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of BIO-key International, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.   Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.   Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matters   The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) are especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.   Revenue Recognition – Refer to Notes A and B of the consolidated financial statements   Description of the Matter   The Company’s revenues are generated pursuant to written contractual arrangements to provide software licenses and/or hardware and to provide related maintenance and support services or professional services. The Company’s performance obligations are either satisfied at a point in time when the customer obtains control of the hardware or is granted the software license or satisfied over time for maintenance revenue over the contractual period. Software licenses may be sold as perpetual licenses or subscription licenses. Contracts may include multiple performance obligations.   39     Significant judgment is exercised by the Company in determining revenue recognition for these contractual arrangements, and includes the following:      ● Determination of whether products and services are considered distinct performance obligations that should be accounted for separately versus together, such as software licenses and related services that are sold with cloud-based services.   ● The pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation.   ● Identification and treatment of contract terms that may impact the timing and amount of revenue recognized (e.g., variable consideration and/or optional purchases).   ● Determination of stand-alone selling prices for each distinct performance obligation and for products and services that are not sold separately.   How the Critical Audit Matter Was Addressed in the Audit   Our audit procedures included:   ● We obtained an understanding of the Company’s revenue recognition process including the various product and service offerings;   ● We reviewed management’s assessment of the terms and conditions of contracts with customers which included an analysis of the distinct performance obligations and a review of the conclusion as to whether revenue from such performance obligations should be recognized over time or at a point in time;   ● We selected a sample of contracts with customers and performed the following:   o  Obtained and read customer sales orders and/or sales invoices and other documents that are part of the agreement;   o  Tested management’s process for identifying distinct performance obligation(s) in the contract;   o  Tested the allocation between software revenue and maintenance revenue including testing any carve out of maintenance from subscription based software and maintenance sales.   The outcome of the audit procedures resulted in determining the amounts of revenue and the application of ASC 606 is reasonable.     /s/ ROTENBERG MERIL SOLOMON BERTIGER & GUTTILLA, P.C.   ROTENBERG MERIL SOLOMON BERTIGER & GUTTILLA, P.C.   We have served as the Company's auditor since 2010.   Saddle Brook, New Jersey March 31, 2022          40       BIO-key International,   Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS       December 31,       2021     2020   ASSETS                 Cash and cash equivalents   $ 7,754,046     $ 16,993,096   Accounts receivable, net     970,626       548,049   Due from factor     49,500       60,453   Note receivable, net of allowance     82,000       295,000   Inventory     4,940,660       330,947   Prepaid expenses and other     216,041       201,507   Investment – debt security     -       512,821   Total current assets     14,012,873       18,941,873   Resalable software license rights     48,752       58,882   Investment – debt security, net     452,821       -   Equipment and leasehold improvements, net     69,168       81,793   Capitalized contract costs, net     249,012       165,315   Deposits and other assets     8,712       8,712   Note receivable, net of allowance     113,000       -   Operating lease right-of-use assets     254,100       487,325   Intangible assets, net     1,298,077       1,514,146   Goodwill     1,262,526       1,262,526   Total non-current assets     3,756,168       3,578,699   TOTAL ASSETS   $ 17,769,041     $ 22,520,572                     LIABILITIES                 Accounts payable   $ 427,772     $ 244,158   Accrued liabilities     828,997       508,487   Note payable – PistolStar acquisition, net of debt discount     -       232,000   Deferred revenue - current     565,355       657,349   Operating lease liabilities, current portion     177,188       234,309   Total current liabilities     1,999,312       1,876,303   Deferred revenue, net of current portion     67,300       44,987   Operating lease liabilities, net of current portion     86,974       264,163   Total non-current liabilities     154,274       309,150   TOTAL LIABILITIES     2,153,586       2,185,453                     Commitments                                       STOCKHOLDERS ’ EQUITY                 Common stock — authorized, 170,000,000 shares; issued and outstanding; 7,853,759 and 7,814,572 of $ .0001 par value at December 31, 2021 and December 31, 2020, respectively     786       782   Additional paid-in capital     120,190,139       119,844,026   Accumulated deficit     ( 104,575,470 )     ( 99,509,689 ) TOTAL STOCKHOLDERS ’ EQUITY     15,615,455       20,335,119   TOTAL LIABILITIES AND STOCKHOLDERS ’ EQUITY   $ 17,769,041     $ 22,520,572     All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-8 reverse stock split, which was effective November 20, 2020.   The accompanying notes are an integral part of these statements.   41       BIO-key International,   Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS       Years ended December 31,       2021     2020                     Revenues                 Services   $ 1,273,354     $ 1,432,228   License fees     2,555,809       962,038   Hardware     1,285,326       442,516   Total revenues     5,114,489       2,836,782                     Costs and other expenses                 Cost of services     686,175       502,214   Cost of license fees     183,199       49,891   Cost of hardware     803,555       242,721   Total costs and other expenses     1,672,929       794,826   Gross Profit     3,441,560       2,041,956                     Operating expenses                 Selling, general and administrative     6,028,360       5,848,687   Research, development and engineering     2,355,056       1,396,436   Total operating expenses     8,383,416       7,245,123   Operating loss     ( 4,941,856 )     ( 5,203,167 )                   Other income (expense)                 Interest income     4,075       30,649   Foreign currency loss     ( 50,000 )     -   Investment-debt security reserve     ( 60,000 )     -   Government grant – Paycheck Protection Program     -       340,819   Interest expense     ( 18,000 )     ( 4,343,212 ) Loss on extinguishment of debt     -       ( 499,076 ) Total other income (expense)     ( 123,925 )     ( 4,470,820 ) Net loss     ( 5,065,781 )     ( 9,673,987 ) Deemed dividend from trigger of anti-dilution provision feature     -       ( 112,686 ) Net loss available to common stockholders     ( 5,065,781 )     ( 9,786,673 )                   Basic and Diluted Loss per Common Share   $ ( 0.65 )   $ ( 2.08 )                   Weighted Average Shares Outstanding:                 Basic and Diluted     7,791,741       4,700,787     All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-8 reverse stock split, which was effective November 20, 2020.   The accompanying notes are an integral part of these statements.   42       BIO-key International,   Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY (DEFICIT)       Common Stock     Additional Paid-in     Accumulated               Shares     Amount     Capital     Deficit     Total   Balance as of December 31, 2019     1,812,483     $ 182     $ 87,437,661     $ ( 89,723,016 )   $ ( 2,285,173 ) Issuance of common stock for directors’ fees     5,270       -       28,511       -       28,511   Issuance of common stock pursuant to securities purchase agreements     43,939       5       277,828       -       277,833   Issuance of common stock pursuant to public offering     4,264,313       426       22,173,999       -       22,174,425   Issuance of common stock pursuant to warrant exercises     918,538       92       5,602,503       -       5,602,595   Issuance of common stock for conversion of convertible note payable     728,654       73       3,788,927       -       3,789,000   Issuance of restricted common stock to employees     41,375       4       ( 4 )     -       -   Warrants issued with convertible notes     -       -       1,388,339       -       1,388,339   Warrant issued for consulting fees     -       -       107,576       -       107,576   Legal and commitment fees     -       -       ( 2,371,223 )     -       ( 2,371,223 ) Beneficial conversion feature     -       -       641,215       -       641,215   Deemed dividends related to down-round features     -       -       112,686       ( 112,686 )     -   Share-based compensation     -       -       656,008       -       656,008   Net loss     -       -       -       ( 9,673,987 )     ( 9,673,987 ) Balance as of December, 2020     7,814,572     $ 782     $ 119,844,026     $ ( 99,509,689 )   $ 20,335,119   Issuance of common stock for directors’ fees     7,828       1       25,535       -       25,536   Issuance of restricted common stock to employees     13,125       1       ( 1 )     -       -   Forfeiture of restricted stock      (1,250)       -       -       -       -   Legal fees     -       -       ( 5,228 )     -       ( 5,228 ) Issuance of common stock for Employee stock purchase plan     19,484       2       36,628       -       36,630   Share based compensation for employee stock purchase plan     -       -       10,680       -       10,680   Share-based compensation     -       -       278,499       -       278,499   Net loss     -       -       -       ( 5,065,781 )     ( 5,065,781 ) Balance as of December, 2021     7,853,759     $ 786     $ 120,190,139     $ ( 104,575,470 )   $ 15,615,455     All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-8 reverse stock split, which was effective November 20, 2020.   The accompanying notes are an integral part of these statements.   43       BIO-key International,   Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS       Years ended December 31,       2021     2020                     CASH FLOW FROM OPERATING ACTIVITIES:                 Net loss   $ ( 5,065,781 )   $ ( 9,673,987 ) Adjustments to reconcile net loss to cash used for operating activities:                 Depreciation     54,649       85,751   Amortization of intangible assets and write-off     216,069       120,240   Amortization of resalable software license rights     10,130       -   Loss on foreign currency     50,000       -   Reserve for investment security     60,000       -   Allowance for note receivable     100,000       -   Allowance for doubtful account     200,000       -   Amortization of debt discount     18,000       1,425,040   Amortization of capitalized contract costs     110,681       152,714   Amortization of debt issuance costs     -       2,166,650   Loss on extinguishment of debt     -       499,076   Amortization of beneficial conversion feature     -       641,215   Share based and warrant compensation for employees and consultants     289,179       763,584   Stock based fees to directors     25,536       28,511   Amortization of operating lease right-of-use assets     233,225       220,915   Change in assets and liabilities:                 Accounts receivable     ( 672,577 )     ( 237,257 ) Due from factor     10,953       50,488   Capitalized contract costs     ( 194,378 )     ( 86,510 ) Inventory     ( 4,609,713 )     98,172   Resalable software license rights     -       14,920   Prepaid expenses and other     ( 14,534 )     ( 83,625 ) Accounts payable     183,614       ( 600,399 ) Accrued liabilities     320,510       ( 84,415 ) Deferred revenue     ( 69,681 )     ( 246,876 ) Operating lease liabilities     ( 234,310 )     ( 204,315 ) Net cash used for operating activities     ( 8,978,428 )     ( 4,950,108 ) CASH FLOWS FROM INVESTING ACTIVITIES:                 Capital expenditures     ( 42,024 )     ( 35,568 ) Issuance of note receivable     -       ( 295,000 ) Purchase of PistolStar     -       ( 2,000,000 ) Cash acquired from purchase of PistolStar     -       100,747   Proceeds from maturity of debt security     -       512,821   Purchase of debt security     -       ( 512,821 ) Net cash used for investing activities     ( 42,024 )     ( 2,229,821 ) CASH FLOWS FROM FINANCING ACTIVITIES:                 Proceeds from public offering     -       22,174,425   Proceeds from issuance of convertible notes     -       3,958,000   Proceeds from Employee Stock Purchase Plan     36,630       -   Repayment of convertible notes     -       ( 4,509,250 ) Proceeds from the exercise of warrants     -       5,602,595   Costs to issue notes and common stock     -       ( 2,693,021 ) Repayment of note payable - PistolStar     ( 250,000 )     ( 250,000 ) Legal fees     ( 5,228 )     -   Net repayments of loans payable to related parties     -       ( 188,737 ) Net cash (used in) provided by financing activities     ( 218,598 )     24,094,012   NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     ( 9,239,050 )     16,914,083   CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR     16,993,096       79,013   CASH AND CASH EQUIVALENTS, END OF YEAR   $ 7,754,046     $ 16,993,096     The accompanying notes are an integral part of these statements.   44     SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION       Years ended December 31,       2021     2020                     Cash paid for:                 Interest   $ 18,000     $ 109,426   Income taxes   $ -     $ -                     Noncash investing and financing activities:                                   Accounts receivable acquired from PistolStar   $ -     $ 184,792   Prepaid expenses acquired from PistolStar   $ -     $ 9,485   Equipment acquired from PistolStar   $ -     $ 36,467   Intangible assets acquired from PistolStar   $ -     $ 1,480,000   Goodwill related to PistolStar acquisition   $ -     $ 1,262,526   Issuance of note payable for PistolStar acquisition, net of discount   $ -     $ 464,000   Accrued expenses acquired from PistolStar   $ -     $ 20,017   Deferred revenue acquired from PistolStar   $ -     $ 590,000   Right-of-use asset addition under ASC 842   $ -     $ 141,761   Operating lease liabilities under ASC 842   $ -     $ 141,761   Issuance of common stock for conversion of note payable   $ -     $ 3,789,000   Issuance of common stock pursuant to securities purchase agreements   $ -     $ 277,833   Warrants issued with convertible notes   $ -     $ 1,388,339   Beneficial conversion feature   $ -     $ 641,215   Deemed dividends related to down-round features   $ -     $ 112,686     The accompanying notes are an integral part of these statements.   45     BIO-key International,   Inc. and Subsidiaries NOTES TO THE FINANCIAL STATEMENTS December   31, 2021 and 2020           NOTE A — THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   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.   Going Concern and Basis of Presentation   The Company has 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. The Company currently requires approximately $ 735,000 per month to conduct operations, a monthly amount that it has been unable to consistently achieve through revenue generation. During 2021, the Company generated approximately $5,114,000 of revenue, which is below its average monthly requirements. During 2020, the Company raised approximately $24,000,000 from financing activities and at December 31, 2021 had approximately $7,800,000 in cash. With the addition of the Swivel Secure Europe, SA (see Note W), the Company expects $1,000,000 of additional cash flow, based on Swivel Secure’s current recurring revenue and expenses, to provide additional operating income. As of the date of this report, the Company has enough cash and receivables for twelve months of operations.   Effective November 20, 2020, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1 -for- 8 . All share figures and results are reflected on a post-split basis.   Foreign Currency   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, monetary balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date.  For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. Gains or losses arising from changes in the exchange rates used in the translation of such transactions and from the remeasurement of the monetary balance sheet items are recorded as gain (loss) on foreign currency transactions.     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 accounting principles generally accepted in the United States of America (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 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.   46     3.   Revenue Recognition   In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:      ● 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 or more of the Company’s biometric fingerprint solutions or identity access management solutions. Revenue is recognized at a point in time once the software is available to the customer for download. Software license contracts are generally invoiced in full on execution of the arrangement.   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 obligated to buy third party hardware from the Company, and may procure these items from a number of suppliers. Revenue is recognized at a point in time once the hardware is shipped to the customer. Hardware items are generally invoiced in full on execution of the arrangement.   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 one to five years in length and are generally invoiced in advance at the beginning of the term. Support and Maintenance revenue for subscription licenses is carved out of the total license cost at 18 % and recognized on a ratable basis over the license term.   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. For other professional services contracts, the Company utilizes an input method and recognizes revenue based on labor hours expended to date relative to the total labor hours expected to be required to satisfy its performance obligation.   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 days of invoicing.  The Company does not record a reserve for product returns or warranties as amounts are deemed immaterial based on historical experience.   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 years. These costs are included as capitalized contract costs on the balance sheet. The period of benefit was determined by taking into consideration customer contracts, technology, and other factors based on historical evidence. Amortization expense is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.   47     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 December 31, 2021 and 2020, amounts in deferred revenue were approximately $633,000 and $702,000, respectively.   4. Business Combinations   In accordance with ASC 805,   Business Combinations  (ASC 805 ), the Company recognizes the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Determining these fair values requires management to make significant estimates and assumptions, especially with respect to intangible assets.   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 individually identified and separately recognized. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement. Assumptions may be incomplete or inaccurate, and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.   5. Goodwill and acquired intangible assets   Goodwill is not amortized, but is evaluated for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company has determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. For purposes of assessing potential impairment, the Company estimates the fair value of the reporting unit, based on the Company’s market capitalization, and compares this amount to the carrying value of the reporting unit. If the Company determines that the carrying value of the reporting unit exceeds its fair value, an impairment charge would be required. The annual goodwill impairment test will be performed as of  December 31st  of each year. To date, the Company has not identified any impairment to goodwill.   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 months or less. At December 31, 2021 and 2020, cash equivalents consisted of a money market account.   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.   Accounts receivable at December 31, 2021 and 2020 consisted of the following:        December 31,       2021     2020                     Accounts receivable   $ 1,234,411     $ 561,834   Loss on foreign currency     ( 50,000 )     -   Allowance for doubtful accounts     ( 213,785 )     ( 13,785 ) Accounts receivable, net of allowances for doubtful accounts   $ 970,626     $ 548,049     Bad debt expenses (if any) are recorded in selling, general, and administrative expense.    48     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 be recoverable. Recoverability of these assets is measured by comparison of their carrying amount to the future undiscounted cash flows the assets are expected to generate. If such assets are considered impaired, the impairment to be recognized is equal to the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique. In assessing recoverability, the Company must make assumptions regarding estimated future cash flows and discount factors. If these estimates or related assumptions change in the future, the Company may be required to record impairment charges. Intangible assets with determinable lives are amortized over their estimated useful lives, based upon the pattern in which the expected benefits will be realized, or on a straight-line basis, whichever is greater.    10.   Advertising Expense   The Company expenses the costs of advertising as incurred. Advertising expenses for 2021 and 2020 were approximately $ 527,000 and $ 494,000 , respectively.   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 exercise of stock options and warrants, when the effect of their inclusion is dilutive.   49     13.   Accounting for Stock-Based Compensation   The Company accounts for share based compensation in accordance with the provisions of ASC 718 - 10, “Compensation — Stock Compensation,” which requires measurement of compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The majority of its share-based compensation arrangements vest over either a three or four year vesting schedule. The Company expenses its share-based compensation under the ratable method, which treats each vesting tranche as if it were an individual grant. The fair value of stock options is determined using the Black-Scholes valuation model and requires the input of highly subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (the “expected option term”), the estimated volatility of its common stock price over the option’s expected term, the risk-free interest rate over the option’s expected term, and the Company’s expected annual dividend yield. Changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amount recognized as an expense in the consolidated statements of operations. As required under the accounting rules, the Company reviews its valuation assumptions at each grant date and, as a result, the Company is likely to change its valuation assumptions used to value employee stock-based awards granted in future periods. The values derived from using the Black-Scholes model are recognized as expense over the service period, net of estimated forfeitures (the number of individuals that will ultimately not complete their vesting requirements). The estimation of stock awards that will ultimately vest requires significant judgment. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Actual results, and future changes in estimates, may differ substantially from current estimates. Options and warrants to outsiders are accounted for under ASC 718.   The following table presents share-based compensation expenses included in the Company’s consolidated statements of operations:       Year ended December 31,       2021     2020                     Selling, general and administrative   $ 269,368     $ 705,971   Research, development and engineering     45,347       86,124       $ 314,715     $ 792,095     Valuation Assumptions for Stock Options   In  2020, 28,440 stock options were granted. No options were granted in 2021. The fair value of each option was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:       Year ended December 31,       2021     2020   Weighted average Risk free interest rate     -       0.30 % Expected life of options (in years)     -       4.50   Expected dividends     -       0 % Weighted average Volatility of stock price     -       115 %   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 issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company early-adopted the new provisions issued July 2017, for derivative liability instruments under FASB ASU 2017 - 11, Earnings Per Share (Topic 260 ), Distinguishing Liabilities from Equity (Topic 480 ) and Derivatives and Hedging (Topic 815 ): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception. Under ASU 2017 - 11, down round features do not meet the criteria for derivative accounting and no liability is to be recorded until an actual issuance of securities triggers the down-round feature. Prior to these provisions, the liabilities were recorded without the actual issuance of the securities triggering the down-round feature.   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 that the tax benefit of the deferred tax asset will not be realized. The evaluation, as prescribed by ASC 740 - 10, “Income Taxes,” includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. Because of the Company’s historical performance and estimated future taxable income, a full valuation allowance has been established.   50     The Company accounts for uncertain tax provisions in accordance with ASC 740 - 10 - 05, “Accounting for Uncertainty in Income Taxes.” The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.   16 . Leases   In accordance with ASC 842,   Lease s (ASC 842 ), the Company records a right-of-use (ROU) asset and a lease liability on the balance sheet for all leases with terms longer than 12 months and classifies them as either operating or finance leases.    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 year are recognized on the balance sheet as ROU assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less under practical expedient in paragraph ASC 842 - 20 - 25 - 2. For contracts with lease and non-lease components, the Company has elected not to allocate the contract consideration, and to account for the lease and non-lease components as a single lease component.   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 determinable and, therefore, the Company uses the incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company determines the incremental borrowing rate for each lease using our estimated borrowing rate, adjusted for various factors including level of collateralization, term and currency to align with the terms of the lease. The operating lease ROU asset also includes any lease prepayments, offset by lease incentives.   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 exercise the option.   17.   Recent Accounting Pronouncements   In June 2016, the FASB issued 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. ASU 2016 - 13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2022 for smaller reporting companies. Early adoption is permitted. The Company is currently assessing the impact ASU 2016 - 13 will have on its consolidated financial statements.   Effective January 1, 2021, the Company adopted ASU 2019 - 12, Simplifying the Accounting for Income Taxes (“ASU 2019 - 12” ) to reduce the cost and complexity in accounting for income taxes. ASU 2019 - 12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019 - 12 also amends other aspects of the guidance to help simplify and promote consistent application of U.S. GAAP. Most amendments within ASU 2019 - 12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of ASU 2019 - 12 did not have a significant impact on the Company’s 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.   51         NOTE B — REVENUE FROM CONTRACTS WITH CUSTOMERS   Disaggregation of Revenue   The following table summarizes revenue from contracts with customers for the years ended December 31, 2021 and 2020:       North America     Africa     EMESA*     Asia     December 31, 2021                                             License fees   $ 1,854,088     $ 521,751     $ 105,314     $ 74,656     $ 2,555,809   Hardware     278,655       698,264       265,996       42,411       1,285,326   Services     1,162,526       42,000       54,918       13,910       1,273,354   Total Revenues   $ 3,295,269     $ 1,262,015     $ 426,228     $ 130,977     $ 5,114,489         North America     Africa     EMESA*     Asia     December 31, 2020                                             License fees   $ 842,307     $ -     $ 46,922     $ 72,809     $ 962,038   Hardware     267,996       -       144,647       29,873       442,516   Services     1,296,696       44,228       68,196       23,108       1,432,228   Total Revenues   $ 2,406,999     $ 44,228     $ 259,765     $ 125,790     $ 2,836,782     * EMESA – Europe, Middle East, South America   Revenue recognized during the year ended December 31, 2021  from amounts included in deferred revenue at the beginning of the year was approximately $ 529,000 . Revenue recognized during the year ended December 31, 2020 from amounts included in deferred revenue at the beginning of the year was approximately $ 290,000 . The Company did not recognize any revenue from performance obligations satisfied in prior periods. Total deferred revenue (contract liability) was $ 632,655 and $ 702,336 at December 31, 2021 and 2020, respectively.   Transaction Price Allocated to the Remaining Performance Obligations   ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as at December 31, 2021. The guidance provides certain practical expedients that limit this requirement, which the Company’s contracts meet as follows:     ● The performance obligation is part of a contract that has an original expected duration of one year or less, in accordance with ASC 606 - 10 - 50 - 14.   Deferred revenue represents the Company’s remaining performance obligations related to prepaid support and maintenance, all of which is expected to be recognized from one to five years.     NOTE C — PISTOLSTAR, INC. ACQUISITION   On  June 30, 2020, the Company acquired PistolStar, Inc., a private company based in the United States, which provides enterprise-ready identity access management solutions, including multi-factor authentication, identity-as-a-service, single sign-on and self-service password reset to commercial, government and education customers throughout the United States and internationally.   From April 10, 2020 until the Company acquired PistolStar, it licensed PortalGuard®, PistolStar’s authentication software, which the Company combines with its biometric authentication solutions offered to existing and prospective customers.   The total purchase price of $ 2.5 million included cash payment of $ 2.0 million and the issuance of a $500,000 promissory note.   The acquisition of PistolStar was accounted for as a business combination and, in accordance with ASC 805,  the Company recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The following table summarizes the final purchase price allocation:   Purchase consideration:         Total cash paid, net of acquired cash   $ 2,000,000   Present value of 4 % Promissory note     464,000   Total purchase price consideration   $ 2,464,000             Fair value of assets acquired and liabilities assumed:         Cash and cash equivalents   $ 100,747   Accounts receivable     184,792   Prepaid expenses and other current assets     9,485   Fixed assets     36,467   Intangible assets     1,480,000   Goodwill     1,262,526   Total assets acquired     3,074,017             Accrued expenses and other current liabilities     738   Accrued payroll     19,279   Deferred revenue     590,000   Total fair value of assets acquired and liabilities assumed   $ 2,464,000     The promissory note accrued interest at 4 % per annum and was payable in four installments over the 12 -month period following the closing. The balance of the note at December 31, 2020 was $ 232,000 , net of the unamortized debt discount. On January 21, 2021, the Company paid the $ 250,000 balance due on the note.   The fair value of the assets acquired and liabilities assumed was less than the purchase price, resulting in the recognition of goodwill. The goodwill reflected the value of the synergies the Company expected to realize and the assembled workforce.   The significant intangible assets identified in the purchase price allocation discussed above include the trade name, proprietary software, and customer relationships. To value the trade name and proprietary software, the Company utilized the Relief from Royalty Method, which quantifies the cost savings associated with asset ownership via a discounted cash flow analysis. To value the customer relationships, the Company utilized the Excess Earnings Method, which isolates the value of the specific intangible asset by discounting its income stream to present value.    The fair value of the assets acquired and liabilities assumed reflected in the tables above is less than the purchase price, resulting in the recognition of goodwill. The goodwill reflects the value of the synergies the Company expects to realize and the assembled workforce.   The following table presents the final fair values and useful lives of the identifiable intangible assets acquired:       Amount     Estimated useful life (in years)   Trade Name   $ 130,000       15     Proprietary Software     420,000       5     Customer relationships     930,000     8 - 10   Total identifiable intangible assets   $ 1,480,000               52         NOTE D — FACTORING   Due from factor consisted of the following as of December 31:       Original Invoice Value     Factored Amount     Factored Balance due   Year Ended December 31, 2021                         Factored accounts receivable   $ 99,000     $ 49,500     $ 49,500   Year Ended December 31, 2020                         Factored accounts receivable   $ 241,715     $ 181,262     $ 60,453     The Company entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to  October 31,  2022.  Pursuant to the terms of the arrangement, the Company, from time to time, sells to the Factor a minimum of $ 150,000  per quarter of certain of its 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 the Company (the “Advance Amount”), with the remaining balance, less fees, forwarded to the Company once the Factor collects the full accounts receivable balance from the customer. In addition, the Company, from time to time, receives 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. The cost of factoring is included in selling, general and administrative expenses. The cost of factoring was as follows:         Years Ended December 31,       2021     2020                     Factoring fees   $ 50,132     $ 98,748         NOTE E — 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 notes and loan payables approximated fair value as the interest rates related to the financial instruments approximated market.       NOTE F — CONCENTRATION OF RISK   Financial instruments which potentially subject the Company to risk primarily consist of cash, and cash equivalents, investment in debt security, and accounts receivables.   The Company maintains its cash and cash equivalents with various financial institutions, which, at times may exceed insured limits. The exposure to the Company is solely dependent upon daily bank balances and the respective strength of the financial institutions. The Company was in excess of coverage of approximately $ 7,057,000 and $ 16,020,000 at December 31, 2021 and 2020, respectively. The Company has not incurred any losses on these accounts.   The Company extends credit to customers on an unsecured basis in the normal course of business. The Company’s policy is to perform an analysis of the recoverability of its receivables at the end of each reporting period and to establish allowances where appropriate. The Company analyzes historical bad debts and contract losses, customer concentrations, and customer credit-worthiness when evaluating the adequacy of the allowances.   For the year ended December 31, 2021 and 2020,   one  customer accounted for  13 % and 18 % of total revenue, respectively.   Three customers accounted for 87 % and one customer accounted for 31 % of total accounts receivable, as of December 31, 2021 and 2020, respectively.       NOTE G — NOTE RECEIVABLE   During the third quarter 2020, the Company loaned $ 295,000 as an advance to Technology Transfer Institute (“TTI”) to aid in fulfilling the African contracts. The note does not bear any interest if paid within the nine ( 9 ) monthly installments beginning December 31, 2020. The note bears a default rate of 5 %. Due to the ongoing delays in payment, the Company reserved $ 100,000 of the note as an allowance. On February 17, 2022, the Company amended the note to modify the payment terms to provide for lower monthly payments, with an updated maturity date on, or before December 6, 2023. A member of our board of directors served as Chief Executive Officer off TTI until August 12, 2020.       December 31,     December 31,       2021     2020                     Note receivable   $ 295,000     $ 295,000   Allowance for doubtful account     ( 100,000 )     -   Note receivable, net of allowance     195,000       295,000   Current portion, net of allowance   $ 82,000     $ 295,000   Noncurrent portion, net of allowance   $ 113,000     $ -     53         NOTE H — INVENTORY   Inventory is stated at the lower of cost, determined on a first in, first out basis, or realizable value, and consists primarily of fabricated assemblies and finished goods. Inventory is comprised of the following as of December 31:        2021     2020                     Finished goods   $ 4,798,203     $ 221,130   Fabricated assemblies     142,457       109,817   Total inventory   $ 4,940,660     $ 330,947         NOTE I — RESALABLE SOFTWARE LICENSES   RIGHTS   On December 31, 2015, the Company purchased third -party software licenses in the amount of $ 180,000  in anticipation of a large pending deployment that has yet to materialize. The Company is amortizing the total cost at the greater of the actual unit cost per license sold or straight line amortization over 10 years. A total of $ 10,130 and $ 14,920 was charged to cost of sales during the years ended December 31, 2021 and 2020, respectively. Since the license purchase, the actual per unit cost (actual usage) of such license rights in the cumulative amount of $ 131,248 has been charged to cost of sales, with a carrying balance of $ 48,752 and $ 58,882 as of December 31, 2021 and 2020, respectively.   The Company has classified the balance as non-current until a larger deployment occurs.   Estimated minimum amortization expense based on straight line amortization of the software license rights over the remaining useful life approximates the following:   Years ending December 31         2022   $ 18,000   2023     18,000   2024     12,752   Total   $ 48,752       NOTE J — INVESTMENT IN DEBT SECURITY   During 2019, the Company purchased a 4,000,000 Hong Kong dollar denominated Bond Certificate with a financial institution in Hong Kong. The Bond Certificate translated to $ 512,821 U.S. Dollars on the June 2019 purchase date. The bond had a one -year term which matured in June 2020, bearing interest at 5 % per annum. The Company redeemed the bond and recorded interest income of approximately $ 25,800 .   The Company then purchased a new 4,000,000 Hong Kong dollar denominated Bond Certificate with a financial institution in Hong Kong in June 2020. The new Bond Certificate translated to $ 512,821 U.S. Dollars, based on the exchange rate at the purchase date. The Company can invest up to 20,000,000 Hong Kong dollars under the terms of the certificate, bearing interest at 5 % per annum. The investment is recorded at amortized cost which approximates fair value was held to maturity. The Company has yet to receive the proceeds and accrued interest from the investment. The Company has sent a legal letter of demand to confirm the status of the bond, and as such, the debt security was classified as noncurrent. In addition, due to the delay in the receipt of the proceeds, the Company recorded a $ 60,000 reserve.       NOTE K — EQUIPMENT AND LEASEHOLD IMPROVEMENTS   Equipment and leasehold improvements consisted of the following as of December  31:       2021     2020                     Equipment   $ 831,784     $ 789,760   Furniture and fixtures     164,079       164,079   Software     32,045       32,045   Leasehold improvements     25,135       25,135         1,053,043       1,011,019                                       Less accumulated depreciation and amortization     ( 983,875 )     ( 929,226 )                   Total   $ 69,168     $ 81,793     54     Depreciation was $ 54,649 and $ 85,751 for 2021 and 2020, respectively. Amounts are recorded in selling, general, and administrative expense as well as in cost of services.       NOTE L — INTANGIBLE ASSETS   Intangible assets consisted of the following as of December  31:       2021             12/31/21     2020             12/31/20       Gross Carrying Amount     Accumulated Amortization     Net Carrying Amount     Gross Carrying Amount     Accumulated Amortization     Net Carrying Amount                                                     Trade name   $ 130,000     $ ( 12,960 )   $ 117,040     $ 130,000     $ ( 4,333 )   $ 125,667   Proprietary software     420,000       ( 126,000 )     294,000       420,000       ( 42,000 )     378,000   Customer relationships     930,000       ( 155,000 )     775,000       930,000       ( 51,667 )     878,333   Patents and patents pending     365,080       ( 253,043 )     112,037       365,080       ( 232,934 )     132,146   Total   $ 1,845,080     $ ( 547,003 )   $ 1,298,077     $ 1,845,080     $ ( 330,934 )   $ 1,514,146       Aggregate amortization expense for 2021 and  2020 was approximately $ 216,000 and $ 120,000 , respectively. Estimated minimum amortization expense based on straight line amortization of the software license rights for each of the next five years and thereafter approximates the following:   Years ending December 31         2022   $ 215,000   2023     213,000   2024     209,000   2025     165,000   2026     121,000   Thereafter     375,077   Total   $ 1,298,077       NOTE M — ACCRUED LIABILITIES   Accrued liabilities consisted of the following as of December  31:       2021     2020                     Compensation   $ 254,433     $ 87,015   Compensated absences     293,297       227,147   Accrued legal and accounting fees     95,738       83,738   Franchise taxes     40,000       -   Employee expenses reimbursement     76,000       67,000   Sales tax payable     18,548       17,544   Factoring fees     495       5,495   Other     50,486       20,548                     Total   $ 828,997     $ 508,487       NOTE N — RELATED PARTY TRANSACTIONS   Non-Interest-Bearing Advances   During the 2019 fiscal year, the Company received a series of non-interest-bearing advances from Mr. Wong Kwok Fong, and Mr. Michael DePasquale, to pay current liabilities. The balance of the advances as at December 31, 2019 was $ 74,737 and $ 114,000 , respectively, which were both repaid in full during 2020.     NOTE O — CONVERTIBLE NOTES PAYABLE   There was no balance outstanding for convertible notes payable as of December 31, 2021 and 2020. Details for Notes that were either converted or redeemed during the 2020 fiscal year were as follows:    55     Securities Purchase Agreement dated July 10, 2019   On July 10, 2019, the Company issued a $ 3,060,000 principal amount senior secured convertible note (the “Original Note”). At closing, a total of $ 2,550,000 was funded. The original issue discount was $ 510,000 . The principal amount due of the Original Note was due and payable as follows: $ 918,000 was due 180 days after funding, $ 1,071,000 was due 270 days after funding, and the remaining balance due 12 months after the date of funding.   The Original Note was secured by a lien on substantially all of the Company’s assets and properties and was convertible at the option of the Investor in shares of common stock at a fixed conversion price of $ 12.00 per share.   In connection with the closing of the Original Note, the Company issued a five -year warrant to the Investor to purchase 250,000 shares of common stock at a fixed exercise price of $ 12.00 per share, paid a $ 50,000 commitment fee, and issued 33,334 shares of common stock in payment of a $ 400,000 due diligence fee. The Company also paid banker fees of $ 193,500 and legal fees of $ 71,330 . The valuation of the warrant of $ 595,662 was recorded to debt discount and was amortized over the life of the Original Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount are included in interest expense on the statement of operations.   On March 12, 2020, the Company issued a $ 3,789,000 principal amount senior secured convertible note (the “Amended Note”), which replaced the Original Note and included an additional $ 729,000 in interest due to the debt restructuring. The principal amount was due and payable in full on April 13, 2020. The Amended Note was secured by a lien on substantially all of the Company’s assets and properties and was convertible at the option of the Investor into shares of common stock at a fixed conversion price of $ 5.20 per share. The Company accounted for the transaction as a debt extinguishment and, therefore, the balance of the fees and unamortized discount associated with the Original Note were written off and included as loss on extinguishment of debt. On the day of the amendment, the closing stock price for the day was $ 6.08 , which resulted in a beneficial conversion of $ 0.88 per share outstanding or $ 641,215 to be amortized to interest expense over the term of the Amended Note, as adjusted for any debt conversion.   On April 12, 2020 and May 6, 2020, the Company entered into amendments (the “Amendments”) to the Amended Note. The Amendments extended the maturity date to June 12, 2020 and extended the Investor’s right to convert the Amended Note into shares of the Company’s common stock at a price of $ 5.20 per share through June 12, 2020. All other provisions of the Amended Note remained the same.   On June 10, 2020, the investor converted the last of the remaining principal into shares of common stock for payment in full, and the remaining principal balance was $ 0 . The Amended Note amount of $ 3,789,000 was converted into 728,654 shares of common stock in 2020.   January 2020 Note   On January 13, 2020, the Company issued a $ 157,000 principal amount secured 10 % convertible redeemable note (the “January 2020 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. At the closing, the Company agreed to issue 81,250 shares of common stock in lieu of payment of a $ 75,000 commitment fee which was reduced to 6,250 shares as the January 2020 Note was repaid prior to the maturity date.   On June 12, 2020, the January 2020 Note was paid in full by payment of $ 211,984 .   February 2020 Note   On February 13, 2020, the Company issued a $ 126,000 principal amount secured 10 % convertible redeemable note (the “February 2020 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.  On March 12, 2020, the Original Note was amended to reduce the conversion price to $ 5.20 per share, which reduced the conversion price of the February Note to $5.20 and resulted in a deemed dividend of $ 70,998 . The February 2020 Note was redeemable at any time by payment of a premium to the principal balance starting at 10 % and increasing to 30 %.   The Company issued 6,250 shares of common stock to the investor in lieu of payment of a $ 57,500 commitment fee. The Company paid $ 6,000 of legal fees in connection with the issuance of February 2020 Note.  The February 2020 Note was paid in full on July 10, 2020 by payment of $ 170,442 .   56     May 2020 Note   On May 6, 2020, the Company issued a $ 2,415,000 principal amount senior secured convertible note (the “May 2020 Note”). At closing, $ 2,100,000 was funded. 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 on the twelfth month after the date of funding. The May 2020 Note was convertible at a fixed convertible price of $ 9.28 per share. In connection with the issuance of the May 2020 Note, the Company paid a $ 133,333 due diligence fee by issuing 14,368 shares of common stock to the Investor priced at $ 9.28 per share. The Company also paid a placement fee of 7 % of the gross proceeds to a placement agent. In connection with the closing of the May 2020 Note, the Company issued a five -year warrant to the investor to purchase  237,500 shares of common stock at a fixed exercise price of $ 9.28 and was immediately exercisable. The valuation of the warrant of $ 876,937 was recorded to debt discount and was amortized over the life of the May 2020 Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in-capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount were included in the interest expense on the statement of operations.   Following the completion of the underwritten offering in July 2020, the principal balance of $ 2,415,000 was paid in full during the third quarter of 2020.   As a result of the repayment, the Company expensed the remaining debt discounts and issuance costs of $ 1,218,163  in July 2020.   June 2020 Note   On June 29, 2020, the Company issued a $ 1,811,250 principal amount senior secured convertible note (the “June 2020 Note”).  At closing, $ 1,575,000 was funded. The principal amount was due and payable in nine equal monthly installments of $ 201,250 beginning four months after the funding date with the remaining balance due on the twelfth month after the date of funding. The June 2020 Note was convertible at a fixed convertible price of $ 9.28 per share. In connection with the issuance of the June 2020 Note, the Company paid a $ 100,000 due diligence fee by issuing 17,071 shares to the Investor priced at $ 5.86 per share. The Company also paid a placement fee of 7 % of the gross proceeds to a placement agent.   In connection with the closing of the June 2020 Note, the Company issued a five -year warrant to the Investor to purchase 178,125 shares of common stock at a fixed exercise price of $ 9.28 per share and was immediately exercisable. The valuation of the warrant of $ 511,402 was recorded to debt discount and is was amortized over the life of the June 2020 Note. The fees associated with the agreement were allocated to debt issuance costs and additional paid-in capital based on the respective ratio of the valuation of the note and warrant. Amortization of the debt issuance costs and debt discount are included in interest expense on the statement of operations.   Following the completion of the underwritten offering in July 2020, the principal balance of $ 1,811,250 was paid in full during the third quarter of 2020. As a result of the repayment, the Company expensed the remaining debt discounts and issuance costs of $ 957,919 in July 2020.     NOTE P — LEASES   The Company’s leases office space in New Jersey under a lease terminating in 2023 and Hong Kong, Minnesota, and New Hampshire with lease termination dates in 2022. The property leased in China is paid monthly as used, without a formal agreement. The leases include non-lease components with variable payments. The following tables present the components of lease expense and supplemental balance sheet information related to the operating leases were:       Year ended December 31, 2021     Year ended December 31, 2020   Lease cost                 Operating lease cost   $ 255,892     $ 239,192   Short-term lease cost     -       -   Total lease cost   $ 255,892     $ 239,192                     Balance sheet information           Operating right-of-use assets   $ 254,100     $ 487,325                     Operating lease liabilities, current portion   $ 177,188     $ 234,309   Operating lease liabilities, non-current portion     86,974       264,163   Total operating lease liabilities   $ 264,162     $ 498,472                     Weighted average remaining lease term (in years) – operating leases     1.45       2.26   Weighted average discount rate – operating leases     5.50 %     5.50 %                   Supplemental cash flow information related to leases were as follows:                                   Cash paid for amounts included in the measurement of operating lease liabilities   $ 256,977     $ 235,186                     Maturities of operating lease liabilities were as follows as of December 31, 2021:                                   2022   $ 187,594           2023     89,225           Total future lease payments   $ 276,819           Less: imputed interest     ( 12,657 )         Total   $ 264,162             57         NOTE Q — COMMITMENTS AND CONTINGENCIES   Sales Incentive Agreement with TTI   On March 25, 2020, the Company entered into a sales incentive agreement Technology Transfer Institute (“TTI”). Terms of the agreement include the following:     1. The original term of the agreement was one year and has been automatically extended for an additional one -year term.     2. For each $ 5,000,000 in revenue (up to a maximum of $ 20,000,000 ) the Company generates from contracts sourced by TTI which are executed during the original term and generate net income of at least 20 % (as defined) within eighteen months after the date such contract is executed, the Company will pay TTI a sales incentive fee of $ 500,000 payable by the issuance of 62,500 shares of common stock.     3. In the event that the Company generates revenue in excess of $20,000,000 from contracts sourced by TTI which are executed during the original term and generate net income of at least 20% (as defined) within eighteen months after the date such contract is executed, the Company will issue TTI a five -year warrant to purchase 12,500 shares of Common Stock at an exercise price of $ 12.00 per share for each $1,000,000 of revenue in excess of $20,000,000 (up to a maximum of $ 25,000,000 ).   In no event will the Company be obligated to issue more than 250,000 shares of common stock or warrants to purchase more than 62,500 shares of common stock pursuant to this agreement.    There has been no revenue generated nor sales incentive fees paid during the periods ended December 31, 2021 and 2020.   Litigation   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 December 31, 2021, the Company was not a party to any pending lawsuits.       NOTE R — EQUITY   1. Preferred Stock   Within the limits and restrictions provided in the Company’s Certificate of Incorporation, the Board of Directors has the authority, without further action by the shareholders, to issue up to 5,000,000 shares of preferred stock, $. 0001 par value per share, in one or more series, and to fix, as to any such series, any dividend rate, redemption price, preference on liquidation or dissolution, sinking fund terms, conversion rights, voting rights, and any other preference or special rights and qualifications.   2. Common Stock   Effective November 20, 2020, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1 -for- 8 . The number of authorized shares and the par value of the Company's common stock and preferred stock were not affected by the reverse stock split. Stockholders who otherwise would be entitled to receive fractional shares were rounded up to the nearest whole share. The reverse stock split became effective at the opening of trading on November 20, 2020.   Holders of common stock have equal rights to receive dividends when, as and if declared by the Board of Directors, out of funds legally available therefor. Holders of common stock have one vote for each share held of record and do not have cumulative voting rights.   Holders of common stock are entitled, upon liquidation of the Company, to share ratably in the net assets available for distribution, subject to the rights, if any, of holders of any preferred stock then outstanding. Shares of common stock are not redeemable and have no preemptive or similar rights. All outstanding shares of common stock are fully paid and nonassessable.   58     Issuances of Common Stock   On June 18, 2021, the stockholders approved the Employee Stock Purchase Plan. Under the terms of this plan, 789,000 shares of common stock are reserved for issuance to employees and officers of the Company at 85 % of the lower of the closing price of the common stock as reported on the Nasdaq Capital Market at the first day or the last day of the offering period. Eligible employees are granted an option to purchase shares under the plan funded by payroll deductions. The Board may suspend or terminate the plan at any time, otherwise the plan expires June 17, 2031. On December 31, 2021, 19,484 shares were issued to employees which resulted in a $ 10,680 non-cash compensation expense for the Company.   On July 23, 2020, the Company completed an underwritten public offering of shares of common stock and warrants resulting in net proceeds of approximately $ 22.7 million, after deducting underwriting discounts and commissions and estimated offering expenses. 4,264,313 shares of common stock were issued as a result of this offering, and a further 797,038 shares of common stock were issued upon the exercise of 512,500 prefunded warrants and 284,538 warrants exercised in conjunction with the offering.   On March 30, 2020, the Company issued 121,500 shares of common stock upon exercise of warrants at $ 12.00 per share, resulting in proceeds of $ 1,458,000 to the Company.   See Note O Convertible Notes Payable for common stock issuances related to conversion of convertible notes payable and shares of common stock issued for fees in connection with the agreements during fiscal 2020.     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. Restricted stock is expensed ratably over the term of the restriction period.   The Company issued 13,125 shares of restricted common stock to certain employees of the Company and 1,250 of shares of restricted common stock were forfeited during fiscal year 2021. 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 $ 44,025 .   The Company issued 38,250 and 3,125 shares of restricted common stock in August and November of 2020, respectively to certain employees and directors of the Company. 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 $ 198,900 , and $ 11,250 , respectively.   Restricted stock compensation for the years ended December 31, 2021 and 2020 was $ 71,819 and $ 23,764 , respectively.   Issuances to Directors, Executive Officers & Consultants   During the year ended December 31, 2021, the Company issued 7,828 shares of common stock to its directors in lieu of payment of board fees, valued at $ 25,536 .   During the year ended December 31, 2020, the Company issued 5,270 shares of common stock to its directors in lieu of payment of board fees, valued at $ 28,511 .   Employees ’ exercise options   During 2021 and 2020, no employee stock options were exercised.   3. Warrants   There were no warrants issued during fiscal 2021.   Warrants Issued for Services:   During the second quarter of 2020, the Company issued a warrant to purchase 15,625 shares of common stock to an investor in payment for a business referral valued at $ 94,655 .   During the third quarter of 2020, the Company issued a warrant to purchase 3,125 shares of common stock to a former employee for a business referral valued at $ 12,921 .   Warrants Issued with Convertible Notes:   See Note O Convertible Notes Payable for warrants issued with convertible notes in connection with the agreements during fiscal 2020.   59     Valuation Assumptions for Warrants:   The Company records the warrants at their fair value which is determined using the Black-Scholes valuation model on the date of the grant. The fair value of each warrant was estimated with the following assumptions:       Year ended December 31,       2021     2020   Weighted average Risk free interest rate     - %     0.33 % Weighted average price   $ -     $ 9.25   Weighted average exercise period     -       5   Weighted average Volatility of stock price     - %     110 %   The warrant volatility for each issuance 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 exercise period. 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 years to maturity.   A summary of warrant activity is as follows:       Total Warrants     Weighted average exercise price     Weighted average remaining life (in years)     Aggregate intrinsic value                                     Outstanding, as of December 31, 2019     423,559       12.80       3.94       —   Granted – public offering     4,264,313       5.20                   Granted – prefunded warrants from the public offering     512,500       0.08                   Granted – other     434,375       9.25                   Increase due to trigger of anti-dilution provision feature     27,244       5.20                   Exercised – public offering     ( 284,538 )     5.20                   Exercised – prefunded warranted from the public offering     ( 512,500 )     0.08                   Exercised – other     ( 121,500 )     12.00                   Forfeited     —       —                   Expired     ( 54,066 )     6.86                   Outstanding, as of December 31, 2020     4,689,387       6.04       4.48       —   Granted     —       —                   Exercised     —       —                   Forfeited     —       —                   Expired     —       —                   Outstanding, as of December 31, 2021     4,689,387       6.04       3.48       —     The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $ 2.21 , $ 3.52 and $ 4.00 as of December 31, 2021, 2020 and 2019, respectively, which would have been received by the warrant holders had all warrant holders exercised their options as of that date. There were no in-the-money warrants exercisable as of December 31, 2021, 2020 and 2019.   4.   Securities Purchase Agreement dated September 23, 2015   On September 23, 2015, the Company issued warrants (the “2015 Warrants”) to purchase 8,681 shares of common stock in connection with the issuance of a promissory note. The warrants were immediately exercisable at an initial exercise price of $ 28.80 per share and had a term of five years.  The 2015 Warrants expired in September 2020.   The 2015 Warrants had a “full ratchet” anti-dilution adjustment provision.  The anti-dilution adjustment provision was triggered in the first quarter of 2020 from the February 2020 Note and amendments to the Original Note. As a result of the forgoing transactions, the number of shares of common stock issuable upon the full exercise of the 2015 Warrants increased to 48,078 , the exercise price was reduced to $ 5.20 per share, and the Company recorded a non-cash deemed dividend in amount of $ 41,688 .    60       NOTE S — STOCK OPTIONS   2004 Stock Option Plan   On October  12, 2004, the Board of Directors of the Company approved the 2004 Stock Option Plan (the “2004 Plan”). The 2004 Plan was not presented to stockholders for approval and thus incentive stock options were not available under this plan. Under the terms of this plan, 20,834 shares of common stock were reserved for issuance to employees, officers, directors, and consultants of the Company at exercise prices which may not be below 85 % of fair market value. The term of stock options granted may not exceed ten years. Options issued under the 2004 Plan vest pursuant to the terms of stock option agreements with the recipients. In the event of a change in control, as defined, all options outstanding vest immediately. The 2004 Plan expired in October  2014.   2015 Stock Option Plan   On January 27, 2016, the stockholders approved the 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan initially reserved 187,500 shares of common stock for issuance of options, restricted stock, and other equity based awards to employees, officers, directors, and consultants of the Company. In 2019, the stockholders approved an amendment to the 2015 Plan which increases the number of shares of common stock authorized for issuance under the 2015 Plan from 83,334 shares to 187,500 shares and also effected certain changes in light of the Tax Cuts and Jobs Act of 2017 and its impact on Section 162 (m) of the United States Internal Revenue Code of 1986, as amended. In 2021, the stockholders approved an amendment to the 2015 to increase the shares of common stock authorized for issuance under the 2015 Plan from 187,500 shares to 789,000 shares together with other technical changes. In 2021, the stockholders approved an amendment to the 2015 to increase the shares of common stock authorized for issuance under the 2015 Plan from 187,500 shares to 789,000 shares together with other technical changes.  The term of stock options granted under the 2015 Plan, may not exceed ten years, exercise prices may not be below 100 - 110 % of fair market value, and vesting occurs over time periods set forth in written agreements with the recipients. In the event of a change in control, certain stock awards issued under the 2015 Plan may be subject to additional acceleration of vesting as may be provided in the participants’ written agreement. The 2015 Plan expires in December 2025.   Non-Plan Stock Options   Periodically, the Company has granted options outside of the 2004 and 2015 Plans to various employees and consultants. In the event of change in control, as defined, certain of the non-plan options outstanding vest immediately.   Stock Option Activity   Information summarizing option activity is as follows:       Number of Options     Weighted average     Weighted average remaining     Aggregate       2004 Plan     2015 Plan     Non Plan     Total     exercise price     life (in years)     intrinsic value                                                             Outstanding, as of December 31, 2019     3,906       70,991       144,070       218,967     $ 20.08       5.00     $ 0   Granted     —       28,440       —       28,440       5.04                   Exercised     —       —       —       —       —                   Forfeited     —       ( 4,545 )     —       ( 4,545 )     17.34                   Expired     ( 3,906 )     ( 703 )     ( 10,979 )     ( 15,588 )     29.17                   Outstanding, as of December 31, 2020     —       94,183       133,091       227,274     $ 17.61       3.87     $ 0                                                             Granted     —       —       —       —     ‐—                   Exercised     —       —       —       —       —                   Forfeited     —       ( 3,291 )     —       ( 3,291 )     3.87                   Expired     —       ( 84 )     ( 11,438 )     ( 11,522 )     39.13                   Outstanding, as of December 31, 2021     —       90,808       121,653       212,461     $ 16.65       3.03     $ 0   Vested or expected to vest at December 31, 2021                       206,283     $ 16.98       2.95     $ 0   Exercisable at December 31, 2021                       186,538     $ 18.04       2.73     $ 0     61     The options outstanding and exercisable at December  31, 2021 were in the following exercise price ranges:               Options Outstanding     Options Exercisable   Range of exercise prices     Number of shares     Weighted average exercise price     Weighted average remaining life (in years)     Number exercisable     Weighted average exercise price   $ 4.08 - 5.20       24,940     $ 5.19       5.64       8,402     $ 5.17   $ 5.21 - 15.68       49,669       12.17       3.79       40,284       12.85   $ 15.69 - 39.36       137,852       20.34       2.27       137,852       20.34   $ 4.08 - 39.36       212,461                       186,538             The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $ 2.21 , $ 3.52 and $ 4.00 as of December  31, 2021, 2020 and 2019, respectively, which would have been received by the option holders had all option holders exercised their options as of that date. There were no in-the-money options exercisable as of December  31, 2021, 2020 and 2019.   The weighted average fair value of options granted during the year ended December 31, 2020 was $ 3.16 per share. The total intrinsic value of options exercised during the years ended December 31, 2021 and 2020 was $ 0 as no options were exercised in either year. The total fair value of shares vested during the years ended December 31, 2021 and 2020 was $ 252,874 and $ 899,750 , respectively.   As of December  31, 2021, future forfeiture adjusted compensation cost related to nonvested stock options is $ 75,035 and will be recognized over an estimated weighted average period of 0.86 years.       NOTE T — INCOME TAXES   There was no provision for federal or state taxes as at December 31, 2021 and 2020.   The Company has deferred taxes due to income tax credits, net operating loss carryforwards, and the effect of temporary differences between the carrying values of certain assets and liabilities for financial reporting and income tax purposes. Significant components of deferred taxes are as follows at December  31:       2021     2020                     Accrued compensation   $ 135,000     $ 81,000   Accounts receivable allowance     75,000       474,000   Stock-based compensation     1,149,000       1,073,000   Basis differences in fixed assets     ( 10,000 )     ( 14,000 ) Basis differences in intangible assets     75,000       65,000   Net operating loss and credit carryforwards     14,467,000       13,337,000   Valuation allowances     ( 15,891,000 )     ( 15,016,000 )                       $ —     $ —     The Company has a valuation allowance against the full amount of its net deferred taxes due to the uncertainty of realization of the deferred tax assets due to operating loss history of the Company. The Company currently provides a valuation allowance against deferred taxes when it is more likely than not that some portion, or all of its deferred tax assets will not be realized. The valuation allowance could be reduced or eliminated based on future earnings and future estimates of taxable income. Similarly, income tax benefits related to stock options exercised have not been recognized in the financial statements.   As of December  31, 2021, the Company has federal net operating loss carryforwards of approximately $ 61 million. Approximately $ 46 million are subject to expiration between 2021 and 2037, and $ 15 million net operating loss carryforwards have no expiration date. These net operating loss carryforwards are subject to the limitations under Section  382 of the Internal Revenue Code due to changes in the equity ownership of the Company.   62     A reconciliation of the effective income tax rate on operations reflected in the Statements of Operations to the US Federal statutory income tax rate is presented below.       2021     2020                     Federal statutory income tax rate     21 %     21 % Permanent differences     -       ( 9 ) Effect of net operating loss     ( 21 )     ( 12 )                   Effective tax rate     — %     — %   The Company has not been audited by the Internal Revenue Service (“IRS”) or any states in connection with income taxes. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The periods from 2018 through 2021 remain open to examination by the IRS and state jurisdictions. The Company believes it is not subject to any tax audit risk beyond those periods. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company does not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense incurred during the years ended December  31, 2021 and 2020.       NOTE U — PROFIT SHARING PLAN   The Company has established a savings plan under section  401 (k) of the Internal Revenue Code. All employees of the Company, after completing one day of service, are eligible to enroll in the 401 (k) plan. Participating employees may elect to defer a portion of their salary on a pre-tax basis up to the limits as provided by the IRS Code. The Company is not required to match employee contributions but may do so at its discretion. The Company made no contributions during the years ended December  31, 2021 and 2020.       NOTE V — EARNINGS PER SHARE (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 reconciliation of the numerator of the basic and diluted EPS calculations for the following fiscal years ended December  31:       2021     2020                     Basic Numerator:                 Net Loss   $ ( 5,065,781 )   $ ( 9,673,987 ) Deemed dividend from trigger of anti-dilution provision feature     -       ( 112,686 ) Net loss available to common stockholders (basic and diluted EPS)   $ ( 5,065,781 )   $ ( 9,786,673 )   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 due to net losses.       Years ended December 31,       2021     2020                     Stock options     -       1,002   Restricted stock     -       3,098   Potentially dilutive securities     -       4,100     63     Items excluded from the diluted per share calculation because the exercise price was greater than the average market price of the common shares:       Years ended December 31,       2021     2020                     Stock options     212,461       223,899   Warrants     4,689,387       4,689,387   Total     4,901,848       4,913,286         NOTE W — SUBSEQUENT EVENTS   On March 8, 2022, the Company completed the acquisition of 100 % of the issued and outstanding capital stock of Swivel Secure Europe, SA pursuant to the terms of a stock purchase agreement. The aggregate purchase price consisted of a base purchase price of $ 1.75 million, subject to closing adjustments based on the closing date working capital, indebtedness and unpaid transaction expenses, and an earn-out of up to $ 500,000 . At the closing, the Company made a cash payment of $ 1.27 million and issued 269,060 shares of common stock of which 89,687 shares were held back by the Company to secure certain indemnification obligations under the stock purchase agreement.   On March 10, 2022, the Company issued 6,360 shares of common stock to its directors in payment of board fees. Additionally, the Company issued an aggregate of 848 shares of common stock to its directors in payment of board committee fees.    On March 11, 2022, the Company issued 932 shares of common stock to its directors in payment of board committee fees. The Company issued an aggregate of 274,250 shares of restricted common stock to employees and the board of directors which vest in equal annual installments over a three -year period from the date of grant.   The Company has reviewed subsequent events through the date of this filing.    64       EXHIBIT   INDEX   Exhibit   Exhibit   No.           2.1   Stock Purchase Agreement by and among the Company, Thomas J. Hoey, and PistolStar, Inc. dated June 6, 2020 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the SEC on July 7, 2020)       2.2   Stock Purchase Agreement by and among the Company, Alex Rocha and Swivel Secure Europe, SA dated February 2, 2022 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the SEC on February 3, 2022)       2.3   Amendment No. 1 to Stock Purchase Agreement by and among the Company, Alex Rocha and Swivel Secure Europe, SA dated March 4, 2022 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the SEC on March 9, 2022)       3.1   Certificate of Incorporation of BIO-key International, Inc., a Delaware corporation (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K, filed with the SEC on January 5, 2005)       3.2   Bylaws (incorporated by reference to Exhibit 3.3 to the current report on Form 8-K, filed with the SEC on January 5, 2005)       3.3   Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Appendix A to the definitive proxy statement, filed with the SEC on January 18, 2006)       3.4   Certificate of Amendment of Certificate of Incorporation of Bio-key International, Inc., a Delaware corporation (incorporated by reference to Exhibit 3.4 to the annual report on Form 10-K, filed with the SEC on March 31, 2015)       3.5   Certificate of Elimination of BIO-key International, Inc. filed October 6, 2015 (incorporated by reference to Exhibit 3.5 to the registration statement on Form S-1 File No. 333-208747 filed with the SEC on December 23, 2015)       3.6   Certificate of Designation of Preferences, Rights and Limitations of Series A-1 Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K, filed with the SEC on November 2, 2015)       3.7   Certificate of Designation of Preferences, Rights and Limitations of Series B-1 Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the quarterly report on Form 10-Q, filed with the SEC on November 16, 2015)       3.8   Certificate of Amendment of Certificate of Incorporation of Bio-key International, Inc., a Delaware corporation (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K, filed with the SEC on December 28, 2016)       3.9   Certificate of Amendment of Certificate of Incorporation of Bio-Key International, Inc., a Delaware corporation (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K, filed with the SEC on November 19, 2020)       4.1   Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the registration statement on Form SB-2, File No. 333-16451)       4.2   Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Registration Statement on Form S-1/A, filed with the SEC on July 17, 2020)       4.3   Form of Warrant (incorporated by reference to Exhibit 4.3 to Amendment No. 1 to the Registration Statement on Form S-1/A, filed with the SEC on July 17, 2020)       4.4   Form of Warrant Agency Agreement (incorporated by reference to Exhibit 4.4 to Amendment No. 2 to the Registration Statement on Form S-1/A, filed with the SEC on July 20, 2020)       4.5   BIO-key International, Inc. Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934*       10.1   Employment Agreement by and between BIO-key International, Inc. and Mira LaCous dated November 20, 2001 (incorporated by reference to Exhibit 10.39 to the current report on Form 8-K, filed with the SEC on January 22, 2002)***       10.2   BIO-key International, Inc. 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.48 to amendment no. 1 the registrant’s registration statement on Form SB-2, File No. 33-120104, filed with the SEC on December 14, 2004)***       10.3   Employment Agreement, effective March 25, 2010, by and between the Company and Michael W. DePasquale (incorporated by reference to Exhibit 10.93 to the annual report on Form 10-K, filed with the SEC on March 26, 2010)***       10.4   Employment Agreement by and between BIO-key International, Inc. and Cecilia Welch dated May 15, 2013 (incorporated by reference to Exhibit 10.42 to the annual report on Form 10-K, filed with the SEC on March 31, 2014)***       10.5   Employment Agreement by and between BIO-key International, Inc. and James Sullivan dated April 5, 2017 (incorporated by reference to Exhibit 10.42 to the annual report on Form 10-K, filed with the SEC on March 29, 2021)***   65     10.6   First Amendment to Lease Agreement by and between BIO-key International, Inc. and BRE/DP MN LLC dated September 12, 2013 (incorporated by reference to Exhibit 10.44 to the annual report on Form 10-K, filed with the SEC on March 31, 2014)       10.7   BIO-key International, Inc. 2015 Equity Incentive Plan (incorporated by reference to Appendix B to the definitive proxy statement filed with the SEC on December 15, 2015)***       10.9   Software License Purchase Agreement Dated November 11, 2015 by and among BIO-key Hong Kong Limited, Shining Union Limited, WWTT Technology China, Golden Vast Macao Commercial Offshore Limited, Giant Leap International Limited (incorporated by reference to Exhibit 10.36 to the registration statement on Form S-1 File No. 333-208747 filed with the SEC on December 23, 2015)**       10.11   Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K, filed with the SEC on May 3, 2017)       10.12   Form Non-Plan Option Agreement between the Company and certain of its directors, officers, employees and contractors (incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q filed with the SEC on May 15, 2017)***       10.13   Securities Purchase Agreement dated April 3, 2018 by and between the Registrant and Wong Kwok Fong (Kelvin) (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed with the SEC on April 4, 2018)       10.14   Securities Purchase Agreement dated May 23, 2018 by and between the Registrant and Giant Leap International Limited (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed with the SEC on May 30, 2018)       10.15   Securities Purchase Agreement dated May 23, 2018 by and between the Registrant and Micron Technology Development Limited (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, filed with the SEC on May 30, 2018)       10.16   Securities Purchase Agreement dated May 31, 2018 by and between the Registrant and Wong Kwok Fong (Kelvin) (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed with the SEC on June 4, 2018)       10.17   Underwriting Agreement dated August 22, 2018 by and between the Registrant and Maxim Group LLP (incorporated by reference to Exhibit 1.1 to the current report on Form 8-K, filed with the SEC on August 27, 2018)       10.18   Form of Common Stock Purchase Warrant dated August 24, 2018 (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K, filed with the SEC on August 27, 2018)       10.19   GLP 2nd Amendment to Lease dated July 27, 2018 (incorporated by reference to Exhibit 10.26 to the annual report on Form 10-K, filed with the SEC on April 1, 2019)       10.20   Marlen 4th Amendment to Lease dated June 2, 2018 (incorporated by reference to Exhibit 10.27 to the annual report on Form 10-K, filed with the SEC on April 1, 2019)       10.21   Securities Purchase Agreement dated July 10, 2019 by and between the Registrant and Lind Global Macro Fund, LP. (incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q, filed with the SEC on August 14, 2019)       10.22   Security Agreement dated July 10, 2019 by and between the Registrant and Lind Global Macro Fund, LP. (incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q, filed with the SEC on August 14, 2019)       10.23   Collateral Sharing Agreement dated July 10, 2019 by and among the Registrant, Lind Global Macro Fund, LP and Versant Funding LLC (incorporated by reference to Exhibit 10.3 to the quarterly report on Form 10-Q, filed with the SEC on August 14, 2019)       10.24   $3,060,00 Senior Secured Convertible Promissory Note dated July 10, 2019 (incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q, filed with the SEC on August 14, 2019)       10.25   Common Stock Purchase Warrant dated July 10, 2019 (incorporated by reference to Exhibit 10.5 to the quarterly report on Form 10-Q, filed with the SEC on August 14, 2019)       10.26   BIO-key International, Inc. Amended and Restated 2015 Equity Incentive Plan (incorporated by reference to Appendix A to the definitive proxy statement filed with the SEC on April 30, 2019)***   66     10.27   Sales Incentive Agreement with Technology Transfer Institute dated March 25, 2020. (incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q, filed with the SEC on June 8, 2020)       10.28   Form of Technology Transfer Institute Warrant. (incorporated by reference to Exhibit 10.2 to the quarterly report on Form 10-Q, filed with the SEC on June 8, 2020)       10.29   Amended and Restated Senior Secured Convertible Promissory Note, due April 13, 2020 issued by the Company to Lind Global Macro Fund, LP. (incorporated by reference to Exhibit 10.3 to the quarterly report on Form 10-Q, filed with the SEC on June 8, 2020)       10.30   Amendment to Amended and Restated Senior Secured Convertible Promissory Note, due April 13, 2020 by and between the Company and Lind Global Macro Fund, LP dated April 12, 2020. (incorporated by reference to Exhibit 10.4 to the quarterly report on Form 10-Q, filed with the SEC on June 8, 2020)       10.31   Securities Purchase Agreement dated May 6, 2020 by and between the Company and Lind Global Macro Fund, LP. (incorporated by reference to Exhibit 10.5 to the quarterly report on Form 10-Q, filed with the SEC on June 8, 2020)       10.32   $2,415,000 Senior Secured Convertible Promissory Note dated May 6, 2020. (incorporated by reference to Exhibit 10.6 to the quarterly report on Form 10-Q, filed with the SEC on June 8, 2020)       10.33   Common Stock Purchase Warrant dated May 6, 2020. (incorporated by reference to Exhibit 10.7 to the quarterly report on Form 10-Q, filed with the SEC on June 8, 2020)       10.34   Amended and Restated Security Agreement dated May 6, 2020 by and between the Company and Lind Global Macro Fund, LP. (incorporated by reference to Exhibit 10.8 to the quarterly report on Form 10-Q, filed with the SEC on June 8, 2020)       10.35   Amendment No. 2 to Amended and Restated Senior Secured Convertible Promissory Note, due April 13, 2020 by and between the Company and Lind Global Macro Fund, LP dated May 13, 2020. (incorporated by reference to Exhibit 10.9 to the quarterly report on Form 10-Q, filed with the SEC on June 8, 2020)       10.36   Securities Purchase Agreement dated June 29, 2020 by and between the Company and Lind Global Macro Fund, LP (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed with the SEC on July 1, 2020)       10.37   $1,811,250 Senior Secured Convertible Promissory Note dated June 29, 2020. (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, filed with the SEC on July 1, 2020)       10.38   Common Stock Purchase Warrant dated May 6, 2020. (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K, filed with the SEC on July 1, 2020)       10.39   Second Amended and Restated Security Agreement dated June 29, 2020 by and between the Company and Lind Global Macro Fund, LP (incorporated by reference to Exhibit 10.4 to the current report on Form 8-K, filed with the SEC on July 1, 2020)       10.40   $500,000 Promissory note, dated June 30, 2020 (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on July 7, 2020)       10.41   Form of Restricted Stock Award Agreement under the BIO-key International, Inc. Amended & Restated 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, filed with the SEC on August 28, 2020)***       10.42   BIO-key International, Inc. 2021 Employee Stock Purchase Plan (incorporated by reference to Appendix A to the definitive proxy statement filed with the SEC on May 4, 2021)       10.43   BIO-key International, Inc. Amended and Restated 2015 Equity Incentive Plan (incorporated by reference to Appendix B to the definitive proxy statement filed with the SEC on May 4, 2021)       21.1*   List of subsidiaries of BIO-key International, Inc.       23.1*   Consent of RMSBG   31.1*   Certification of the Chief Executive Officer pursuant to Section  302 of the Sarbanes-Oxley Act of 2002 31.2*   Certification of the Chief Financial Officer pursuant to Section  302 of the Sarbanes-Oxley Act of 2002 32.1*   Certification of the Chief Executive Officer pursuant to Section  906 of the Sarbanes-Oxley Act of 2002 32.2*   Certification of the Chief Financial Officer pursuant to Section  906 of the Sarbanes-Oxley Act of 2002   67     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 (embedded within the Inline XBRL and contained in Exhibit 101)   *  filed herewith   ** Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted sections have been filed separately with the Securities and Exchange Commission   *** Management compensatory plan.   68     SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) 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.       Date: March 31, 2022 By: /s/  MICHAEL W. DEPASQUALE     Michael W. DePasquale     CHIEF EXECUTIVE OFFICER (Principal Executive Officer)     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the dates indicated.     Signature   Title   Date           /s/  MICHAEL W. DEPASQUALE   Chairman of the Board of Directors, Chief Executive Officer and Director (Principal Executive Officer)   March 31, 2022 Michael W. DePasquale                   /s/  CECILIA WELCH   Chief Financial Officer (Principal Financial and Accounting Officer)   March 31, 2022 Cecilia Welch                   /s/ROBERT J. MICHEL   Director   March 31, 2022 Robert J. Michel                   /s/  THOMAS E. BUSH III   Director   March 31, 2022 Thomas E. Bush                   /s/  THOMAS GILLEY   Director   March 31, 2022 Thomas Gilley                   /s/  WONG KWOK FONG   Director   March 31, 2022 Wong Kwok Fong                   /s/  PIETER KNOOK   Director   March 31, 2022 Pieter Knook                   /s/  MANNY ALIA   Director   March 31, 2022 Manny Alia           69