What changed in this filing

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Item 1. Financial Statements

2025-08-13 compared with 2025-05-15 · 193 added, 108 removed, 457 unchanged (40% of the section changed)

43 unchanged sentences

Government loan – BBVA Bank – net of current portion

11,666 44,762

Operating lease liabilities, net of current portion

8 unchanged sentences

issued and outstanding;

5,814,041 and 3,715,483 of $ .0001 par value at March 31, 2025 and December 31, 2024, respectively

6,848,776 and 3,715,483 of $ .0001 par value at June 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

137,948,437 133,030,271

Accumulated other comprehensive loss

Accumulated other comprehensive income

114,898 49,290

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Three Months Ended

Six Months Ended

Total revenues

3 unchanged sentences

Cost of hardware

Cost of hardware - reserve

Total costs and other expenses

7 unchanged sentences

Loan fee amortization

Change in fair value of convertible note

Interest expense

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Issuance of common stock for directors’ fees

Issuance of common stock to employees

Issuance of restricted stock to employees

Issuance of common stock for repayment of debt

6 unchanged sentences

( 130,044,447

Issuance of common stock for directors’ fees

Issuance of common stock for repayment of debt

Restricted stock forfeited

Issuance of restricted common stock to employees and directors

Share-based compensation for Employee Stock Purchase Plan

Issuance of common stock for Employee Stock Purchase Plan

Foreign currency translation adjustment

Share-based compensation

Exercise of warrants

Balance as of June 30, 2025

( 131,211,843

See accompanying notes to the condensed consolidated financial statements.

14 unchanged sentences

( 125,517,495

Restricted stock forfeited

Issuance of common stock for Employee Stock Purchase Plan

Share-based compensation for Employee Stock Purchase Plan

Foreign currency translation adjustment

Share-based compensation

Balance as of June 30, 2024

( 129,022,269

See accompanying notes to the condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOW FROM OPERATING ACTIVITIES:

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Share and warrant-based compensation for employees and consultants

Stock based directors’ fees

Share-based directors’ fees

Change in assets and liabilities:

Accounts receivable

Allowance for doubtful receivables

Due from factor

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Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

CASH FLOW FROM INVESTING ACTIVITIES:

Capital expenditures

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CASH FLOW FROM FINANCING ACTIVITIES:

Proceeds from note payable

Offering costs

2 unchanged sentences

Repayment of government loan

Net cash used in financing activities

Net cash provided in financing activities

Effect of exchange rate changes

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SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION

Three Months Ended March 31,

Six Months Ended June 30,

Cash paid for:

Noncash investing and financing activities:

Non-cash investing and financing activities

Issuance of stock for repayment of debt

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025 (Unaudited)

June 30, 2025 (Unaudited)

NATURE OF BUSINESS AND BASIS OF PRESENTATION

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.

BIO-key International, Inc.

and its wholly-owned subsidiaries (collectively, the “Company” or “BIO-key”), 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.

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Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key International, Inc.

and its wholly-owned subsidiaries (collectively, the “Company” or “BIO-key”) and are stated in conformity with accounting principles generally accepted in the United States of America (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key and are stated in conformity with accounting principles generally accepted in the United States of America (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

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In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented.

The balance sheet at March 31, 2025 was derived from the audited financial statements, but does not include all of the disclosures required by GAAP.

The balance sheet at June 30, 2025 was derived from the audited financial statements, but does not include all of the disclosures required by GAAP.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the related notes thereto included in the Company’s Annual Report on Form 10 -K for the fiscal year ended December 31, 2024 , filed with the SEC on June 5, 2024.

Foreign Currencies

The Company accounts for foreign currency transactions pursuant to ASC 830, Foreign Currency Matters ("ASC 830” ).

The Company accounts for foreign currency transactions pursuant to Accounting Standards Codification ("ASC") 830, Foreign Currency Matters (“ASC 830” ).

The functional currency of the Company is the U.S.

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In addition, the Company has purchased inventory for projects in Nigeria, which have been delayed in deployment, and is, therefore looking into other markets and opportunities to sell or return the product to generate additional cash.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which contemplate continuation of the Company as a going concern, and assumes continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern, and assumes continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The Company has suffered substantial net losses and negative cash flows from operations in recent years and is dependent on debt and equity financing to fund its operations, all of which raise substantial doubt about the Company’s ability to continue as a going concern.

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Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three month periods ended March 31, 2025 and March 31, 2024 :

$ 205,843 $ 64,152 $ 142 $ 2,461 $ 272,598

354,584 525,093 219,081 - 1,098,758

17,852 - 188,911 29,040 235,803

The following table summarizes revenue from contracts with customers for the three -month periods ended June 30, 2025 and June 30, 2024 :

Total revenues

$ 578,279 $ 589,245 $ 408,134 $ 31,501 $ 1,607,159

$ 191,481 $ 20,254 $ 1,387 $ - $ 213,122

519,244 1,266,553 164,637 - 1,950,434

17,408 - 239 - 17,647

Total revenues

$ 728,133 $ 1,286,807 $ 166,263 $ - $ 2,181,203

The following table summarizes revenue from contracts with customers for the six -month periods ended June 30, 2025 and June 30, 2024 :

Total revenues

*EMESA – Europe, Middle East, South America

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Maintenance contracts include provisions for unspecified when-and-if available product updates and customer telephone support services.

At March 31, 2025 and December 31, 2024 , amounts in deferred revenue were approximately $ 1,065,000 and $ 485,000 , respectively.

Revenue recognized during the three months ended March 31, 2025 from amounts included in deferred revenue at the beginning of the period was approximately $ 200,000 .

At June 30, 2025 and December 31, 2024 , amounts in deferred revenue were approximately $ 970,000 and $ 485,000 , respectively.

Revenue recognized during the three months and six months ended June 30, 2025 from amounts included in deferred revenue at the beginning of the period was approximately 122,000 and 321,000 , respectively.

Revenue recognized during the three and six -months ended June 30, 2024 from amounts included in deferred revenue at the beginning of the period was approximately $ 157,000 and $ 431,000 , respectively.

ACCOUNTS RECEIVABLE

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Accounts receivable are written off when deemed uncollectible.

Accounts receivable at March 31, 2025 and December 31, 2024 consisted of the following:

Accounts receivable at June 30, 2025 and December 31, 2024 consisted of the following:

Accounts receivable

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The following table presents share-based compensation expenses included in the Company’s unaudited condensed interim consolidated statements of operations:

Three Months Ended March 31,

Three Months Ended June 30,

Selling, general and administrative

Research, development and engineering

Six Months Ended June 30,

Selling, general and administrative

Research, development and engineering

Inventory is stated at the lower of cost, determined on a first in, first out basis, or realizable value.

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The Company has been selling units in small quantities and continues to explore other markets and opportunities to sell the product.

Inventory is comprised of the following as at March 31, 2025 and December 31, 2024 :

Inventory is comprised of the following as at June 30, 2025 and December 31, 2024 :

Finished goods

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(“Fiber Food”), an early-stage company engaged in developing global food security solutions, in consideration of the issuance of 595,000 shares of the Company’s common stock.

Fiber Food is not a principal stockholder of Boumarang and has no corporate governance or control rights.

Fiber Food is not a principal stockholder of Boumarang, Inc.

and has no corporate governance or control rights.

The purchase agreement between the Company and Fiber Food contemplates collaboration between the parties regarding potential strategic and commercial transactions, including acquiring assets or equity interests in other operating companies, integrating the Company’s identity access management solutions into Fiber Food’s offerings, and introducing the Company to its customers, affiliates and business contacts who are potential users of the Company’s solutions, in each case pursuant to future definitive agreements on terms to be negotiated by the parties.

The Company has engaged in discussions with Fiber Food and Boumarang regarding the contemplated collaboration, but no definitive agreements have been executed.

The Company has engaged in discussions with Fiber Food and Boumarang, Inc.

regarding the contemplated collaboration, but no definitive agreements have been executed.

In the event that at any time during the nine -month period after the closing of the transaction the Company values the Boumarang Shares at less than $ 5,000,000 on its balance sheet, the Company has the right to cause Fiber Food to repurchase the Boumarang Shares from the Company in exchange for the return of the shares of Company common stock issued in exchange for the Boumarang Shares.

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When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use in pricing the asset or liability, such as inherent risk, non-performance risk and credit risk.

The Company follows ASC Topic 820 – “Fair Value Measurement,” which establishes a three -level valuation hierarchy for disclosure of fair value measurements.

The Company follows ASC 820 – “Fair Value Measurement,” which establishes a three -level valuation hierarchy for disclosure of fair value measurements.

The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement.

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The Boumarang Shares are classified as a Level 3 asset and have been valued based on a combination of recent sales of Boumarang common stock to third parties and a third party valuation applying a discounted cash flow analysis which included discounts for lack of control and lack of marketability, small company risk premium, and specific company risk premium based on Boumarang being an early-stage pre-revenue company.

The lack of control and marketability discounts were based on published studies and transfer restrictions contained in Boumarang’s corporate governance documents.

The lack of control and marketability discounts were based on published studies and transfer restrictions contained in Boumarang, Inc’s corporate governance documents.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Boumarang Shares may fluctuate from period to period and the fair value of the Boumarang Shares may differ significantly from the values that would have been used had a ready market existed for such shares and may differ materially from the values that the Company may ultimately realize.

The early-stage pre-revenue status and unproven technology of Boumarang raise uncertainties that could impact the recoverability of the investment in the Boumarang Shares.

ASC 321 - 10 - 35 requires annual impairment testing for equity securities without readily determinable fair values.

The early-stage pre-revenue status and unproven technology of Boumarang, Inc.

raise uncertainties that could impact the recoverability of the investment in the Boumarang Shares.

ASC 321 - 10 - 35 Equity Securities - Subsequent Measurement requires annual impairment testing for equity securities without readily determinable fair values.

COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be involved in litigation relating to claims arising out of our operations in the normal course of business.

As of March 31, 2025 , the Company was not a party to any pending lawsuits.

As of June 30, 2025 , the Company was not a party to any pending lawsuits.

The Company’s leases office space in New Jersey, Minnesota, New Hampshire, Madrid and Hong-Kong with lease termination dates in 2027.

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Total lease cost

6 Months ended

Total lease cost

Balance sheet information

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Weighted average discount rate – operating leases

Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2025 and 2024:

Maturities of operating lease liabilities were as follows as of March 31, 2025 :

Cash paid for amounts included in the measurement of operating lease liabilities for the six months ended June 30, 2025 and 2024:

Maturities of operating lease liabilities were as follows as of June 30, 2025 :

2025 (6 months remaining)

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On June 24, 2024, the Company entered into and closed a note purchase agreement (the “Purchase Agreement”) which provided for the issuance of a $ 2,360,000 principal amount senior secured promissory note (the “2024 Note”).

The 2024 Note carries an original issue discount of $ 350,000 and the Company agreed to pay $ 10,000 to the Lender to cover its transaction costs, which were deducted from the proceeds of the 2024 Note resulting in a total of $ 2,000,000 being funded to the Company at closing.

The 2024 Note carries an original issue discount of $ 350,000 and the Company agreed to pay $ 10,000 to the lender (the "Lender") to cover its transaction costs, which were deducted from the proceeds of the 2024 Note resulting in a total of $ 2,000,000 being funded to the Company at closing.

The proceeds will be used for general working capital.

The principal amount of the 2024 Note is due eighteen months ( 18 ) following the date of issuance.

The principal amount of the 2024 Note is due 18 months following the date of issuance.

Interest under the 2024 Note accrues at a rate of nine percent ( 9 %) per annum.

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At the end of each month following the Redemption Start Date, if the Company has not reduced the outstanding balance under the 2024 Note by at least $ 270,000 , then by the fifth ( 5th ) day of the following month, the Company must either pay to Lender the difference between $ 270,000 and the amount, if any, redeemed in such month plus the Exit Fee, or the outstanding balance due under the Note will automatically increase by one percent ( 1 %).

As of June 30, 2025, there have been no redemptions by the Lender.

The 2024 Note is secured by a lien on substantially all of the Company’s assets and properties and the Company’s obligations under the 2024 Note are guaranteed by Pistol Star, Inc., a wholly owned subsidiary of the Company.

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Upon the occurrence of an Event of Default, Lender may ( i) cause interest on the outstanding balance to accrue at an interest rate equal to the lesser of twenty two ( 22 %) or the maximum rate permitted under applicable law, and (ii) accelerate all amounts due under the 2024 Note plus an amount equal to (a) fifteen percent ( 15 %) of the amount due under the 2024 Note for each default that is considered a major trigger event (as defined), and (b) five percent ( 5 %) of the amount due under the 2024 Note for each occurrence of any default that is considered a minor trigger event (as defined), in any case not to exceed twenty five percent ( 25 %).

In the third quarter of 2024, the Company received gross proceeds of approximately $ 1.9 million in connection with a financing transaction (see Note 12 Warrants).

In the third quarter of 2024, the Company received gross proceeds of approximately $ 1.9 million in connection with a financing transaction (see Note 12 Stockholders' Equity).

In accordance with the terms of the 2024 Note, 40 % of the proceeds received, or approximately $ 762,600 , was used to prepay amounts due under the 2024 Note.

In, January 2025, the Company entered into two Exchange Agreements with the holder of the Note and agreed to partition the original Note new Promissory Notes in the original principal amounts of $ 629,000 and $ 205,000 , respectively, reducing the outstanding principal amount of the original Note to approximately $ 738,400 .

In January 2025, the Company entered into two Exchange Agreements with the holder of the 2024Note pursuant to which it partition from the 2024 Note two new promissory notes in the original principal amounts of $ 629,000 and $ 205,000 , respectively, reducing the outstanding principal amount of the 2024 Note to approximately $ 738,400 .

In May 2025 and in June 2025, the Company entered into two Exchange Agreements with the holder of the Note pursuant to which it partitioned the 2024 Note into two new promissory notes in the original principal amounts of $ 200,000 and $ 200,000 , respectively, reducing the outstanding principal amount of the 2024 Note to approximately $ 338,400 .

All of the partitioned notes were subsequently exchanged for shares of common stock.

EARNINGS (LOSS) PER SHARE - COMMON STOCK (“EPS”)

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Items excluded from the diluted per share calculation because the exercise price was greater than the average market price of the common shares, and they were also excluded from diluted earnings per share due to anti-dilution:

Three Months ended March 31,

Three Months ended

Six Months Ended

Stock options

1,857 3,373 1,857 3,373

3,745,958 1,722,695 3,745,958 1,722,695

3,747,815 1,726,068 3,747,815 1,726,068

STOCKHOLDERS’ EQUITY

Issuances of Common Stock

During the three -month periods ended March 31, 2025 , and 2024 , there have not been any shares of common stock issued to anyone outside the Company, except as noted in this Note 12.

During the six -month periods ended June 30, 2025 , and 2024 , there have not been any shares of common stock issued to anyone outside the Company, except as noted in this Note 12.

On June 18, 2021, the stockholders approved the Employee Stock Purchase Plan.

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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.

There were no shares issued during the three -month periods ended March 31, 2025 and 2024.

The Company may suspend or terminate the plan at any time, otherwise the plan expires June 17, 2031.

On June 30, 2025, 1,251 shares were issued to employees which resulted in a $ 876 non-cash compensation expense for the Company.

On June 28, 2024, 1,390 shares were issued to employees which resulted in a $ 456 non-cash compensation expense for the Company.

Issuances of Restricted Stock

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Nonvested stock is expensed ratably over the term of the restriction period.

During the three -month periods ended March 31, 2025 and 2024 , the Company issued 2,500 and 0 shares of restricted common stock, respectively, to certain employees and directors.

During the six -month periods ended June 30, 2025 and 2024 , the Company issued 2,500 and 0 shares of restricted common stock, respectively, to certain employees and directors.

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 $ 2,525 and $ 0 , respectively.

During the three -month periods ended March 31, 2025 and 2024 , 7,572 and 316 shares of restricted common stock were forfeited, respectively.

Share based compensation for the three -month periods ended March 31, 2025 and 2024 , was $ 52,488 and $ 56,793 , respectively.

During the six -month periods ended June 30, 2025 and 2024 , 7,572 and 316 shares of restricted common stock were forfeited, respectively.

Share based compensation for the six -month periods ended June 30, 2025 and 2024 , was $ 52,488 and $ 56,793 , respectively.

Issuances to Directors

During the three -month periods ended March 31, 2025 , and 2024 , the Company issued 8,913 and 4,287 , shares of common stock to its directors in lieu of payment of board and committee fees valued at $ 9,002 and $ 9,003 , respectively.

During the six -month periods ended June 30, 2025 , and 2024 , the Company issued 8,913 and 4,287 , shares of common stock to its directors in lieu of payment of board and committee fees valued at $ 9,002 and $ 9,003 , respectively.

Employees ’ exercise options

During the three -month periods ended March 31, 2025 and 2024 , no employee stock options were exercised.

On January 15, 2025, the Company entered into a warrant exercise agreement with an existing institutional investor to exercise certain outstanding warrants to purchase an aggregate of 2,061,112 shares of the Company’s common stock, $ 0.0001 par value per share (the “Common Stock”), at an exercise price of $ 1.85 per share which were originally issued to the Investor on September 13, 2024.

During the six -month periods ended June 30, 2025 and 2024 , no employee stock options were exercised.

On January 15, 2025, the Company entered into a warrant exercise agreement (the "Warrant Exercise Agreement") with an existing institutional investor (the "Investor") to exercise certain outstanding warrants to purchase an aggregate of 2,061,112 shares of the Company’s common stock at an exercise price of $ 1.85 per share which were originally issued to the Investor on September 13, 2024 ( the "Existing Warrants").

In consideration for the exercise of the Existing Warrants, subject to compliance with the beneficial ownership limitations included in the existing warrants, the Investor received new unregistered Series A warrants to purchase up to an aggregate of 1,545,834 shares of the Company’s common stock (the “Series A Warrants”) and new unregistered Series B warrants to purchase up to an aggregate of 1,545,834 shares of the Company’s common stock (the “Series B Warrants”, and together with the “Series A Warrants, the “New Warrants”).

The New Warrants have substantially the same terms, are immediately exercisable at an exercise price of $ 2.15 per share, and will expire five years from the date of issuance.

The Company agreed to file a resale registration statement covering the public resale of the shares of Common Stock issuable upon exercise of the New Warrants with the Securities and Exchange Commission (the “SEC”), and to use commercially reasonable efforts to have such Resale Registration Statement declared effective by the SEC within 90 calendar days following the date of the Warrant Exercise Agreement.

The New Warrants each include a beneficial ownership limitation that prevents the Investor from beneficially owning more than 4.99 % of the Company’s outstanding common stock at any time.

The Company realized gross proceeds under the Warrant Exercise Agreement of approximately $ 3.8 million, prior to deducting placement agent fees and estimated offering expenses.

Net proceeds are being used for working capital and general corporate purposes, including repayment of a portion of the Company’s outstanding secured note.

There were 777,666 prefunded warrants exercised during the three -month period ended March 31, 2024.

Net proceeds are being used for working capital and general corporate purposes, including repayment of a portion of the 2024 Note.

There were 777,666 prefunded warrants exercised during the six -month period ended June 30, 2024.

Partitioned Notes

During the three -month period ended June 30, 2025, partitioned notes in the aggregate principal amount of $ 400,000 were exchanged for 498,437 shares of common stock (See Note 10 Note Payable).

FAIR VALUES OF FINANCIAL INSTRUMENTS

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MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

During each of the three month periods ended March 31, 2025 , and 2024 , two customers accounted for 47 % and one customers accounted for 59 % of the revenue, respectively.

Two customers accounted for 49 % of current accounts receivable at March 31, 2025 .

During each of the three -month periods ended June 30, 2025 , and 2024 , two customers accounted for 47 % and one customers accounted for 59 % of the revenue, respectively.

Two customers accounted for 49 % of current accounts receivable at June 30, 2025 .

At December 31, 2024 , two customers accounted for 36 % of current accounts receivable.

United States, Hong Kong and Nigeria

The Company recorded no income tax expense for the three months ended March 31, 2025 and 2024 because the estimated annual effective tax rate was zero .

The Company recorded no income tax expense for the three and six months ended June 30, 2025 and 2024 because the estimated annual effective tax rate was zero.

In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.

As of March 31, 2025 and December 31, 2024 , the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

Due to the current loss for the three months ended March 31, 2025 , the Company did not record income taxes.

As of June 30, 2025 and December 31, 2024 , the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

Due to the current loss for the six months ended June 30, 2025 , the Company did not record income taxes.

SUBSEQUENT EVENTS

During April 2025, 16,926 shares of restricted common stock were forfeited by employees who left the Company before the lapse of the restriction period applicable to such shares.

On May 8, 2025, the Company issued 11,691 shares of common stock to its directors in payment of meeting fees.

Additionally, the Company issued an aggregate of 12,500 shares of restricted stock to new employees with three -year vesting.

All the shares were issued at $ 0.77 the closing price on May 8, 2024, as reported on the Nasdaq Capital Market.

On August 7, 2025, the Company issued an aggregate of 15,000 shares of restricted stock to new employees with three -year vesting.

All the shares were issued at $ 0.76 the closing price on August 7, 2025, as reported on the Nasdaq Capital Market.

The Company has reviewed subsequent events through the date of this filing.

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One large bank has enrolled and identifies over 21.7 million of their customers using BIO-key fingerprint biometrics in branches on a daily basis.

PortalGuard and IBB deliver unique value to enterprises who find that mainstream MFA solutions do not adequately address their workforce use cases.

PortalGuard and Identity-Bound Biometrics, or IBB, deliver unique value to enterprises who find that mainstream MFA solutions do not adequately address their workforce use cases.

PortalGuard operates as a single MFA user experience, providing a wide set of authentication choices to meet every use case.

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

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

We do not mandate the use of BIO-key hardware with our software and services.

Our NIST-certified fingerprint biometric platform is unique in that it supports interoperable mixing and matching combinations of different manufactures’ fingerprint scanners in a deployment, so that the right scanner can be selected for the right use case, without mandating the use of a particular scanner.

Our National Institute of Standards, and Technology, or NIST, certified fingerprint biometric platform is unique in that it supports interoperable mixing and matching combinations of different manufactures’ fingerprint scanners in a deployment, so that the right scanner can be selected for the right use case, without mandating the use of a particular scanner.

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

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Swivel Secure, now operates as BIO-key EMEA maintains a direct sales force with offices in Madrid, Spain and Lisbon, Portugal, and sells only BIO-key products.

We operate a SaaS business model with customers subscribing to term use of our software for annual recurring revenue.

We operate a software as a service, or SaaS, business model with customers subscribing to term use of our software for annual recurring revenue.

We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners including resellers, system integrators, master agents and other distribution partners.

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RESULTS OF OPERATIONS

THREE MONTHS ENDED March 31, 2025 AS COMPARED TO March 31, 2024

THREE MONTHS ENDED June 30, 2025 AS COMPARED TO June 30, 2024

Consolidated Results of Operations - Percent Trend

Three Months Ended March 31,

Three Months Ended June 30,

Total revenues

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Cost of hardware - reserve

Total Cost of Goods Sold

Total Cost and other expenses

Operating expenses

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Three Months Ended

Cost of Goods Sold

For the three months ended March 31, 2025, and 2024, service revenues included approximately $265,000 and $193,000, respectively, of recurring maintenance and support revenue, and approximately $8,000 and $20,000 respectively, of non-recurring custom services revenue.

Recurring service revenue increased $72,000 or 37% in 2025 which was due to the updated support for a large customer service agreement.

Non-recurring custom services decreased 59% due to loss of one large customer for Swivel Secure customizations and upgrades.

We expect the service revenue to remain at these reduced levels in future periods.

For the three months ended March 31, 2025, license revenue decreased $851,676 or 44% to $1,098,758 from $1,950,434 in the corresponding period in 2024 , due to the ramp up of BIO-key EMEA selling only BIO-key product which we expect to accelerate in 2025.

For the three months ended

March 31, 2025, hardware sales increased 1236% to $235,803 from $17,647 in the corresponding period in

The increase was due largely to several long-term customers expanding their purchase of biometric cybersecurity solutions.

For the three months ended March 31 2024 existing customers

reduced add-on orders.

Costs of goods sold

For the three months ended March 31, 2025, cost of service decreased $40,705 or 29% to $98,144 from $138,849 in the three months ended March 31, 2024, due to absence of costs to support Swivel Secure product deployments.

For the three months ended March 31, 2025, license fees decreased to $72,885 from $148,221 in the three months ended March 31, 2024, due the absence in license fees for third-party software included in our previous Swivel Secure product offerings.

For the three months ended March 31, 2025, hardware costs increased to $108,469 from $12,573 in the three months ended March 31, 2024, related to increased hardware revenue.

Costs and other expenses

Hardware - reserve

Total Costs and other expenses

For the three months ended June 30, 2025, and 2024, service revenues included approximately $271,000 and $274,000, respectively, of recurring maintenance and support revenue, and approximately $51,000 and $10,000 respectively, of non-recurring custom services revenue.

Recurring service revenue decreased $3,000 or 1% in 2025 which was due to the timing of renewals of service agreements.

Non-recurring custom services increased 412% due to an upgrade for one large customer.

Overall, service revenues increased 14% to $321,996 from $283,569 in the corresponding period in 2024.

For the three months ended June 30, 2025, license revenue increased $31,862 or 4% to $806,087 from $774,225 in the corresponding period in 2024 , due to the ramp up of BIO-key EMEA selling only BIO-key products which we expect to accelerate in 2025.

For the three months ended June 30, 2025, hardware sales increased 581% to $568,824 from $83,492 in the corresponding period in 2024.

The increase was due largely to one long-term customer expanding its purchase of biometric cybersecurity solutions.

Costs and other expenses

For the three months ended June 30, 2025, cost of service increased $44,916 or 61% to $118,301 from $73,385 in the three months ended June 30, 2024, due to an upgrade for one large customer.

For the three months ended June 30, 2025, license fees decreased to $86,488 from $148,432 in the three months ended June 30, 2024, due to the absence of license fees for third-party software included in our previous Swivel Secure product offerings.

For the three months ended June 30, 2025, hardware costs increased to net cost of $258,391 (after giving effect to the $277,415 reversal of the reserve for inventory) from $40,455 in the three months ended June 30, 2024, related to increased hardware revenue which included sales of a portion of our fully reserved inventory.

Selling, general and administrative

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Selling, general and administrative

Selling, general and administrative expenses for the three months ended March 31, 2025, decreased 23% from $1,782,973 in the corresponding period in 2024 to $1,372,524in the current quarter.

Selling, general and administrative expenses for the three months ended June 30, 2025, decreased 13% from $1,941,866 in the corresponding period in 2024 to $1,680,550 in the current quarter.

The decreases included reductions in administration, sales personnel costs, and professional services fees.

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Research, development, and engineering

For the three months ended March 31, 2025, research, development, and engineering costs decreased 2% to $595,775 compared to $607,521 in the corresponding period in 2024.

The decrease consisted primarily in a decrease in rent costs.

For the three months ended June 30, 2025, research, development, and engineering costs increased 8% to $636,027 compared to $591,234 in the corresponding period in 2024.

The increase consisted primarily of professional services and personnel costs, offset by a decrease in rent costs.

Other income (expense)

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Loan fee amortization

Change in fair value of convertible note

Interest expense

Other income (expense)

Other income (expense) for the three months ended March 31, 2025 consisted of interest income of $3, interest expense of $35,910 on the note payable and the government loan through the BBVA bank, and a loan fee amortization amount of $60,000.

Other income (expense) for the three months ended March 31, 2024 consisted of interest income of $5 and interest expense of $1,356 on the government loan through the BBVA bank net of interest.

Other income (expense) for the three months ended June 30, 2025 consisted of interest income of $2,092, interest expense of $25,638 on the note payable and the government loan through the BBVA bank, and a loan fee amortization amount of $60,000.

Other income (expense) for the three months ended June 30, 2024 consisted of interest income of $46 and interest expense of $8,910 comprised of approximately $1,400 on the government loan through the BBVA bank and the balance on the 2024 Note, and a loan fee amortization amount of $4,000.

Six MONTHS ENDED June 30, 2025 AS COMPARED TO June 30, 2024

Consolidated Results of Operations - Percent Trend

Six Months Ended June 30,

Total Revenues

Costs and other expenses

Cost of services

Cost of license fees

Cost of hardware

Cost of hardware - reserve

Total Cost of Goods Sold

Operating expenses

Selling, general and administrative

Research, development and engineering

Total Operating Expenses

Operating loss

Other expense

Loss before provision for income tax

Provision for income tax

Revenues and cost of goods sold

Six Months Ended

Total Revenue

Cost of Goods Sold

Hardware - reserve

For the six months ended June 30, 2025, and 2024, service revenues included approximately $535,000 and $467,000, respectively, of recurring maintenance and support revenue, and approximately $59,000 and $30,000 respectively, of non-recurring custom services revenue.

Recurring service revenue increased $68,000 or 15% in 2025 which was due to the updated support for a large customer service agreement.

Non-recurring custom services increased 100% due to an upgrade for one large customer.

Overall, service revenues increased 20% to $594,594 $496,690 in the corresponding period in 2024.

For the six months ended June 30, 2025, license revenue decreased $819,814 or 30% to $1,904,845 from $2,724,659 in the corresponding period in 2024, due to the ramp up of BIO-key EMEA selling only BIO-key product which we expect to accelerate in 2025.

six months ended

June 30, 2025, hardware sales increased 696% to $804,627 from $101,140 in the corresponding period in

The increase was due largely to several long-term customers expanding their purchase of biometric cybersecurity solutions combined with selling some of fully reserved inventory for the African project.

Costs of goods sold

For the six months ended June 30, 2025, cost of service increased $4,211 or 2% to $216,445 from $212,234 in the six months ended June 30, 2024, due to the costs associated with the upgrade for one large customer.

For the six months ended June 30, 2025, license fees decreased to $159,373 from $296,652 in the six months ended June 30, 2024, due to the absence of license fees for third-party software included in our previous Swivel Secure product offerings.

For the six months ended June 30, 2025, hardware costs increased to a net cost of $314,831 (after giving effect to the $277,415 reversal of the reserve for inventory) from $53,0293 in the six months ended June 30, 2024, related to increased hardware revenue which included sales of a portion of our fully reserved inventory.

Selling, general and administrative

Six Months Ended

Selling, general and administrative

Selling, general and administrative expenses for the six months ended June 30, 2025, decreased 18% from $3,724,839 in the corresponding period in 2024 to $3,053,074 in the current quarter.

The decreases included reductions in administration, sales personnel costs, and professional services fees.

Research, development and engineering

Six Months Ended

Research, development and engineering

For the six months ended June 30, 2025, research, development, and engineering costs increased 3% to $1,231,802 compared to $1,198,755 in the corresponding period in 2024.

The increase consisted primarily of professional services and personnel costs, offset by a decrease in rent costs.

Other income (expense)

Six Months Ended

Interest income

Loan fee amortization

Interest expense

Other income (expense)

Other income (expense) for the six months ended June 30, 2025 consisted of interest income of $2,095, interest expense of $61,548 on the note payable and the government loan through the BBVA bank, and a loan fee amortization amount of $60,000.

Other income (expense) for the six months ended June 30, 2024 consisted of interest income of $51 and interest expense of $10,267 consisting of approximately $2,700 on the government loan through the BBVA bank and the balance for interest accrued on the 2024 Note, as defined below, and a loan fee amortization amount of $4,000.

LIQUIDITY AND CAPITAL RESOURCES

Operating activities overview

Net cash used in operations during the three months ended March 31, 2025 was $835,312.

Net cash used in operations during the six months ended June 30, 2025 was $1,715,324.

Items of note included:

Net positive cash flows related to adjustments for non-cash expenses of approximately $592,000.

Net positive cash flows related to inventory, amount due from factor, prepaid expenses, and deferred revenue of approximately $174,000.

Negative cash flows related to changes in accounts receivable, accounts payable, and accrued liabilities of approximately $583,000, due to working capital management.

Net positive cash flows related to inventory, accounts payable, and deferred revenue of approximately $132,000.

Negative cash flows related to changes in accounts receivable and allowance, amount due from factor accounts, prepaid expenses, and accrued liabilities of approximately $535,000, due to working capital management.

Financing activities overview

Net cash provided by financing activities during the three months ended March 31, 2025 was $3,529,227 which included $3,813,057 of proceeds from the exercise of warrants, which was offset by repayment of $35,047 of the government loan through the BBVA bank and $248,783 for offering costs.

Net cash provided by financing activities during the six months ended June 30, 2025 was $3,493,505 which included $3,813,057 of proceeds from the exercise of warrants, and $876 from the purchase of shares in the Employee Stock Purchase Plan, which was offset by repayment of $71,645 of the government loan through the BBVA bank and $248,783 for offering costs.

Investing activities overview

Net cash used in investing activities during the three months ended March 31, 2025 consisted of capital expenditures was $4,570.

Net cash used in investing activities during the six months ended June 30, 2025 consisted of capital expenditures was $6,048 for capital expenditures.

Liquidity and Capital Resources

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

On January 15, 2025, we entered into a warrant exercise agreement with an existing investor (the “Investor”) to exercise certain outstanding warrants to purchase an aggregate of 2,061,112 shares of the Company’s common stock, at an exercise price of $1.85 per share which were originally issued to the Investor on September 12, 2024.

In consideration for the exercise of the Existing Warrants, subject to compliance with the beneficial ownership limitations included in the Existing Warrants, the Investor received new warrants to purchase up to an aggregate of 3,091,668 shares of the Company’s Common Stock.

On January 15, 2025, we entered into a warrant exercise agreement with an existing investor (the “Investor”) to exercise certain outstanding warrants to purchase an aggregate of 2,061,112 shares of common stock, at an exercise price of $1.85 per share which were originally issued to the Investor on September 12, 2024 (the "Existing Warrants").

The New Warrants have substantially the same terms, are immediately exercisable at an exercise price of $2.15 per share and will expire five years from the date of issuance.

The gross proceeds to the Company were approximately $3.8 million, prior to deducting placement agent fees and estimated offering expenses.

On September 12, 2024, we entered into a warrant exercise agreement with an existing investor (the “Investor”) to exercise certain outstanding warrants to purchase an aggregate of 1,030,556 shares of the Company’s common stock.

On September 12, 2024, we entered into a warrant exercise agreement with the Investor to exercise certain outstanding warrants to purchase an aggregate of 1,030,556 shares of common stock.

The warrants were originally issued to the Investor on October 31, 2023 and had an original exercise price of $3.15 per share.

In consideration for the immediate exercise of the warrants, we reduced the exercise price of the warrants to $1.85 per share and issued to the Investor unregistered Series A Warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock and unregistered Series B Warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock, each with an exercise price of $1.85 per share.

In consideration for the immediate exercise of the warrants, we reduced the exercise price of the warrants to $1.85 per share and issued to the Investor unregistered Series A Warrants to purchase an aggregate of 1,030,556 shares of common stock and unregistered Series B Warrants to purchase an aggregate of 1,030,556 shares of common stock, each with an exercise price of $1.85 per share.

The Series A and Series B warrants share substantially the same terms, are immediately exercisable and will expire five years from the date of issuance.

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The 2024 Note is due eighteen months (18) following the date of issuance, accrues interest at a rate of nine percent (9%) per annum, and commencing six months after the date of issuance of, the lender shall have the right to redeem up to $270,000 of principal amount each month.

In connection with the warrant exercise agreement described above, we prepaid approximately $762,600 of the amount due under the 2024 Note, and during the first quarter of 2025, the lender converted approximately $864,000 of principal amount due under the 2024 Note into common stock.

As of the date of this report, the outstanding principal amount due under the 2024 Note is $738,400.

In connection with the September 12, 2024 warrant exercise agreement described above, we prepaid approximately $762,600 of the amount due under the 2024 Note.

As of the date of this report, the outstanding principal amount due under the 2024 Note is approximately $338,400.

For a more complete description of the 2024 Note, please see Note 10 to Our Condensed Consolidated Financial Statements included in Part I Item 1 of this report.

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Pursuant to the terms of the arrangement, from time to time, we sell to the Factor a minimum of $150,000 per quarter of certain of our accounts receivable balances on a non-recourse basis for credit approved accounts.

The Factor remits 35% of the foreign and 75% of the domestic accounts receivable balance to us (the “Advance Amount”), with the remaining balance, less fees, forwarded to us once the Factor collects the full accounts receivable balance from the customer.

The Factor remits 35% of the foreign and 75% of the domestic accounts receivable balance to us, with the remaining balance, less fees, forwarded to us once the Factor collects the full accounts receivable balance from the customer.

In addition, from time to time, we receive over advances from the Factor.

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Liquidity outlook

At March 31, 2025, our total cash and cash equivalents were $3,133,752, as compared to $437,604 at December 31, 2024.

At March 31, 2025, we had working capital of approximately $1,124,000

At June 30, 2025, our total cash and cash equivalents were $2,275,344, as compared to $437,604 at December 31, 2024.

At June 30, 2025, we had working capital of approximately $503,000

As discussed above, we have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables.

10 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements