What changed in this filing

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Item 1. Financial Statements

2025-11-14 compared with 2025-08-13 · 292 added, 132 removed, 518 unchanged (45% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Cash and cash equivalents

4 unchanged sentences

394,176 378,307

318,538 378,307

Prepaid expenses and other

19 unchanged sentences

1,214,377 1,278,732

Note payable, current

319,834 1,525,977

9 unchanged sentences

75,146 196,237

Note payable, long term 1,000,000 -

Government loan – BBVA Bank – net of current portion

9 unchanged sentences

issued and outstanding;

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

7,313,423 and 3,715,483 of $ .0001 par value at September 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

13 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total revenues

13 unchanged sentences

Loan fee amortization

Change in fair value of convertible note

Interest expense

1 unchanged sentence

Loss before provision for income tax

Provision for (income tax) tax benefit

Provision for income taxes

Comprehensive loss:

26 unchanged sentences

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

Share-based compensation for employee stock plan

Foreign currency translation adjustment

3 unchanged sentences

( 131,211,843

Issuance of common stock for directors’ fees

Issuance of common stock for repayment of debt

Issuance of restricted common stock to employees and directors

Foreign currency translation adjustment

Share-based compensation

Balance as of September 30, 2025

( 132,176,692

See accompanying notes to the condensed consolidated financial statements.

8 unchanged sentences

Restricted stock forfeited

Exercise of warrants

Exercise of prefunded warrants

Foreign currency translation adjustment

10 unchanged sentences

( 127,184,445

Restricted stock forfeited

Issuance of restricted common stock to employees and directors

Share-based compensation

Foreign currency translation adjustment

Exercise of prefunded warrants

Exercise of warrants

Issuance costs

Balance as of September 30, 2024

( 127,923,404

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOW FROM OPERATING ACTIVITIES:

4 unchanged sentences

Interest payable on note

Reserve for inventory

Operating leases right-of-use assets

Share and warrant-based compensation for employees and consultants

Share-based directors’ fees

Stock based directors’ fees

Change in assets and liabilities:

Accounts receivable

Allowance for doubtful receivables

Allowance for credit losses

Due from factor

Capitalized contract costs

Resalable software license rights

Prepaid expenses and other

4 unchanged sentences

Net cash used in operating activities

CASH FLOW FROM INVESTING ACTIVITIES:

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

1 unchanged sentence

CASH FLOW FROM FINANCING ACTIVITIES:

Proceeds from note payable

Offering costs

Proceeds for exercise of warrants

Offering costs

Proceeds from note payable

Receipt of cash from employee stock purchase plan

Repayment of government loan

Net cash provided in financing activities

Net cash provided by financing activities

Effect of exchange rate changes

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

5 unchanged sentences

SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION

Six Months Ended June 30,

Nine Months Ended September 30,

Cash paid for:

Non-cash investing and financing activities

Issuance of stock for repayment of debt

Noncash financing activities

Issuance of common stock for repayment of debt

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2025 (Unaudited)

September 30, 2025 (Unaudited)

NATURE OF BUSINESS AND BASIS OF PRESENTATION

5 unchanged sentences

Basis of Presentation

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.

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key and include all normal and recurring adjustments which are necessary for a fair presentation in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim consolidated financial statements and Rule 8 - 03 of Regulation S- X promulgated by 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 ended December 31, 2025.

Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted.

1 unchanged sentence

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 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

7 unchanged sentences

Translation adjustments are included in accumulated other comprehensive income (loss).

Recently Issued Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board issued ASU 2020 - 06, Debt - Debt with Conversion and Other Options (Subtopic 470 - 20 ) and Derivatives and Hedging - Contracts in Entity ’ s Own Equity (Subtopic 815 - 40 ) (“ASU 2020 - 06” ) to simplify accounting for certain financial instruments.

Recently Adopted Accounting Pronouncements

Effective January 1, 2024, the Company adopted ASU 2020 - 06, Debt - Debt with Conversion and Other Options (Subtopic 470 - 20 ) and Derivatives and Hedging - Contracts in Entity ’ s Own Equity (Subtopic 815 - 40 ) (“ASU 2020 - 06” ) to simplify accounting for certain financial instruments.

ASU 2020 - 06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.

1 unchanged sentence

ASU 2020 - 06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

ASU 2020 - 06 was effective for the Company on January 1, 2024 and should be applied on a full or modified retrospective basis.

The adoption of ASU 2020 - 06 did not have a material effect on the consolidated financial statements of the Company.

Effective January 1, 2024, the Company adopted ASU 2023 - 07, Segment Reporting (Topic 280 ):

“ Improvements to Reportable Segment Disclosures ” (“ASU 2023 - 07” ) to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

The adoption of ASU 2023 - 07 did not have a significant impact on the Company’s consolidated financial statements.

See Note 16 – Segment Information.

Recently Issued Accounting Pronouncements

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023 - 06, “ Disclosure Improvements:

Codification Amendments in Response to the SEC ’ s Disclosure Update and Simplification Initiative ” (“ASU 2023 - 06” ).

This ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“ASC”).

The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of ASC Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the ASC with the SEC’s regulations.

The ASU has an unusual effective date and transition requirements since it is contingent on future SEC rule setting.

If the SEC fails to enact required changes by June 30, 2027, this ASU is not effective for any entities.

Early adoption is not permitted.

The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023 - 09, “ Improvements to Income Tax Disclosures ” (“ASU 2023 - 09” ) to enhance the transparency and decision-usefulness of income tax disclosures, particularly in the rate reconciliation table and disclosures about income taxes paid.

This ASU applies to all entities subject to income taxes.

This ASU will be effective for public companies for annual periods beginning after December 15, 2024 ( year ended December 31, 2025 for the Company).

The adoption of this standard is not expected to a material impact on the Company’s consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024 - 03, “ Income Statement:

Reporting Comprehensive Income— Expense Disaggregation Disclosures ,” which requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement, as well as disclosures about selling expenses.

This ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The amendments may be applied either ( 1 ) prospectively to financial statements issued for reporting periods after the effective date of this ASU or ( 2 ) retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures.

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.

GOING CONCERN

In accordance with ASU No.

2014 - 15, Disclosure of Uncertainties about an Entity ’ s Ability to Continue as a Going Concern (Subtopic 205 - 40 ) , the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

The Company has historically financed operations through access to the capital markets by issuing convertible debt securities, convertible preferred stock, common stock, and through factoring receivables.

As of the date of this report, the Company does not have enough cash for twelve months of operations.

The history of significant losses, the negative cash flow from operations, the limited cash resources on hand and the dependence by the Company on its ability, to obtain additional financing to fund its operations after the current cash resources are exhausted raises substantial doubt about the Company's ability to continue as a going concern.

The Company has lowered expenses through decreasing spending in marketing, and research and development.

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.

As of the date of this report, the Company does have enough cash for twelve months of operations.

However, the history of losses, the negative cash flow from operations, and the dependence by the Company on its ability to obtain additional financing to fund its operations after the current cash resources are exhausted raises doubt about the Company's ability to continue as a going concern.

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.

Recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon the Company’s ability to increase its revenue and meet its financing requirements on a continuing basis and become profitable in its future operations.

The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

The Company has lowered expenses through decreasing spending in marketing, and research and development.

In addition, the Company has purchased inventory for projects in Nigeria, which have been delayed in deployment, and has slowly been selling into other markets to generate additional cash.

The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

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

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

September 30,

$ 204,536 $ 63,482 $ 95 $ - $ 268,113

471,471 - 446,480 - 917,951

5,692 - 217,500 140,450 363,642

Total Revenues

$ 681,699 $ 63,482 $ 664,075 $ 140,450 $ 1,549,706

September 30,

$ 188,181 $ 34,753 $ 44,437 $ - $ 267,371

738,838 223,703 478,470 - 1,441,011

52,897 - 361,525 22,000 436,422

Total Revenues

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

$ 979,916 $ 258,456 $ 884,432 $ 22,000 $ 2,144,804

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

September 30,

$ 630,517 $ 191,116 $ 37,980 $ 3,094 $ 862,707

1,170,729 525,094 1,126,973 - 2,822,796

73,987 - 876,692 217,590 1,168,269

Total Revenues

$ 1,875,233 $ 716,210 $ 2,041,645 $ 220,684 $ 4,853,772

September 30,

$ 618,421 $ 98,430 $ 47,211 $ - $ 764,062

1,797,707 1,490,255 877,707 - 4,165,669

140,598 - 361,764 35,200 537,562

Total Revenues

$ 2,556,726 $ 1,588,685 $ 1,286,682 $ 35,200 $ 5,467,293

*EMESA – Europe, Middle East, South America

4 unchanged sentences

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

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.

At September 30, 2025 and December 31, 2024 , amounts in deferred revenue were approximately $ 735,000 and $ 970,000 , respectively.

Revenue recognized during the three months and nine months ended September 30, 2025 from amounts included in deferred revenue as of December 31, 2024 was approximately $ 82,000 and $ 404,000 , respectively.

Revenue recognized during the three and nine months ended September 30, 2024 from amounts included in deferred revenue at December 31, 2023 was approximately $ 51,000 and $ 482,000 , respectively.

ACCOUNTS RECEIVABLE

2 unchanged sentences

Accounts receivable are written off when deemed uncollectible.

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

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

September 30,

Accounts receivable

$ 1,342,757 $ 1,351,482

Allowance for credit losses

( 383,254 ) ( 633,253 )

Accounts receivable, net of allowances for credit losses

$ 959,503 $ 718,229

Bad debt expenses are recorded in selling, general, and administrative expense.

1 unchanged sentence

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

Three Months Ended June 30,

Three Months Ended September 30,

Selling, general and administrative

$ 24,920 $ 53,117

Research, development and engineering

Six Months Ended June 30,

$ 31,660 $ 66,053

Nine Months Ended September 30,

Selling, general and administrative

$ 87,466 $ 140,142

Research, development and engineering

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

18,519 31,475

$ 105,985 $ 171,617

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

The Company periodically evaluates inventory items and establishes reserves for obsolescence accordingly.

The Company also reserves for excess quantities, slow moving goods, and for other impairment of value based upon assumptions of future demand and market conditions.

The reserve on inventory is due to slow moving inventory purchased for projects in Nigeria, and slow-moving inventory.

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 June 30, 2025 and December 31, 2024 :

The reserve on inventory is due to slow moving inventory purchased for projects in Nigeria, and slow-moving inventory elsewhere.

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

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

September 30,

Finished goods

$ 3,605,342 $ 4,098,513

Fabricated assemblies

53,289 53,289

Reserve on finished goods

( 3,264,455 ) ( 3,773,495 )

Total inventory

$ 394,176 $ 378,307

Equity Investment in Privately Held Company

9 unchanged sentences

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.

Under the purchase agreement, the Company had 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 if at any time during the nine -month period after the closing of the transaction the Company valued the Boumarang Shares at less than $ 5,000,000 on its balance sheet.

This repurchase right has expired.

The purchase agreement also contains a standstill which prohibits the Company, Fiber Food, Boomerang and their respective affiliates and representatives for a period of two years, from, among other things, initiating any business combination, restructuring, tender offer, proposal to seek representation on the board of directors, or any proxy solicitation, instigating, encouraging or assisting any third party from doing any of the forgoing, or acquiring any debt or equity securities of any other party.

The Company accounts for the investment under ASC 321, Investments - Equity Securities .

The Boumarang Shares constitute an investment in a privately held company for which there is no trading market and are carried at fair value.

8 unchanged sentences

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, Inc’s corporate governance documents.

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

4 unchanged sentences

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

As of September 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.

3 unchanged sentences

3 Months ended

September 30,

Total lease cost

$ 6,979 $ 9,702

9 Months ended

September 30,

Total lease cost

$ 20,937 $ 38,808

September 30,

Balance sheet information

Operating right-of-use assets

$ 54,433 $ 73,372

Operating lease liabilities, current portion

$ 26,522 $ 24,642

Operating lease liabilities, non-current portion

28,967 48,994

Total operating lease liabilities

$ 55,489 $ 73,636

Weighted average remaining lease term (in years) – operating leases

Weighted average discount rate – operating leases

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 :

5.50 % 5.50 %

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

$ 35,397 $ 40,622

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

2025 (3 months remaining)

1 unchanged sentence

imputed interest

N OTE PAYABLE

N OTES PAYABLE

Note Purchase Agreement dated June 24, 2024

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”).

On June 24, 2024, the Company entered into and closed a note purchase agreement with Streeterville Capital, LLC (the "Lender") 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 (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 were used for general working capital.

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

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

All repayments of principal due under the 2024 Note were subject to an exit fee of seven percent ( 7 %) of the principal amount being repaid (the “Exit Fee”).

Commencing six months after the date of issuance of the 2024 Note (the “Redemption Start Date”), Lender has the right to redeem up to $ 270,000 of principal amount under the 2024 Note each month which amount plus the Exit Fee will be due and payable three ( 3 ) business days after Lender’s delivery of a redemption notice to the Company.

At the end of each month following the Redemption Start Date, if the Company had 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 September 30, 2025, there were no redemptions by the Lender.

The 2024 Note was secured by a lien on substantially all of the Company’s assets and properties and the Company’s obligations under the 2024 Note were guaranteed by Pistol Star, Inc.

(“Pistol”), a wholly owned subsidiary of the Company.

The 2024 Note could be prepaid in whole or in part without penalty at any time.

In the event that the Company received any proceeds in connection with any fundraising or financing transaction (including any warrant exercises), it would be required to make a mandatory prepayment equal to the lesser of (i) forty percent ( 40 %) of the amount raised in such transaction and (ii) the full amount due under the 2024 Note.

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.

Between January and September 2025, the Company entered into a number of Exchange Agreements with the holder of the 2024 Note pursuant to which it partitioned from the 2024 Note new promissory notes in the aggregate principal amount of $1,434,000 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.

(see Note 17 Subsequent Events).

Note Purchase Agreement dated September 30, 2025

On September 30, 2025, the Company entered into and closed a note purchase agreement with the Lender which provided for the issuance of a $ 1,130,000 principal amount senior secured promissory note (the “2025 Note”).

The 2025 Note carries an original issue discount of $ 125,000 and the Company agreed to pay $ 5,000 to the Lender to cover its transaction costs, which were deducted from the proceeds of the 2025 Note resulting in a total of $ 1,000,000 being funded to the Company at closing.

The proceeds will be used for general working capital.

4 unchanged sentences

At the end of each month following the Redemption Start Date, if the Company has not reduced the outstanding balance under the 2025 Note by at least $ 135,000 , then by the fifth ( 5th ) day of the following month, the Company must either pay to Lender the difference between $ 135,000 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.

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

The 2025 Note is secured by a lien on substantially all of the Company’s assets and properties and the Company’s obligations under the 2025 Note are guaranteed by Pistol.

The 2025 Note can be prepaid in whole or in part without penalty at any time.

In the event that the Company receives any proceeds in connection with any fundraising or financing transaction (including any warrant exercises), it will be required to make a mandatory prepayment equal to the lesser of (i) forty percent ( 40 %) of the amount raised in such transaction and (ii) the full amount due under the 2025 Note.

The 2024 Note provides for customary events of default, including, among other things, the event of non-payment of principal, interest, fees or other amounts, a representation or warranty proving to have been incorrect when made, failure to perform or observe covenants within a specified period of time, the bankruptcy or insolvency of the Company or of all or a substantial part of its property, and monetary judgment defaults of a specified amount.

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 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 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”)

3 unchanged sentences

Three Months ended

Six Months Ended

Nine Months Ended

September 30,

Stock options

4 unchanged sentences

Issuances of Common Stock

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.

During the nine -month periods ended September 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.

8 unchanged sentences

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

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.

During the nine -month periods ended September 30, 2025 and 2024 , the Company issued 280,500 and 168,963 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 $ 213,645 and $ 31,200 , 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.

During the nine -month periods ended September 30, 2025 and 2024 , 25,748 and 1,351 shares of restricted common stock were forfeited, respectively.

Share based compensation for the nine -month periods ended September 30, 2025 and 2024 , was $ 125,989 and $ 171,67 , respectively.

Issuances to Directors

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.

During the nine -month periods ended September 30, 2025 , and 2024 , the Company issued 22,136 and 4,287 , shares of common stock to its directors in lieu of payment of board and committee fees valued at $ 20,002 and $ 9,003 , respectively.

Employees ’ exercise options

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

During the nine -month periods ended September 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").

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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.

There were 777,666 prefunded warrants exercised during the nine -month period ended September 30, 2024 and the Company received proceeds of approximately $ 1,600 .

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).

During the nine -month period ended September 30, 2025, partitioned notes in the aggregate principal amount of $ 600,000 were exchanged for 753,084 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 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 .

During each of the three -month periods ended September 30, 2025 , and 2024 , two customers accounted for 42 % and three customers accounted for 47 % of the revenue, respectively.

Two customers accounted for 45 % of current accounts receivable at September 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 and six months ended June 30, 2025 and 2024 because the estimated annual effective tax rate was zero.

The Company recorded no income tax expense for the three and nine months ended September 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 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.

As of September 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 nine months ended September 30, 2025 , the Company did not record income taxes.

SEGMENT INFORMATION

The Company operates as one operating segment.

The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer, who reviews financial information presented on a consolidated basis.

The CODM used consolidated revenues, gross profit and loss before provision for income taxes to assess financial performance and allocate resources.

These financial metrics are used by the CODM to make key operating decisions, such as the need to allocate its budget to operating expenses and invest in additional equipment.

The segment assets are equal to the assets presented in the condensed consolidated balance sheets.

The significant expenses that are regularly provided to the CODM are disclosed in the consolidated statements of operations as a part of the condensed consolidated net loss.

See the condensed consolidated financial statements for all financial information regarding the Company’s operating segment.

See Note 4 for the Company’s revenues by geographic region.

The Company’s long-lived tangible assets are recognized on the Condensed Consolidated Balance Sheet are located in New Hampshire and Hong Kong.

The Company’s operating lease right-of use assets recognized on the Condensed Consolidated Balance Sheet are located in Minnesota.

SUBSEQUENT EVENTS

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.

October 27, 2025, the Company entered into and closed 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

3,091,668 shares of the Company’s common stock, which were originally issued to the Investor on

January 15, 2025 ( the “Existing Warrants”).

Pursuant to the Warrant Exercise Agreement, the exercise price of the Existing Warrants was reduced from

$ 2.15 per share to

$ 1.02 per share.

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 warrants to purchase up to an aggregate of

6,183,336 shares of the Company’s Common Stock (the “New Warrants”).

The New Warrants have substantially the same terms, are immediately exercisable at an exercise price of

$ 1.02 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 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 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 gross proceeds to the Company under the Warrant Exercise Agreement were approximately

$ 3.1 million, prior to deducting placement agent fees and estimated offering expenses.

The Company intends to use the net proceeds for working capital and general corporate purposes, including repayment of a portion of the Company’s outstanding secured note.

Maxim Group LLC acted as the exclusive placement agent to the Company and the Company agreed to pay Maxim an aggregate cash fee equal to

6.0 % of the gross proceeds received by the Company under the Warrant Exercise Agreement.

On October 27, 2025, the Company entered into two Exchange Agreements (the “Exchange Agreements”) with the Lender, to whom the Company previously issued the 2024 Note in the original principal amount of $ 2,360,000 .

Pursuant to the Exchange Agreements, the Company and Lender agreed to (i) partition from the 2024 Note two new Promissory Notes (the “Partitioned Notes”) in the original principal amounts of $ 261,841 and $ 66,150 , respectively, (ii) cause the outstanding balance of the 2024 Note to be reduced by $ 327,991 , the aggregate principal amount of the Partitioned Notes, and (iii) exchange the Partitioned Notes for an aggregate of 429,027 shares of the Company’s Common Stock.

As a result of the Exchange Agreements, the 2024 Note has been paid in full.

In connection with the

October 27, 2025 warrant exercise agreement described above, the Company prepaid approximately

$ 455,000 of the amount due under the

November 6, 2025, the Company issued

2,500 shares of restricted stock to a new employee with

three -year vesting.

All the shares were issued at

$ 0.63 the closing price of the Company's common stock on

November 6, 2025, as reported on the Nasdaq Capital Market.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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Until the fourth quarter of 2024, Swivel Secure was the exclusive distributer of AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland.

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.

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

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

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RESULTS OF OPERATIONS

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

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

Consolidated Results of Operations - Percent Trend

Three Months Ended June 30,

Three Months Ended September 30,

Total Revenues

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Cost of hardware - reserve

Total Cost and other expenses

Total Cost of Goods Sold

Operating expenses

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Three Months Ended

September 30,

Total Revenue

Three Months Ended

Costs and other expenses

September 30,

Cost of Goods Sold

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.

For the three months ended September 30, 2025, and 2024, service revenues included approximately $263,000 and $214,000, respectively, of recurring maintenance and support revenue, and approximately $5,000 and $53,000 respectively, of non-recurring custom services revenue.

Recurring service revenue increased $49,000 or 23% in 2025 which was due to the timing of renewals of service agreements.

Non-recurring custom services decreased 90% due to an upgrade for one large customer in 2024.

Overall, service revenues remained flat at $268,113 as compared to $267,371 in the corresponding period in 2024.

For the three months ended September 30, 2025, license revenue decreased $523,060 or 36% to $917,951 from $1,441,011 in the corresponding period in 2024, as several long-term customers expanded their license deployments in the corresponding period in 2024.

For the three months ended September 30, 2025, hardware sales decreased 17% to $363,642 from $436,422 in the corresponding period in 2024.

The decrease was one new customer large deploy, several new customer deploys of fully reserved inventory in the 2025 period, and to one long-term customer expanding its purchase of biometric cybersecurity solutions in the 2024 period.

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.

For the three months ended September 30, 2025, cost of service decreased $30,021 or 27% to $80,702 from $110,723 in the three months ended September 30, 2024, due to an upgrade for one large customer for the 2024 period.

For the three months ended September 30, 2025, license fees decreased to $74,077 from $146,732 in the three months ended September 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 September 30, 2025, hardware costs decreased to net cost of $203,209 (after giving effect to the $231,625 reversal of the reserve for inventory) from $207,655 in the three months ended September 30, 2024, for a net decrease of 2%

Selling, general and administrative

Three Months Ended

September 30,

Selling, general and administrative

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.

Selling, general and administrative expenses for the three months ended September 30, 2025, decreased 13% from $1,607,925 in the corresponding period in 2024 to $1,400,288 in the current quarter.

The decreases included reductions in administration and professional services fees, and non-recurring write-off of administration fees.

Research, development and engineering

Three Months Ended

September 30,

Research, development, and engineering

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.

For the three months ended September 30, 2025, research, development, and engineering costs increased 5% to $683,620 compared to $652,174 in the corresponding period in 2024.

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

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Three Months Ended

September 30,

Interest income

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Other income (expense)

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

Other income (expense) for the three months ended September 30, 2025 consisted of interest income of $515, interest expense of $13,174 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 September 30, 2024 consisted of interest income of $2 and interest expense of $98,556 comprised of approximately $4,200 on the government loan through the BBVA bank and the balance on the 2024 Note, and a loan fee amortization amount of $60,000.

Nine MONTHS ENDED September 30, 2025 AS COMPARED TO September 30, 2024

Consolidated Results of Operations - Percent Trend

Six Months Ended June 30,

Nine Months Ended September 30,

Total Revenues

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Revenues and cost of goods sold

Six Months Ended

Nine Months Ended

September 30,

Total Revenue

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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.

For the nine months ended September 30, 2025, and 2024, service revenues included approximately $799,000 and $681,000, respectively, of recurring maintenance and support revenue, and approximately $64,000 and $83,000 respectively, of non-recurring custom services revenue.

Recurring service revenue increased approximately $117,000 or 17% in 2025 which was due to the updated support for a large customer service agreement.

Non-recurring custom services decreased 22% due to an upgrade for one large customer in 2024.

Overall, service revenues increased 13% to $862,707 from $764,062 in the corresponding period in 2024.

For the nine months ended September 30, 2025, license revenue decreased $1,342,873 or 32% to $2,822,796 from $4,165,669 in the corresponding period in 2024, due to the ramp up of BIO-key EMEA selling only BIO-key product which has been accelerating in 2025.

nine months ended

September 30, 2025, hardware sales increased 117% to $1,168,2697 from $537,562 in the corresponding period in

The increase was due to several long-term and new customers expanding their purchase of biometric cybersecurity solutions combined with selling some of fully reserved inventory initially 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.

For the nine months ended September 30, 2025, cost of service decreased $25,810 or 8% to $297,147 from $322,957 in the nine months ended September 30, 2024, due to the costs associated with the upgrade for one large customer.

For the nine months ended September 30, 2025, license fees decreased to $233,450 from $443,384 in the nine months ended September 30, 2024, due to the absence of license fees for third-party software included in our previous Swivel Secure product offerings.

For the nine months ended September 30, 2025, hardware costs increased to a net cost of $571,069 (after giving effect to the $509,040 reversal of the reserve for inventory) from $260,684 in the nine months ended September 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

Nine Months Ended

September 30,

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.

Selling, general and administrative expenses for the nine months ended September 30, 2025, decreased 16% from $5,332,764 in the corresponding period in 2024 to $4,453,362 in the current quarter.

The decreases included reductions in administration, administrative write-offs, sales personnel costs, and professional services fees.

Research, development and engineering

Six Months Ended

Nine Months Ended

September 30,

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.

For the nine months ended September 30, 2025, research, development, and engineering costs increased 3% to $1,915,422 compared to $1,850,929 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

Nine Months Ended

September 30,

Interest income

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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.

Other income (expense) for the nine months ended September 30, 2025 consisted of interest income of $2,610, interest expense of $74,722 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 nine months ended September 30, 2024 consisted of interest income of $53 and interest expense of $108,823 consisting of approximately $8,100 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 $64,000.

LIQUIDITY AND CAPITAL RESOURCES

Operating activities overview

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

Net cash used in operations during the nine months ended September 30, 2025 was $2,838,088.

Items of note included:

Net positive cash flows related to adjustments for non-cash expenses of approximately $823,000.

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.

Net positive cash flows related to accounts receivable and amount due from factor of approximately $83,000.

Negative cash flows related to changes in allowance for doubtful receivables, accounts payable, capitalized contract costs, inventory, prepaid expenses, deferred revenues, and accrued liabilities of approximately $875,000, due to working capital management.

Financing activities overview

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.

Net cash provided by financing activities during the nine months ended September 30, 2025 was $4,456,013 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 $109,137 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 six months ended June 30, 2025 consisted of capital expenditures was $6,048 for capital expenditures.

Net cash used in investing activities during the nine months ended September 30, 2025 consisted of capital expenditures of $7,373 for computers.

Liquidity and Capital Resources

Since our inception, our capital needs have been met through proceeds from the sale of equity and debt securities, and revenue.

Since our inception, our capital needs have been met mainly through proceeds from the sale of equity and debt securities, and revenue.

We expect capital expenditures to be less than $100,000 during the next twelve months.

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

On September 30, 2025, we entered into and closed a note purchase agreement which provided for the issuance of a $1,130,000 principal amount senior secured promissory note (the "2025 Note").

This resulted in gross proceeds of approximately $1,000,000 after deducting estimated offering expenses, and the original issue discount.

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 $135,000 of principal amount each month.

In connection with the October 27, 2025 warrant exercise agreement described above, we prepaid approximately $450,000 of the amount due under the 2025 Note.

As of the date of this report, the outstanding principal amount due under the 2025 Note is approximately $675,000.

For a more complete description of the 2025 Note, please see Note 10 to Our Condensed Consolidated Financial Statements included in Part I Item 1 of this report.

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").

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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.

As of the date of this report, the loan has been paid in full.

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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Liquidity outlook

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.

At September 30, 2025, our total cash and cash equivalents were $2,039,853, as compared to $437,604 at December 31, 2024.

At September 30, 2025, we had a working capital of approximately $782,000.

On October 27, 2025, we enhanced our liquidity by closing a warrant exchange agreement resulting in net proceeds of approximately $2,500,000, after deduction of placement fees and repayment of certain indebtedness.

We currently require approximately $830,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation.

We also have approximately $3.1 million of inventory (currently reserved) purchased for projects in Nigeria.

We also have approximately $2.8 million of inventory (currently reserved) initially purchased for projects in Nigeria.

We continue to explore other markets and opportunities to sell the product to generate additional cash.

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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