What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2026-06-12 compared with 2025-04-23 · 412 added, 373 removed, 1187 unchanged (40% of the section changed)

19 unchanged sentences

Changes in Internal Control Over Financial Reporting

During the fourth quarter of 2024, we implemented a number of changes to our internal control over financial reporting.

We have adopted policies and procedures designed to enhance our review and procedures to thoroughly assess all accounts, including receivables, revenue, and inventory, for potential adjustments required for proper presentation of the value of the accounts.

These changes consisted of allocating additional human resources to our finance and accounting functions, implementing additional testing and redundancy, and restructuring financial management personnel at Swivel Secure, including the review and approval of all accounting decisions at both the subsidiary and parent levels.

During 2025, there have been no changes to our internal control over financial reporting.

OTHER INFORMATION

During the three months ended December 31, 2025, none of our directors or “officers” (as defined in Rule 16a - 1 (f) under the Securities Exchange Act of 1934, as amended) adopted or terminated a “Rule 10b5 - 1 trading arrangement” or “non-Rule 10b5 - 1 trading arrangement,” as each term is defined in Item 408 of Securities and Exchange Commission Regulation S-K.

Because this Annual Report on Form 10 -K is being filed within four business days from the date of the reportable event noted below, we have elected to make the following disclosure in this Annual Report on Form 10 -K instead of in a Current Report on Form 8 -K under Item 2.06 - Material Impairments.

The following disclosure is intended to satisfy the requirements of Item 2.06 of Form 8 -K.

On June 10, 2026, in connection with preparing audited financial statements for the fiscal year ended December 31, 2025, the Company completed its annual impairment testing of the value of its investment in shares of common stock of Boumarang, Inc.

(the “Boumarang Shares”).

The valuation of the Boumarang Shares was based on an independent valuation report prepared by a third party which valued the Boumarang Shares at $5.000,000 as of December 31, 2025.

The valuation was based in part on the anticipated revenues of Boumarang which have not been achieved as of June 10, 2006.

As a result, the Company determined to record a 50% impairment of its investment in Boumarang Shares which resulted in a material charge for impairment of $2.5 million under U.S.

generally accepted accounting principles.

This noncash impairment charge is reflected in the Company’s audited financial statements for the fiscal year ended December 31, 2025.

The Company does not anticipate that this charge will result in material future cash expenditures.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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Sullivan has an undergraduate degree in Computer Science from Brown University and has over 26 years of experience in IT projects and implementation, including directly working with security and identity management solutions at the Company, Computer Associates, Platinum Technology, and Memco Software.

Committees of the Board of Directors

Audit Committe e

Audit Committee of the Board of Directors

Our audit committee is comprised of Cameron Williams (Chair), Robert J.

6 unchanged sentences

The charter is available on our website at www.bio-key.com .

Compensation Committee

Our compensation committee is comprised of Cameron Williams (Chair) and Robert Michel, both of whom meet the independence standards established by NASDAQ and under the Exchange Act.

The compensation committee’s duties include overseeing our overall compensation philosophy, policies and programs.

This includes reviewing and analyzing the design and function of our various compensation components, establishing salaries, incentives and other forms of compensation for officers and non-employee directors, and administering our equity incentive plan.

In fulfilling its responsibilities, the compensation committee has the authority to delegate any or all of its responsibilities to a subcommittee of the compensation committee.

Our compensation committee operates under a written charter that is reviewed annually.

The charter is available on our website at www.bio-key.com .

Code of Ethics

11 unchanged sentences

We believe our Insider Trading Policy is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and the Nasdaq Listing Rules.

Our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.

Our Insider Trading Policy is filed with the SEC and incorporated by reference herein to Exhibit 19.1 to our Annual Report on Form 10 -K for the year ended December 31, 2024.

Term of Office

5 unchanged sentences

Name and Principal

312,875 33,750 199 346,824

Chief Executive Officer

285,000 24,000 491 309,491

225,312 26,250 518 252,080

Chief Financial Officer

199,500 22,500 - 222,000

252,135 30,000 162,186 ( 3 ) 144,321

Chief Legal Officer

223,250 22,500 79,429 ( 4 )

The aggregate grant date fair value of the restricted shares is calculated by the multiplying the quantity of shares issued by the closing trading price of the shares on the date of issuance calculated under FASB ASC 718.

10 unchanged sentences

In setting cash compensation levels, we favor a balance in which base salaries are generally targeted at slightly below the peer average and a bonus opportunity that is targeted at slightly above the average.

In 2025, we increased the base compensation of our executive officers based on their collective efforts in managing key accounts, completing a series of financing transactions over the past two years, and the fact that base compensation levels had not been increased since 2022.

Effective July 1, 2024, we restored the 2023 based compensation of Mr.

8 unchanged sentences

We also include an equity component as part of our compensation package because we believe that equity-based compensation aligns the long-term interests of our named executive officers with those of stockholders.

In 2024 and 2023, we issued restricted stock awards to each of our named executive officers in recognition of the revenue growth of the Company in 2023 and revenue growth of the Company in 2022 and successful integration of Swivel Secure, respectively.

In 2025 and 2024, we issued restricted stock awards to each of our named executive officers.

These cash and equity compensation components of pay are supplemented by various benefit plans that provide health, life, accident, disability and severance benefits, most of which are the same as the benefits provided to all of our US based employees.

26 unchanged sentences

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table sets forth for each named executive officer, information regarding outstanding equity awards as at December 31, 2024.

The following table sets forth for each named executive officer, information regarding outstanding equity awards (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026) at December 31, 2025 .

Option Awards

of stock that

24 1,699.20 3/21/2026

18 1,699.20 3/21/2026

Calculated based on the closing market price of the Company’s common stock on December 31, 2025 of $5.40 per share.

24,000 shares vest in three equal annual installments commencing July 31, 2025.

1,945 shares vest in two equal annual installments commencing August 29, 2025.

22,500 shares vest in three equal annual installments commencing July 31, 2025.

1,667 shares vest in two equal annual installments commencing August 29, 2025.

22,500 shares vest in three equal annual installments commencing July 31, 2025.

1,667 shares vest in two equal annual installments commencing August 29, 2025

4,500 shares vest in three equal annual installments commencing September 2, 2026.

1,600 shares vest in two equal annual installments commencing July 31, 2026, and 65 shares vest in one annual installment commencing August 29, 2026.

3,500 shares vest in three equal annual installments commencing September 2, 2026.

1,500 shares vest in two equal annual installments commencing July 31, 2026, and 55 shares vest in one annual installment commencing August 29, 2026.

4,000 shares vest in three equal annual installments commencing September 2, 2026.1,500 shares vest in two equal annual installments commencing July 31, 2026, and 167 shares vest in one annual installment commencing August 29, 2026

Narrative Disclosure to Outstanding Equity Awards at Fiscal Year End Table

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DePasquale his base salary and benefits earned but unpaid through the date of termination, and any prorated bonus earned during the then current bonus year, plus two times his then current base salary.

Action to Recover Erroneously Awarded Compensation

In preparing our year-end 2023 consolidated financial statements, we determined that certain errors were made which required the restatement of our previously issued financial statements for the interim periods occurring within the year ended December 31, 2023.

These errors resulted in the overstatement of accounts receivable and revenue, understatements of certain allowances for accounts receivable and certain reserves for inventory, and an understatement of net loss and total stockholders’ equity.

This restatement is reflected in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on June 5, 2024 and amended on June 20, 2024.

Our executive officers did not receive any incentive-based compensation in 2023 that was subject to recovery.

Accordingly, no recovery was required or sought from any of our executive officers under our Clawback Policy, which is filed as Exhibit 97.1 to this Annual Report on Form 10-K.

Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information

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Narrative Disclosure to Director Compensation Table

During 2024, we had a policy to pay each non-employee director $3,000 per board meeting, and $1,000 per board committee meeting attended.

During 2025, we changed our policy to increase the board fees payable to each non-employee to $3,500 per board meeting.

The Directors still receive $1,000 per board committee meeting attended.

Fees for attendance at regular quarterly board meetings held during the first three quarters of each fiscal year are paid through the issuance of common stock and payments for the last meeting of the year are paid in cash or, at the option of the director, in shares of common stock.

All of our directors elected to receive payment in common stock for the first and second board meeting in 2024.

All of our directors elected to receive payment in common stock for the first board meeting in 2025.

All directors will be indemnified by us for actions associated with being a director to the fullest extent permitted under Delaware law.

1 unchanged sentence

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of April 21, 2025 information with respect to the securities holdings of all persons that we, pursuant to filings with the SEC and our stock transfer records, have reason to believe may be deemed the beneficial owner of more than 5% of our common stock.

The following table also sets forth, as of such date, the beneficial ownership of our common stock by all of our current executive officers and directors, both individually and as a group.

The beneficial owners and number of securities beneficially owned have been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as awarded, and, in accordance therewith, include all shares of our common stock that may be acquired by such beneficial owners within 60 days of April 21, 2025 upon the exercise or conversion of any options, warrants or other convertible securities.

This table has been prepared based on 5,814,041.

The following table sets forth, as of June 10, 2026 information with respect to the securities holdings of all persons that we, pursuant to filings with the SEC and our stock transfer records, have reason to believe may be deemed the beneficial owner of more than 5% of our common stock.

The following table also sets forth, as of such date, the beneficial ownership of our common stock by all of our current executive officers and directors, both individually and as a group (as adjusted to reflect our 1-for-10 reverse stock split, which was effective April 30, 2026).

The beneficial owners and number of securities beneficially owned have been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as awarded, and, in accordance therewith, include all shares of our common stock that may be acquired by such beneficial owners within 60 days of June 10, 2026 upon the exercise or conversion of any options, warrants or other convertible securities.

This table has been prepared based on 1,085,360 outstanding shares.

Amount and Nature

7 unchanged sentences

Fiber Food Systems, Inc

530 Technology Drive, Suite 100

Irvine, CA 92618

Streeterville Capital LLC

303 East Wacker Drive, Suite 1040

Chicago, IL 60601

Unless otherwise indicated, the address of each person listed below is c/o BIO-key International, Inc., 101 Crawfords Corner Rd, Suite 4116, Holmdel, NJ 07733

Includes 232 shares issuable on exercise of options, 9,167 shares issuable upon exercise of warrants, and 28,120 shares of restricted stock of which 25,297 remain subject to vesting.

Includes 174 shares issuable upon exercise of options and 26,064 shares of restricted stock of which 24,166 remain subject to vesting.

Includes 87 shares issuable upon exercise of options and 10,203 shares of restricted stock of which 9,371 remain subject to vesting.

Includes 174 shares issuable on exercise of options, 12,667 shares issuable upon exercise of warrants, and 26,064 shares of restricted stock of which 24,166 remain subject to vesting.

Includes 917 shares issuable upon exercise of warrants, and 73,13 shares of restricted stock of which 6,165 remain subject to vesting.

Includes 6,107 shares of restricted stock of which 5,055 remain subject to vesting.

Includes 3,522 shares of restricted stock of which 3,119 remain subject to vesting.

Includes 1,267 shares issuable upon exercise of warrants, and 6,608 shares of restricted stock of which 5,556 remain subject to vesting.

Includes 2 shares issuable on exercise of options and 906 shares of restricted stock of which 742 remain subject to vesting.

1 unchanged sentence

Includes 906 shares of restricted stock of which 742 remain subject to vesting.

Includes 232 shares issuable on exercise of options and 3,036 shares of restricted stock of which 2,435 remain subject to vesting.

Includes 504 shares of restricted stock of which 359 remain subject to vesting.

The address of Kelvin is Flat C, 27/F, Block 5, Grand Pacific Views, Siu Lam, Hong Kong N7.

Based on information contained in a Schedule 13G filed with the SEC on January 15, 2025 and other information known to the Company.

Streeterville Capital LLC (“Streeterville”) is the direct holder of 340,000 shares of common stock.

Streeterville Management LLC and John M.

Fife indirectly beneficially own these shares.

Streeterville has sole voting and dispositive power over the shares.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth, as of December 31, 2024, information with respect to securities authorized for issuance under equity compensation plans.

The following table sets forth, as of December 31, 2025, information with respect to securities authorized for issuance under equity compensation plans (as adjusted to reflect our 1-for-10 reverse stock split, which was effective April 30, 2026).

On January 27, 2016, the stockholders approved the 2015 Equity Incentive Plan, which was amended on June 13, 2019, by vote of stockholders, and amended and restated by vote of stockholders on June 18, 2021 (as amended and restated, the “2015 Plan”).

The 2015 Plan reserves 43,834 shares of common stock for issuance of options, restricted stock, and other equity-based awards to employees, officers, directors, and consultants of the Company.

The 2015 Plan reserved 4,384 shares of common stock for issuance of options, restricted stock, and other equity-based awards to employees, officers, directors, and consultants of the Company.

Options are issued at exercise prices which may not be below 100-110% of fair market value and have terms not to exceed ten years.

1 unchanged sentence

In the event of a change in control, certain stock awards issued under this plan may be subject to additional acceleration of vesting as may be provided in the participants’ written agreement.

The 2015 Plan expires in December 2025.

The 2015 Plan expired in December 2025.

In addition to options issued under the 2015 Plan, we have issued options to purchase common stock to employees, officers, directors and consultants outside of the plan.

5 unchanged sentences

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

On August 8, 2025, at the Annual Meeting, a proposal was approved to amend the plan to reserve an additional 70,000 shares of common stock.

In 2025, the Company issued 2,126 shares to employees.

On December 14, 2023, the stockholders approved the 2023 Stock Incentive Plan.

4 unchanged sentences

The 2023 Plan expires on December 13, 2033, unless terminated earlier.

Awards have been granted for 185,194 shares under the 2023 Plan in 2024.

On August 8, 2025, at the Annual Meeting, a proposal was approved to amend the plan to reserve an additional 70,000 shares of common stock.

In 2025, the Company issued 28,050 restricted shares to employees of which 3,026 were forfeited.

The Company also issued 2,316 shares to the Board of Directors for payments of Board fees.

of securities

11 unchanged sentences

Excludes employee stock purchase rights accruing under the ESPP.

Amount includes 529 shares of common stock and 155,957 shares of common stock available as of December 31, 2024 for future issuance under the 2015 Plan and the 2023 Plan, respectively, and 33,799 shares of common stock available as of December 31, 2024 for future issuance under the ESPP.

Amount includes 58,007 shares of common stock available as of December 31, 2025 for future issuance under the 2023 Plan, and 71,251 shares of common stock available as of December 31, 2025 for future issuance under the ESPP.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

3 unchanged sentences

Kelvin is the Co-Chairman of the board of directors and an executive officer.

2023 Public Securities Offering

On October 31, 2023, we completed a public offering of shares of common stock and warrants resulting in net proceeds of approximately $3.3 million, after deducting placement agent fees and estimated offering expenses.

Units comprised of shares of common stock and warrants to purchase common stock were purchased at a per unit price of $3.15, and warrants have an exercise price of $3.15.

DePasquale, our Chairman of the Board of Directors and Chief Executive Officer, James D.

Sullivan, our Vice President of Strategy and Compliance, Chief Legal Officer, and Mr.

Sullivan’s spouse each participated in the public offering.

DePasquale purchased 9,167 shares of common stock and a warrant to purchase 9,167 shares of common stock for a total purchase price of $28,875.

Sullivan purchased 12,667 shares of common stock and a warrant to purchase 12,667 shares of common stock for a total purchase price of $39,000, and his spouse purchased 3,173 shares of common stock and a warrant to purchase 3,173 shares of common stock for a total purchase price of $9,993.

Collaboration with Fiber Food Systems, Inc .

11 unchanged sentences

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Change in Independent Registered Public Accounting Firm

As previously disclosed, on April 24, 2024, the Audit Committee approved the engagement of Bush & Associates CPA (“Bush & Associates”) as the Company’s independent registered public accounting firm and on April 23, 2024, dismissed Marcum LLP (“Marcum”), as the Company’s independent registered public accounting firm.

Marcum was retained to serve as the Company’s independent registered public accounting firm on July 20, 2022.

The audit report of Marcum on the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2022 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles except that the report included an explanatory paragraph raising substantial doubt about the Company’s ability to continue as a going concern.

Marcum did not audit the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2021.

During the two most recent fiscal years ended December 31, 2023 and 2022, and the subsequent interim period through April 23, 2024, there were (i) no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Marcum on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Marcum, would have caused Marcum to make reference thereto in its report on the Company’s consolidated financial statements for the year ended December 31, 2022, and (ii) no “reportable events” as such term is defined in Item 304(a)(1)(v) of Regulation S-K except that:

(A) as previously reported in Item 9A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, the Company reported a material weakness in its internal control over financial reporting for the fiscal year ended December 31, 2022, relating to Company’s review and control procedures over the income tax provision in the Company’s financial statement which were not operating at a level of precision to prevent or detect a potential material misstatement in the Company’s consolidated financial statements and a lack of control over the Company’s foreign subsidiaries with respect to the filing of required tax returns on a timely basis;

and (B) as previously reported in the Company's Current Report on Form 8-K filed with the U.S.

Securities and Exchange Commission on April 22, 2024, the Company concluded on April 16, 2023 that its previously issued consolidated financial statements for the three months ended March 31, 2023, the three and six months ended June 30, 2023, and the three and nine months ended September 30, 2023 included in the Company’s previously filed Quarterly Reports on Form 10-Q for such periods should no longer be relied upon.

These reportable events were discussed among the Audit Committee and Marcum.

Marcum has been authorized by the Company to respond fully to the inquiries of Bush & Associates concerning these reportable events.

The Company previously disclosed this information in its Current Report on Form 8-K filed with the SEC on April 30, 2024, provided Marcum with a copy of the disclosures, and requested that Marcum furnish it with a letter addressed to the SEC stating whether or not it agrees with the Company’s statements therein.

A copy of the letter dated April 29, 2024 was filed as an exhibit to such Form 8-K.

During the two most recent fiscal years ended December 31, 2023 and 2022, and the subsequent interim period through April 24, 2024, neither the Company, nor anyone on its behalf, consulted Bush & Associates regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the consolidated financial statements of the Company, and no written report or oral advice was provided to the Company by Bush &Associates that Bush & Associates concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue;

or (ii) any matter that was the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).

Audit and Non-Audit Fees

The following table shows fees for professional services and audit fees billed to us by Bush & Associates for the audit of our annual consolidated financial statements for the years ended December 31, 2024 and 2023 and for review of our financial statements included in our quarterly reports in 2024.

The following table also shows fees for professional services and audit fees billed to us by Marcum LLC for review of our financial statements included in our quarterly reports in 2023, services in connection with the audit of our financial statements for the year ended December 31, 2023, and for providing various consents in 2023 and 2024:

The following table shows fees for professional services and audit fees billed to us by Bush & Associates CPA, our independent registered public accounting firm, for the audit of our annual consolidated financial statements for the years ended December 31, 2025 and 2024 and for review of our financial statements included in our quarterly reports in 2024:

Audit-Related Fees

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– EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Report.

The following documents are filed as part of this Report.

Portions of Item 15 are submitted as separate sections of this Report:

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Notes to Consolidated Financial Statements—December 31, 2025 and 2024

(b) The exhibits listed in the Exhibits Index immediately preceding such exhibits are filed as part of this Report

(2) Financial statement schedules:

Not applicable.

(3) The exhibits listed in the Exhibits Index are filed as part of this Report

– FORM 10-K SUMMARY

2 unchanged sentences

are included herein at the indicated page numbers:

Report of Independent Registered Public Accounting Firm (Bush and Associates CPA., PCAOB ID:

Report of Independent Registered Public Accounting Firm ( Bush and Associates CPA.

Consolidated Balance Sheets —Years ended December 31, 2025 and 2024 42

Consolidated Statements of Operations and Comprehensive Loss—Years ended December 31, 2025 and 2024 43

35 unchanged sentences

Henderson, Nevada

April 23, 2025

June 12, 2026

BIO-key International, Inc.

6 unchanged sentences

Due from factor

74,170 99,320

Inventory, net of reserve

11 unchanged sentences

47,953 73,372

Investments 5,000,000 -

2,500,000 5,000,000

Intangible assets, net

7 unchanged sentences

1,333,930 1,278,732

Government loan – BBVA Bank, current portion

604,102 1,525,977

Government loan – BBVA Bank, current portion

Deferred revenue – current

8 unchanged sentences

Government loan – BBVA Bank, net of current portion

44,762 188,787

Operating lease liabilities, net of current portion

21,266 48,994

Total non-current liabilities

2 unchanged sentences

3,196,510 4,843,528

Commitments (Note O)

Commitments (Note L)

STOCKHOLDERS’ EQUITY

12 unchanged sentences

$ 8,303,315 $ 8,615,560

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-10 reverse stock split, which was effective April 30, 2026.

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

$ 1,172,107 $ 1,108,506

3,423,300 5,189,370

1,342,148 631,695

Total revenues

5,937,555 6,929,571

Costs and other expenses

Cost of services

387,144 396,274

Cost of license fees

309,829 589,505

Cost of hardware

1,189,464 516,611

Cost of hardware reserve

( 513,400 ) ( 213,005 )

Total costs and other expenses

1,373,037 1,289,385

4,564,518 5,640,186

Operating expenses

Selling, general and administrative

6,282,232 7,140,147

Research, development and engineering

2,609,893 2,511,080

Operating expenses before impairment of investment 8,892,125 9,651,227

Impairment of investment 2,500,000 -

Total operating expenses

11,392,125 9,651,227

Operating loss

( 6,827,607 ) ( 4,011,041 )

Other income (expense)

Interest income

Gain from sale of asset

Loss on foreign currency transactions

Loan fee amortization

Change in fair value of convertible note

( 256,833 ) ( 124,000 )

Interest expense

( 60,793 ) ( 175,755 )

Total other income (expense)

Loss before provision for income tax benefit

Provision for income tax benefit

( 313,839 ) ( 312,649 )

Loss before provision for income taxes (tax benefits)

( 7,141,446 ) ( 4,323,690 )

Provision for income taxes (tax benefits)

( 16,500 ) 22,998

$ ( 7,157,946 ) $ ( 4,300,692 )

Comprehensive loss:

Other comprehensive loss- Foreign translation adjustment

$ ( 7,157,946 ) $ ( 4,300,692 )

Other comprehensive income – Foreign translation adjustment

25,513 26,469

Comprehensive loss

$ ( 7,132,433 ) $ ( 4,274,223 )

Basic and Diluted Loss per Common Share

$ ( 10.77 ) $ ( 20.88 )

Weighted Average Shares Outstanding:

Basic and Diluted

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

664,770 205,977

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-10 reverse stock split, which was effective April 30, 2026.

The accompanying notes are an integral part of these statements.

7 unchanged sentences

Issuance of common stock for directors’ fees

1,205 - 18,006 - - 18,006

Issuance of restricted common stock to employees

17,896 2 ( 2 ) - - -

Forfeiture of restricted stock

( 917 ) - - - - ( 1 )

Exercise of warrants

Issuance of warrants

190,322 19 1,908,080 - - 1,908,099

Issuance of stock for securities purchase agreements

59,500 6 4,999,994 - - 5,000,000

Issuance of common stock for employee stock purchase plan

264 - 3,690 - - 3,690

Share based compensation for employee stock purchase plan

- - 775 - - 775

Foreign currency translation adjustment

- - - 26,469 - 26,469

Share-based compensation

- - 224,470 - - 224,470

Issuance costs

- - ( 172,350 ) - - ( 172,350 )

- - - - ( 4,300,692 ) ( 4,300,692 )

Balance as of December 31, 2024

1 unchanged sentence

Issuance of common stock for directors’ fees

2,314 - 20,004 - - 20,004

Issuance of restricted common stock to employees

28,300 3 ( 3 ) - - -

Forfeiture of restricted stock

( 3,025 ) - - -

Exercise of warrants

Issuance of warrants

Issuance of stock for securities purchase agreements

515,278 52 6,966,506 - - 6,966,558

Issuance of stock for repayment of debt

168,672 17 1,786,974 - - 1,786,991

Issuance of common stock for employee stock purchase plan

2,125 - 10,076 - - 10,076

Share based compensation for employee stock purchase plan

- - 2,250 - - 2,250

Foreign currency translation adjustment

- - - 25,513 - 25,513

Share-based compensation

- - 144,321 - 144,321

Issuance costs

- - ( 462,994 ) - - ( 462,994 )

- - - - ( 7,157,946 ) ( 7,157,946 )

Balance as of December 31, 2025

1,085,360 $ 109 $ 141,497,741 $ 74,803 $ ( 136,465,848 ) $ 5,106,805

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-10 reverse stock split, which was effective April 30, 2026.

The accompanying notes are an integral part of these statements.

4 unchanged sentences

CASH FLOW FROM OPERATING ACTIVITIES:

$ ( 7,157,946

) $ ( 4,300,692 )

Adjustments to reconcile net loss to cash used for operating activities:

84,458 93,026

Amortization of intangible assets and write-off

267,273 304,983

Interest payable on Note

58,282 164,589

Loss on foreign currency

Reserve for inventory

Allowance for doubtful account

( 513,400 ) ( 213,005 )

Allowance for credit losses

( 250,000 ) ( 372,532 )

Amortization of debt discount

261,833 124,000

Amortization of capitalized contract costs

173,062 175,900

Impairment of investment 2,500,000 -

Share based and warrant compensation for employees and consultants

146,571 225,245

Stock based fees to directors

20,004 18,006

Bad debt expense

Change in fair value of convertible note

15,000 100,000

Deferred income tax benefit

16,500 ( 22,998 )

Amortization of operating lease right-of-use assets

25,419 79,521

Change in operating assets and liabilities:

Accounts receivable

( 252,593 ) 855,829

Due from factor

74,170 25,150

Capitalized contract costs

( 75,227 ) ( 355,520 )

Right of use asset

- ( 115,988 )

520,828 280,438

Prepaid expenses and other

27,325 85,523

Accounts payable

( 310,629 ) ( 502,987 )

Income tax payable - 15,000

Accrued liabilities

55,198 ( 42,116 )

Deferred revenue

( 334,407 ) 526,240

Operating lease liabilities

( 20,410 ) ( 66,712 )

Net cash used for operating activities

( 4,668,689 ) ( 2,914,072 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

( 12,012 ) ( 13,047 )

Net cash used for investing activities

( 12,012 ) ( 13,047 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from public offerings

Repayment of convertible notes

Proceeds from the exercise of warrants

6,966,558 1,908,099

Costs incurred for issuance of common stock

( 462,994 ) ( 172,350 )

Proceeds from issuance of note payable

1,000,000 2,000,000

Repayment of note payable

( 455,000 ) ( 762,611 )

Repayment of government loan

( 146,393 ) ( 150,024 )

Proceeds from Employee Stock Purchase Plan

Net cash (used in) provided by financing activities

6,912,247 2,826,854

Effect of exchange rate changes

NET DECREASE IN CASH AND CASH EQUIVALENTS

25,513 26,469

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

2,257,059 ( 73,796 )

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

437,604 511,400

CASH AND CASH EQUIVALENTS, END OF YEAR

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

$ 2,694,663 $ 437,604

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-10 reverse stock split, which was effective April 30, 2026.

The accompanying notes are an integral part of these statements.

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Cash paid during the year for:

$ 60,793 $ 175,755

Noncash investing and financing activities:

Operating lease right-of-use asset and liability for new lease

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-18 reverse stock split, which was effective December 21, 2023.

Issuance of common stock for repayment of debt

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1-for-10 reverse stock split, which was effective April 30, 2026.

The accompanying notes are an integral part of these statements.

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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.

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 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.

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.

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 order to mitigate the losses and improve cash flow, the Company is working on the following initiatives.

The EMEA subsidiary is now only selling BIO-key and PortalGuard solutions that do not carry the previous license fee of 50% cost of sales.

Agents are actively seeking other markets to sell our inventory for the Nigerian projects.

The Company continues to lower expenses with a view to keeping current monthly expenses at the current level of approximately $ 750,000 .

The Company has an investment that it can liquidate to fund operations (See Note H) and to pay the required Note Payable payments (See Note J).

We expect that the growth in revenue will alleviate our going concern within the next twelve months.

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.

Reverse Stock Split

All references to issued and outstanding shares for all periods reflect the 1 -for- 18 reverse stock split, which was effective December 21, 2023.

As a result, all share numbers for all periods, including the number of shares underlying warrants, options, and other convertible securities, and all exercise prices applicable to such warrants, options and convertible securities have been adjusted retrospectively to reflect the 1 -for- 18 reverse stock split.

On April 30, 2026, subsequent to the balance sheet date, the Company effected a 1‑for‑10 reverse stock split of its common stock.

All share and per share amounts, including shares underlying options, warrants and other convertible securities, have been retroactively adjusted for all periods presented to reflect this reverse stock split

Foreign Currency

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

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

The functional currency of the Company is the U.

dollar, which is the currency of the primary economic environment in which it operates.

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Gains or losses arising from changes in the exchange rates used in the translation of such transactions and from the remeasurement of the monetary balance sheet items are recorded as gain (loss) on foreign currency transactions.

In order to mitigate the losses and improve cash flow, the Company is working on the following initiatives.

Our EMEA subsidiary is now only selling our BIO-key and PortalGuard solutions that does not carry the previous 50% cost of sales.

We have agents actively seeking other markets to sell our inventory for the Nigerian projects.

We continue to lower expenses if possible and keep our current monthly expenses at the current level of approximately $ 812,000 .

We now have an investment that we can liquidate to fund operations (See Note H) and to pay the required Note Payable payments (See Note J).

The functional currency of Swivel Secure Europe, SA is the Euro.

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Translation adjustments are included in accumulated other comprehensive loss.

The functional currency of BIO-key Africa is the Naira, however, the majority of the Company's transactions are U.

Under ASC 830, all assets and liabilities are translated into U.

dollars using the current exchange rate at the end of each fiscal period.

An adjustment will be made for the current value of our bank account in Naira currency if the amount materially changes.

The functional currency of BIO-key Hong Kong is the HKD (Hong Kong dollar).

Under ASC 830, all assets and liabilities are translated into U.

dollars using the current exchange rate at the end of each fiscal period.

An adjustment will be made for the current value of our bank account in Yen currency if the amount materially changes.

Summary of Significant Accounting Policies

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Securities and Exchange Commission (SEC).

These accounting principles require us to make certain estimates, judgments and assumptions.

The Company believes that the estimates, judgments and assumptions upon which it relies are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.

These accounting principles require the Company to make certain estimates, judgments and assumptions.

The Company believes that the estimates, judgments and assumptions upon which it relies are reasonable based upon information available to it at the time that these estimates, judgments and assumptions are made.

These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented.

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These costs are deferred and then amortized over a period of benefit determined to be four years.

The period of benefit was determined averaging customer life (churn rate) and historical renewal rates.

We continue to monitor the four -year period as facts and circumstances change.

These costs are included as capitalized contract costs on the balance sheet.

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

At December 31, 2024 and 2023 , amounts in deferred revenue were approximately $ 443,000 and $ 515,000 , respectively.

Business Combinations

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The annual goodwill impairment test will be performed as of December 31st of each year.

Refer Note G for more information regarding the impairment of goodwill in 2022.

Intangible assets acquired in a business combination are recorded at their estimated fair values at the date of acquisition.

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Accounts Receivable

Accounts receivable are carried at original amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis.

Accounts receivable are carried at original amount less an estimate made for credit losses based on a review of all outstanding amounts on a monthly basis.

Management determines the allowance for doubtful receivables by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions.

3 unchanged sentences

$ 1,604,075 $ 1,351,482

Allowance for doubtful accounts

Allowance for Credit Losses

( 383,253 ) ( 633,253 )

Accounts receivable, net of allowances for doubtful accounts

Accounts receivable, net of allowances for Credit Losses

$ 1,220,822 $ 718,229

Bad debt expenses (if any) are recorded in selling, general, and administrative expense.

The allowance for doubtful accounts for the years ended December 31, 2024 and 2023 is as follows:

The allowance for credit losses for the years ended December 31, 2025 and 2024 is as follows:

Balance at Beginning of Year

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Balance at End of Year

Year ended December 31, 2024 Allowance for Doubtful Accounts

Year ended December 31, 2025 Allowance for Credit Losses

$ 633,253 $ - $ ( 250,000 ) $ 383,253

Year ended December 31, 2023 Allowance for Doubtful Accounts

Year ended December 31, 2024 Allowance for Credit Losses

$ 1,005,785 $ 16,265 $ ( 388,797 ) $ 633,253

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Intangible assets with determinable lives are amortized over their estimated useful lives, based upon the pattern in which the expected benefits will be realized, or on a straight-line basis, whichever is greater.

There were no impairments in 2024 and 2023 .

Impairment expenses in 2025 and 2024 .

were $ 2,500,000 and $ 0 .

respectively.

Advertising Expense

8 unchanged sentences

Diluted EPS includes the effect from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options and warrants, when the effect of their inclusion is dilutive.

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1 -for- 18 reverse stock split, which was effective December 21, 2023.

All BIO-key shares issued and outstanding for all periods reflect BIO-key’s 1 -for- 10 reverse stock split, which was effective April 30, 2026.

Accounting for Stock-Based Compensation

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An option to terminate is considered unless it is reasonably certain we will not exercise the option.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016 - 13, Financial Instruments-Credit Losses (Topic 326 ), referred to herein as ASU 2016 - 13, which significantly changes how entities will account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

ASU 2016 - 13 replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments.

Under ASU 2016 - 13 credit impairment is recognized as an allowance for credit losses, rather than as a direct writedown of the amortized cost basis of a financial asset.

The impairment allowance is a valuation account deducted from the amortized cost basis of financial assets to present the net amount expected to be collected on the financial asset.

Once the new pronouncement is adopted by the Company, the allowance for credit losses must be adjusted for management’s current estimate at each reporting date.

The new guidance provides no threshold for recognition of impairment allowance.

Therefore, entities must also measure expected credit losses on assets that have a low risk of loss.

For instance, trade receivables that are either current or not yet due may not require an allowance reserve under currently generally accepted accounting principles, but under the new standard, the Company will have to estimate an allowance for expected credit losses on trade receivables under ASU 2016 - 13.

ASU 2016 - 13 is effective for the Company for annual periods, including interim periods within those annual periods, beginning on January 1, 2023.

The Company has adopted the accounting standard.

Recently Adopted Accounting Pronouncements

Effective January 1, 2025.

The Company adopted 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.

The adoption of this standard did not have to a material impact on the Company’s consolidated financial statements but expanded the disclosures required.

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 November 2024, the FASB issued ASU 2024 - 03, "Disaggregation of Income Statement Expenses (“DISE”)" ("ASU 2024 - 03" ) which applies to all public entities and requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

Public entities must adopt the new standard prospectively for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption and retrospective application are permitted.

The Company is currently evaluating the impact of ASU 2024 - 03 on its consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standard, if currently adopted, would have a material effect on the accompanying consolidated financial statements.

NOTE B — REVENUE FROM CONTRACTS WITH CUSTOMERS

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The contract liability is derived by an 18 % carve-out on subscription orders which is based on industry standards and our current maintenance and support charge for perpetual licenses.

Services revenue decreased $ 1,110,379 from year ended December 31, 2023 to December 31, 2024 which was largely attributed to one customer with a 70 % cost the services.

License fees increased $ 847,297 from year ended December 31, 2023 to December 31, 2024 which a trend that we expect to continue.

Transaction Price Allocated to the Remaining Performance Obligations

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The carrying value of the Company’s notes and loan payables approximated fair value as the interest rates related to the financial instruments approximated market.

Warrants were valued using the Black-Scholes model.

The volatility for warrants were based on the five -year term of the warrants.

We also substituted the Bloomberg one year volatility resulting in approximately $10,000 less in the sensitivity analysis.

NOTE D — CONCENTRATION OF RISK

2 unchanged sentences

The exposure to the Company is solely dependent upon daily bank balances and the respective strength of the financial institutions.

The Company was not in excess of coverage at December 31, 2024 and December 31, 2023.

The Company was not in excess of coverage at December 31, 2025 and 2024.

The Company has not incurred any losses on these accounts.

2 unchanged sentences

The Company analyzes historical bad debts and contract losses, customer concentrations, and customer credit-worthiness when evaluating the adequacy of the allowances.

For the year ended December 31, 2024 one customer accounted for 24 % of total revenue and 4 % of accounts receivable.

For the year ended December 2023 , three customers accounted for 34 % of total revenue.

For the year ended December 31, 2025 , two customers accounted for 26 % of total revenue.

For the year ended December 2024 , one customer accounted for 24 % of total revenue.

At December 31, 2025 , two customers accounted for 43 % of the total accounts receivable.

At December 31, 2023 , three customers accounted for 66 % of total accounts receivable.

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

NOTE E — INVENTORY

2 unchanged sentences

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 in 2023 and 2024 is due to slow moving inventory purchased for projects in Nigeria and other slow moving inventory.

The reserve on inventory in 2025 and 2024 is due to slow moving inventory, including inventory purchased for projects in Nigeria.

The Company is looking into other markets and opportunities to sell or return the product.

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201,679 225,978

49,143 49,143

Leasehold improvements

6 unchanged sentences

Amounts are recorded in selling, general, and administrative expense as well as in cost of services.

Additions for the years ending 12/31/2024 and 12/31/23 were $ 13,047 and $ 1,000 , respectively.

There have been no write-offs or adjustments for the years ending 12/31/2024 and 12/31/2023.

NOTE G — INTANGIBLE ASSETS AND GOODWILL

NOTE G — INTANGIBLE ASSETS

Intangible assets consisted of the following as of December 31:

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Years ending December 31

The Company concluded the amounts in goodwill had been fully impaired and accordingly wrote-off the entire balance in full for the Swivel Secure Europe LTD acquisition, due the reversal of the earnout payable based on the 2022 revenue achievement as at December 31, 2022.

NOTE H - INVESTMENTS

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The Boumarang Shares were purchased from Fiber Food Systems, Inc.

(“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”), an early-stage company engaged in developing global food security solutions, in consideration of the issuance of 59,500 shares of the Company’s common stock (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026).

Fiber Food is not a principal stockholder of Boumarang 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.

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.

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 purchase agreement 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.

In April of 2025, Boumarang acquired all intellectual property rights to the Wavedrone platform from Shore House IVF, a technology developer based in the Faroe Islands, for $ 3.5 million acquisition which was executed entirely in Boumarang common stock.

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

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

In April of 2026 the Company received an updated independent valuation report with a December 31, 2025 valuation of $ 2.00 per share.

The independent report referenced revenue beginning in 2026 as the basis of the valuation, which has not occurred to date.

As a result, management has recorded a 50 % impairment of investment.

NOTE I — ACCRUED LIABILITIES

12 unchanged sentences

$ 1,333,930 $ 1,278,732

For the years ended 12/31/2024 from 12/31/2023, there were increases in compensation costs related to commission payments due of approximately, $ 223,000 and increases in employee expenses reimbursement due to timing of reimbursements of approximately $ 30,000 .

These increases were offset by decreases for the years ended 12/31/2024 from 12/31/2023 of approximately $ 28,000 for a lower vacation time accrual, approximately $ 104,000 for lower legal and accounting fees, approximately $ 97,000 for taxes, approximately $ 1,135 for sales tax, and approximately $ 50,000 for miscellaneous accrued expenses.

NOTE J — NOTE PAYABLE

Securities 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”).

For the years ended December 31, 2025 from December 31, 2024, there were decreases in compensation costs related to commission payments due of approximately, $ 161,000 and decreases in employee expenses reimbursement due to timing of reimbursements of approximately $ 9,000 .

These decreases were offset by increases for the years ended December 31, 2025 and December 31, 2024 of approximately $ 46,000 for a higher vacation time accrual, approximately $ 25,000 for higher legal and accounting fees, approximately $ 9,000 for sales tax, and approximately $ 157,000 for miscellaneous accrued expenses.

NOTE J — NOTES PAYABLE

Securities 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.

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

The proceeds are being used for general working capital.

The principal amount of the 2025 Note is due 18 months following the date of issuance.

Interest under the 2025 Note accrues at a rate of nine percent ( 9 %) per annum.

2 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 %).

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 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 Star, Inc., a wholly owned subsidiary of the Company (Pistol).

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

1 unchanged sentence

The 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 %).

The Company received gross proceeds of approximately $ 1.9 million in connection with a financing transaction (see Note N Warrants).

At December 31, 2025 the Company was not in default of any covenants.

In connection with the October 27, 2025 warrant exercise agreement described in Note M, the Company prepaid approximately $ 455,000 of the amount due under the 2025 Note.

At December 31, 2025, the principal balance due for the 2025 note was $ 545,000 .

Securities Purchase Agreement dated June 24, 2024

The 2024 Note carried 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 proceeds were used for general working capital.

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

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

All repayments of principal due under the 2024 Note will be 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 Note (the “Redemption Start Date”), Lender shall have 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.

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 Note were guaranteed by Pistol.

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.

The Company received gross proceeds of approximately $ 2.0 million in connection with a financing transaction (see Note M Warrants).

In accordance with the terms of the 2024 Note, on October 1, 2024, 40 % of the proceeds received, or approximately $ 762,600 , was used to prepay amounts due under the 2024 Note.

Subsequent to the period ending December 31, 2024, the Company entered into two Exchange Agreements with the holder of the Note and agreed to partition the original Note two 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 .

NOTE K — CONVERTIBLE NOTE PAYABLE

Securities Purchase Agreement dated December 22, 2022

On December 22, 2022, the Company entered into and closed a securities purchase agreement (the “Purchase Agreement”) which issued a $ 2,200,000 principal amount senior secured promissory note (the “Note”).

At closing, a total of $ 2,002,000 was funded, with the proceeds to be used for general working capital.

The principal amount of the Note was due six months following the date of issuance, subject to one six -month extension by the Company.

Interest under the Note accrues at a rate of 10 % per annum, payable monthly through month six and at the rate of 12 % per annum in months seven through twelve, payable monthly.

The Note is secured by a lien on substantially all of the Company’s assets and properties can be prepaid in whole or in part without penalty at any time.

In connection with the issuance of the Note, the Company issued to the investor 38,889 shares of Common Stock (the “Commitment Shares”) valued at $ 18.00 per share and a warrant (the “Warrant”) to purchase 11,112 shares of common stock (the “Warrant Shares”) at an exercise price of $ 54.00 per share, exercisable commencing on the date of issuance with a term of five years.

The warrant was valued at $ 94,316 (see Note N).

On October 31, 2023 the Company repaid $ 1,400,000 of principal due under the Note, and on December 21, 2023 the Company repaid the remaining principal balance of $ 800,000 due under the Note.

As of December 31, 2023, the Note was paid in full.

NOTE L — LEASES

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 $ 1,459,000 reducing the outstanding principal amount of the 2024 Note to approximately $ 338,400 .

On October 27, 2025, the Company entered into two Exchange Agreements (the “Exchange Agreements”) with the Lender.

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 42,903 shares of the Company’s Common Stock (as adjusted

to reflect our

10 reverse stock split, which was effective

April 30, 2026).

As a result of the Exchange Agreements, the

2024 Note has been paid in full.

NOTE K — LEASES

The Company’s leases office space in New Jersey, Minnesota, New Hampshire, Madrid and Hong Kong with lease termination dates in 2026 and 2027.

6 unchanged sentences

Balance sheet information

Operating right-of-use assets

Operating lease right-of-use assets

$ 47,953 $ 73,372

2 unchanged sentences

Operating lease liabilities, non-current portion

21,266 48,994

Total operating lease liabilities

9 unchanged sentences

imputed interest

NOTE M — COMMITMENTS AND CONTINGENCIES

Distribution Agreement

Swivel Secure had a distribution agreement with Swivel Secure Limited (“SSL”).

Terms of the agreement include the following:

The initial term of the agreement ends on January 31, 2027 and will be automatically extended for additional one -year terms thereafter unless either party provides written notice to the other party not later than 30 days before the end of the term that it does not wish to extend the term.

SSL appoints Swivel Secure as the exclusive distributor of SSL’s products, to market, sell and distribute in the EMEA (Europe, Middle East and Africa), excluding the United Kingdom and Republic of Ireland, for a defined discount on the sale price.

Swivel Secure is expected to generate a certain minimum level of orders of SSL products each year during the term of the agreement.

If Swivel Secure fails to meet such minimum level of orders in any year, the exclusive distribution rights will terminate and Swivel Secure will serve as a non-exclusive distributer of SSL Products.

The Company and Swivel Secure Limited terminated the Distribution Agreement in the fourth quarter 2024.

The Company made a business decision to that our PortalGuard and WEB-key solutions be sold versus the Swivel Secure Limited solutions to increase gross profit by close to 50%.

The termination of the agreement did not result in any penalties or inventory returns.

NOTE L — CONTINGENCIES

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

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

NOTE N — EQUITY

NOTE M — EQUITY

Preferred Stock

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All outstanding shares of common stock are fully paid and nonassessable.

Issuances of Common Stock

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

Under the terms of this plan, 43,834 shares of common stock are reserved for issuance to employees and officers of the Company at 85 % of the lower of the closing price of the common stock as reported on the Nasdaq Capital Market at the first day or the last day of the offering period.

Employee Stock Purchase Plan

On June 18, 2021, the stockholders approved the 2021 Employee Stock Purchase Plan ("ESPP").

Under the terms of this plan, 4,384 shares of common stock were reserved for issuance to employees and officers of the Company at 85 % of the lower of the closing price of the common stock as reported on the Nasdaq Capital Market at the first day or the last day of the offering period.

Eligible employees are granted an option to purchase shares under the plan funded by payroll deductions.

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

During 2024 and 2023 , 2.641 , and 17,478 shares respectively were issued under the ESPP to employees, which resulted in a $ 775 , and $ 4,343 non-cash compensation expense respectively for the Company

On December 22, 2022, the Company issued the Commitment Shares.

See Note K - Convertible Note Payable for more information.

On August 8, 2025, at the Company’s Annual Stockholders Meeting (“Annual Meeting”), a proposal was approved to amend the plan to reserve an additional 70,000 shares of common stock.

During 2025 and 2024, 2,126 , and 264 shares, respectively, were issued under the ESPP to employees, (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026) which resulted in a $ 2,250 and $ 775 non-cash compensation expense, respectively.

Issuances of Restricted Stock

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

The Company issued 178,963 shares of restricted common stock to certain employees of the Company and 9,168 of shares of restricted common stock were forfeited during fiscal year 2024 .

The Company issued 16,404 shares of restricted common stock to certain employees of the Company and 3,752 of shares of restricted common stock were forfeited during fiscal year 2023.

The Company issued 28,300 shares of restricted common stock to certain employees of the Company and 3,025 of shares of restricted common stock were forfeited during the year ended December 31, 2025.

The Company issued 17,896 shares of restricted common stock to certain employees of the Company and 917 of shares of restricted common stock were forfeited during the year ended December 31, 2024 ( as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026).

These shares vest in equal annual installments over a three -year period from the date of grant.

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Issuances to Directors, Executive Officers & Consultants

During the 2024 and 2023 years, the Company issued 12,048 and 3,078 shares of common stock respectively to its directors in lieu of payment of board fees, valued at $ 18,005 and $ 39,007 respectively.

During the 2025 and 2024 years, the Company issued 2,314 and 1,205 shares of common stock respectively to its directors in lieu of payment of board fees, valued at $ 20,004 and $ 18,006 respectively (as adjusted

to reflect our

10 reverse stock split, which was effective

April 30, 2026).

Warrants Issued with a Warrant Exercise Agreement:

On 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 309,167 shares of the Company’s common stock (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026), 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 $ 21.50 per share to $ 10.20 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 618,334 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 $ 10.20 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 January 15, 2025, the Company entered into a warrant exercise agreement (the "January Warrant Exercise Agreement") with the Investor to exercise certain outstanding warrants to purchase an aggregate of 206,111 shares of the Company’s common stock (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026) at an exercise price of $ 18.50 per share which were originally issued to the Investor on September 13, 2024 ( the "Existing 2024 Warrants").

In consideration for the exercise of the Existing 2024 Warrants, subject to compliance with the beneficial ownership limitations included in the existing warrants, the Investor received new unregistered warrants which were amended and exercised in full pursuant to the Warrant Exercise Agreement which is more fully described in the preceding paragraph.

The Company realized gross proceeds under the January 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 2024 Note.

On September 12, 2024, the Company entered into a Warrant Exercise Agreement ("Inducement Agreement") with an existing institutional investor for the immediate exercise of certain outstanding warrants that the Company issued on October 30, 2023.

Pursuant to the warrant inducement agreement, the investor agreed to exercise outstanding warrants to purchase an aggregate of 1,030,556 shares of the Company's common stock at an amended exercise price of $ 1.85 .

The gross proceeds from the exercise of the warrants was approximately $ 1.9 million, prior to deducting placement agent fees and estimated offering expenses.

In consideration for the immediate exercise of the warrants, the Company also agreed to issue 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.

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

Warrants Issued with Convertible Note:

See Note K - Convertible Note Payable for the warrant issued with a convertible note in 2022.

Pursuant to the Inducement Agreement, the investor agreed to exercise outstanding warrants to purchase an aggregate of 103,056 shares of the Company's common stock (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026) at an amended exercise price of $ 18.50 .

The gross proceeds from the exercise of the warrants were approximately $ 1.9 million, prior to deducting placement agent fees and estimated offering expenses.

In consideration for the immediate exercise of the warrants, the Company issued new unregistered warrants which were amended and exercised in full pursuant to the January Warrant Exercise Agreement which is more fully described in the preceding paragraph.

Valuation Assumptions for Warrants:

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The volatility for each issuance is determined based on the review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected exercise period.

The five -year volatility is higher than the one -year rate from Bloomberg of 245 %, based on several reverse-splits of BIO-key's stock over the five -year period.

The five -year volatility is higher than the one -year rate from Bloomberg, based on several reverse-splits of BIO-key's stock over the five -year period.

The risk-free rate is based on the U.S.

Treasury yield curve in effect at the time of grant for periods corresponding with the years to maturity.

A summary of warrant activity is as follows:

A summary of warrant activity (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026) is as follows:

Outstanding, as of December 31, 2023

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( 515,278 ) 10.20

( 24,521 ) 1,007.70

Outstanding, as of December 31, 2025

2 unchanged sentences

There were no in-the-money warrants exercisable as of December 31, 2025, 2024 and 2023 .

NOTE O — STOCK OPTIONS

NOTE N — STOCK OPTIONS

2023 Stock Incentive Plan

On December 14, 2023, the stockholders approved the 2023 Stock Incentive Plan.

The 2023 Plan reserves 333,334 shares of common stock for issuance of options, restricted stock, and other equity based awards to employees, officers, directors, consultants advisors and independent contractors of the Company.

The 2023 Plan initially reserved 33,333 shares of common stock for issuance of options, restricted stock, and other equity based awards to employees, officers, directors, consultants advisors and independent contractors of the Company.

Options are issued at exercise prices which may not be below 100 % of fair market value (or 110 % of the fair market value if, at the time the option is granted, the participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes of our stock) and have terms not to exceed ten years.

2 unchanged sentences

The 2023 Plan expires on December 13, 2033, unless terminated earlier.

On August 8, 2025, at the Annual Meeting, a proposal was approved to amend the plan to reserve an additional 70,000 shares of common stock.

In 2025, the Company issued 28,300 restricted shares to employees of which 3,026 were forfeited.

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In the event of a change in control, certain stock awards issued under the 2015 Plan may be subject to additional acceleration of vesting as may be provided in the participants’ written agreement.

The 2015 Plan expires in December 2025.

The 2015 Plan expired in December 2025.

Non-Plan Stock Options

11 unchanged sentences

( 104 ) — ( 104 ) 2,822.40

( 1,187 ) ( 4,724 ) ( 5,911 ) 380.51

Outstanding, as of December 31, 2025

1 unchanged sentence

Vested or expected to vest at December 31, 2025

3,007 $ 197.31 1.14 $ 0

Exercisable at December 31, 2025

3,007 $ 197.31 1.14 $ 0

The options outstanding and exercisable at December 31, 2024 were in the following exercise price ranges:

The options outstanding and exercisable at December 31, 2025 were in the following exercise price ranges (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026):

Options Outstanding

4 unchanged sentences

196 $ 1,453.15 0.69 196 $ 1,453.15

$169.93 - 504.00

1,150 282.24 0.22 1,150 282.24

$93.60 - 504.00

The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $ 5.40 , $ 17.10 , and $ 30.00 as of December 31, 2025, 2024 and 2023 , respectively, which would have been received by the option holders had all option holders exercised their options as of that date.

2 unchanged sentences

The total intrinsic value of options exercised during the years ended December 31, 2025 and 2024 was $ 0 as no options were exercised in either year.

The total fair value of shares vested during the years ended December 31, 2024 and 2023 was $0 ( none vested) and $ 18,310 .

respectively.

The total fair value of shares vested during the years ended December 31, 2025 and 2024 was $0 as no options vested in either year.

As of December 31, 2024, there was no future forfeiture adjusted compensation costs related to nonvested stock options.

NOTE P — INCOME TAXES

The components of net loss consist of the following:

NOTE O — INCOME TAXES

For financial reporting purposes, the net pre-tax book loss for the United States and foreign entities, in the aggregate, was:

United States

5 unchanged sentences

There was no provision for current federal, foreign or state taxes for both of the years ended December 31, 2025 and 2024 as a result of taxable losses incurred in these jurisdictions.

The provision for income tax benefits consist of the following (in thousands):

Current – federal,

Deferred- Federal

The provision for income taxes (tax benefits) benefits consists of the following:

Federal and States

Subtotal - $ -

Federal and States

16,500 ( 22,998 )

Change in valuation allowance

Provision for income tax expense (benefit)

$ 16,500 $ ( 22,998 )

There were no payments made in relation to income taxes for the year ending December 31, 2025.

Significant components of deferred tax assets and liabilities are as follows at December 31, 2025 and 2024 :

1 unchanged sentence

$ 140,490 $ 154,457

Allowance for doubtful accounts

Allowance for credit losses

20,626 20,513

3 unchanged sentences

114,885 114,251

Right-of-use operating lease assets

( 5,979 ) ( 16,346 )

Operating lease liabilities

Stock-based compensation

2 unchanged sentences

( 1,951 ) ( 6,268 )

Intangible assets - US

Impairment of investment 712,500 -

Intangible assets - Foreign

- ( 145,000 )

Reserve - Foreign

Allowance for credit losses - Foreign

Inventory reserve

589,271 781,213

Interest expense

Operating lease liabilities

1,116,119 1,554,541

Operating lease right-of-use assets

Net operating loss and research and credit carryforwards

11,824,622 13,277,118

Valuation allowance

1 unchanged sentence

Net deferred tax liability

The Company has a valuation allowance against the full amount of its net deferred taxes due to the uncertainty of realization of the deferred tax assets due to operating loss history of the Company.

The Company recorded a valuation allowance equal to its net deferred taxes due to the uncertainty of realization of the deferred tax assets due to operating loss history of the Company.

The Company currently provides a valuation allowance against deferred taxes when it is more likely than not that some portion, or all of its deferred tax assets will not be realized.

7 unchanged sentences

In addition, the Company has net operating loss carry forwards from various states of approximately $ 12.5 million which expire from 2026 through 2045.

A reconciliation of the effective income tax rate on operations reflected in the statements of operations to the US federal statutory income tax rate is presented below.

A reconciliation of the effective tax rate on loss from operations and the US federal statutory rate is presented below for the years ended December 31, 2025 and 2024.

Federal statutory income tax rate

State taxes, net of federal benefit

$ ( 1,673,013 ) 21 %

State taxes, net of federal benefit

Permanent differences

( 1.84 ) 1.97

Amortization of intangible assets 33,242 ( 0.7 )

Restricted Stock units 26,334 ( 0.6 )

Others 2,918 ( 0.1 )

Expiration of net operating loss and research credit carryforwards

1,848,627 ( 40.5 )

Expiration and forfeiture of stock options

foreign rate differential

( 7.23 ) ( 5.84 )

Foreign rate differential - all

187,823 (4.1)

True ups and other

175,955 ( 3.9 )

3 unchanged sentences

$ 16,500 ( 0.4 )%

The rate reconciliation above has been adjusted to be presented in compliance with the guidance under ASU 2023 - 09.

The Company has adopted this guidance on a prospective basis.

As previously disclosed for the year ended December 31, 2024, prior to the adoption of ASU 2023 - 09, the following is a reconciliation of our income tax rate computed using the federal statutory rate to our actual income tax rate.

Federal statutory income tax rate

State taxes, net of federal benefit

Permanent differences

Expiration of net operating loss and research credit carryforwards

Foreign rate differential

Valuation allowance

Effective tax rate

On July 4, 2025, the One Big Beautiful Bill was enacted ("OBBBA"), introducing significant and wide-ranging changes to the U.S.

federal tax system.

Significant components include restoration of 100% accelerated tax depreciation on qualifying property including expansion to cover qualified production property.

Another major aspect includes the return to immediate expensing of domestic research and experimental expenditures ("R&E") which in some cases may include retroactive application back to 2021 for businesses with gross receipts of less than $31 million or accelerated tax deductions of R&E that was previously capitalized for larger businesses.

The legislation also reinstates EBITDA-based interest deductions for tax purposes and makes several business tax incentives permanent.

Less favorable business provisions include limitations on tax deductions for charitable contributions.

In accordance with ASC 740, the Company recognized the effects of the OBBBA in the period that included the enactment date.

The Company continues to evaluate the ongoing effects of the OBBBA, including the interaction of the enacted provisions with its existing tax attributes and elections.

The Company has not been audited by the Internal Revenue Service (“IRS”) or any states in connection with income taxes.

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federal jurisdiction and various state jurisdictions.

The Company has not filed its required returns for fiscal 2024 as of the date of this report.

Management believes that when the returns are filed, the taxes that will be owed will not be material due to the losses incurred during the year.

The Company is currently working on the filings and expects to file these returns in April 2026.

The Company estimates that the potential penalties for non-filing will be minimal due to the losses incurred.

The periods from 2021 through 2025 remain open to examination by the IRS and state jurisdictions.

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As a result, management could not calculate the amount of net operating loss carryforwards that are available to offset future taxable income.

We estimate that the potential penalties for non-filing will be minimal due to the losses.

The Company is currently working on the filings and expects to be current by December 31, 2025.

Potential penalties for non-filing are estimated to be minimal due to the losses.

The Company expects to be current by December 31, 2026.

The Company's subsidiary in Hong Kong has not filed its required returns in several years.

1 unchanged sentence

As a result, management could not calculate the amount of net operating loss carryforwards are available to offset future taxable income.

Potential penalties for non-filing are expected to be minimal due to the losses.

The Company expects to be current in 2026.

The Company's subsidiary in Portugal has not filed its required returns since inceptions.

Management believes that when the returns are filed, no taxes will be owed due to losses incurred during those periods.

As a result, management could not calculate the amount of net operating loss carryforwards are available to offset future taxable income.

We estimate that the potential penalties for non-filing will be minimal due to the losses.

The Company will be working on the filings during 2025 and expects to be current in 2026.

The Company believes it is not subject to any tax audit risk beyond those periods.

The Company will be working on the filings during 2026.

The Company believes it is

not subject to any tax audit risk beyond those periods.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

The Company does not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense incurred during the years ended December 31, 2024 and 2023 .

The Company does

not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense incurred during the years ended

December 31, 2025 and 2024 .

NOTE P — SAVINGS PLAN

The Company has established a savings plan under section 401 (k) of the Internal Revenue Code.

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The plan passed its 2024 annual non-discrimination test and expects to pass the 2025 annual non-discrimination test.

NOTE R — EARNINGS PER SHARE (EPS)

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:

NOTE Q — EARNINGS PER SHARE (EPS)

Years ended December 31,

2 unchanged sentences

664,946 277,349

NOTE S — QUARTERLY FINANCIAL DATA (UNAUDITED AND RESTATED)

The Company is providing restated quarterly unaudited consolidated financial information for interim periods occurring within the year ended December 31, 2023.

The need for the restatement arose out of the results of certain financial analysis the Company performed in the course of preparing its year-end 2023 consolidated financial statements.

In the course of the audit of the Company’s consolidated financial statements for the fiscal year ended December 31, 2023, the Company determined that certain errors were made which require the restatement of the Company’s previously issued financial statements for the interim periods occurring within the year ended December 31, 2023.

These errors resulted in the overstatement of accounts receivable and revenue, understatements in certain allowances for accounts receivable and certain reserves for inventory, and an understatement of net loss and total stockholders’ equity which errors may also impact other amounts included in the financial statements.

The Company attributes the errors principally to a material weakness in internal controls over the recording and processing of revenues, allowances for accounts receivable and certain reserves for inventory, which the Company worked to remediate in 2024.

We have put newly trained management in control of our EMEA invoice processing and revenue recognition process.

Additionally, we have added more inventory analysis in our quarterly closing process.

The restated consolidated balance sheet line items for the first, second and third fiscal quarters of 2023 are as follows:

Originally Reported

Three Months Ended Six Months Ended Nine Months Ended Three Months Ended Six Months Ended Nine Months Ended Three Months Ended Six Months Ended Nine Months Ended

March 31, 2023

June 30, 2023

September 30, 2023

March 31, 2023

June 30, 2023

September 30, 2023

March 31, 2023

June 30, 2023

September 30, 2023

Accounts receivable, net

$ 3,362,203 $ 3,178,785 $ 2,799,218 $ ( 900,000 ) $ ( 1,100,000 ) $ ( 1,300,000 ) $ 2,462,203 $ 2,078,785 $ 1,499,218

4,427,815 4,384,098 4,289,213 ( 500,000 ) ( 1,500,000 ) ( 2,500,000 ) 3,927,815 2,884,098 1,789,213

Total current assets

8,936,084 8,531,330 7,820,339 ( 1,400,000 ) ( 2,600,000 ) ( 3,800,000 ) 7,536,084 5,931,330 4,020,339

Accumulated deficit

( 116,773,695 ) ( 118,196,573 ) ( 118,834,397 ) ( 1,400,000 ) ( 2,600,000 ) ( 3,800,000 ) ( 118,173,695 ) ( 120,796,573 ) ( 122,634,397 )

Total Stockholders' Equity

5,156,755 3,845,091 3,314,451 ( 1,400,000 ) ( 2,600,000 ) ( 3,800,000 ) 3,756,755 1,245,091 ( 485,549 )

Total Liabilities and Stockholders' Equity

11,106,057 10,583,245 9,749,380 ( 1,400,000 ) ( 2,600,000 ) ( 3,800,000 ) 9,706,057 7,983,245 5,949,380

The restated line items of the consolidated statements of comprehensive income for the three -month periods ended March 31, 2023, June 30, 2023, and September 30, 2023 are as follow:

Originally Reported

$ 2,478,556 $ 1,235,771 $ 950,015 $ ( 900,000 ) $ 1,578,556 $ 1,235,771 $ 950,015

Total revenues

3,083,767 1,928,929 1,817,108 ( 900,000 ) - - 2,183,767 1,928,929 1,817,108

Cost of hardware - Reserve

- - - 500,000 1,000,000 1,000,000 500,000 1,000,000 1,000,000

Total costs and other expenses

820,274 606,111 476,604 500,000 1,000,000 1,000,000 1,320,274 1,606,111 1,476,604

2,263,493 1,322,818 1,340,504 ( 1,400,000 ) ( 1,000,000 ) ( 1,000,000 ) 863,493 322,818 340,504

Selling, general and administrative

1,931,732 1,943,164 1,547,376 200,000 200,000 1,931,732 2,143,164 1,747,376

Total Operating Expenses

2,621,891 2,501,345 2,106,062 - 200,000 200,000 2,621,891 2,701,345 2,306,062

Operating loss

( 358,398 ) ( 1,178,527 ) ( 765,558 ) ( 1,400,000 ) ( 1,200,000 ) ( 1,200,000 ) ( 1,758,398 ) ( 2,378,527 ) ( 1,965,558 )

Loss before provision for income tax

( 288,322 ) ( 1,279,878 ) ( 638,013 ) ( 1,400,000 ) ( 1,200,000 ) ( 1,200,000 ) ( 1,688,322 ) ( 2,479,878 ) ( 1,838,013 )

( 288,322 ) ( 1,422,878 ) ( 637,824 ) ( 1,400,000 ) ( 1,200,000 ) ( 1,200,000 ) ( 1,688,322 ) ( 2,479,878 ) ( 1,838,013 )

Comprehensive Net loss

( 288,322 ) ( 1,422,878 ) ( 637,824 ) ( 1,400,000 ) ( 1,200,000 ) ( 1,200,000 ) ( 1,688,322 ) ( 2,479,878 ) ( 1,838,013 )

Comprehensive loss

( 216,176 ) ( 1,402,994 ) ( 602,460 ) ( 1,400,000 ) ( 1,200,000 ) ( 1,200,000 ) ( 1,616,176 ) ( 2,459,994 ) ( 1,802,649 )

Basic and Diluted Loss per Common Share

( 0.52 ) ( 2.56 ) ( 1.12 ) ( 2.52 ) ( 2.16 ) ( 2.11 ) ( 3.04 ) ( 4.45 ) ( 3.22 )

The restated line items of the consolidated statements of comprehensive income for the six -month period ended June 30, 2023 and nine -month period ended September 30, 2023 are as follows:

Originally Reported

Six Months Ended

Nine Months Ended

Six Months Ended

Nine Months Ended

Six Months Ended

Nine Months Ended

June 30, 2023

September 30, 2023

June 30, 2023

September 30, 2023

June 30, 2023

September 30, 2023

$ 3,714,327 $ 4,664,341 $ ( 900,000 ) $ ( 900,000 ) $ 2,814,327 $ 3,764,341

Total revenues

5,012,696 6,829,804 ( 900,000 ) ( 900,000 ) 4,112,696 5,929,804

Cost of hardware - reserve

- - 1,500,000 2,500,000 1,500,000 2,500,000

Total costs and other expenses

1,426,385 1,902,989 1,500,000 2,500,000 2,926,385 4,402,989

3,586,311 4,926,815 ( 2,400,000 ) ( 3,400,000 ) 1,186,311 1,526,815

Selling, general and administrative

3,874,896 5,422,272 200,000 400,000 4,074,896 5,822,272

Total Operating Expenses

5,123,237 7,229,298 200,000 400,000 5,323,237 7,629,298

Operating loss

( 1,536,926 ) ( 2,302,483 ) ( 2,600,000 ) ( 3,800,000 ) ( 4,136,926 ) ( 6,102,483 )

Loss before provision for income tax

( 1,568,200 ) ( 2,206,212 ) ( 2,600,000 ) ( 3,800,000 ) ( 4,168,200 ) ( 6,006,212 )

( 1,711,200 ) ( 2,349,023 ) ( 2,600,000 ) ( 3,800,000 ) ( 4,311,200 ) ( 6,149,023 )

Comprehensive net loss

( 1,711,200 ) ( 2,349,023 ) ( 2,600,000 ) ( 3,800,000 ) ( 4,311,200 ) ( 6,149,023 )

Comprehensive loss

( 1,619,170 ) ( 2,221,629 ) ( 2,600,000 ) ( 3,800,000 ) ( 4,219,170 ) ( 6,021,629 )

Basic and Diluted Loss per Common Share

( 3.07 ) ( 4.12 ) ( 4.67 ) ( 6.67 ) ( 7.74 ) ( 10.79 )

NOTE T — SUBSEQUENT EVENTS

On January 8, 2025, the Company issued 14,970 shares of common stock in repayment of $ 25,000 of the principal due on the 2024 Note.

On January 10, 2025, 679 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 January 10, 2025, 5,000 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 January 15, 2025, the Company entered into a warrant exercise agreement under which the counterparty agreed to exercise outstanding warrants to purchase 2,061,112 shares of common stock at an exercise price of $ 1.85 per share resulting in gross proceeds of approximately $ 3.8 million, prior to deducting placement agent fees and estimated offering expenses.

In connection with this transaction, the Company issued additional warrants to purchase an aggregate 3,091,668 shares of common stock at an exercise price of $ 2.15 per share.

On January 15, 2025, the Company issued 149,635 shares of common stock in repayment of $ 205,000 of the principal due on the 2024 Note.

On January 15, 2025, the Company issued 340,000 shares of common stock in repayment of $ 629,000 of the principal due on the 2024 Note.

On January 17, 2025, the Company issued 431,000 shares of common stock upon the exercise of warrants.

On January 23, 2025, the Company issued 427,112 shares of common stock upon the exercise of warrants.

On February 14, 2025, the Company issued 241,000 shares of common stock upon the exercise of warrants.

On March 13, 2025, the Company issued 491,000 shares of common stock upon the exercise of warrants.

On March 20, 2025, the Company issued 8,913 shares of common stock to its directors in payment of board fees.

On March 20, 2025, the Company issued 2,500 shares of restricted stock to new employees which vest over three -years.

The forgoing issuances of common stock after December 31, 2024 total 2,106,130 shares representing a 56 % increase in the Company's outstanding shares of common stock since December 31, 2024, less forfeitures.

On March 28, 2025, 1,893 shares of restricted common stock were forfeited by an employee who left the Company before the lapse of the restriction period applicable to such shares.

NOTE R — SEGMENTS

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

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

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

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

NOTE S — SUBSEQUENT EVE NTS

On February 17, 2026, 250 shares of restricted common stock were forfeited by an employee who left the Company before the lapse of the restriction period applicable to such shares (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026).

On March 19, 2026, the Company issued 250 shares of restricted stock to a new employee which vest over three -years (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026).

The forgoing issuances of common stock after December 31, 2025 total 250 shares representing a 0 % increase in the Company's outstanding shares of common stock since December 31, 2025, including forfeitures (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026.

On April 20, 2026, the Company held a Special Meeting of stockholders at which our stockholders approved a reverse split of our outstanding shares of common stock.

After the Special Meeting, the Board set the reverse stock split ratio at 1 -for- 10 , and on April 28, 2026, the Company filed a Certificate of Amendment with the Secretary of State of the State of Delaware to effect the reverse stock split which became effective at 5:00 p.m., Eastern Time, on April 29, 2026.

The Common Stock began trading on the Nasdaq Capital Market on a split-adjusted basis on April 30, 2026 under a new CUSIP number, 09060C606 (as adjusted to reflect our 1 -for- 10 reverse stock split, which was effective April 30, 2026).

On May 6, 2026, the Company received notice from the Nasdaq Capital Market that the Company’s common stock would be suspended from trading on the Nasdaq Capital Market at the opening of business on May 13, 2026 due to the Company’s failure to regain compliance with the $1.00 minimum bid requirement and failure to timely file its periodic reports with the SEC The Company has scheduled an appeal of such determination to Nasdaq’s Hearings Panel and a hearing has been scheduled for June 16, 2026.

Effective with the opening of trading on May 13, 2026, the Company’s common stock has been traded on OTC Markets.

On June 5, 2026, the Company received notice from the Nasdaq Stock Market stating that the Company had not yet filed its Quarterly Report on Form 10 -Q for the period ended March 31, 2026 with the SEC as required by applicable Nasdaq Listing Rules, that this served as an additional basis for delisting the Company’s common stock from the Nasdaq Capital Market, and would be considered in determining the Company’s continued listing on the Nasdaq Capital Market.

EXHIBIT INDEX

17 unchanged sentences

Certificate of Amendment to Certificate of Incorporation of BIO-key International, Inc., a Delaware corporation (incorporated by reference to Exhibit 3.1 to the current report on Form 8-K filed with the SEC on December 19, 2023)

Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the registration statement on Form SB-2, File No.

81 unchanged sentences

and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.3 to the Company’ s Current Report on Form 8-K filed January 16, 2025)

Insider Trading Policy

Amendment No.

1 to the BIO-key International, Inc.

2023 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 20, 2025)

Amendment No.

1 to the BIO-key International, Inc.

2021 Employe Stock Purchase Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed August 20, 2025)

Note Purchase Agreement dated September 30, 2025 by and between the Company and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 3, 2025)

$1,130,000 Secured Promissory Note dated September 30, 2025 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 3, 2025)

Security Agreement dated September 30, 2025 by and between the Company and Streeterville Capital, LLC.

(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed October 3, 2025)

Intellectual Property Security Agreement dated September 30, 2025 by and between the Company and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed October 3, 2025)

Guaranty dated September 30, 2025 by and between Pistol Star, Inc.

and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed October 3, 2025)

Form of Warrant Exercise Agreement, dated October 27, 2025, by and between BIO-key International, Inc.

and the Investor (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed October 30, 2025)

Exchange Agreement, dated October 27, 2025, by and between BIO-key International, Inc.

and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 30, 2025)

Exchange Agreement, dated October 27, by and between BIO-key International, Inc.

and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed October 30, 2025)

Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed October 30, 2025)

Insider Trading Policy (incorporated by reference to Exhibit 19.1 to the Company’s Annual Report on Form 10-K filed on April 23, 2025)

List of subsidiaries of BIO-key International, Inc.

5 unchanged sentences

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Clawback Policy dated October 2, 2023

Clawback Policy dated October 2, 2023 (incorporated by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K filed on April 23, 2025)

Inline XBRL Instance

12 unchanged sentences

BIO-KEY INTERNATIONAL, INC.

April 23, 2025

June 12, 2026

/s/ MICHAEL W.

8 unchanged sentences

(Principal Executive Officer)

April 23, 2025

June 12, 2026

/s/ CECILIA WELCH

Chief Financial Officer (Principal Financial and Accounting Officer)

April 23, 2025

June 12, 2026

Cecilia Welch

April 23, 2025

June 12, 2026

/s/ WONG KWOK FONG

April 23, 2025

June 12, 2026

Wong Kwok Fong

/s/ CAMERON WILLIAMS

April 23, 2025

June 12, 2026

Cameron Williams

/s/ EMMANUEL ALIA

April 23, 2025

June 12, 2026

Emmanuel Alia

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

What changed 10-K

Item 9A. Controls and Procedures