Good morning, everyone. Thank you for standing by, and welcome to BIO-key International's Third Quarter 2025 Conference Call. As a reminder, this conference is being recorded today, Friday, November 14, 2025. I will now turn the call over to Bill Jones, Investor Relations. You may proceed.

Thank you, operator. Hosting today are BIO-key's Chairman and CEO, Mike DePasquale, and its CFO, Ceci Welch. As a reminder, today's call and webcast as well as answers to investor questions include forward-looking statements which are subject to risks and uncertainties that may cause actual results to differ materially from current expectations. Words like anticipate, believe, expect, plan and project and similar words identify and express forward-looking statements. These statements are made based on the beliefs, assumptions and information currently available to management as of today, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For a more complete description of such risks and uncertainties, which affect future performance, please see Risk Factors in the company's annual report, Form 10-K as filed with the SEC. Listeners are cautioned not to place undue reliance on such forward-looking statements made as of today, and the company makes no obligation to revise or disclose revisions to forward-looking statements to reflect circumstances or events occurring after today's call. And now with that, I'll turn the call over to Mike to begin.

Thanks, Bill, and thank you all for joining us today. After my remarks and Ceci's financial review, we will open up the call to investor questions. From a big picture standpoint, we reported revenue of approximately $1.55 million in Q3 '25, roughly in line with revenue in the first two quarters this year, and we reported year-to-date revenue of slightly under $5 million. The roughly $600,000 decrease in both the third quarter and year-to-date revenue in 2025 compared to last year is largely due to quarter-to-quarter variability resulting from the timing of some larger customer orders. We had particular strength in last year's third quarter from two large orders, one from a long-time banking customer, which was more of a catch-up for expanding their deployment, and another one from an ongoing rollout of solutions by a long-time defense industry customer. Both customers are still very, very active. The defense customer had a $140,000 order after the quarter closed in October that we expected to get in the third quarter, but it rolled over to the fourth quarter instead. We continue to expect ongoing deployments and orders even this quarter and beyond. In addition, we expect our large banking customer to renew their subscription contract in early 2026 based on their steadily expanding deployment of our solution. The customer has over 29 million users enrolled in our solution with the potential for meaningful future additions. They made a major expanded investment in our solutions in 2023 and 2024, including a $900,000 upgrade to our fingerprint-only biometric customer identification technology. This option allows them to identify clients with just a single fingerprint scan, eliminating the need for any other identifiers, including a card or an ID number. In essence, this is saving them approximately 30 seconds per transaction, which is significant for them. Their current annual license fee is now over $1 million and is scheduled for renewal in early 2026. Whether they choose a one- or a two-year contract, we expect to see $1 million to $3 million in business with that renewal in the first quarter. Across the board, we enjoy very high renewal rates in excess of 90%, meaning our customer churn rate is in the single digits. The variability we see in our quarterly revenues is primarily due to the timing of renewals, new deployments, our large customer expansions, and there can also be true-ups for additional software licenses. Q3 is generally a seasonally slower period for us, particularly in Europe due to the summer holiday period. However, we expect to close out the year very strong as we advance our channel sales efforts in the broader Europe, Middle East, and Africa regions, where we are now focused solely on BIO-key branded solutions. Furthermore, we are in the final stages of developing new marketing messaging for our website and business development. This messaging and collateral should be implemented during the fourth quarter to position us well for the start of the new year. We engaged an external marketing firm earlier in the year to assist with our new website content and targeted marketing strategies. We are finalizing a major website overhaul focused on improving content and navigation, with a planned release prior to the Gartner IAM Conference, which is being held mid-December. We also plan to release a significant update to our PortalGuard identity platform. PortalGuard operates as a single multifactor authentication user experience providing a broad set of 17 factors of authentication, including our identity-bound biometric options to meet virtually any use case. Version 7, which is the new version, represents our most significant update ever, featuring major platform modernization, enhanced configurability, and improved deployment capabilities. Development is expected to conclude within the coming weeks, after which we will undergo rigorous internal and third-party security testing. The timeline for general availability is late Q1 or early Q2 in 2026. In Q3, we also introduced our new FBI FAP 20 certified EcoID III fingerprint scanner, aimed primarily at regulated industries. Although BIO-key is primarily a software company, providing a total solution—including state-of-the-art hardware—is essential in supporting our annually recurring revenue software model. The EcoID III reader pairs encrypted device-to-host communications with liveness detection for faster, more secure authentication. We delivered initial volume EcoID III orders for defense and government customers in Q3. We also expect government-related and highly regulated industries like financial services, higher education, and health care to gravitate towards our new reader. Our PortalGuard platform and our IDaaS Passkey:YOU solution pair very well with the new EcoID III fingerprint sensor. As I mentioned on our call last quarter, we launched our cyber defense initiative in response to increased global defense spending, particularly in Europe and the Middle East, and our success with some significant high-profile deployments in these markets. Incorporated into these rising defense budgets is a significant emphasis on cyber resiliency and security as a priority. Today, two of the top four largest global defense agencies by spending are using BIO-key technology to secure their critical information. We are well positioned to capitalize on these growing defense budgets and spending, and we are advancing a growing pipeline of opportunities based on the deployment of our solutions by some of the most respected military security and defense ministries and agencies. Supporting this initiative, we are adding select resources to engage with contractors who will help us expand our market reach. We expect to see a growing base of new contract activity from these efforts, building on deployments this quarter and beyond. A primary factor in defense industry deployments is our ability to support critical infrastructure and access to sensitive environments with advanced biometrics and multifactor authentication technologies without reliance on mobile devices or hardware tokens. Biometric authentication is better suited for these engagements given its enhanced security, accuracy, convenience, and ability to better prevent fraud and unauthorized access compared to traditional methods. Biometrics minimize false positives and improve the precision of access control, which aids in monitoring traceability and insider threat management. Streamlining access processes also reduces time spent on logins and boosts productivity for defense personnel while maintaining strict security. For defense agencies managing highly sensitive data and infrastructure, we believe biometrics are growing as a preferred choice over traditional methods alone, and our references in that space give us a unique competitive advantage. We are gaining momentum in both the defense sector and in banking and government, as the rising incidence of security incidents highlight potential cybersecurity vulnerabilities. Additionally, growing regulatory requirements and increasingly stringent cyber insurance underwriting standards requiring multifactor authentication adoption create opportunities for our superior biometrics and portable authentication options. We are excited about the growth prospects heading into next year. Though given our size, the variability of our business may continue to fluctuate on a quarterly basis based on the timing of larger orders. But as we work to build the business, we'll maintain a sharp focus on our cost structure while seeking to reduce our breakeven levels and support our goal of achieving positive cash flow and profitability. Ceci will walk through the numbers, but let me highlight that we have been able to reduce our operating expenses by over 10% through the first nine months of 2025 while at the same time expanding our global reach and suite of solutions. Finally, as far as funding our runway to profitability, after the close of the third quarter, we raised approximately $3 million net of fees and related expenses through a warrant exercise transaction priced at $1.02 per share. This funding significantly expands our cash liquidity and puts us in a much stronger position to pursue growth. As we expect to close out the year strong, we are in a very good financial position to grow our business and exceed our objectives heading into the new year. With that, let me turn the call over to Ceci to review the financials, and then we'll take questions.

Thank you, Mike. We released our results this morning, and we plan to file our 10-Q later today. Let me walk through some of our highlights. Our Q3 '25 revenue was $1.5 million versus $2.1 million in Q3, down approximately $595,000 year-over-year, principally due to the large orders Mike referenced in Q3 2024 that we did not have in this quarter. Those orders accounted for approximately $665,000 of year-over-year difference, offset by some new orders. As a result, our license fee revenue was $918,000 in Q3 '25 versus $1.4 million in Q3 '24. Service revenue increased slightly to $268,000 in Q3 '25 versus $267,000 in Q3 '24 as growth of recurring service revenue more than offset the decline in customer service revenue supporting large customer upgrades in Q3 '24. Hardware sales declined to approximately $364,000 in Q3 '25 from $436,000 in Q3 '24 due to the timing of hardware shipments supporting ongoing customer rollouts. Partially offsetting the timing difference was the sale of fully reserved inventory in Q3 '25. We now have approximately $2.8 million remaining in fully reserved inventory for which we have several potential customers. Q3 '25 gross margin remained strong at 77% compared to 78% in Q3 '24 as the absence of third-party licensed software offset a lower portion of our license revenue. BIO-key made further inroads in trimming operating expenses, which decreased 8% to $2.1 million in Q3 '25 versus $2.3 million in Q3 '24. This reflects a 13% or $208,000 decrease in SG&A expense, offset by a 5% or $31,000 increase in research, development, and engineering expenses required to support the generation and product introduction, including the EcoID III and our forthcoming PortalGuard upgrade. Reflecting lower revenues tempered by lower operating expenses, BIO-key's Q3 '25 net loss was $965,000 or $0.15 per share as compared to $739,000 or $0.39 per share in Q3 '24. For the first nine months of 2025, our net loss was $2.9 million or $0.50 per share as compared to a net loss of $2.9 million or $1.69 per share a year ago. Per share amounts were based on 6.6 million and 1.9 million weighted average shares outstanding in Q3 '25 and Q3 '24, respectively, and 5.8 million and 1.7 million for the first nine months of 2025, respectively, reflecting shares issued for warrant exercises and other finance-related activities. As of September 30, BIO-key had current assets of $3.7 million, including $2 million in cash compared with 2024 year-end current assets of $1.9 million and $438,000 in cash. Accounts receivable increased 21% to $959,000 at September 30, 2025, from $792,000 at year-end 2024. BIO-key secured gross proceeds of $1 million for working capital and to support ongoing operations with the September 30 issuance of a senior secured promissory note. As Mike mentioned, subsequent to the close of the third quarter, we generated net proceeds of $2.9 million from the exercise of warrant agreements to purchase BIO-key shares at an exercise price of $1.02. Accordingly, the cash proceeds of the financing were not reflected in our Q3 '25 balance sheet. With that, operator, let's proceed with the question-and-answer session.

And your first question comes from Dan Khamis, a private investor.

Well, it's been about 10 months, I think, since you announced the Bank of Egypt win. Was that a recurring revenue deal? Or were those permanent licenses? And are you expecting similar revenue from that client in 2026?

Absolutely. Yes, the answer to that question is that was an initial deployment that we announced just about a year, give or take, 10 months ago. We are expecting an expanded deployment, and that may even happen here in the fourth quarter. So the answer to that question is, yes, that is a growing deployment.

I see. A follow-up to that is, since you partnered with Raya on that, does that mean your margins are lower on that project?

Not at all. Our gross margins on software are 90-plus percent, and they remain 90-plus percent from a gross perspective. I'll make a comment about partners just as kind of an aside. You may have noticed over the last month or so, we've made a number of announcements with partner companies that are bringing us into local markets throughout the Middle East, Africa, and Europe, and you're going to see even more coming in the near term. That's a force multiplier. These announcements are significant. If you read these press releases, these are significant players with significant resources in the local markets who have influence in particular industries, some in government, some in banking, health care, and so forth. What you get there is you get local cultural support, which can influence things, and given that 90-plus percent of all business in EMEA generally comes through partners. This growing base in our CAP Program, the Channel Alliance Program, is going to pay significant dividends for us as we proceed forward. Every one of these partners we've signed comes with a deal, right? Historically, partners get signed and then you go out to find opportunities. What's happening here, particularly in EMEA, is that we're signing these partners because they already have a deal or have been working with them, and they want to go out and represent what they perceive to be the most unique and capable identity and access management and biometrically enabled platform available. You can see from all those announcements that we're making very, very good progress.

Yes, that's helpful. Just on the Bank of Egypt still, the first step was to handle the NBE employees, right? And then move on to B2B and B2C. Are we looking at non-employee expansion as a target for 2027?

I think two things. Number one, the initial deployment was in the range of 20,000 users, which was not the full employee base. There is still expansion in the existing enterprise employee base. The second question, which pertains to what we call CIAM, Customer Identity and Access Management, the answer is yes, there is definitely an opportunity to take this to customers, similar to what we do with Capitec Bank in South Africa, where they utilize our biometric technology not only for employee access but also for customer access.

Okay. So— is that 2027? Is there a chance that could happen next year?

I think all of this is on the table. Again, the employee expansion is on the table for this year. I believe in 2026, they'll begin looking at the CIAM deployment.

On the defense side, I think in the second quarter, Ceci, you mentioned iterating to multimillion dollars with your largest defense ministry. Last week, you announced one of the largest Middle East sector deployments in the region with another unnamed defense organization. Is this contract on the same scale as this longer-term defense ministry?

It's even bigger. It has even greater potential. So the answer is yes, they're very large. Most of these defense ministry opportunities, depending on the size of the country, are indeed large opportunities. They have good expansion potential because usually, you're starting with a base population, and they can expand out to additional users.

With all these bank and defense wins, do you have any feel for what your current ARR is, the recurring revenue?

Our ARR is growing. I would say we're in the $6 million to $7 million range right now, considering our churn, as I mentioned in my prepared remarks, is in the single digits. That's a solid number.

Yes, that's a remarkable churn. Your EcoID III release indicated the price point for high-quality scanners was significantly reduced. Is the price lowered relative to EcoID II, or does this third version compete with a different quality of scanner?

Definitely competes with a higher-quality device. We sell, what I call, FBI-certified PIV-certified readers. One is called the PIVPro, which we've been selling for many years. That's a very high-quality optical device. The EcoID III competes with that device at a lower price point—$49.99, list price quantity one versus the PIVPro, which is in the high 60s, low 70s. The new EcoID III is much higher in quality and includes liveness detection and full encryption on-device. The EcoID II did not have those capabilities. We sold an initial order of about 7,500 to one of our defense customers as soon as we could deliver the product in Q3.

It's been about a year since you received the Boomerang stock. I assume the 9-month put period is over and you didn't return the stock. Is there any update on the value of that asset now?

I think we'll be looking at that as we do our audit for calendar 2025, fiscal 2025. They've made a number of small acquisitions and are involved in some strategic scenarios, nothing I can speak to at this time, but it appears that the value is certainly intact.

One more question for this round here. I think your stock has been trading anywhere from 1x to 100x the volume for the last 3 weeks. Can you share any research you've done to figure out what's driving that kind of action?

It's a tough question to answer. First, announcements typically drive volume. We've seen significant volume in the stock on some of our announcements. The reason we saw such enormous volume on a single day—450 million shares—turning $400 million in trade value is unusual, and I can't definitively say why that happened. There is a lot of interest in our space, particularly in security. We have a unique offering in a strong niche in defense and banking, and we have great references. Looking at our market capitalization perspective, we're very undervalued. There may be interest in investing and taking a position in a potential company with significant upside. But those are just theories, and I can't really provide clarity on that kind of volume.

Is there anybody else in the queue right now?

Operator?

Yes, we do have another questioner in.

Okay. I'll get off then.

And your next question comes from Jack Vander Aarde with Maxim Group.

Mike, I'm juggling a few conference calls this morning, so I had to join this call a little late. I apologize if I'm being redundant. The guidance is something new that popped up. I want to know what kind of led to your decision process to feel confident enough to establish formal guidance parameters, and can we expect a formal guidance framework for 2026 on the next earnings call?

Thanks, Jack. I appreciate your busy schedule today. Yes, we're confident in our position right now. You've seen our announcements and that we're starting to see results from the investments we've made, particularly in the partner network we've been building. We have more confidence in our pipeline, which is solid. We feel good about that. I would love to provide guidance, and as we become more predictable, we will do that. This quarter, we expected at least $200,000 to $250,000 more in business than materialized, not due to any issues with the business, but just timing—one of our defense customers had to change budgets, causing a delay. So that's what makes it difficult for us. I hope we'll be more predictable in the beginning part of the year and can provide guidance.

Okay, great. Two more questions, Mike. First, there was a large renewal coming up, I think, in Q1 '26. Is that still on track?

Yes.

Great. The U.S. Government shutdown was the longest in history. Did that have any impact on your business in Q4 or any growth initiatives?

Not at all. We didn't see any impact at all. Typically, we operate above that in the context of security. It's kind of a mandate, and we've never really seen any impacts.

Can you touch on 2026 outside of the large renewal in Q1 '26? Are there any other major upcoming renewals or expansion opportunities?

There will be lots of that, especially from our pipeline of new deals and opportunities generated from our expanding footprint in both defense and banking, as well as health care. Expect a lot more activity in the coming months and quarters, including renewals from the large banking and finance contracts we've had for years and continue to expand. You'll see expansions with customers like the National Bank of Egypt and others as they continue to grow their existing deployments—not only for employees or internal use but also for customer access. There’s a lot on the horizon, and I emphasize that the expanding partner network is vital for tripling our business in the coming quarters and years.

Can you provide an update on the Channel Alliance Program? It was a major growth area a couple of years ago, but I haven’t heard an update.

Yes, we've seen a number of announcements recently regarding our Channel Alliance Program. Those are significant partners we have. We have distributors, MSPs (managed service providers), MSSPs (managed security service providers), and resellers within the CAP Program. It's continuing to grow, but more importantly, we focus on quality rather than quantity. We prioritize significant players who have local expertise and credibility. When they recommend our solution, customers are more likely to consider it. That’s what we are driving; it’s about driving quality.

Are any of your channel partners exclusively reselling BIO-key, or are they also servicing other vendors?

Yes, that's a great question. Some partners exclusively sell the BIO-key IAM solution, while most provide broad software solutions like Microsoft, Oracle, and network security companies like Cisco. They typically offer all of that to end-user customers, and the security piece is one component of their overall service. It varies, but we have some that exclusively sell BIO-key and others that sell various solutions. Regardless, our competitive advantage is that we offer biometric components that competitors do not natively have, making us an attractive option.

The margins were strong for licensing revenue, which is great. Going forward, are any changes to operating expenses expected?

We are constantly analyzing everything. We look to reduce spending wherever possible and make sound decisions. We've already lowered all our rents, and we'll continue to keep our eyes on cost discipline.

Mike, do you echo those comments in terms of seeing profitability breakeven on the horizon?

Absolutely. There is no question in my mind. I see it happening soon. It's a combination of several factors, including our pipeline, larger renewals, and our ability to manage scaling around our existing resources. Our model allows us to scale nicely, especially since level 1 and level 2 support typically comes from partners while we serve as backup. Even on the hardware side, we achieve good margins, ensuring we do not pursue anything without at least a 50% margin. Blended, we're in the 70% to 80% range, and we believe we can sustain that.

And your next question is a follow-up from Dan Khamis.

It looks like your revenues are going to be flat or down year-over-year. The good news is that expenses have come down, but have you isolated the reason for flatness? Was it the loss of swivel revenue? What caused the flatness?

Definitely, transitioning from third-party to BIO-key products took some time to get productive. We're productive now, and I think you'll see better results moving forward. Additionally, we had an anomaly last year with our banking customer needing to catch up. In particular, in Q3, we generated over $0.5 million in revenue that was not recurring—it was essentially a one-time event. So, aside from timing, I am not concerned about anything in this business right now. I believe we’re in a strong position, lowering our breakeven point, growing our partner network, which serves as a multiplier for getting more deals, and operating in a market with insatiable demand for advanced security solutions.

With the $3 million in cash, you're likely at about 1x book value. I know you and Jim have been buying in the second and third quarters, about $25,000 worth. Why do you believe BKY is the best investment for that $25,000?

I believe we are fundamentally undervalued. Compare us across any multiple or comp, and we’ve traditionally been undervalued. We’ve done a lot of financing, which understandably caused overhang and sometimes trepidation among investors. However, we felt that keeping the company alive with our installed base of customers puts us in a solid position. I believe we are not capturing the value we deserve, and I expect that will be unlocked soon.

Showing no further questions, this concludes the question-and-answer session. I'll ask Mike DePasquale to provide closing remarks.

Thank you, and thank you again for joining our call today. We greatly appreciate your interest in investing in BIO-key and look forward to updating you on our progress. If you have any questions, please reach out to our IR team via phone or email, and they will be very responsive. Their contact information is in today's earnings release. With that, operator, this will conclude the call. Thank you, everyone, and have a terrific weekend.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.