Good morning, everyone. Thank you for standing by, and welcome to BIO-key International's 2025 Year-End Conference Call. As a reminder, this conference is being recorded today, Tuesday, March 31, 2026. I will now turn the call over to Bill Jones, Investor Relations. You may proceed.

Thank you, Jerry. 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 that are subject to risks and uncertainties, which may cause actual results to differ materially from current expectations. Words like anticipate, believe, expect and project or similar words identify and express forward-looking statements. These statements are made based on beliefs, assumptions and information currently available to management as of today and pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. For a more complete description of the risks and uncertainties that affect future performance, please see Risk Factors in the company's annual report, Form 10-K with the SEC. Listeners are cautioned not to place undue reliance on forward-looking statements made as of today. The company makes no obligation to revise or disclose revisions to forward-looking statements to reflect circumstances or events occurring after this call. Now I will turn the call over to Mike to begin. Mike?

Thanks, Bill, and thank you all for joining us today. After my remarks and Ceci's financial overview, we will open the call to investor questions. As highlighted in today's press release, we had a broad base of achievements in 2025 that position BIO-key for improved top line and bottom line performance in 2026 and future periods. Kicking off the year, we now anticipate Q1 '26 revenue of approximately $2.2 million, representing a 37% increase over Q1 in 2025 and a larger sequential improvement over Q4 '25 as well. We also expect a substantial improvement in our Q1 '26 bottom line performance exceeding each of our fiscal '25 quarters, and although we were disappointed by our 2025 revenue performance, we are now seeing much more urgency and focus from our customers and prospects to take action in better securing access to mission-critical systems, particularly in the military and defense, financial services and regulated industries. Our 2025 revenue comparison versus 2024 was also impacted by two significant factors totaling roughly $2 million. The first related to a $1.5 million 2-year license renewal with a foreign national bank, the bulk of which was recorded in 2024. This caused roughly an $800,000 decrease in recognized revenue related to this customer in 2025 versus 2024. Despite revenue recognition timing related to this customer, the relationship continues to grow nicely, and earlier this month, they executed an expanded 1-year license renewal of over $1 million for 2026, which represents an approximately 30% increase in revenue over the previous contract. Our year-over-year revenue comparison also reflected the completion in 2025 of our strategic transition to selling only BIO-key-branded solutions in the EMEA region. As anticipated, this transition is beginning to benefit our gross margin and growth prospects as we rebuild our EMEA pipeline with BIO-key-only solutions and sales opportunities that carry substantially higher net margins. While these factors led to lower year-over-year software license revenue, both Hardware and Services revenues grew in 2025 due to the expansion of our customer base and licensed endpoints. Turning to our outlook. Let me review key trends in the enterprise authentication market that support our optimism for 2026. First is the increasing need for secure access to digital platforms and protection against growing cybersecurity threats, which is driving rapid growth in the authentication solutions market. Global sales are estimated to be $23 billion in 2025 and projected to reach almost $100 billion by 2035, representing a compound annual growth of almost 16%. As cybercrime becomes more sophisticated, we expect businesses and governments to increasingly embrace advanced authentication technologies such as those that BIO-key provides to safeguard sensitive information and maintain customer trust. This surge in demand for enhanced authentication solutions is being driven by the widespread adoption of digital services, e-commerce, online banking and the growing use of mobile devices. Authentication solutions, including biometrics, MFA, and digital certificates are all crucial to ensure that only authorized individuals gain access to private information or systems. A key gap we fill is that mainstream MFA solutions offer only device-assisted authentication, whereas our PortalGuard platform is a complete MFA offering with phoneless and tokenless authentication that leverages biometrics. Our Passkey:YOU Solution provides web-secured hosted FIDO2 passkey authentication for tokenless, phoneless and passwordless authentication with biometric efficiency. By year-end 2026, passwordless authentication will be the default for workforce access across almost every enterprise. The shift is being driven by the increased vulnerability of passwords to phishing, credential reuse and account takeover attacks. More than 70% are already moving towards passwordless adoption and about three-quarters of enterprises expect to invest in passkeys or passwordless tools this year. Biometric authentication adoption is expected to continue to grow, particularly in the most sensitive and high-value use cases in the regulated spaces such as military and defense, financial services and health care, where we have already seen growing adoption. The traction we see is also aided by more supportive regulatory frameworks in many foreign jurisdictions as well as by escalating geopolitical risks, which we're all aware of. AI-driven threats are forcing security leaders to rethink how access decisions are made, emphasizing the need for much more resilient identity strategies, where biometrics can play a pivotal role as opposed to conventional methods that are most vulnerable to AI-powered attacks. Authentication technologies are converging towards unified access for workforce, partner and privileged access under single strategic foundations. Our PortalGuard Passkey and Biometric Solutions provide infinite flexibility in deploying to any component of a company's employee population despite infrastructure and job function. Phones and tokens are no longer necessary and with 16 types of authentication factors, one size no longer fits all. These significant shifts in how enterprises approach authentication with a focus on security, convenience, compliance and evolving regulations play directly to our strengths. In 2025, we launched our Defense & Intelligence Cybersecurity Initiative, which is discussed in today's press release. We also highlight several recent contract wins and momentum we are seeing in the defense and financial sectors, as well as significant new partnerships, both domestically and internationally. Since that's in the press release, I won't repeat it here, but we can certainly address any questions regarding any of those areas in the Q&A session. In terms of our continuing investment in R&D and new product development, in Q4, BIO-key formally introduced the new FBI FAP 20 Certified EcoID III fingerprint scanner. EcoID III is our most advanced reader, which pairs encrypted device-to-host communication with liveness detection for faster, more secure authentication. EcoID III is primarily for highly regulated industries and the most sensitive zero-trust environments such as defense and banking. We're also finishing up work on our most significant update ever for our PortalGuard Identity platform, Version 7.0. This includes a major platform monetization, significant new configurability and flexibility and improved lower-cost deployment capabilities. It is currently undergoing comprehensive third-party security testing for an expected release during the second quarter. Our updated product offerings and unique biometric capabilities give us a sustainable competitive advantage, particularly in the regulated industries due to those strict compliance standards. Our defense and banking niches, in particular, have significant global upside in 2026 and beyond. Today, our business is predominantly subscription-based, and we continue to utilize a partner-centric model, in which roughly 50% of our new U.S. business and nearly 100% of our international business is sold through a network of sales channel partners, including Amazon and TD Synnex, which we have built relationships with over the last few years. Turning to overhead and cost. In 2025, we were able to reduce our total SG&A expense by almost $800,000 or 11% and total operating expenses by 7%. This mission continues, and we are optimistic about the potential benefits of AI adoption in our processes to drive even further operational efficiency, productivity and lower cost. These initiatives play an important role, along with our growth efforts, to progress the company toward our goal of reaching breakeven and profitability in 2026. Finally, we also made great strides in strengthening our financial position in 2025, ending the year with $2.7 million in cash, up more than $2 million from 2024 and increasing our book value to $7.6 million versus $3.8 million at the end of 2024. Our current cash position and expected cash receipts provide a solid working capital base to support our growth plans for 2026. We're off to a strong start this year with building momentum in several key verticals. We expect top line expansion, combined with expense management to meaningfully advance our goal of reaching our target again of breakeven and profitability this year, and we are well positioned in terms of financial liquidity to fund our growth plans. Given the growing adoption of BIO-key's flexible passwordless, tokenless and phoneless authentication solutions that we are seeing, we expect 2026 to be a very exciting and productive year for our company and for our shareholders. We're entering the most exciting chapter in our company's history, one defined by innovation, strategic expansion and relentless focus on delivering value to our customers and our shareholders. Significant growth and profitability are in sight and with the right team, technology and partnerships in place, we are poised to deliver long-term shareholder value. Now let me turn the call over to Ceci for a review of the financials.

Thank you, Mike. We released our results this morning, so let me provide a quick review. Reflecting the factors Mike addressed earlier, the total 2025 revenues decreased 12% to $6.1 million versus $6.9 million in 2024. 2025 revenue did benefit from over 100% increase in Hardware revenues to $1.3 million in 2025, largely due to increased purchases of our Biometric Solutions, and Service revenue increased 6% to $1.2 million due to BIO-key's growing customer base and new customer deployment. In Q4 of '25, License Fee revenue decreased 26%, Hardware revenue increased 85% and Service revenues decreased 10% reflecting the factors Mike discussed as well as the timing of deployment. Our 2025 gross margin was 77.5% as compared to 81.4% in 2024, primarily due to the mix of License Fee revenue and Hardware revenue as a percent of total revenues. Gross margins on license fees improved to 91% in 2025 from 88% in 2024, reflecting the benefit of selling branded products versus third-party products in the EMEA region. In 2025, we reduced our SG&A costs by 11% due to proactive cost management, including reorganization of sales personnel, reducing marketing show expenses and lower audit fees, partially offset by higher professional fees related to BIO-key financing activities. We will continue to focus on cost reduction opportunities as we move forward in 2026. Research and development engineering costs increased 4% in 2025 to support the new product development, as Mike discussed. As a result, operating expenses decreased 7% overall in 2025. Lower operating costs helped to offset the impact of lower revenue in 2025 as BIO-key's net loss increased to $4.6 million or $0.69 per share from $4.3 million or $2.09 per share in 2024. BIO-key's Q4 '25 net loss increased to $1.7 million or $0.19 per share as compared to $1.4 million in 2024 or $0.46 per share. Weighted average common shares outstanding, which reflect warrant exercises and other financial activities, are provided in today's press release. As of December 31, 2025, BIO-key had current assets of $4.6 million, including cash of $2.7 million as compared to the prior year-end of $1.9 million, which included $438,000 of cash. Accounts receivable increased 73% to $1.2 million at December 31, 2025, from $718,000 at the end of 2024, and our book value increased to $7.6 million at year-end 2025 from $3.8 million at the close of 2024. We plan to file the 10-K within the next week. With that, operator, let's please proceed to the question-and-answer session.

Our first question today is from Jack Vander Aarde with Maxim Group.

So, Mike, I think you already addressed it pretty well. I just want to also get a little more clarity on the 2025 revenue being a little softer than you initially expected. But obviously, great to see you're targeting a strong first quarter '26 with $2.2 million of revenue. That's fantastic. Just trying to better understand the 2025 result. So one of the reasons mentioned was due largely to a significant contract renewal with a foreign retail bank in 2024 that didn't benefit 2025. Can you just maybe speak to this a little bit further? Is this an active customer? Are they due for an expansion or renewal in 2026? Just help me better understand that particular customer.

Yes. In my prepared remarks, Jack, I mentioned that they did renew for one year at over $1 million, so about a 30% increase in value of that contract. It was a two-year contract that we closed in 2024. We recorded the revenue for those two years in 2024, so in 2025 it wasn't repeatable, which is why you see the impact. To give you a little more color on 2025 beyond those points, we went through a significant transition in our EMEA division. That took a little longer than we expected, but it is going to have a huge benefit for us in 2026 and going forward because of two things. Number one, we're selling BIO-key-only solutions that include our biometrics, which are getting very strong visibility, especially within regulated industries like banking, defense and health care. The second piece is that deal sizes in EMEA tend to be larger; some deals are seven-figure but most are in the high hundreds of thousands of dollars. They are larger deals, sold through channel partners, typically with larger customers, and when they close the benefits are significant. That transition took a little longer in 2025, which explains some of the underperformance versus our expectations. Most of it was timing, but we are very bullish and encouraged about 2026, and we expect to take advantage of that benefit. That should help us reach our goal of breakeven profitability and being cash flow positive this year.

Okay. Great. I really appreciate that extra color, Mike. That actually makes a lot of sense. And then just to be extra crystal clear, in the press release you referenced various specific deals in highlights. Is this the customer that I'm looking at? Or is this a different one under the financial sector, you secured a $1.04 million one-year license renewal with the foreign bank. Is this that customer from 2024 or a separate entity?

No, that's that customer.

Okay. Great. Then Mike, let's talk about the first quarter because this is definitely a point of emphasis that popped out to me. Here we are, we're basically at the end of the first quarter as of today. It sounds like you have a pretty good read-through on that $2.2 million target. Is any of that slippage from the fourth quarter that slipped into the first quarter? And do you have a good sense of the mix of that revenue? Is it mostly license revenue? How should I think about that? Is it growth across all three segments?

The majority will likely be License revenue, but there is also some strong Hardware revenue as well, with very good margins. Our blended gross margins are typically in the high 70s up through the low 80s, so depending on the mix you're going to see an 80% plus gross margin across the board, whether hardware or software combined.

Excellent. That's helpful. Could you touch on some of these large deals you're seeing? You mentioned more urgency across segments. Where would you say the potential needle movers are that you haven't discussed explicitly yet? Are these opportunities primarily in Europe and in the military and defense sector, or in financial services, or really all over the board? Where are you seeing the largest needle-mover opportunities?

For sure. We've developed quite a niche in defense and government where incorporating our biometrics is getting significant uptake. Given the geopolitical scenario, there's a real sense of urgency around security. Within our niche, we have a sub-niche focused on intelligence and information, and that's top priority. Our solutions provide the level of security required, plus convenience, availability and scalability, which are critical in those segments. We're seeing business on a global basis and expansion will be global: EMEA, Europe, the Middle East. We have a couple of very large opportunities in South America where we are working with large partners. The relationship we announced a couple of weeks ago with TD Synnex—one of the largest resellers and VARs—is important; they are global but very focused on state, local and federal business and will act as a force multiplier for our growth domestically. So it's across the board. We have opportunities in gambling, to secure access to information; in banking with large national banks and regional banks; in health care from national ministries to hospitals. We've been in many of those spaces for a long time. But in the regulated space we see continued growth. If you're a defense or government contractor, your business is expanding and each contractor must meet NIST-level compliance to do business with the government, which is a huge opportunity for us. Our relationship with TD Synnex should be significant domestically.

The next question is from Dan Camis, a private investor.

Were your expenses in the first quarter about the same as the fourth quarter?

We haven't reported the quarter yet, so I can't comment on the exact numbers for expense. We do believe our revenue will be in the range we predicted. Generally, the first quarter should be similar to other quarters. Sometimes events, for example attending a large conference, can cause a little higher spend. We are relaunching our website right now and plan to do so early in the second quarter, so there might be some related expense. Other than that, we're pretty stable.

So we should see pretty significant improvement in cash flow in the first quarter. Can you give any clue as to what to expect for R&D expenses in 2026?

We are about to launch one of the most significant upgrades for our PortalGuard platform, Version 7.0. A lot of that investment has already been spent; we've been working on this for nearly one and a half to two years. I would expect our R&D expenses to remain relatively stable and not grow significantly. We also have an initiative to assess AI-related tools and where to use them across the business and within development to become more efficient and productive, and ultimately reduce cost and increase time to market.

Is there anything revolutionary about this version or is it a marginal improvement and upgrade in your offerings that you can talk about?

It's significant, and we'll be announcing details shortly, especially for partners. Some of our larger partners want to be able to control, mix and match and deploy because everything is subscription now. They want the ability to deploy licenses, pull them back if a customer cancels and reuse those licenses in other accounts. The ability to have multi-tenant management for partners is a big deal, and that's part of what we're delivering along with many other enhancements: security improvements, incorporation of mobile technologies, and a host of different options and availability. Much of this is focused on giving partners more control in the dashboard and management of the solution set.

Is there anything in that 30% increase you mentioned in the $1 million foreign bank renewal that you're particularly excited about, or was it just more licenses?

I'm excited about a couple of items. Number one, the growth and increase in the user population. Number two, their assessment of our more advanced technologies like one-to-many, which could dramatically change the way they operate and increase the size of the contract as we continue through this year and into next. That opportunity could be one of the largest deployments of this type in the world, so there's a lot of growth potential for that customer.

Are you saying you're going to be scrubbing their database on a one-to-many basis?

No, no, they already do that. I'm talking about some more advanced use of the technology beyond what they currently employ.

Okay. I guess we'll be hearing about that then.

Hopefully.

You said it's a good start toward your goal of achieving breakeven results in early 2026. Are you saying there's a potential for breakeven in the second quarter, or were you just saying that you reduced your cash burn in the first quarter?

Our goal this year is to be breakeven or profitable and to be cash flow positive; that's our objective. I can't specify the exact quarter, but we expect to be there in the early part of 2026. You can look at our expenses in the roughly $2 million range, our revenue in the $2 million to $3 million range, and gross margins in the 80% area and you can see the potential. Again, that's our goal and objective. I believe we have the team, the partners and the product, and we have a receptive market in our regulated niches to get there.

Any evidence in the first quarter that U.S. businesses are willing to purchase from BIO-key rather than their usual large competitors, given the move toward passwordless adoption?

Yes. We're seeing new business traction here in the U.S. The TD Synnex partnership is a strong proof point: they are a large public company enthusiastic about offering our solutions, especially in their public sector business. That partnership should act as a force multiplier given their customer base and partner network.

When you've mentioned partner announcements in the past, there's usually an underlying deal. Is that what's happening with TD Synnex?

We have a series of deals in progress with them. You'll hear more as we are able to announce them.

Can you say anything about your ARR, where is that running in the first quarter? Or are we still between $6 million and $7 million?

Yes, we're in that range. We've largely transitioned to subscription for new business, and we're migrating legacy customers as well, especially now that we have new and enhanced features. Multiyear deals are our focus and even when customers are on-prem we can offer subscription and multiyear arrangements that meet their requirements. Internationally, many customers prefer on-prem solutions, and we can support both hosted and on-premise deployments. Version 7 includes the ability to do both at the same time and to transition seamlessly, which is a powerful differentiator.

Any changes in the Boumarang asset or any news on that?

No. I know they have an S-1 filed now, which I think is public information and they are looking at a couple of acquisitions. That's all I have at this point; I have no other information.

So no change in that asset value at all?

No.

Last question: I think you have about 10 business days to get the stock above $1 before a reverse split. At this point, is there anything you think could forestall such a split?

That's a great question. We need to be prudent to protect our NASDAQ listing, and the Board filed the proxy as a precaution. If the stock trades for ten consecutive days over $1 before early May, we would not do the reverse split. Our shareholder meeting is scheduled for late April and I'm hoping the stock will trade up. The market environment has been difficult broadly, so it's hard to predict. We are in a position to do what is necessary to protect the company, and while I hope we won't have to do a reverse split, if we do, we will.

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

Thank you again for joining today's call. We genuinely appreciate your interest in BIO-key, and I look forward to updating investors on our progress on our Q1 call in May. In the interim, we will update investors via press release of significant developments. If you have any questions, please reach out to our IR team whose contact information is in today's press release. With that, operator, please conclude the conference. Thank you, everyone, and have a great day.

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