Bio Key International Inc 10-K/A, filed Jun 15, 2026
Bio Key International Inc (BKYI)
About this 10-K/A
Bio Key International Inc filed this 10-K/A on June 15, 2026, covering the fiscal year ended December 31, 2025.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No.1)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE FISCAL YEAR ENDED
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of June 30, 2025 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the registrant’s common stock held by non-affiliates was $
As of June 10, 2026, the registrant had
Documents Incorporated by Reference
None.
EXPLANATORY NOTE
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| Item 1C | Cybersecurity | 18 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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PRIVATE SECURITIES LITIGATION REFORM ACT
All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “should,” “estimate,” “will,” “may,” “future,” “plan,” “intend” and “expect” and similar expressions generally identify forward-looking statements. These statements are not guarantees of future performance or events and are subject to risks and uncertainties that may cause actual results to differ materially from those included within or implied by such forward-looking statements. These risks and uncertainties include, without limitation, our history of losses and limited revenue; our ability to raise additional capital; our ability to continue as a going concern; our ability to protect our intellectual property; changes in business conditions; changes in our sales strategy and product development plans; changes in the marketplace; continued services of our executive management team; security breaches; competition in the biometric technology and identity access management industries; market acceptance of biometric products generally and our products under development; our ability to convert sales opportunities to customer contracts; our ability to expand into Asia, Africa and other foreign markets; our ability to migrate Swivel Secure customers to BIO-key and Portal Guard offerings; our ability to execute definitive agreements with Fiber Food Systems and/or its customers to utilize our access management solutions; our ability to integrate our solutions into any of Fiber Food System’s offerings; fluctuations in foreign currency exchange rates; the duration and extent of continued hostilities in Ukraine and its impact on our European customers; the impact of tariffs and other trade barriers which may make it more costly for us to import inventory from China and Hong Kong and certain product components from South Korea; delays in the development of products, the commercial, reputational and regulatory risks to our business that may arise as a consequence of non-compliance with Securities and Exchange Commission (“SEC”) and Nasdaq periodic reporting requirements; the commercial reputational and reputational risk and impact on the trading and liquidity of our common stock as a result of the recent suspension of trading of our common stock on the Nasdaq Capital Market; our temporary loss of the use of a Registration Statement on Form S-3 to register securities in the future; any disruption to our business that may occur on a longer-term basis should we be unable to maintain effective internal controls over financial reporting, statements of assumption underlying any of the foregoing, and numerous other matters of national, regional and global scale, including those set forth under the caption “Risk Factors” in Item 1A of this Annual Report and other filings with the SEC. These factors are not intended to represent a complete list of the general or specific factors that may affect us. It should be recognized that other factors, including general economic factors and business strategies, may be significant, presently or in the future. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
ITEM 1. BUSINESS
Solely for convenience, trademarks and tradenames referred to in this Annual Report on Form 10-K appear (after the first usage) without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks and tradenames.
Overview
BIO-key International, Inc. (the “Company,” “BIO-key,” “we,” or “us”) is a leading identity and access management (IAM) platform provider enabling secure work-from-anywhere for enterprise, education, and government customers using secure multi-factor authentication (MFA). Our vision is to enable any organization to secure streamlined and passwordless workforce, customer, citizen and student access to any online service, workstation, or mobile application, without a requirement to use tokens or phones for roving users and shared workstations. Our products include PortalGuard® and PortalGuard Identity-as-a-Service (IDaaS) enterprise IAM, WEB-key® biometric civil and large-scale ID infrastructure, MobileAuth® mobile phone authentication application for iOS and Android, and high-quality, low-cost accessory fingerprint scanner and FIDO-compliant hardware to provide a full and complete solution for identity-innovating customers.
BIO-key PortalGuard empowers organizations to maximize the power of cloud, mobile and web technologies by securing users’ identities and connecting them with the applications they rely on, while keeping cyber-intruders and unauthorized delegates (proxy users) out. Competing MFA solutions require a phone or token for every user authentication use case, but this is expensive and ineffective for workforce users who cannot use a phone in their workplace, who rove among workstations or share kiosks for access to information systems. BIO-key’s exclusive Identity-Bound Biometrics (IBB) authentication methods address this by making biometric identification based available at any end point device, making the user, not their phone or a token, their own credential.
Our customers trust BIO-key® to secure access to a variety of cloud, mobile and web applications, on-premise and cloud-based hypervisor servers from all of their devices. Employees and contractors sign into BIO-key PortalGuard to seamlessly and securely access the applications needed to do their work, and customers sign into BIO-key PortalGuard to access online services. Organizations use PortalGuard to securely collaborate and communicate with their partners and to provide their customers with flexible, resilient user experiences online and while using mobile devices. PortalGuard can operate standalone as a comprehensive MFA, Single Sign On, and Self-Service Password Reset solution, directly authenticating for Windows sign in and application access, or as an upgraded MFA user experience within an enterprise IAM framework such as Microsoft, Okta, Ping or ForgeRock.
BIO-key’s WEB-key is a scalable biometric service management platform, incorporating key functions for regulatory compliance, enrollment, authentication or identification, and integrity in a multi-tenant private or public cloud delivery platform. Government agencies use BIO-key for their large-scale civil ID projects, because WEB-key underpins a biometric identity ecosystem, is cloud-ready, and provides a scalable, high-integrity trust platform which can be operated anywhere and supports over 30 fingerprint scanners interchangeably.
We also deliver biometric software integration application programming interfaces, or APIs, allowing software developers to leverage our platform to securely and efficiently embed biometric multi-factor authentication, or MFA, into their own products. This allows software developers to focus on their core functionality while BIO-key ensures users enter the application without requiring them to carry their phone or any token.
Even the most security-focused organizations are suffering breaches as a result of human error or improper conduct. As enterprises scale the number of software as a service, or SaaS applications, and multi-cloud services they rely on and the interconnections between them increase, assured identity has emerged as a critical component of an organization’s security framework, directly affecting each triad of cybersecurity – confidentiality, integrity, and availability. As access perimeters dissolve, organizations must evolve from network-based security models to Zero Trust and Continuous Authentication and Risk Trust Assessment (CARTA) security models, focusing on adaptive and context-aware controls. True server-secured biometric verification removes the human nature vulnerability at the root of many security compromises creating a more reliable means to manage user access and protect digital assets against rogue users willing to hand over their credentials to a proxy. Our global identity as a service, or IDaaS, hosting capability allows our customers to simplify and efficiently scale their security infrastructures across internal IT systems and external customer facing applications without installation overhead, security or uptime management efforts.
We designed BIO-key PortalGuard IDaaS and WEB-key to provide organizations an integrated approach to managing and securing all of their identities using the technologies they already use while providing capacity for future needs through the strategic use of biometrics to limit vulnerability and contain authentication costs. Our platform allows users to authenticate their customers, employees, contractors, and partners. It enables any user to connect to any device, cloud or application, all with a simple, customizable, intuitive and consumer-friendly user experience. We utilize server-secured Identity-Bound Biometrics to support roving users without requiring them to carry their phone or a token. As of December 31, 2025, more than 600 customers across multiple industries use BIO-key to secure and manage access for users around the world.
Development of Business
BIO-key was founded in 1993 to develop and market advanced fingerprint biometric technology and related security software solutions. First incorporated as BBG Engineering, the company was renamed SAC Technologies in 1994 and renamed BIO-key International, Inc. in 2002. Our principal executive office is located at 101 Crawfords Corner Road, Suite 4116, Holmdel, NJ, 07733.
BIO-key was a pioneer in developing automated finger identification technology that supplements or compliments other methods of identification and verification, such as personal inspection identification, passwords, tokens, smart cards, ID cards, credit card, passports, driver’s licenses, or other form of possession or knowledge-based credentialing. Our advanced technology and is used to improve both the accuracy and speed of fingerprint biometrics in some of the largest biometric systems in the world.
On June 30, 2020, we enhanced our product offering by acquiring PistolStar, Inc. (“PistolStar”). PistolStar provides enterprise-ready identity access management solutions to commercial, government and education customers throughout the United States and internationally. PistolStar develops and markets our PortalGuard line of software and services.
On March 8, 2022, we expanded our sales and support operation into Europe, Africa and the Middle East (“EMEA”) by acquiring Swivel Secure Europe, SA. Swivel Secure Europe is a Madrid, Spain based provider of IAM solutions serving over 300 customers through a network of dozens of channel partners throughout EMEA. Until the fourth quarter of 2024, Swivel Secure Europe was the exclusive distributer of the AuthControl® Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Middle East, and Africa, excluding the United Kingdom. Swivel Secure, now operates under the name BIO-key EMEA, maintains a direct sales force with offices in Madrid, Spain and Lisbon, Portugal, and sells only BIO-key hardware, software and services.
On November 27, 2024, we commenced a collaboration with Fiber Food Systems, Inc., an early-stage company engaged in developing global food security solutions. Under this arrangement, we are working to explore IAM use cases across the food industry. As part of this agreement, we acquired shares of Boumarang, Inc. from Fiber. Boumarang is developing sustainable, AI-driven, hydrogen-powered, long-range drone technology. We are working with Boumarang and its partners to integrate our biometric technology into autonomous systems, targeting applications across aerospace and other industries. We expect that these initiatives have the potential to create new commercial opportunities in future periods.
Our Products
BIO-key PortalGuard and PortalGuard IDaaS
BIO-key PortalGuard is an independent, customer-controlled and neutral-by-design cloud-based identity platform that allows our customers to integrate with any cloud or on-premise SaaS application, service or cloud host, as well as Windows device authentication through a single secure, reliable and scalable IAM platform. It provides identical capabilities in both a SaaS (PortalGuard IDaaS) or on-premise (PortalGuard) delivery model. PortalGuard integrates BIO-key’s Identity Bound Biometric (IBB) authentication as what-you-are authentication options that are not tied to a device or “what you have” authentication, allowing our customers to positively identify who is accessing their systems, not the device they might have handed off to another user. Our three-way IAM neutrality consists of:
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seventeen MFA authentication factor choices, including our server-secured IBB via fingerprint scanners, or using a palm scan, facial selfie, or voice biometric via our MobileAuth app on a mobile phone; |
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open user directory choices including on premise, hybrid or full-Azure Active Directory, LDAP, IBM Domino, or custom SQL user directory; and |
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multiple single sign on, or SSO, federation options, including SAML, Open ID Connect (OIDC), OAUTH, CAS and WS-Fed. |
These capabilities allow our customers to combine and authenticate legacy and future technologies and to securely connect users to the technology that they choose. We design transparent compatibility of the BIO-key PortalGuard IDaaS with on-premise infrastructures and public and hybrid clouds.
Our customers use the BIO-key PortalGuard IDaaS to secure their workforces and student populations and make their partner networks more collaborative. PortalGuard IDaaS provides more and secure experiences for their customers and end users, which enables our customers to future-proof their environments. PortalGuard IDaaS can be used as the central system for an organization’s connectivity, access, authentication and identity lifecycle management needs across all of its users, technology and applications. We enable our customers to easily deploy, manage and secure applications and devices, and offer provisioning services using open source tools.
Developers can leverage an extensive suite of API and modular SDK tools to build custom cloud, mobile and web application enrollment and authentication experiences that leverage BIO-key PortalGuard and WEB-key as the underlying identity management platform. Once deployed, PortalGuard allows administrators to enforce contextual access management decisions based on conditions such as user identity, device, geolocation, application destination identity, IP range, and time of day.
Our customers use BIO-key to (i) manage and secure work-related IT access of their employees, contractors and supply chain partners, which we call workforce identity; and (ii) manage and secure the identities of users of their web properties, which we call customer identity.
BIO-key PortalGuard and PortalGuard IDaaS for Workforce Identity. PortalGuard streamlines the way an organization’s employees, contractors and supply chain partners connect to its applications and data from any device, while increasing user efficiency, preventing unauthorized delegation, credential sharing, and keeping digital environments secure through our MFA capabilities. We enable organizations to provide their workforces with immediate and secure access to every application from any device they use, without maintaining multiple credentials. Our multi-directory support interfaces with the directories in place at an organization, while allowing SQL-based custom directories where none presently exist. BIO-key PortalGuard Desktop allows customers to extend the BIO-key PortalGuard IDaaS to their existing on-premises and remote workstation Windows sign in.
BIO-key PortalGuard and PortalGuard IDaaS for Customer Identity. BIO-key PortalGuard allows organizations to secure access to their online properties, while upgrading their customers’ user experience by delivering self-enrollment and management for customer-facing cloud, mobile or web applications. We enable an organization’s product team to layer BIO-key’s MFA, SSO and self-service password reset, or SSPR, functionality into their cloud, web and mobile applications through federation standards or using our APIs. Our customers are able to centrally manage policies, audit and log access across their properties, leading to more seamless customer experiences.
BIO-key VST and WEB-key; Products; Civil and Large-Scale ID Infrastructure
We have developed what we believe is the most discriminating and effective commercially available finger-based biometric technology. This technology is embedded in our PortalGuard product for enterprise security, providing customers with a unique capability to authenticate users without a phone or token, where appropriate, such as manufacturing, retail, call centers, and health care workers. Other markets for scalable biometric engines include government markets, large scale identity projects such as voter’s registration, driver’s license, national ID programs, and SIM card registration.
We also offer a full line of easy to use finger scanners for both enterprise and consumer markets. Our PIV Pro, SidePass®, EcoID II® and SideSwipes® finger readers can be used on any laptop, tablet or other device which contains a USB A or C port. We market and sell these fingerprint scanners through distributors and directly to end users via Amazon.
Fingerprint Readers
Our series of compact fingerprint readers, we find commercial companies use SidePass®, SideSwipe® or EcoID II® to replace their Windows passwords and enable Windows Hello for Business without replacing or upgrading laptops or tablets.
Identity and Access Management, User Multi-Factor Authentication, Single Sign On, Privilege Entitlement and Access Control
Our products simplify the authentication process for enterprise users and consumers, while raising security levels. This allows our customers to meet new, stronger authentication requirements and security best practices across many industries, while delivering a superior end-user experience. Customers use our products to reduce risk of theft, fraud, loss, account takeover attacks, and unauthorized account sharing by limiting access to valuable assets, privileges, data, services, networks and places to only authorized individuals. Our products provide stronger identity binding and a superior user experience versus traditional credentialing systems, which utilize a physical or knowledge-based electronic credential to authenticate the holder but fail to authenticate the actual user in addition to the token. Both commercial enterprises and the public sector have seen a shift in the requirement for stronger authentication, and the FBI, NIST and industry thought leaders such as SalesForce and Microsoft have encouraged entities to enhance their security posture by implementing stronger 2-factor authentication (2FA) or MFA. We believe the market for advanced user MFA, including fingerprint biometrics, extends to nearly every industry segment and the market opportunity for our products is massive, global and growing.
Our Markets
Historically, our largest market has been identity and access management for highly regulated industries like government and healthcare. However, we are witnessing a change in the landscape as organizations within all industries and of all sizes are embracing biometric technology and MFA as a security and workflow solution. Millions of users have been successfully using biometrics in phones from Apple and Samsung and they welcome the same user experience to access applications without passwords or tokens.
Our acquisition of PistolStar added a large customer base in the state and local government and higher education (SLED) vertical. Colleges and universities throughout the United States use our PortalGuard MFA and SSO platform. As governments, colleges and universities continue to operate in remote environments, we have seen additional demand for our solutions.
We believe there is potential for significant market growth in the following key areas:
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Enterprise MFA for access to computer networks, and applications. |
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Large scale identification projects. |
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Government funded initiatives, including the state board of elections. |
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International law enforcement applications where we are viewed as a global leader in the biometric technology and serve customers such as the Israeli Defense Force and the Singapore Police departments. |
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Consumer mobile credentialing, including mobile payments, credit and payment card programs, data and application access, and commercial loyalty programs. |
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Demand for BIO-key hardware products from Windows Hello for Business users and Fortune 2000 companies. |
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Government services and highly regulated industries including, Medicare, Medicaid, Social Security, drivers' licenses, campus and school ID, passports/visas. |
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Remote authentication challenges, including those created by the remote work shift resulting from the pandemic. |
Business Model
Our business model is focused on the following key areas:
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Market Drivers |
Enterprise needs are not being met by mainstream MFA’s phone app or token approach. Supply chain breaches, ransomware attacks, and administrative access compromises highlight the shortcomings of mainstream MFA and security approaches, which leave far too much responsibility on end-users to comply with cyber-hygiene policies. BIO-key’s biometric authentication process prevents human error and human nature from undermining secure authentication, while making the end user’s access easier than ever. The current climate of broad enterprise adoption of MFA to replace passwords presents opportunities for us to leverage our unique differentiators and exploit the gaps in existing IAM technology approaches. One of those gaps is the challenge of authenticating users that “rove” among workstations. A second gap is preventing unauthorized account sharing and delegation. |
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OEM Customers |
We continue to prioritize securing agreements with OEM customers. The history of success supporting NCR, Omnicell, and Idemia provides an established footprint that we intend to build upon. As OEM customers embed our solutions within their products, the customer benefits from the enhanced security and workflow, and frees them from investing in R&D to manage an IAM infrastructure of their own. OEM customers’ ordering patterns are more predictable and OEM customers generally require lower service and support resourcing. |
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Highly Regulated Industries |
Government ID projects and healthcare organizations, including hospitals, clinics, and small private practices present a strong opportunity for us. Additionally, the financial services industry, including banks and credit unions has grown substantially. |
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Partner Model |
In 2025, we continued to grow our Channel Alliance Partner program focused on partnering with select value added resellers, integrators, and distributors. |
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Microsoft Partnership |
We are a Microsoft Partner and our line of compact fingerprint scanners has been tested and qualified by Microsoft to support Windows Hello and Windows Hello for Business. |
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Hardware |
Hardware products generated 22% and 9% of our revenue in 2025 and 2024, respectively. EcoID II® has emerged as one of our most popular scanner for enterprise deployments. For customers that require the highest level of security, PIV-Pro is a FIPS compliant fingerprint scanner, and our updated EcoID III® introduced in 2025 is PIV-071006 FAP-20 compliant, both suitable for highly regulated industries and organizations that want a best-in-class solution. |
We have grown our business through a combination of organic growth and the strategic acquisitions of PistolStar and Swivel Secure Europe. We expect to continue to pursue strategic acquisitions of select businesses and assets in the IAM space. In furtherance of this strategy, we are active in the industry and regularly evaluate businesses that we believe will either provide an entry into new market verticals or be synergistic with our existing operations and in either case, be accretive to earnings. We cannot provide any assurance as to whether we will be able to complete any acquisition and if completed, successfully integrate any business we acquire into our operations. Please see the section captioned “RISK FACTORS” for additional information regarding acquisition risks.
Marketing and Distribution
We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners. Through our Channel Alliance Program, we have partnered with more than 85 resellers, system integrators and other distribution partners. We are committed to continue to aggressively grow this program in 2025.
We partner with leading application, managed service and infrastructure vendors, such as Intelisys, Insight, NGEN, Amazon Web Services, Pathify (formerly UCROO Campus), Software House International (SHI), Atlassian, and ProCirrus.
We offer our software under a SaaS term license and generate annual recurring revenue (ARR) primarily by selling multi-year subscriptions to our software. We employ a customer success team, focused on customer satisfaction and early remediation.
Intellectual Property Rights
We develop and own significant intellectual property and believe that our intellectual property is fundamental to our biometric and IAM product operation: We own patented technologies and trade secrets developed or acquired by us.
Patents
On June 5, 2012, PistolStar was issued US Patent No. 8,196,193 for “Method For Retrofitting Password Enabled Computer Software with a Redirectional User Authentication Method”, where a device, method, and system may be used to integrate and control authentication and passwords among various applications and platforms. With the payment of all maintenance fees, this patent will expire on November 1, 2030.
On March 12, 2013, PistolStar was issued US Patent No. 8,397,077 for “Client Side Authentication Redirection”, where user specific attributes may be accessed and used to produce a generated password, using an algorithm and the user attributes. With the payment of all maintenance fees, this patent will expire on August 7, 2030.
On May 3, 2017, we were issued US Patent No. 9,646,146 for our “Utilization of Biometric Data”, a method enables existing small area sensors to capture substantially more fingerprint surface area, leading to a higher degree of accuracy when performing a match. With the payment of all maintenance fees, this patent will expire on March 6, 2035.
On June 19, 2018, we were issued U.S. Patent No. 10,002,244 for our “Utilization of Biometric Data” to allow continuous, passive user authentication on a mobile device. With the payment of all maintenance fees, this patent will expire on March 6, 2035.
On July 27, 2018, we were issued U.S. Patent No. 10,025,831 for “Adaptive Short Lists and Acceleration of Biometric Database Search”, a method to quickly and iteratively search a database of biometric data. With the payment of all maintenance fees, this patent will expire on August 10, 2036.
On September 3, 2019, we were issued U.S. Patent No. 10,400,481 for “Fingerprint Lock”, a lock design method of the shackle and spring integration to electronics. With the payment of all maintenance fees, this patent will expire on June 27, 2037.
On September 10, 2019, we were issued U.S Patent No. 10,410,040 for “Fingerprint Lock Control method and Fingerprint Lock System”, a lock design method of the control process of scanning, and server communications for user profile management. With the payment of all maintenance fees, this patent will expire on July 26, 2037.
On April 20, 2021, we were issued U.S. Patent No. 10,984,085 for “Biometric Recognition for Uncontrolled Acquisition Environments”, expected to be deployed in mobile devices, the patent provides a method of continuous capture of the users biometric data before the need of the authentication or enrollment, as well as during an active session with a user, to assure the user has not changed. With the payment of all maintenance fees, this patent will expire on March 13, 2039.
We have also been granted parallel patents to the US Patent portfolio to certain of our patents in many foreign countries offering protection of our intellectual property rights around the world.
Trademarks
We have registered our trademarks “BIO-key”, “True User Identification”, “Intelligent Image Indexing”, “WEB-key”, “SideSwipe”, “SidePass”, “EcoID”, “PistolStar®”, “PortalGuard”, “MobileAuth”, “PASSIVEKEY®” and “PISTOLSTAR®” with the U.S. Patent & Trademark Office, as well as many foreign countries, protecting the names of our companies and our key technology offerings.
We also own the following unregistered trademarks: “PortalGuard Nebula™”, “Password Power™” and “Scooch™”.
Copyrights and trade secrets
We take measures to ensure copyright and license protection for our software releases prior to distribution. When possible, the software is licensed in an attempt to ensure that only licensed and activated software functions to its full potential. We also take measures to protect the confidentiality of our trade secrets.
Research and Development
Our PortalGuard IAM product line is mature, with hundreds of active customers, and we are adding additional factors and capabilities to the product, as well as enhancing the self-management for the functionally equivalent PortalGuard IDaaS offering. A significant new authentication factor set will come via our MobileAuth application for users to experience multiple biometric secure authentication via their mobile phone devices. Our VST and WEB-key biometric platforms are mature, stable, and widely-deployed. We concentrate our research and development efforts on enhancing the functionality, reliability and integration of our current products as well as acquiring and developing new and innovative products and solutions for providing broader access to the BIO-key user experience.
Although we believe that our identification technology is one of the most advanced and discriminating fingerprint technologies available today, the markets in which we compete are characterized by rapid technological change and evolving standards and use-cases. In order to maintain our position in the market, we will need to continue to upgrade and refine our existing technologies as new standards become relevant to our customers and markets.
During the years ended December 31, 2025 and 2024, we incurred expenses of $2,609,893 and $2,511,080, respectively, for research and development.
In future periods our R&D efforts will remain focused on updating and advancing our core software products including PortalGuard and PortalGuard IDaaS, MobileAuth, WEB-key and VST. These products are critical to support the anticipated growth in enterprise IAM.
Competition
The IAM, MFA and SSO market is characterized by multiple solution providers of solutions in either standalone or IAM suite delivery models. We believe that our unique differentiator in this market is the incorporation of an unparalleled server-secured biometric authentication capability among our seventeen authentication factors. There are numerous companies involved in the development, manufacturing and marketing of fingerprint biometrics products to commercial, government, law enforcement and prison markets. These companies include, but are not limited to, IDEMIA, Thales, NEC, Neurotechnology, and Innovatrics.
The majority of sales for automated fingerprint identification products in the market to date have been deployed for government agencies, healthcare facilities, and law enforcement applications. The consumer and commercial markets represent areas of growth potential for biometrics, led by the use of mobile devices.
The epidemic of security and data breaches reported over the past few years is one of the driving factors for identifying new methods of protecting valuable data. After attempting to create a more sophisticated password, or more efficient token or PIN, it has become apparent that each of these methods are easily compromised, and the downside risks are significant.
We have also seen FIDO-compliant keys enter the market, led by Yubico’s YubiKey, a hardware token device that acts as a credential for access. FIDO officially recommends enterprises purchase two or more keys for every user, to prevent lockout in the event of a lost or misplaced FIDO token. These hardware tokens alone do not meet the needs of large organizations for which key sharing and lost keys are concerns, establishing the opportunity for our Identity Bound Biometric differentiation. Where FIDO is needed, we offer a line of equivalent function and quality, but lower-cost FIDO 2.0 keys.
With respect to competing biometrics technologies, each has its strengths and weaknesses and none has emerged as a market leader:
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Fingerprint identification is generally viewed as very accurate, inexpensive and non-intrusive and is the dominant biometric in use today and will be for the foreseeable future; |
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Palm Vein scanning is expensive, technique-sensitive, and offers mobility challenges; |
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Iris scanning is viewed as accurate, but the hardware is significantly more expensive; and |
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Facial recognition can have privacy concerns with work-from-home use, and is typically highly dependent on ambient lighting conditions, angle of view, and other factors. |
Government Regulations
Various state, federal and EU privacy laws govern the collection, storage, use and any sale of biometric-related data. To the extent that our IDaaS offerings include the collection and storage of customer users’ personal or biometric data, we operate as a processor of such data. Our WEB-key platform includes compliance features to ensure automated compliance with these laws including collection of informed written consent during enrollment workflows and robust auditing to control and report on the retention of biometric data and removal requests. Additionally, our customers have access to these tools to maintain their own compliance, including deletion of user data when business relationships terminate.
We believe in biometric privacy rights, and that both users and their organizations benefit from a responsibly operated biometric identity infrastructure. We actively participate in industry privacy workgroups as recognized biometric subject matter experts in order to influence and keep abreast of any proposed changes to these regulations. Beyond these regulations, we are not currently subject to direct regulation by any government agency, other than regulations generally applicable to businesses or related to specific project requirements. In the event of any international sales, we would be subject to various domestic and foreign laws regulating such exports and export activities.
Environmental Regulations
As of the date of this report, we have not incurred any material expenses relating to our compliance with federal, state, or local environmental laws and do not expect to incur any material expenses in the foreseeable future.
Seasonality
Generally, our revenues do not exhibit a seasonal pattern, however, revenue is affected by customer budgeting, government fiscal year planning, and capital budgets.
Human Capital Resources
As of the date of this report, we have forty-two employees consisting of forty-one individuals on a full-time basis and one part-time employee as follows: (i) nineteen in engineering, customer support, and research and development; (ii) nine in finance and administration; and (iii) fourteen in sales and marketing. We also have two factory contractors in China. None of our employees are represented by a labor union and we believe that our relationship with our employees is good.
Set forth below are the risks that we believe are material to our investors. This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements appearing just before the section captioned “BUSINESS” in Item 1 above.
BUSINESS AND FINANCIAL RISKS
Material weaknesses could materially and adversely affect our operations, financial condition, reputation and stock price.
It is possible that we may discover significant deficiencies or material weaknesses in our internal control over financial reporting in the future. For example, internal control over financial reporting may not achieve their intended objectives. Control processes that involve human diligence and compliance, such as our disclosure controls and procedures and internal control over financial reporting, are subject to lapses in judgment and breakdowns resulting from human failures. Controls can also be circumvented by collusion or improper management-override of such controls. Because of such limitations, there are risks that material misstatements due to error or fraud may not be prevented or detected, and that information may not be reported on a timely basis.
Based on our limited cash resources, history of losses, negative cash flow from operations, and dependence on debt and equity financing to fund operations, our independent registered public accounting firm has included an explanatory paragraph in their opinion as to the substantial doubt about our ability to continue as a going concern.
Due to, among other factors, our history of losses, limited cash resources, negative cash flow from operations, and dependence on debt and equity financing to fund operations, our independent registered public accounting firm has included an explanatory paragraph in their opinion for the year ended December 31, 2025 as to the substantial doubt about our ability to continue as a going concern within one year after issuance. Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which contemplate that we will continue to operate as a going concern. Our financial statements do not contain any adjustments that might result if we are unable to continue as a going concern.
Historically, we have not generated significant revenue and have sustained substantial operating losses.
In order to increase revenue, we have developed a direct sales force and anticipate the need to retain additional sales, marketing and technical support personnel and may need to incur substantial expenses. We cannot assure you that we will be able to secure these necessary resources, that a significant market for our technologies will develop, or that we will be able to achieve our targeted revenue. If we are unable to achieve revenue or raise capital sufficient to cover our ongoing operating expenses, we will be required to scale back operations, including marketing and research initiatives, or in the extreme case, discontinue operations.
We may need to obtain additional financing to execute our business plan, which may not be available. If we are unable to raise additional capital or generate significant revenue, we may not be able to continue operations.
We have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $750,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. During 2025, we generated approximately $6.1 million of revenue, which is below our average monthly requirements. If we are unable to generate sufficient revenue to cover operating expenses and fund our business plan, we will need to obtain additional third-party financing. We may, therefore, need to obtain additional financing through the issuance of debt or equity securities. We cannot assure you that we will be able to secure any such additional financing on terms acceptable to us or at all. If we cannot obtain such financing, we will not be able to execute our business plan, will be required to reduce operating expenses, and in the extreme case, discontinue operations.
Our failure to timely file our annual report on Form 10-K for the year ended December 31, 2025 has made us ineligible to use a Form S-3 to register the offer and sale of securities, which could adversely affect our ability to raise future capital.
As a result of our failure to timely file our annual report on Form 10-K for the year ended December 31, 2025 we are not eligible to register the offer and sale of our securities using a registration statement on Form S-3 until one year from the date we regain and maintain status as a current filer, assuming that we remain listed on the Nasdaq Capital Market. Should we wish to register the offer and sale of our securities to the public prior to the time we are eligible to use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our financial condition.
Our biometric technology has yet to gain widespread market acceptance and we do not know how large of a market will develop for our technology.
Biometric technology has received only limited market acceptance, particularly in the private sector. Our technology represents a novel security solution and we have not yet generated significant sales. Although recent security concerns relating to identification of individuals and appearance of biometric readers on popular consumer products, including the Apple iPhone, have increased interest in biometrics generally, it remains an evolving market. Biometric based solutions compete with more traditional security methods including keys, cards, personal identification numbers and security personnel. Acceptance of biometrics as an alternative to such traditional methods depends upon a number of factors including:
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national or international events which may affect the need for or interest in biometric solutions; |
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the performance and reliability of biometric solutions; |
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marketing efforts and publicity regarding these solutions; |
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public perception regarding privacy concerns; |
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costs involved in adopting and integrating biometric solutions; |
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proposed or enacted legislation related to privacy of information; and |
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competition from non-biometric technologies that provide more affordable, but less robust, authentication (such as tokens and smart cards). |
For these reasons, we are uncertain whether our biometric technology will gain widespread acceptance in any commercial markets or that demand will be sufficient to create a market large enough to produce significant revenue or earnings. Our future success depends, in part, upon business customers adopting biometrics generally, and our solution specifically.
Biometric technology is a relatively new approach to Internet security, which must be accepted in order for our WEB-key solution to generate significant revenue.
Our WEB-key authentication initiative represents a relatively new approach to Internet security, which has been adopted on a limited basis by companies that distribute goods, content or software applications over the Internet. The implementation of our WEB-key solution requires the distribution and use of a finger scanning device and integration of database and server side software. Although we believe our solutions provide a higher level of security for information transmitted over the Internet than existing traditional methods, unless business and consumer markets embrace the use of a scanning device and believe the benefits of increased accuracy outweigh implementation costs, our solution will not gain market acceptance.
The market for our solutions is still developing and if the biometrics industry adopts standards or a platform different from our standards or platform, our competitive position would be negatively affected.
The market for identity solutions is still developing. The evolution of this market may result in the development of different technologies and industry standards that are not compatible with our current solutions, products or technologies. Several organizations set standards for biometrics to be used in identification and documentation. Although we believe that our biometric technologies comply with existing standards, these standards may change and any standards adopted could prove disadvantageous to or incompatible with our business model and current or future solutions, products and services.
Our software products may contain defects which will make it more difficult for us to establish and maintain customers.
Although we have completed the development of our core biometric technology, it has only been used by a limited number of business customers. Despite extensive testing during development, our software may contain undetected design faults and software errors, or “bugs” that are discovered only after it has been installed and used by a greater number of customers. Any such defect or error in new or existing software or applications could cause delays in delivering our technology or require design modifications. These could adversely affect our competitive position and cause us to lose potential customers or opportunities. Since our technologies are intended to be utilized to secure physical and electronic access, the effect of any such bugs or delays will likely have a detrimental impact on us. In addition, given that biometric technology generally, and our biometric technology specifically, has yet to gain widespread acceptance in the market, any delays would likely have a more detrimental impact on our business than if we were a more established company.
In order to generate revenue from our biometric products, we are dependent upon independent original equipment manufacturers, system integrators and application developers, which we do not control. As a result, it may be more difficult to generate sales.
We market our technology through licensing arrangements with:
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original equipment manufacturers (OEMs), system integrators and application developers which develop and market products and applications which can then be sold to end users; and |
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companies which distribute goods, services or software applications over the Internet. |
As a technology licensing company, our success will depend upon the ability of these manufacturers and developers to effectively integrate our technology into products and services which they market and sell. We have no control over these licensees and cannot assure you that they have the financial, marketing or technical resources to successfully develop and distribute products or applications acceptable to end users or generate any meaningful revenue for us. These third parties may also offer the products of our competitors to end users. While we have commenced a significant sales and marketing effort, we have only begun to develop a significant distribution channel and may not have the resources or ability to sustain these efforts or generate any meaningful sales.
We face intense competition and may not have the financial and human resources necessary to keep up with rapid technological changes, which may result in our technology becoming obsolete.
The Internet, facility access control, and information security markets are subject to rapid technological change and intense competition. We compete with both established biometric companies and a significant number of startup enterprises as well as providers of more traditional methods of access control. Most of our competitors have substantially greater financial and marketing resources than we do and may independently develop superior technologies, which may result in our technology becoming less competitive or obsolete. We may not be able to keep pace with this change. If we are unable to develop new applications or enhance our existing technology in a timely manner in response to technological changes, we will be unable to compete in our chosen markets. In addition, if one or more other biometric technologies such as voice, face, iris, hand geometry or blood vessel recognition are widely adopted, it would significantly reduce the potential market for our fingerprint identification technology.
We recognized revenues from Africa and the European Union in 2025 and 2024 and expect continued revenues from these regions in future periods. Our financial performance will be subject to risks associated with changes in the value of the U.S. dollar versus local currencies.
Owing to the international scope of our operations, including our recent acquisition of Swivel Secure Europe, SA, we are exposed to foreign exchange risk. Our primary exposure to movements in foreign currency exchange rates relates to non-U.S. dollar-denominated sales and operating expenses worldwide. Weakening of foreign currencies relative to the U.S. dollar will adversely affect the U.S. dollar value of our foreign currency-denominated sales and earnings, if any, and could lead to us raising international pricing, potentially reducing the demand for our products. In addition, margins on sales of our products in foreign countries and on sales of products that include components obtained from foreign suppliers could be materially adversely affected by foreign currency exchange rate fluctuations. As a result, our business and the price of our common stock may be affected by fluctuations in foreign exchange rates, which may have a significant impact on our results of operations and cash flows from period to period. Currently, we do not have any exchange rate hedging arrangements in place.
Although we have made significant sales of our products throughout Asia and Africa in prior years, we have not been able to consistently enforce our contract rights and collect all receivables which has resulted in material write-offs.
Our ability to enforce our international contracts is contingent on our relationships with foreign resellers, and their financial viability. Although we are making efforts to better enforce our contract rights, there can be no assurance that we will be able to fully collect all receivables originating in Asia and Africa or that will not have to write-off future receivables which may be material in amount. Any such write-offs have negatively impacted our financial position and results of operation.
We depend on key employees and members of our management team, including our Chairman of the Board and Chief Executive Officer, Chief Financial Officer, and our Chief Legal Officer, in order to achieve our goals. We cannot assure you that we will be able to retain or attract such persons.
Our employment contracts with Michael W. DePasquale, our Chairman of the Board and Chief Executive Officer, Cecilia C. Welch, our Chief Financial Officer, and James D. Sullivan, our Chief Legal Officer, each have one-year terms and renew automatically for successive one-year periods unless notice of non-renewal is provided by the Company. Although the contracts do not prevent them from resigning, they do contain confidentiality and non-compete clauses, which are intended to prevent them from working for a competitor within one year after leaving our Company. Our success depends on our ability to attract, train and retain employees with expertise in developing, marketing and selling software solutions. In order to successfully market our technology, we will need to retain additional engineering, technical support and marketing personnel. The market for such persons remains highly competitive and our limited financial resources will make it more difficult for us to recruit and retain qualified persons.
We cannot assure you that the intellectual property protection for our core technology provides a sustainable competitive advantage or barrier to entry against our competitors.
Our success and ability to compete is dependent in part upon proprietary rights to our technology. We rely primarily on a combination of patent, copyright and trademark laws, trade secrets and technical measures to protect our propriety rights. We have filed a patent application relating to both the optic technology and biometrics solution components of our technology wherein several claims have been allowed. The U.S. Patent and Trademark Office has issued us a series of patents for our Vector Segment fingerprint technology (VST), and our other core biometric analysis and identification technologies. However, we cannot assure you that we will be able to adequately protect our technology or other intellectual property from misappropriation in the U.S. and abroad. Any patent issued to us could be challenged, invalidated or circumvented or rights granted thereunder may not provide a competitive advantage to us. Furthermore, patent applications that we file may not result in issuance of a patent or, if a patent is issued, the patent may not be issued in a form that is advantageous to us. Despite our efforts to protect our intellectual property rights, others may independently develop similar products, duplicate our products or design around our patents and other rights. In addition, it is difficult to monitor compliance with, and enforce, our intellectual property rights on a worldwide basis in a cost-effective manner. In jurisdictions where foreign laws provide less intellectual property protection than afforded in the U.S. and abroad, our technology or other intellectual property may be compromised, and our business would be materially adversely affected.
If any of our proprietary rights are misappropriated or we are forced to defend our intellectual property rights, we will have to incur substantial costs. Such litigation could result in substantial costs and diversion of our resources, including diverting the time and effort of our senior management, and could disrupt our business, as well as have a material adverse effect on our business, prospects, financial condition and results of operations. We can provide no assurance that we will have the financial resources to oppose any actual or threatened infringement by any third party. Furthermore, any patent or copyrights that we may be granted may be held by a court to infringe on the intellectual property rights of others and subject us to the payment of damage awards.
We may be subject to claims with respect to the infringement of intellectual property rights of others, which could result in substantial costs and diversion of our financial and management resources.
Third parties may claim that we are infringing on their intellectual property rights. We may violate the rights of others without our knowledge. We may expose ourselves to additional liability if we agree to indemnify our customers against third party infringement claims. While we know of no basis for any claims of this type, the existence of and ownership of intellectual property can be difficult to verify, and we have not made an exhaustive search of all patent filings. Additionally, most patent applications are kept confidential for twelve to eighteen months, or longer, and we would not be aware of potentially conflicting claims that they make. We may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternative technology or obtain other licenses. In addition, we may incur substantial expenses in defending against these third-party infringement claims and be diverted from devoting time to our business and operational issues, regardless of the merits of any such claim.
In addition, in the event that we recruit employees from other technology companies, including certain potential competitors, and these employees are engaged in the development of portions of products which are similar to the development in which they were involved at their former employers, we may become subject to claims that such employees have improperly used or disclosed trade secrets or other proprietary information. If any such claims were to arise in the future, litigation or other dispute resolution procedures might be necessary to retain our ability to offer our current and future services, which could result in substantial costs and diversion of our financial and management resources. Successful infringement or licensing claims against us may result in substantial monetary damages, which may materially disrupt the conduct of our business and have a material adverse effect on our reputation, business, financial condition and results of operations. Even if intellectual property claims brought against us are without merit, they could result in costly and time consuming litigation and may divert our management and key personnel from operating our business.
If we are unable to effectively protect our intellectual property rights on a worldwide basis, we may not be successful in the international expansion of our business.
Access to worldwide markets depends in part on the strength of our intellectual property portfolio. There can be no assurance that, as our business expands into new areas, we will be able to independently develop the technology, software or know-how necessary to conduct our business or that we can do so without infringing the intellectual property rights of others. To the extent that we have to rely on licensed technology from others, there can be no assurance that we will be able to obtain licenses at all or on terms we consider reasonable. The lack of a necessary license could expose us to claims for damages and/or injunction from third parties, as well as claims for indemnification by our customers in instances where we have a contractual or other legal obligation to indemnify them against damages resulting from infringement claims. With regard to our own intellectual property, we actively enforce and protect our rights. However, there can be no assurance that our efforts will be adequate to prevent the misappropriation or improper use of our protected technology in international markets.
We may not achieve profitability if we are unable to maintain, improve our offerings.
We believe that our future business prospects depend in part on our ability to maintain and improve our current services and to develop new ones on a timely basis. Our services will have to achieve market acceptance, maintain technological competitiveness, and meet an expanding range of customer requirements. We may experience difficulties that could delay or prevent the successful development, introduction or marketing of new services and service enhancements. Additionally, our new services and service enhancements may not achieve market acceptance. If we cannot effectively develop and improve services, we may not be able to recover our fixed costs or otherwise become profitable.
We are subject to risks and uncertainties associated with the continued growth of our international operations, which may harm our business.
We have international operations and continue to expand our international operations when we acquired Swivel Secure Europe SA. Accordingly, our business is subject to risks and uncertainties associated with doing business outside of the United States and could be adversely affected by a variety of factors, including:
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multiple, conflicting and changing laws and regulations such as privacy, security, and data use regulations, tax laws, export and import restrictions, economic and trade sanctions and embargoes, employment laws, anticorruption laws, regulatory requirements, reimbursement or payer regimes and other governmental approvals, permits and licenses; |
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failure by us, our collaborators or our distributors to obtain regulatory clearance, authorization or approval for the use of our product candidates in various countries; |
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additional potentially relevant third-party patent rights; |
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complexities and difficulties in obtaining intellectual property protection and enforcing our intellectual property; |
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difficulties in staffing and managing foreign operations; |
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financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our product candidates and exposure to foreign currency exchange rate fluctuations; |
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natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; |
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regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act (FCPA), its books and records provisions, or its anti-bribery provisions, or laws similar to the FCPA in other jurisdictions in which we may now or in the future operate; and |
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anti-bribery requirements of several Member States in the European Union and other countries that may change and require disclosure of information to which U.S. legal privilege may not extend. |
Any of these factors could significantly harm our business, operating results, financial condition or prospects.
Our business could be negatively impacted by security threats, including cybersecurity threats, ransomware, and other disruptions.
Our customers use our solutions to access their business systems and store data related to their employees, contractors, partners and customers. Our systems’ integrity is essential to their use of our platform, which stores, transmits and processes customers’ proprietary information and users’ personal data. If the confidentiality, integrity or availability of our customers’ data or systems is disrupted, we could incur significant liability to our customers and to individuals or businesses whose information was being stored by our customers, and our platform may be perceived as less desirable, which could negatively affect our business and damage our reputation. We, our third-party service providers, and our customers may be unable to anticipate these techniques or to implement adequate preventive measures. Further, because we do not control our third-party service providers, or the processing of data by our third-party service providers, we cannot ensure the integrity or security of measures they take to protect customer information and prevent data loss beyond evaluating and relying on their representations as to their security methods and posture. Although we utilize various procedures and controls to monitor these threats and mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing. If any of these events were to materialize, they could lead to losses of sensitive information, critical infrastructure, personnel or capabilities, essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations, or cash flows. As a technology company, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information. on an ongoing basis.
In addition to threats from traditional computer “hackers,” malicious code (such as malware, viruses, worms and ransomware), employee or contractor theft or misuse, password spraying, phishing and denial-of-service attacks, we and our third-party service providers now also face threats from sophisticated nation-state and nation-state-supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risks to our systems (including those hosted on AWS’ systems), internal networks, our customers’ systems and the information that they store and process. Cybersecurity attacks in particular are evolving, we expect that they will continue, and we expect the scope and sophistication of these efforts may increase in future periods. As a result, we and our third-party service providers may be unable to anticipate these techniques or implement adequate preventative measures quickly enough to prevent either an electronic intrusion into our systems or services or a compromise of customer data, employee data or other protected information.
Although we have implemented systems and procedures that are designed to protect customer, employee, vendor and Company information, prevent data loss and other security breaches, and otherwise identify, assess, and analyze cybersecurity risks, these measures may not function as expected or may not be sufficient to protect our internal networks and platform against certain attacks. Development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures increase and become more sophisticated. We face an evolving threat landscape in which cybercriminals, among others, employ a complex array of techniques designed to access personal data and other information, including, for example, the use of fraudulent or stolen access credentials, malware, ransomware, phishing, denial of service and other types of attacks. While, to the best of our knowledge, we have not experienced any material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a security breach or cyberattack that could materially increase financial risk to the Company or our customers, such a security breach or cyberattack could adversely affect our business and operations, including by damaging our reputation and our relationships with our customers, employees and investors, exposing us to litigation, fines, penalties or remediation costs.
We maintain cybersecurity insurance, but our insurance may be insufficient to cover all liabilities incurred in any such incident, and any incident may result in loss of, or increased costs of, that cybersecurity insurance. Any breach, or any perceived breach, of our systems, our customers’ systems, or other systems or networks secured by our products, without regard to whether any breach is due to a vulnerability in our platform, may also undermine confidence in our platform or the identity as a service industry and could result in damage to our reputation and brand, negative publicity, loss of partners, customers and sales, increased costs to correct any problem, costly litigation and other liabilities. In addition, a breach of the security measures of one of our partners could result in the disclosure of confidential information or other data that may provide additional avenues of attack, and if a high profile security breach occurs with respect to a comparable cloud technology provider, our customers and potential customers may lose trust in the security of the cloud business model generally, which could adversely impact our ability to retain existing customers or attract new ones. Any of these negative outcomes could adversely impact market acceptance of our products and could harm our business, results of operations, and financial condition.
Our failure to comply with applicable privacy, data protection and information security laws or related contractual obligations could subject us to significant liability and negatively impact our financial position and results of operation.
There are numerous laws and regulations in various jurisdictions regarding privacy, data protection, information security, and the storing, sharing, use, processing, transfer, disclosure and protection of personal data. In light of the increasing pace of new technology development, including with respect to biometric data, the scope of these data protection and privacy-related laws and regulations are expanding, subject to differing interpretations, and may be inconsistent among jurisdictions, or conflict with other rules that we are subject to. These evolving laws and regulations may result in increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. We are also subject to the terms of our privacy policies and contractual obligations to third parties related to privacy, data protection and information security.
Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to customers or other third parties, or applicable laws or regulations relating to privacy, data protection, or information security may result in governmental investigations or enforcement actions, litigation, claims or public statements against us by consumer advocacy groups or others, and could result in significant liability or cause our customers to lose trust in us, which could cause them to cease or reduce use of our products and services and otherwise have an adverse effect on our reputation and business. Any similar failure or perceived failure by users of our products or services may also have an adverse effect on our reputation and business. In addition, legal, regulatory, contractual and other obligations as well as public concerns relating to privacy, data protection or information security could restrict our ability to store and process data as part of our solutions or otherwise impact our ability to provide our solutions in certain jurisdictions and may result in the loss of business opportunities from customers operating in, or seeking to expand into, those jurisdictions. Additionally, we are subject to SEC rules related to cybersecurity risk management, which may further increase our regulatory burden and the cost of compliance in such events.
Our business could be adversely affected by trade tariffs or other trade barriers.
Our business is subject to the imposition of tariffs and other trade barriers, which may make it more costly for us to import inventory from China and Hong Kong and certain product components from South Korea. The current presidential administration has imposed new tariffs on imports to the United States and may impose additional tariffs in the future. Other countries have, and in the future may, impose retaliatory tariffs. The resulting environment of retaliatory trade or other practices or additional trade restrictions or barriers could harm our ability to obtain inventory and product components or sell our products and services at prices customers are willing to pay, which could have a material adverse effect on our business, prospects, results of operations, and cash flows. Relatedly, trade policies could lead to an increasing number of competitors entering the United States, thereby creating more competition. If we experience cost increases as a result of existing or future tariffs and are unable to pass on such additional costs to our customers, or otherwise mitigate the costs, our business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected.
Scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
Public companies are facing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds and influential investors are also focused on these practices, especially as they relate to the environment, climate change, health and safety, supply chain management, diversity, labor conditions and human rights, both in our own operations and in our supply chain. Increased ESG-related compliance costs could result in material increases to our overall operational costs. Our ESG practices may not meet the standards of all of our stakeholders and advocacy groups may campaign for further changes. Additionally, different stakeholder groups have divergent views on ESG matters, which increases the risk that any action or lack thereof with respect to ESG matters may be perceived negatively by at least some stakeholders and adversely impact our reputation and business. Anti-ESG sentiment has gained some momentum across the United States, with several states having enacted or proposed “anti-ESG” policies or legislation or issued related legal opinions. The federal government has similarly taken action to curtail ESG initiatives. A failure, or perceived failure, to adapt to or comply with regulatory requirements or to respond to investor or stakeholder expectations and standards could negatively impact our business and reputation and have a negative impact on the trading price of our common stock.
The impact of the Russian invasion of Ukraine, and the US-Iran war, and the international community’s response have created substantial political and economic disruption, uncertainty, and risk.
The short and long-term implications of Russia’s invasion of Ukraine, and the war between the US and Iran are difficult to predict at this time. We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the U.S. and several European and Asian countries, which has not caused any material harm to the Company to date; along with the war in Iran, may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and customers. Such risks include, but are not limited to, adverse effects on macro-economic conditions, including inflation; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our product prices; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could negatively affect our business and financial condition. These and related actions, responses, and consequences that cannot now be predicted or controlled may contribute to world-wide economic reversals.
There is a scarcity of and competition for acquisition opportunities.
A component of our business plan is to acquire businesses and assets in the biometric and identity access management industry and other industries which we believe would complement our current offerings. There are a limited number of operating companies available for acquisition that we deem to be desirable targets. In addition, there is a very high level of competition among companies seeking to acquire these operating companies. Many established and well-financed entities are active in acquiring interests in companies that we may find to be desirable acquisition candidates. Many of these entities have significantly greater financial resources, technical expertise and managerial capabilities than us. Consequently, we will be at a competitive disadvantage in negotiating and executing possible acquisitions of these businesses. Even if we are able to successfully compete with these entities, this competition may affect the terms of completed transactions and, as a result, we may pay more or receive less favorable terms than we expected for potential acquisitions. We may not be able to identify operating companies that complement our strategy, and even if we identify a company that complements our strategy, we may be unable to complete an acquisition of such a company for many reasons, including:
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failure to agree on the terms necessary for a transaction, such as the purchase price; |
|
● |
incompatibility between our operational strategies or management philosophies with those of the potential acquiree; |
|
● |
competition from other acquirers of operating companies; |
|
● |
lack of sufficient capital to acquire a profitable company; and |
|
● |
unwillingness of a potential acquiree to work with our management. |
Risks related to acquisition financing.
We have limited financial resources and our ability to make additional acquisitions without securing additional financing from outside sources is also limited. In order to continue to pursue our acquisition strategy, we may be required to obtain additional financing. We may obtain such financing through a combination of debt financing or the placement of debt and equity securities. We may finance some portion of our future acquisitions by either issuing equity or by using shares of our common stock for all or a portion of the purchase price for such businesses. In the event that our common stock does not attain or maintain a sufficient market value, or potential acquisition candidates are otherwise unwilling to accept our common stock as part of the purchase price for the sale of their businesses, we may be required to use more of our cash resources, if available, in order to maintain our acquisition program. If we do not have sufficient cash resources, we will not be able to complete acquisitions and our growth could be limited unless we are able to obtain additional capital through debt or equity financings.
We may experience difficulties in integrating the operations, personnel and assets of any business we acquire which may disrupt our business, dilute stockholder value, and adversely affect our operating results.
There can be no assurance that we will be able to identify, acquire or profitably manage any businesses or successfully integrate acquired businesses into the Company without substantial costs, delays or other operational or financial problems. Such acquisitions also involve numerous operational risks, including:
|
● |
difficulties in integrating operations, technologies, services and personnel; |
|
● |
the diversion of financial and management resources from existing operations; |
|
● |
the risk of entering new markets; |
|
● |
difficulties in retaining the existing customers; |
|
● |
the potential loss of existing or acquired strategic operating partners following an acquisition; |
|
● |
the potential loss of key employees following an acquisition and the associated risk of competitive efforts from departures; |
|
● |
assumed or unforeseen liabilities that arise in connection with the acquired business; |
|
● |
possible legal disputes with the acquired company following an acquisition; and |
|
● |
the inability to generate sufficient revenue to offset acquisition or investment costs. |
As a result, if we fail to properly evaluate and execute any acquisitions or investments, our business and prospects may be seriously harmed.
To the extent we make any material acquisitions, our earnings may be adversely affected by non-cash charges relating to the amortization of intangible assets.
Under applicable accounting standards, purchasers are required to allocate the total consideration paid in a business combination to the identified acquired assets and liabilities based on their fair values at the time of acquisition. The excess of the consideration paid to acquire a business over the fair value of the identifiable tangible assets acquired must be allocated among identifiable intangible assets including goodwill. The amount allocated to goodwill is not subject to amortization. However, it is tested at least annually for impairment. The amount allocated to identifiable intangible assets, such as customer relationships and the like, is amortized over the life of these intangible assets. We expect that this will subject us to periodic charges against our earnings to the extent of the amortization incurred for that period. Because our business strategy focuses, in part, on growth through acquisitions, our future earnings may be subject to greater non-cash amortization charges than a company whose earnings are derived solely from organic growth. As a result, we may experience an increase in non-cash charges related to the amortization of intangible assets acquired in our acquisitions. Our financial statements will show that our intangible assets are diminishing in value, even if the acquired businesses are increasing (or not diminishing) in value.
RISKS RELATED TO OUR COMMON STOCK
We have issued a substantial number of warrants exercisable into shares of our common stock which could result in substantial dilution to the ownership interests of our existing stockholders.
As of the date of this report, approximately 794,073 shares of our common stock (as adjusted to reflect our 1-for-10 reverse stock split, which was effective April 30, 2026) were reserved for issuance upon exercise or conversion of outstanding stock options and warrants. The exercise or conversion of these securities will result in a significant increase in the number of outstanding shares and substantially dilute the ownership interests of our existing stockholders.
An active trading market for our common stock may not be sustained.
On May 13, 2026 trading of our common stock on the Nasdaq Capital Market was suspended which could adversely impact the trading and liquidity of our common stock. Our common stock currently trades on OTC Markets and an active trading market for our shares may not be developed on OTC Markets and if developed, sustained. If an active market for our common stock is not developed or sustained, it may be difficult for you to sell your shares without depressing the market price for the shares or sell your shares at all. Any inactive trading market for our common stock may also impair our ability to raise capital to continue to fund our operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
Trading of our common stock on the Nasdaq Capital Market was suspended on May 13, 2026. If we are not successful in our appeal of Nasdaq’s decision and are unable to regain compliance with the continued listing requirements of The Nasdaq Stock Market, our Common Stock will be delisted and the price of our Common Stock and our ability to access the capital markets could be negatively impacted.
On May 13, 2026 trading of our common stock on Nasdaq was suspended due to our failure to regain compliance with the minimum bid requirement and to timely file our periodic reports with the SEC. Our common stock currently trades on OTC Markets under the symbol “BKYI”. On April 30, 2026, we effected a one-for-ten reverse stock split which restored our share price to a level in excess of Nasdaq’s $1 minimum closing bid price requirement. Due to the timing of the reverse split, we were unable to maintain this share price level for 10 consecutive trading days prior to May 6, 2026 which resulted in our shares being suspended from trading on Nasdaq. The suspension and potential delisting of our common stock from Nasdaq could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock as shares traded on the OTC Markets generally have substantially less liquidity and it can be more difficult for stockholders and broker/dealers to purchase and sell our shares in an orderly manner or at all. As a result, the trading price of our common stock may change quickly, and brokers may not be able to execute trades as quickly as they previously could when our common stock was listed on a national exchange.. Delisting could also harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities. .
We have appealed Nasdaq’s decision to suspend trading in our common stock and are currently working to regain compliance with all continued listing standards of the Nasdaq Capital Market. A hearing to consider our appeal is currently scheduled for June 16, 2026. There can be no assurance that our appeal will be successful or that our shares will not be delisted.
We may need to raise additional funds in the future through issuances of securities and such additional funding may be dilutive to stockholders or impose operational restrictions.
We may need to raise additional capital in the future to help fund our operations through sales of shares of our common stock or securities convertible into shares of our common stock, as well as issuances of debt. Such additional financing may be dilutive to our stockholders, and debt financing, if available, and may involve restrictive covenants which may limit our operating flexibility. If additional capital is raised through the issuance of shares of our common stock or securities convertible into shares of our common stock, the percentage ownership of existing stockholders will be reduced. These stockholders may experience additional dilution in net book value per share and any additional equity securities may have rights, preferences and privileges senior to those of the holders of our common stock.
Because we do not expect to pay dividends for the foreseeable future, investors seeking cash dividends should not purchase our shares of common stock.
We have never declared or paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Accordingly, investors seeking cash dividends should not purchase shares of our common stock.
Provisions of our certificate of incorporation, bylaws and Delaware law may make a contested takeover of our Company more difficult.
Certain provisions of our certificate of incorporation, bylaws and the General Corporation Law of the State of Delaware (“DGCL”) could deter a change in our management or render more difficult an attempt to obtain control of us, even if such a proposal is favored by a majority of our stockholders. For example, we are subject to the provisions of the DGCL that prohibit a public Delaware corporation from engaging in a broad range of business combinations with a person who, together with affiliates and associates, owns 15% or more of the corporation’s outstanding voting shares (an “interested stockholder”) for three years after the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Our certificate of incorporation also includes undesignated preferred stock, which may enable our board of directors to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise. Finally, our bylaws include an advance notice procedure for stockholders to nominate directors or submit proposals at a stockholders meeting. Delaware law and our charter may, therefore, inhibit a takeover.
The trading price of our common stock may be volatile.
The trading price of our shares has from time to time fluctuated widely and, in the future, may be subject to similar fluctuations. The trading price may be affected by a number of factors including the risk factors set forth in this Annual Report on Form 10-K as well as our operating results, financial condition, announcements of innovations or new products by us or our competitors, general conditions in the biometrics and access control industries, and other events or factors. We cannot assure you that any of the broker-dealers that currently make a market in our common stock will continue to serve as market makers or have the financial capability to stabilize or support our common stock. A reduction in the number of market makers or the financial capability of any of these market makers could also result in a decrease in the trading volume of and price of our shares. In recent years broad stock market indices, in general, and the securities of technology companies, in particular, have experienced substantial price fluctuations. Such broad market fluctuations may adversely affect the future-trading price of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
We take a defense-in-depth approach, leveraging multiple, layered security measures, to protect our data, our customers’ data, our infrastructure, and our employees. We embed data protection throughout our operations and information technology programs, relying on multiple and various controls to prevent and detect threats, with the goal of safeguarding our assets, data and personnel.
We evaluate cybersecurity risks as part of our overall enterprise risk management. A steering committee of senior executives meets quarterly to evaluate any changes to the Company’s exposure to cybersecurity risks, discuss potential mitigation plans, and provide updates on mitigation efforts already underway. Our cybersecurity team keeps up to date on the latest threats and risks through multiple channels and is also involved in evaluating risks associated with any new proposed service providers. We employ a Cybersecurity Engineer, reporting directly to our Chief Technology Officer, who manages our cybersecurity team that is comprised entirely of security professionals with industry recognized certifications. Our Cybersecurity team is responsible for assessing and managing risks associated with both our internal operations and our use of third-party service providers and informing/gaining feedback from the cybersecurity steering committee.
Additionally, our cybersecurity team maintains a comprehensive set of cybersecurity policies and standards, including a security incident response framework. The framework is a set of coordinated procedures and tasks that our incident response team executes to ensure timely and accurate reporting and resolution of computer security incidents. The framework details who, how and when appropriate persons or committees, including the Board of Directors and Audit Committee are kept informed on the status of potential cybersecurity incidents. A summary of recent incidents is also presented by the Chief Legal Officer (“CLO”) at each regular Audit Committee meeting. Our policies and standards were developed in collaboration with a wide range of disciplines, including information technology, cybersecurity, legal, compliance and business. Our cybersecurity strategy and policies are continually reassessed to ensure they attempt to identify and proactively address the constant changes in the global threats. Decision makers such as the CLO, executive team, and Audit Committee are regularly kept up to date on cybersecurity trends. Ongoing collaboration with stakeholders throughout the business also helps to build continued awareness and visibility of future needs.
We engage external vendors to assess the cybersecurity program as needed. An independent third party will perform annual multi-stage penetration testing of our IT environment.
Our cybersecurity program is governed by the Audit Committee of our Board. The Audit Committee of the Board and the full Board will each receive quarterly updates on cybersecurity risks identified through the enterprise risk management processes described above.
Notwithstanding our processes to oversee and identify risk from cybersecurity threats, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. We identify nation state-sponsored threat actors and the rise in sophistication and proliferation of ransomware campaigns as top reasonable material risks to the business. The theft, unauthorized use or publication of our intellectual property and/or confidential business or personal information (whether through a breach of our own systems or the breach of a system of a third party that provides services to us) could harm our competitive or negotiating positions, reduce the value of our investment in research and development and other strategic initiatives, compromise our patent enforcement strategies or outlook, damage our reputation or otherwise adversely affect our business. To date there have not been any risks that have materially affected our operations.
See Item 1A. “RISK FACTORS” for a discussion of cybersecurity risks.
We do not own any real estate. We conduct operations from leased premises in Eagan, Minnesota (1,994 square feet), Bedford, New Hampshire (3,364 square feet), and Holmdel, New Jersey (150 square feet). Internationally, we conduct operations from leased premises in Tsuen Wan, Hong Kong (1,098 square feet), Jiangmen, China (3,267 square feet), and Madrid, Spain (1,504 square feet). Our Eagan, Minnesota and Bedford, New Hampshire offices provide research and development, and customer support, for BIO-key software and PistolStar software, respectively. Our Holmdel, New Jersey location serves as our corporate headquarters. Our Hong Kong location is a small warehouse for finished goods as well as administrative and sales support. Our Jiangmen, China facility provides our hardware research and development, contract manufacturing and warehousing of raw materials, work-in-process, and finished goods. Our Madrid, Spain office serves as our sales organization for Europe, the Middle East, and parts Africa.
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this report, we are not a party to any pending lawsuit.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock currently trades on the OTC Markets under the symbol “BKYI”.
Holders
As of June 10, 2026, the number of stockholders of record of our common stock was 171.
Dividends
We have not paid any cash dividends on our common stock to-date and have no intention of paying any cash dividends on our common stock in the foreseeable future. The declaration and payment of dividends on our common stock is also subject to the discretion of our Board of Directors and certain limitations imposed under the Delaware General Corporation Law. The timing, amount, and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors.
Securities Authorized for Issuance under Equity Compensation Plans
For information on securities authorized for issuance under the Company’s equity compensation plans, see “Item 12 - Security Ownership of Certain Beneficial Owners and Related Stockholder Matters.”
Unregistered Sales of Equity Securities
There were no unregistered sales of the Company’s equity securities during 2025 that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
Issuer Purchases of Equity Securities
None.
Not Applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other parts of this Report contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in the section captioned “RISK FACTORS” in Item 1A and elsewhere in this Report.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand our Company. This discussion is provided as a supplement to and should be read in conjunction with our consolidated financial statements for the years ended December 31, 2025 and 2024 and the accompanying notes included elsewhere in this Report.
All share totals reported herein have been adjusted to reflect our 1-for-10 reverse stock split, which was effective April 30, 2026.
Overview
We are a leading identity access management (IAM) platform provider for the enterprise and large-scale customer and civil ID solutions. Built to leverage BIO-key’s world-class biometric core platform among seventeen strong authentication factors, BIO-key PortalGuard and hosted PortalGuard IDaaS are platforms that enable our customers to securely and easily assure that only the right people can access the right systems. PortalGuard goes beyond traditional multifactor authentication (MFA) solutions by addressing functional gaps, such as allowing roving users to biometrically authenticate at any workstation without using their phones or tokens, eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification.
Our customers use BIO-key every day to securely access a variety of cloud, mobile and web applications, on-premise and cloud-based servers from all of their devices. Employees, contractors, students and faculty sign in through PortalGuard to seamlessly and securely access the applications they need to do their important work, without relying on personal phone use or per-user tokens. Organizations use our platform to securely collaborate with their supply chain and partners, and to provide their customers with flexible, resilient user experiences online or in-person.
Large-scale customer and civil ID customers use our scalable biometric management platform and FBI-certified scanner hardware to manage enrollment, de-duplication and authentication for millions of users. One large bank has enrolled and identifies over 21.7 million of their customers using BIO-key fingerprint biometrics in branches on a daily basis.
PortalGuard and IBB deliver unique value to enterprises who find that mainstream MFA solutions do not adequately address their workforce use cases. PortalGuard operates as a single MFA user experience, providing a wide set of authentication choices to meet every use case. We sell our branded biometric and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution. We do not mandate the use of BIO-key hardware with our software and services. Our NIST-certified fingerprint biometric platform is unique in that it supports interoperable mixing and matching combinations of different manufactures’ fingerprint scanners in a deployment, so that the right scanner can be selected for the right use case, without mandating the user of a particular scanner.
Security-conscious software developers leverage our platform APIs and federation interfaces to securely and efficiently embed biometric and MFA identity capabilities into their software. Our approach to IDaaS allows our customers to efficiently scale their security and identity infrastructures to protect both internal cloud workforce- and external customer-facing applications.
In 2022, we expanded our product offerings and customer base when we acquired Swivel Secure, a Madrid, Spain based provider of IAM solutions. Until the fourth quarter of 2024, Swivel Secure was the exclusive distributer of AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland. Swivel Secure, now operates as BIO-key EMEA maintains a direct sales force with offices in Madrid, Spain and Lisbon, Portugal, and sells only BIO-key products.
We operate a SaaS business model with customers subscribing to term use of our software for annual recurring revenue. We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners including resellers, system integrators, master agents and other distribution partners. Our subscription fees include a term license of hosted or on-premise product and technical support and maintenance of our platform. We base subscription fees primarily on the products used and the number of users enrolled in our platform. We generate subscription fees pursuant to noncancelable contracts with a weighted average duration of approximately one year.
Strategic Outlook
We plan to have a more significant role in the IAM market which continues to expand. We plan to continue to offer customers a suite of authentication options that complement our biometric solutions. The more well-rounded offerings of authentication options will allow customers to customize their approach to authentication all under one umbrella.
We expect to grow our business within government services and highly-regulated industries in which we have historically had a strong presence including financial services, higher education, and healthcare. We believe that continued heightened security and privacy requirements in these industries, and as colleges and universities continue operating in remote environments, we will generate increased demand for security solutions, including biometrics. In addition, we expect that the compatible, yet superior portable biometric user experience offered by our technology for Windows 10 users will accelerate the demand for our computer network log-on solutions and fingerprint readers. Through value add-offerings via direct sales, resellers, and strategic partnerships with leading higher education platform providers, we will continue to grow our installed base.
Our primary sales strategies are focused on (i) increased marketing efforts into the IAM market, (ii) dedicated pursuit of large-scale identification projects across the globe and (iii) growing our channel alliance program which we have grown to more than eighty-five participants and continues to generate incremental revenues.
A second component of our growth strategy is to pursue strategic acquisitions of select businesses and assets in the IAM space. In furtherance of this strategy, we are active in the industry and regularly evaluate businesses that we believe will either provide an entry into new market verticals or be synergistic with our existing operations and in either case, be accretive to earnings. We cannot provide any assurance as to whether we will be able to complete any acquisition and if completed, successfully integrate any business we acquire into our operations.
Recent Developments
As discussed under “Item 1A. Risk Factors”, given the uncertainty the current economic and political environment and their effects on our business operations, sales cycles, personnel, and the geographic markets in which we operate, and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature, the related financial impact cannot be reasonably estimated at this time.
The current trend of continued remote work environments increases the risk of unauthorized users, phishing attacks, and hackers who are eager to take advantage of the challenges of securing remote workers. A growing trend of security incidents that highlight potential cybersecurity vulnerabilities, additional regulatory requirements, and increasingly stringent Cyber Insurance underwriting standards that mandate enhanced security solutions has resulted in many businesses requiring MFA for their employees, partners and customers to access their business systems and data. We believe that biometrics should continue to play a key role in remote user authentication.
RESULTS OF OPERATIONS
Consolidated Results of Operations
Two Year % trend
|
Years ended |
||||||||
|
December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Revenues |
||||||||
|
Services |
20 | % | 16 | % | ||||
|
License fees |
58 | % | 75 | % | ||||
|
Hardware |
22 | % | 9 | % | ||||
| 100 | % | 100 | % | |||||
|
Costs and other expenses |
||||||||
|
Cost of services |
7 | % | 6 | % | ||||
|
Cost of license fees |
5 | % | 9 | % | ||||
|
Cost of hardware |
20 | % | 7 | % | ||||
|
Cost of hardware reserve |
-9 | % | -3 | % | ||||
|
Total cost of goods sold |
23 | % | 19 | % | ||||
|
Gross Profit |
77 | % | 81 | % | ||||
|
Operating expenses |
||||||||
|
Selling, general and administrative |
106 | % | 103 | % | ||||
|
Research, development and engineering |
44 | % | 36 | % | ||||
| Impairment of investment | 42 | % | - | |||||
|
Total operating expenses |
192 |
% | 139 | % | ||||
|
Operating loss |
-115 | % | -58 | % | ||||
|
Other income (expense) |
||||||||
|
Total other income (expense) |
-5 | % | -4 | % | ||||
|
Loss before provision for income tax benefit |
-120 | % | -62 | % | ||||
|
Provision for income tax benefit |
0 | % | 0 | % | ||||
|
Net loss |
-120 | % | -62 | % | ||||
Revenues and Costs and other expenses
|
2025-2024 |
||||||||||||||||
|
2025 |
2024 |
$ Chg |
% Chg |
|||||||||||||
|
Revenues |
||||||||||||||||
|
Services |
$ | 1,172,107 | $ | 1,108,506 | $ | 63,601 | 6 | % | ||||||||
|
License fees |
3,423,300 | 5,189,370 | (1,766,070 | ) | -34 | % | ||||||||||
|
Hardware |
1,342,148 | 631,695 | 710,453 | 112 | % | |||||||||||
|
Total Revenue |
$ | 5,937,555 | $ | 6,929,571 | $ | (922.016 | ) | -14 | % | |||||||
|
Costs and other expenses |
||||||||||||||||
|
Services |
$ | 387,144 | $ | 396,274 | $ | (9,130 | ) | -2 | % | |||||||
|
License fees |
309,829 | 589,505 | (279,676 | ) | -47 | % | ||||||||||
|
Hardware |
1,189,464 | 516,611 | 672,853 | 130 | % | |||||||||||
|
Hardware reserves |
(513,400 | ) | (213,005 | ) | (300,395 | ) | 141 | % | ||||||||
|
Total Costs and other expenses |
$ | 1,373,037 | $ | 1,289,385 | $ | 83,652 | 6 | % | ||||||||
Revenues
Revenue decreased $922,016 or 142% to $5,937,555 in 2025 as compared to $6,929,571 in 2024. This reduction was due largely to a significant contract renewal with a foreign retail bank that benefited 2024 that did not recur in 2025 and due to our exit from our distribution agreement with Swivel Secure Limited (SLL) and transition to selling BIO-key branded solutions in the EMEA market and to the factors discussed below.
For the years ended December 31, 2025, and 2024, service revenues included approximately $1,060,000 and $1,017,000, respectively, of recurring maintenance and support revenue, and approximately $112,000 and $91,000, respectively, of non-recurring custom services revenue. Recurring service revenue increased 4% in 2025 due to the growing customer base. Non-recurring custom services increased 23% in 2025 due to several new customers requiring supported deployments. We expect the service fees to increase from the current levels as we expand our deployments worldwide.
For the years ended December 31, 2025 and 2024 license revenue decreased $1,766,070 or 34% to $3,423,300, due largely to a significant contract renewal with a foreign retail bank that benefited 2024 hat did not recur in 2025, and due to the ramp up of BIO-key EMEA selling only BIO-key product.
Hardware sales increased by $710,453, or 112%, to $1,342,148 in 2025 from $631,695 in 2024. The increase was attributable to several long-term and new customers expanding their purchase of biometric cybersecurity solutions combined with selling some of fully reserved inventory from the African project.
Costs of goods sold
For the year ended December 31, 2025, cost of services decreased approximately 2% to $387,144, due primarily to the decreased costs to support Swivel Secure deployments.
License fees for the year ended December 31, 2025 decreased $279,676, or approximately 47%, to $309,829 from $589,505 due primarily to decreased license revenue and related license fees payable for third-party software distributed by Swivel Secure.
Hardware costs for the year ended December 31, 2024 increased $672,853, or approximately 130%, to $1,189,464 from $516,611 in 2024. The increase was associated with the increased hardware sales and hardware mix. Hardware reserve costs for the year ended December 31, 2025 increased $300,395, or approximately 141% from $(213,005) to $(513,400) which represented a removal of the entire reserve for sales of slow-moving inventory purchased for projects in Nigeria, and for other older inventory. We were successful in our efforts to sell the slow-moving inventory.
Gross Profit
Gross profit decreased to $4,564,518 in 2025 from $5,640,186 in 2024, due to lower license fee revenue, and an increase in lower-margin services and hardware revenue.
Our strategic decision to exit the SSL agreement and offer only BIO-key branded solutions in the EMEA market contributed to lower costs to support deployments, including software license fees incurred in connection with sales of Swivel Secure offerings using SLL solutions rather than BIO-key’s internally developed software solutions. 2025 gross profit also benefited from the sale of $513,400 of fully reserved hardware inventory.
Selling, general and administrative
|
2025-2024 |
||||||||||||||
|
2025 |
2024 |
$ Chg |
% Chg |
|||||||||||
| $ | 6,282,232 | $ | 7,140,147 | $ | (857,915 | ) | -12 | % | ||||||
Selling, general and administrative costs for year ended December 31, 2025 were $6,282,232 compared to $7,140,147 in 2024, representing an 12% decrease. The decrease was due to a reorganization of sales personnel costs, lower marketing show expenses, and audit fees which were partially offset by an increase in professional services, principally related to financing activities in 2025.
Research, development and engineering
|
2025-2024 |
||||||||||||||
|
2025 |
2024 |
$ Chg |
% Chg |
|||||||||||
| $ | 2,609,893 | $ | 2,511,080 | $ | 98,813 | 4 | % | |||||||
For the year ended December 31, 2025 research, development and engineering costs were $2,609,893 compared with $2,511,080 representing a 4% increase from 2024. Included in the increase were higher personnel costs associated with wages and benefits for engineering employees to support new product development.
Impairment of investment
|
2025-2024 |
||||||||||||||
|
2025 |
2024 |
$ Chg |
% Chg |
|||||||||||
| $ | 2,500,000 | $ | - | $ | 2,500,000 | 100 | % | |||||||
For the year ended December 31, 2025 impairment of investment was $2,500,000 compared with $0 representing a 100% increase from 2024. The amount of $2,500,000 represents a 50% impairment of the investment based on expected revenue that has not occurred to date.
Other income (expense)
|
2025-2024 |
||||||||||||||||
|
2025 |
2024 |
$ Chg |
% Chg |
|||||||||||||
|
Interest income |
$ | 3,787 | $ | 110 | $ | 3,677 | 3343 | % | ||||||||
|
Foreign currency loss |
- | (13,004 | ) | 13,004 | -100 | % | ||||||||||
|
Loan transaction costs |
(256,833 | ) | (124,000 | ) | (132,833 | ) |
52 |
% | ||||||||
|
Interest expense |
(60,793 | ) | (175,755 | ) | 114,962 | -65 | % | |||||||||
| $ | (313,839 | ) | $ | (312,649 | ) | $ | (2,501,190 | ) | 800 | % | ||||||
The amounts for other income (expense) for the year ended December 31, 2025 consisted of interest income of $3,787, interest expense of $60,793 on the note payable and the government loan through the BBVA bank, and a loan fee amortization amount of $256,833. The amounts for the year ended December 31, 2024, consisted of interest income of $110, interest expense of $175,755 on the note payable and the government loan through the BBVA bank, and a loan fee amortization amount of $124,000.
Net Loss
Reflecting decreased gross profit and an impairment expense, net loss increased to $(7,157,946) in 2025 from a net loss of $(4,300,692) in 2024.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities overview
Net cash used for operations during the year ended December 31, 2025 was $4,668,689. Items of note included:
|
● |
Net positive cash flows related to non-cash expenses of approximately $3,568,000. | |
|
● |
Net negative cash flows related to changes in accounts receivable, lease liabilities, accounts payable, deferred revenue and prepaid expenses in the aggregate amount of approximately $984,000 and our net loss for the period. |
Investing activities overview
Net cash used in investing activities during the year December 31, 2025 was $12,012 for capital expenditures.
Financing activities overview
Approximately $7,967,000 was provided by financing activities during the year ended December 31, 2025 consisting of the proceeds of $1,000,000 advanced under a secured note, proceeds from the exercise of warrants totaling approximately $6,500,000, and $10,076 from sales of common stock under our employee stock purchase plan. These amounts were offset by a partial repayment of note payable, repayment of a government loan, and costs associated with the issuance of our securities.
Sources of Liquidity
Since our inception, our capital needs have been principally met through proceeds from the sale of equity and debt securities. We expect capital expenditures to be less than $100,000 during the next twelve months.
The following sets forth our primary sources of capital during the previous two years:
On October 27, 2025, we entered into and closed a warrant exercise agreement with an existing institutional investor to exercise certain outstanding warrants to purchase an aggregate of 3,091,668 shares of common stock. The warrants were originally issued on January 15, 2025 and had an exercise price of $2.15 per share. In consideration for the immediate exercise of these warrants, we issued new unregistered warrants to purchase up to an aggregate of 6,183,336 shares of common stock at an exercise price of $1.02. We realized gross proceeds of approximately $3.1 million, prior to deducting placement agent fees and estimated offering expenses.
On September 30, 2025, we entered into and closed a note purchase agreement which provided for the issuance of a $1,130,000 principal amount senior secured promissory note (the "2025 Note"). This resulted in gross proceeds of approximately $1,000,000 after deducting estimated offering expenses, and the original issue discount. The 2025 Note is due eighteen months (18) following the date of issuance, accrues interest at a rate of nine percent (9%) per annum, and commencing six months after the date of issuance, the lender shall have the right to redeem up to $135,000 of principal amount each month. In connection with the October 27, 2025 warrant exercise agreement described above, we prepaid approximately $450,000 of the amount due under the 2025 Note. As of the date of this report, the outstanding principal amount due under the 2025 Note is approximately $675,000. For a more complete description of the 2025 Note, please see Note J to our Consolidated Financial Statements included in Part II Item 8 of this report.
On January 15, 2025, we entered into a warrant exercise agreement with an existing institutional investor to exercise certain outstanding warrants to purchase an aggregate of 206,112 shares of common stock at an exercise price of $18.50 per share which were originally issued to the Investor on September 13, 2024. In consideration for the exercise of these warrants, we issued new warrants to the investor to purchase an aggregate 309,167 shares of common stock at an exercise price of $21.50 per share. We realized gross proceeds of approximately $3.8 million, prior to deducting placement agent fees and estimated offering expenses.
On September 12, 2024, we entered into a warrant exercise agreement with the investor to exercise certain outstanding warrants to purchase an aggregate of 103,056 shares of common stock. The warrants were originally issued to the investor on October 31, 2023 and had an original exercise price of $31.50 per share. In consideration for the immediate exercise of these warrants, we reduced the exercise price of the warrants to $18.50 per share and issued to the Investor additional warrants to purchase an aggregate of 206,112 shares of common stock at an exercise price of $18.50 per share. The forgoing transaction resulted in gross proceeds of approximately $1.9 million prior to deducting placement agent fees and estimated offering expenses.
On June 24, 2024, we entered into and closed a note purchase agreement which provided for the issuance of a $2,360,000 principal amount senior secured promissory note (the "2024 Note"). This resulted in gross proceeds of approximately $1,826,000 after deducting placement agent fees, estimated offering expenses, and the original issue discount. The 2024 Note was due eighteen months (18) following the date of issuance, accrues interest at a rate of nine percent (9%) per annum, and commencing six months after the date of issuance of, the lender shall have the right to redeem up to $270,000 of principal amount each month. In connection with the warrant exercise agreements described above, we prepaid approximately $762,600 of the amount due under the 2024 Note. Pursuant to a series of exchange agreements in January 2025, the lender exchanged $859,000 principal amount due under the 2024 Note for 50,461 shares of common stock. As of the date of this report, the 2024 Note is fully paid. For a more complete description of the 2024 Note, please see Note J to Our Consolidated Financial Statements included in Part II Item 8 of this report.
We entered into an accounts receivable factoring arrangement with a financial institution (the “Factor”) which has been extended to October 2026 and may be discontinued at that time. Pursuant to the terms of the arrangement, from time to time, we sell to the Factor a minimum of $150,000 per quarter of certain of our accounts receivable balances on a non-recourse basis for credit approved accounts. The Factor remits 35% of the foreign and 75% of the domestic accounts receivable balance to us (the “Advance Amount”), with the remaining balance, less fees, forwarded to us once the Factor collects the full accounts receivable balance from the customer. In addition, from time to time, we receive over advances from the Factor. Factoring fees range from 2.75% to 15% of the face value of the invoice factored and are determined by the number of days required for collection of the invoice. We expect to continue to use this factoring arrangement periodically to assist with our general working capital requirements due to contractual requirements.
Liquidity Outlook
At December 31, 2025, our total cash and cash equivalents were approximately $2,694,000, as compared to $438,000 at December 31, 2024.
As discussed above, we have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $750,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. During 2025, we generated approximately $5,900,000 of revenue, which did not generate enough cash to fully fund our average monthly cash requirements. We also have approximately $2.9 million of inventory (currently reserved) purchased for projects in Nigeria. We continue to explore other markets and opportunities to sell or return the product to continue to generate additional cash.
If we are unable to generate sufficient revenue and positive cash flow from operations or liquidation of existing inventory to fund current operations and execute our business plan, we will need to obtain additional third-party financing during the next twelve months. Our long-term viability and growth will depend upon the successful commercialization of our technologies and our ability to obtain adequate financing. To the extent that we require such additional financing, no assurance can be given that any form of additional financing will be available on terms acceptable to us, if at all, that adequate financing will be obtained to meet our needs, or that such financing would not be dilutive to existing stockholders. If available financing is insufficient or unavailable or we fail to continue to generate sufficient revenue, we may be required to further reduce operating expenses, delay the expansion of operations, be unable to pursue merger or acquisition candidates, or in the extreme case, not continue as a going concern.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ significantly from these estimates under different assumptions or conditions.
We believe that of our significant accounting policies, which are described in Note A of the notes to our consolidated financial statements included in this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations, as listed below:
1. Revenue Recognition
2. Allowances for Accounts Receivable
New Accounting Pronouncements
See Note A Item 16, “Recent Adopted Accounting Pronouncements” and Note A Item 17, “Recent Issued Accounting Pronouncements,” of the Consolidated Financial Statements for additional information about new accounting pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See financial statements appearing at pages 42-65 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of December 31, 2025, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, the risk. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our CEO and CFO, we have conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025, based upon the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2025
As we are a smaller reporting company, this annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
During 2025, there have been no changes to our internal control over financial reporting.
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.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following sets forth certain information about each director and executive officer of the Company.
|
NAME |
AGE |
POSITIONS HELD |
|||
|
Michael W. DePasquale |
71 |
Chairman of the Board of Directors and Chief Executive Officer |
|||
|
Cameron Williams (a)* (b) (c) |
79 |
Director |
|||
|
Robert J. Michel (a) (b)*(c) |
69 |
Director |
|||
|
Wong Kwok Fong (Kelvin) |
62 |
Director and Vice-Chairman of the Board of Directors |
|||
|
Emmanuel Alia (b) (c)* |
61 |
Director |
|||
|
Cecilia C. Welch |
66 |
Chief Financial Officer |
|||
|
Mira K. LaCous |
64 |
Chief Technology Officer |
|||
|
James D. Sullivan |
58 |
Vice President of Strategy and Compliance, Chief Legal Officer |
|||
|
(a) |
Compensation Committee Member |
|
(b) |
Audit Committee Member |
|
(c) |
Nominating Committee Member |
|
* |
Indicates chair of committee |
Set forth below is a brief description of the background and business experience of our directors and executive officers for the past five years.
Directors
Michael W. DePasquale has served as our Chief Executive Officer and a Director since January 3, 2003, and Chairman of the Board since January 29, 2014. He served as Co-Chief Executive Officer of the Company from July 2005 to August 2006. Mr. DePasquale brings more than 30 years of executive management, sales and marketing experience to the Company. Mr. DePasquale has held executive management positions with McGraw-Hill, Digital Equipment Corporation, and other companies in the software and professional services industries. Mr. DePasquale earned a Bachelor of Science degree from the New Jersey Institute of Technology. He serves as the Vice Chairman on the Board of Directors of the International Biometrics and Identification Industry Association. We believe Mr. DePasquale’s qualifications to sit on the board of directors include his extensive executive management experience in the technology sector and biometric industry expertise which strengthen the board’s collective qualifications, skills and experience.
Cameron E. Williams was appointed Director of the Company on June 2, 2023. Mr. Williams has over 40 years of financial and executive management experience. Since 2014, he has served as the principal of CEW Advisory Services, a consulting firm he founded which provides strategic planning and related services to the consumer lending industry. He previously founded CEW Solutions which provided fraud investigation services to insurance companies, law firms, and third-party administrators. From 2007 to 2009, Mr. Williams served as COO of Asta Funding, Inc., a publicly traded diversified financial services company where he was responsible for the sourcing and financial analysis of distressed consumer assets. From 1998 to 2007, Mr. Williams served as President of Popular Financial Holdings, an affiliate of Popular, Inc., a $36 billion banking organization. Mr. Williams began his career in the banking industry holding financial management positions with Security Pacific Financial Services, BankAmerica Financial, Inc., and Security Pacific Financial Services System, Inc. Mr. Williams earned a Bachelor’s in Accounting and completed graduate coursework at San Diego State University. We believe Mr. Williams’ extensive financial and executive management experience in a variety of industries strengthens the Board’s collective qualifications, skills, and experience.
Robert J. Michel has served as a Director of the Company since April 10, 2017. He has over 30 years of accounting and financial management experience. Since September, 2018, he has served as the Chief Financial Officer of Daxor Corporation (Nasdaq: DXR), a medical device manufacturing company specializing in blood volume analysis. Prior to Daxor, from November, 2017 until September 2018, Mr. Michel served as the CFO of Roadway Moving, Inc., a transportation, moving and storage company located in New York City. Mr. Michel spent 15 years at Asta Funding, Inc. (Nasdaq: ASFI), a diversified financial services company, including serving as its Chief Financial Officer from 2009 until 2017 where he was responsible for all financial matters and SEC reporting. Mr. Michel is a certified public accountant, earned an MBA in Taxation from St. John’s University, and a BS in Business Administration from Villanova University. We believe Mr. Michel’s qualifications to sit on the board of directors include his substantial experience in accounting and financial management for public companies which provide the board with a deep knowledge of financial and SEC reporting and strengthen the board’s collective qualifications, skills, and experience.
Wong Kwok Fong (Kelvin) has served as a Director of the Company since December 4, 2015, as Managing Director of our Hong Kong Subsidiary since August 2016, and as Vice-Chairman of the Board of Directors since March 2019. He is the co-founder of China Goldjoy Group (previously World Wide Touch Technology Holdings Limited), a company listed on The Stock Exchange of Hong Kong. From 1997 until August, 2015, Mr. Wong served as the Chairman of China Goldjoy Group and served as its Chief Technology Officer through October 2016. During this time, Kelvin played a significant role in the substantial growth of the business. Kelvin brings over 25 years of senior management experience in manufacturing, supply chain, and marketing functions in the electronics and technology industries, including establishing manufacturing plants in Hong Kong and China, and building an extensive network in the electronics and technology industries. We believe Kelvin’s qualifications to sit on the board of directors include his substantial experience in the technology industry, including biometrics and payment systems, and serving the Asian markets, which broaden and strengthen the board’s collective qualifications, skills, and experience.
Emmanuel Alia was appointed Director of the Company on April 3, 2020. Since 2018, Mr. Alia has been providing management consulting services as an advisor to businesses seeking market entry strategies to emerging markets such as Africa and the Caribbean. From 2011 to 2018, Mr. Alia served as an Executive Director at the Corporate and Investment division of JPMorgan, and as a Senior Vice-President at CHASE Bank’s Consumer and Community Banking specializing in the financial and banking services industry and opportunities in Africa. During Mr. Alia’s tenure with JPMorgan, he served as head of Wholesale Operations in the Receivables Operations of the Global banking operations in the US and Canada, head of Retail Banking in the Greater Detroit area, and head of branches in the New York and New Jersey areas. For two years Mr. Alia was co-chair of the Black Organizational Leadership Development, an employee networking group in JPMorgan that works with firm’s leadership to strengthen the firm’s message, strategies and community outreach globally. Mr. Alia received a Bachelor of Arts in Accounting from Southeastern University and a Master’s of Business Administration (MBA) from Cornell University. We believe Mr. Alia’s qualifications to sit on the board of directors include his extensive industry experience and connection and networking abilities in the African communities and markets which further broaden and strengthen the board’s collective qualifications, skills, and experience.
Executive Officers
Cecilia C. Welch has served as the Chief Financial Officer of the Company since December 21, 2009. Ms. Welch joined the Company in 2007 as Corporate Controller. Prior to joining the Company, Ms. Welch has held senior financial management positions in various industries, including software and manufacturing. Ms. Welch has a bachelor’s degree in accounting from Franklin Pierce University.
Mira K. LaCous has served as Chief Technology Officer of the Company since March 13, 2014, as Senior Vice President of Technology & Development since 2012, and as our Vice President of Technology and Development since 2000. Ms. LaCous has over 35 years of product/project management, solution architecture, software development, team leadership and customer relations experience, with a background that includes successfully bringing numerous innovative products and technologies to market, including automated voice response systems, automated building control systems, software piracy protection, internet training materials and testing, WYSIWYG page layout and design software, image scanning / recognition software and systems, biometric security systems and algorithms, automated national ID systems using biometrics, and mobile applications with secure frameworks. Ms. LaCous has been a speaker at multiple events/conferences and has worked with teams around the globe bringing biometric technology deployments to life. Ms. LaCous is the author of eight (8) US patented technologies, multiple international patents and lead the engineering team in developing other patents and inventive technologies. Ms. LaCous earned a bachelor’s degree in Computer Science, with mathematics and physics from North Dakota State University.
James D. Sullivan has served as BIO-key’s Senior Vice President of Strategy and Compliance and BIO-key’s Chief Legal Officer since February 2020, as Senior Vice President of Strategy and Business Development from April 2012 through December 2018, and the dual role as Senior Vice President of Global Sales from August 2015 through December of 2016. Mr. Sullivan is a recognized expert in privacy, cybersecurity, and biometric authentication for workforce and consumer applications. During his twenty years with the Company, Mr. Sullivan has directly worked with dozens of the Company’s customers, including AT&T, Israel Defense Forces, LexisNexis, NCR and Omnicell, as well as large-scale biometric-centered identity management projects that interface daily with millions of corporate and consumer users. Mr. Sullivan earned a Juris Doctor with Honors from Georgia State University College of Law, is a member of the Georgia Bar, and enrolled to practice before the IRS. Mr. 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.
Audit Committee of the Board of Directors
Our audit committee is comprised of Cameron Williams (Chair), Robert J. Michel, and Emmanuel Alia each of whom meets the independence standards for purposes of serving on an audit committee established by NASDAQ and under the Exchange Act. Our audit committee (i) assists the board of directors in its oversight of the integrity of our financial statements, compliance with legal and regulatory requirements, and corporate policies and controls, (ii) has the sole authority to retain and terminate our independent registered public accounting firm, approve all auditing services and related fees and the terms thereof, and pre-approve any non-audit services to be rendered by our independent registered public accounting firm, and (iii) is responsible for confirming the independence and objectivity of our independent registered public accounting firm. Our independent registered public accounting firm has unrestricted access to our audit committee. Our board of directors has determined that Robert J. Michel qualifies as an “audit committee financial expert,” as such term is defined in Item 407 of Regulation S-K.
Our audit 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
We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our Code of Ethics is designed to deter wrongdoing and promote: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules, and regulations; (iv) the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and (v) accountability for adherence to the code. We intend to disclose amendments or waivers of the Code of Ethics on our website within four business days. Any person may obtain a copy of our Code of Ethics free of charge by sending a written request for such to the attention of the Chief Financial Officer of the Company, 101 Crawfords Corner Road, Suite 4116, Holmdel, NJ 07733.
Insider Trading Policy
We have adopted an Insider Trading Policy governing the purchase, sale, and/or other dispositions of our securities by directors, officers and employees, among other insiders. 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 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
Our directors are elected at the annual meeting of stockholders and hold office until the annual meeting of the stockholders next succeeding his or her election, or until his or her prior death, resignation or removal in accordance with our bylaws. Our officers are appointed by the Board and hold office until the annual meeting of the Board next succeeding his or her election, and until his or her successor shall have been duly elected and qualified, subject to earlier termination by his or her death, resignation or removal.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid to or accrued by our chief executive officer and the two most highly compensated executive officers other than our chief executive officer, for the fiscal years ended December 31, 2025 and 2024:
SUMMARY COMPENSATION TABLE
|
Stock |
All Other |
||||||||||||||||||
|
Name and Principal |
Salary |
Awards |
Compensation |
Total |
|||||||||||||||
|
Position |
Year |
($) |
($) (1) |
($) (2) |
($) |
||||||||||||||
|
Michael W. DePasquale |
2025 |
312,875 | 33,750 | 199 | 346,824 | ||||||||||||||
|
Chief Executive Officer |
2024 |
285,000 | 24,000 | 491 | 309,491 | ||||||||||||||
|
Cecilia C. Welch |
2025 |
225,312 | 26,250 | 518 | 252,080 | ||||||||||||||
|
Chief Financial Officer |
2024 |
199,500 | 22,500 | - | 222,000 | ||||||||||||||
|
James D. Sullivan |
2025 |
252,135 | 30,000 | 162,186 | (3) | 144,321 | |||||||||||||
|
Chief Legal Officer |
2024 |
223,250 | 22,500 | 79,429 |
(4) |
325,179 | |||||||||||||
|
(1) |
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. |
|
(2) |
Consists of life insurance premiums paid by the Company except as otherwise noted. |
|
(3) |
Consists of $161,389 of sales commissions and $797 of life insurance premiums paid by the Company. |
| (4) | Consists of $78,632 of sales commissions and $797 of life insurance premiums paid by the Company. |
Narrative Disclosure to Summary Compensation Table
Compensation for our executives is comprised of three main components: base salary, annual performance-based cash bonus, and long-term equity awards. We do not target a specific weighting of these three components or use a prescribed formula to establish pay levels. Rather, the board of directors and compensation committee considers changes in the business, external market factors and our financial position each year when determining pay levels and allocating between long-term and current compensation for the named executive officers.
Cash compensation is comprised of base salary and an annual performance-based cash bonus opportunity. The compensation committee generally seeks to set a named executive officer’s targeted total cash compensation opportunity within a range that is the average of the applicable peer company and/or general industry compensation survey data, adjusted as appropriate for individual performance and internal pay equity and labor market conditions.
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. DePasquale, Mr. Sullivan and Ms. Welch. Effective January 16, 2023, we decreased the base compensation of Mr. DePasquale, Mr. Sullivan and Ms. Welch as part of the revised budget for the year.
Performance-based bonuses have historically been based upon the achievement of certain revenue milestones established by the compensation committee. The committee believes that this higher emphasis on performance-based cash bonuses places an appropriate linkage between a named executive officer’s pay, his or her individual performance, and the achievement of specific business goals by placing a higher proportion of annual cash compensation at risk, thereby aligning executive opportunity with the interests of stockholders.
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 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.
Employment Agreements
On March 26, 2010, we entered into an employment agreement, effective as of March 25, 2010, with Michael W. DePasquale to serve as our Chief Executive Officer until March 24, 2011. The agreement automatically renews for subsequent one-year terms, unless the employment relationship is terminated by either party, or modified in accordance with the terms and conditions of the agreement. Since 2018, Mr. DePasquale’s annual base salary has been $275,000, subject to adjustment by the compensation committee. In addition to the base salary, a “Performance Bonus” may be awarded to Mr. DePasquale on the basis of the Company achieving certain corporate and strategic performance goals, as determined by the compensation committee in its sole discretion. The employment agreement contains standard and customary confidentiality, non-solicitation and “work made for hire” provisions as well as a covenant not to compete which prohibits Mr. DePasquale from doing business with any current or prospective customer of the Company or engaging in a business competitive with that of the Company during the term of his employment and for the one-year period thereafter. This agreement also contains a number of termination and change in control provisions as described under the captions “Termination Arrangements” and “Change in Control Arrangements” below.
On April 5, 2017, we entered into an employment agreement with James Sullivan. The agreement automatically renews for subsequent one-year terms, unless terminated by the Company upon at least two months prior written notice which is treated as termination without cause. Since 2021, Mr. Sullivan’s annual base salary has been $225,000, subject to adjustment by the compensation committee. The agreement contains standard and customary confidentiality, technical invention provisions as well as non-competition and non-solicitation covenants which prohibit Mr. Sullivan from doing business with any current or prospective customer of the Company or engaging in any business competitive with that of the Company during the term or his employment and for the one-year period thereafter. The agreement also contains a number of termination provisions as described under the caption “Termination Agreements” below.
On May 15, 2013, we entered into an employment agreement with Cecilia Welch to serve as the Chief Financial Officer of the Company until May 2014. The agreement automatically renews for subsequent one-year terms, unless the employment relationship is terminated by either party, or modified in accordance with the terms and conditions of the agreement. The employment agreement contains standard and customary confidentiality, technical invention provisions, as well as a covenant not to compete, which prohibits Ms. Welch from doing business with any current or prospective customer of the Company or engaging in a business competitive with that of the Company during the term of her employment and for the one-year period thereafter. This agreement also contains a number of termination provisions as described in “Termination and Change in Control Arrangements” in this Item.
Stock Option Grants and Restricted Stock Awards
In the event of any change in the outstanding shares of our common stock by reason of a stock dividend, stock split, combination of shares, recapitalization, merger, consolidation, transfer of assets, reorganization, conversion or what the board deems to be similar circumstances, the number and kind of shares subject to outstanding options and restricted stock awards, and the exercise price of such options shall be appropriately adjusted. Restricted Furthermore, option agreements and restricted stock award agreements contain change of control provisions as described under the caption “Change in Control Provisions” below.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
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 |
Stock Awards |
||||||||||||||||
|
Market value |
|||||||||||||||||
|
Number of |
Number of |
of |
|||||||||||||||
|
securities |
shares or |
shares of |
|||||||||||||||
|
underlying |
units |
units of |
|||||||||||||||
|
unexercised |
Option |
of stock that |
stock that |
||||||||||||||
|
options |
exercise |
Option |
have not |
have not |
|||||||||||||
|
exercisable |
price |
expiration |
vested |
vested |
|||||||||||||
|
Name |
(#) |
($) |
date |
(#) |
($)(1) |
||||||||||||
|
Michael W. DePasquale |
24 | 1,699.20 |
3/21/2026 |
6,165 | |||||||||||||
| - | - | (2) | |||||||||||||||
|
Cecilia C. Welch |
18 | 1,699.20 |
3/21/2026 |
5,055 | |||||||||||||
| - | - | (3) | |||||||||||||||
|
James D. Sullivan |
18 | 1,699.20 |
3/21/2026 |
5,556 | |||||||||||||
| - | - | (4) | |||||||||||||||
|
(1) |
Calculated based on the closing market price of the Company’s common stock on December 31, 2025 of $5.40 per share. |
|
(2) |
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) |
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) |
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
The following are the material terms of each agreement, contract, plan or arrangement that provide for payments to one or more of our named executive officers at, following or pursuant to their resignation, retirement or termination, or in connection with a change in control of the Company.
Termination Arrangements
We may terminate our employment agreement with Mr. DePasquale at any time with or without cause. In the event of termination by us without cause, we will continue to pay Mr. DePasquale his then current base salary for the greater of nine months from the date of such termination or the number of months remaining until the end of the term of the agreement.
We may terminate our employment agreement with Mr. Sullivan at any time with or without cause. In the event of termination by us without cause, we will continue to pay Mr. Sullivan his then current base salary, plus earned commissions, for the greater of six months from the date of such termination or the number of months remaining until the end of the term of the agreement.
We may terminate our employment agreement with Ms. Welch at any time with or without cause. In the event of termination by us without cause, we will continue to pay Ms. Welch her then current base salary for the greater of six months from the date of such termination or the number of months remaining until the end of the term of the Agreement.
Change in Control Provisions
Our 2015 Equity Incentive Plan (the “Plan”) provides for the acceleration of vesting of unvested options and termination of any restriction or forfeiture provisions applicable to restricted stock awards upon a “Change in Control” of the Company. A Change in Control is defined in the Plans to include (i) a sale or transfer of substantially all of the Company’s assets; (ii) the dissolution or liquidation of the Company; (iii) a merger or consolidation to which the Company is a party and after which the prior stockholders of the Company hold less than 50% of the combined voting power of the surviving corporation’s outstanding securities; (iv) the incumbent directors cease to constitute at least a majority of the Board of Directors; or (v) a change in control of the Company which would otherwise be reportable under Section 13 or 15(d) of the Exchange Act. In the event of a “Change In Control” the Plan provides for the immediate vesting of all options issued thereunder and termination of all forfeiture provisions applicable to restricted stock award issued thereunder. Options issued to executive officers outside of the Plans contain change in control provisions substantially similar to those contained in the Plans.
Our 2023 Stock Incentive Plan (the “2023 Plan”) provides for the Board or the Compensation Committee, as applicable, to accelerate the of vesting of unvested options and termination of any restriction or forfeiture provisions applicable to restricted stock awards upon a “Change in Control” of the Company. A Change in Control is defined in the 2023 Plan to include (i) a sale or transfer of substantially all of the Company’s assets; (ii) a merger or consolidation to which the Company is a party and after which the prior stockholders of the Company hold less than 50% of the combined voting power of the surviving corporation’s outstanding securities; (iii) the incumbent directors cease to constitute at least a majority of the Board of Directors; (iv) any person becomes directly or indirectly the beneficial owner of 40% of the combined voting power of our outstanding securities; or (v) a change in control of the Company which would otherwise be reportable under Section 13 or 15(d) of the Exchange Act.
Our employment agreement with Mr. DePasquale contains a change in control provision that is triggered if Mr. DePasquale is not offered continued employment with us or any successor, or within five years following such Change of Control, we or any successor terminate Mr. DePasquale’s employment without cause. If this occurs, then we will pay Mr. 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.
Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
During 2025, we did not grant any stock options as part of our equity compensation program. If stock options are granted in the future, we intend to not grant stock options or similar awards in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement, and not time the public release of such information based on stock option grant dates.
DIRECTOR COMPENSATION
The following table sets forth for each director, information regarding their compensation for the year ended December 31, 2025:
|
Stock Awards |
Total |
|||||||
|
Name (1) |
($) (2) |
($) |
||||||
|
Robert J. Michel (3) |
700 | 29,502 | ||||||
|
Emmanuel Alia (4) |
600 | 20,500 | ||||||
|
Cameron Williams (5) |
700 | 33,502 | ||||||
|
(1) |
Mr. DePasquale and Kelvin Wong have been omitted from the above table because they do not receive any additional compensation for serving on our Board of Directors. |
|
|
(2) |
The aggregate fair value of the common stock issued was calculated based on the closing price of our common stock on the date of issuance in accordance with FASB ASC 718. |
|
| (3) | At December 31, 2025, Mr. Michel held options to purchase 4 shares of common stock and held 742 shares of restricted common stock. | |
| (4) | At December 31, 2025, Mr. Alia held options to purchase 2 shares of common stock and held 742 shares of restricted common stock. | |
| (5) | At December 31, 2025 Mr. Williams held 742 shares of restricted common stock. |
Narrative Disclosure to Director Compensation Table
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 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. We reimburse each of our non-employee directors for their reasonable expenses incurred in connection with attending meetings of the board of directors and related committees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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 |
Percentage |
|||||||
|
of Beneficial |
of |
|||||||
|
Name and Address of Beneficial Owner (1) |
Ownership |
Class |
||||||
|
Directors and Executive Officers |
||||||||
|
Michael W. DePasquale |
11,445 | (2) | 1.1 | % | ||||
|
Cecilia C. Welch |
5,940 | (3) | * | |||||
|
Mira K. LaCous |
3,826 | (4) | * | |||||
|
James D. Sullivan |
11,003 | (5) | 1.0 | % | ||||
|
Robert J. Michel |
2,359 | (6) | * | |||||
|
Emmanuel Alia |
2,135 | (7) | * | |||||
|
Cameron E. Williams |
2,195 | (8) | * | |||||
|
Wong Kwok Fong (Kelvin) |
3,525 | (9) | * | |||||
|
All officers and directors as a group (eight (8) persons) |
42,428 | 3.9 | % | |||||
|
Beneficial Owner |
||||||||
|
Fiber Food Systems, Inc |
59,500 | 5.5 | % | |||||
|
* |
Less than 1% |
|
(1) |
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 |
|
|
(2) |
Includes 917 shares issuable upon exercise of warrants, and 73,13 shares of restricted stock of which 6,165 remain subject to vesting. |
|
|
(3) |
Includes 6,107 shares of restricted stock of which 5,055 remain subject to vesting. |
|
|
(4) |
Includes 3,522 shares of restricted stock of which 3,119 remain subject to vesting. |
|
|
(5) |
Includes 1,267 shares issuable upon exercise of warrants, and 6,608 shares of restricted stock of which 5,556 remain subject to vesting. |
|
|
(6) |
Includes 2 shares issuable on exercise of options and 906 shares of restricted stock of which 742 remain subject to vesting. |
|
|
(7) |
Includes 2 shares issuable on exercise of options and 906 shares of restricted stock of which 742 remain subject to vesting. |
|
|
(8) |
Includes 906 shares of restricted stock of which 742 remain subject to vesting. |
|
|
(9) |
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. |
EQUITY COMPENSATION PLAN INFORMATION
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 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. Options issued under the 2015 Plan vest pursuant to the terms of stock option agreements with the recipients. 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 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. The terms of these outstanding options are substantially similar to the provisions of the 2015 Plan and options issued thereunder. In the event of change in control, as defined, certain of the non-plan options outstanding vest immediately.
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 are reserved for issuance and sale to employees and officers of the Company at a purchase price equal to 85% of the lower of the closing price of our common stock as reported on the Nasdaq Capital Market on the first day or the last day of the offering period. Eligible employees are granted an option to purchase shares of common stock funded by payroll deductions. 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. The 2023 Plan reserves 33,334 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. 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. Options issued under the 2023 Plan vest pursuant to the terms of stock option agreements with the recipients. In the event of a change in control, certain awards issued under this plan may be subject to additional acceleration of vesting as may be provided in the participants’ written agreement or as determined by the Board or Compensation Committee. 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 28,050 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.
|
Number |
|||||||||||||||
|
of securities |
|||||||||||||||
|
remaining |
|||||||||||||||
|
available for |
|||||||||||||||
|
Number of |
future issuance |
||||||||||||||
|
securities to be |
Weighted- |
under equity |
|||||||||||||
|
issued |
average |
compensation |
|||||||||||||
|
upon exercise |
exercise price |
plans |
|||||||||||||
|
of outstanding |
of outstanding |
(excluding |
|||||||||||||
|
options, |
options, |
securities |
|||||||||||||
|
warrants and |
warrants and |
reflected in |
|||||||||||||
|
rights |
rights |
column (a)) |
|||||||||||||
|
Plan Category |
(a) |
(b) |
(c) |
||||||||||||
|
Equity compensation plans approved by security holders |
196 |
(1)(2) |
$ | 1,453.15 | 129,258 |
(3) |
|||||||||
|
Equity compensation plans not approved by security holders |
— | -, | — | ||||||||||||
|
Total |
196 |
(1)(2) |
$ | 1,453.15 | 129,258 |
(3) |
|||||||||
|
(1) |
Consists of shares of common stock issuable upon the exercise of options outstanding as of December 31, 2025 under the 2015 Plan and the 2023 Plan. |
|
(2) |
Excludes employee stock purchase rights accruing under the ESPP. |
|
(3) |
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. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Standstill Agreement with Principal Stockholders
Pursuant to separate securities purchase agreements dated October 29, 2015 and November 11, 2015 with Wong Kwok Fong (Kelvin), we issued and sold shares of series A-1 stock to Kelvin which were subsequently converted into shares of our common stock. The forgoing agreements contain a standstill provision (the “Standstill”) which prohibits Kelvin either alone or together with any other person, from acquiring additional shares of our common stock or any of our assets, soliciting proxies, or seeking representation on our board of directors. Kelvin is the Co-Chairman of the board of directors and an executive officer.
Collaboration with Fiber Food Systems, Inc.
On November 27, 2024, we entered into a securities purchase agreement with Fiber Food Systems, Inc. (“Fiber Food”) pursuant to which we purchased from Fiber Food 5,000,000 shares (the “Boumarang Shares”) of common stock of Boumarang, Inc., an early-stage private technology company developing sustainable long-range drone technology for commercial applications, in exchange for 595,000 shares of the Company’s common stock. As a result of the forgoing transaction, Fiber Food become the beneficial owner of in excess of 5% of the Company’s outstanding shares of common stock. The purchase agreement with Fiber Food contemplates collaboration between the parties regarding potential strategic and commercial transactions, including acquiring assets or equity interests in other operating companies, integrating our identity access management solutions into Fiber Food’s offerings, and introducing us to its customers, affiliates and business contacts who are potential users of our solutions, in each case pursuant to future definitive agreements on terms to be negotiated by the parties. In the event that at any time during the nine-month period after the closing of the transaction we value the Boumarang Shares at less than $5,000,000 on our balance sheet, we have the right to cause Fiber Food to repurchase the Boumarang Shares from us in exchange for the return of the shares of Company common stock issued in exchange for the Boumarang Shares. As of the date of this report, we have engaged in discussions with Fiber Food and Boumarang regarding the contemplated collaboration but no definitive agreements have been executed. 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.
Director Independence
As required under the NASDAQ Marketplace Rules, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Our board considered certain relationships between our directors and us when determining each director’s status as an “independent director” under Rule 5605(a)(2) of the NASDAQ Marketplace Rules. Based upon such definition and SEC regulations, we have determined that Robert Michel, Emmanuel Alia, and Cameron Williams, are “independent” under NASDAQ standards.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit and Non-Audit Fees
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:
|
2025 |
2024 |
|||||||
|
Audit Fees |
$ | 125,000 | $ | 105,000 | ||||
|
Audit-Related Fees |
- | 24,602 | ||||||
|
Tax Fees |
23,000 | - | ||||||
|
Other Fees |
- | - | ||||||
|
Total Fees |
$ | 148,000 | $ | 129,602 | ||||
Audit Fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by our auditors in connection with statutory and regulatory filings or engagements.
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and which are not reported under audit fees. These fees relate primarily to services provided in connection with registration of securities and review of documents filed with the SEC.
Tax Fees consist of fees billed for professional services for tax compliance assistance rendered during the fiscal year.
Audit Committee Pre-Approval Procedures
The audit committee approves the engagement of our independent auditors to render audit and non-audit services before they are engaged. All of the fees for 2025 and 2024 shown above were pre-approved by the audit committee.
The audit committee pre-approves all audit and other permitted non-audit services provided by our independent auditors. Pre-approval is generally provided for up to one year, is detailed as to the particular category of services and is subject to a monetary limit. Our independent auditors and senior management periodically report to the audit committee the extent of services provided by the independent auditors in accordance with the pre-approval, and the fees for the services performed to date. The audit committee may also pre-approve particular services on a case-by-case basis.
Our audit committee will not approve engagements of our independent registered public accounting firm to perform non-audit services for us if doing so will cause our independent registered public accounting firm to cease to be independent within the meaning of applicable SEC rules. In addition, our audit committee considers, among other things, whether our independent registered public accounting firm is able to provide the required services in a more or less effective and efficient manner than other available service providers.
ITEM 15. – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Report. Portions of Item 15 are submitted as separate sections of this Report:
|
(1) Financial statements filed as part of this Report: |
||
| Report of Independent Registered Public Accounting Firm (Bush and Associates CPA., PCAOB ID:6797) | ||
|
|
||
|
Consolidated Balance Sheets as of December 31, 2025 and 2024 |
||
|
|
||
|
Consolidated Statements of Operations—Years ended December 31, 2025 and 2024 |
||
|
|
||
|
Consolidated Statements of Stockholders’ Equity—Years ended December 31, 2025 and 2024 |
||
|
|
||
|
Consolidated Statements of Cash Flows—Years ended December 31, 2025 and 2024 |
||
|
|
||
|
Notes to Consolidated Financial Statements—December 31, 2025 and 2024 |
(2) Financial statement schedules:
Not applicable.
(3) The exhibits listed in the Exhibits Index are filed as part of this Report
None.
FINANCIAL STATEMENTS
The following financial statements of BIO-key International, Inc. are included herein at the indicated page numbers:
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
BIO-Key International, Inc.
101 Crawfords Corner Road,
Suite 4116,
Holmdel, NJ 07753.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Bio-Key International, Inc. (the “Company”) as of December 31, 2025 and 2024 and the related statements of operations, stockholders’ equity, and cash flows for the years then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company's ability to continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in Note A of the financial statements, the Company has suffered 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. Management’s plans regarding these matters are disclosed in Note A. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. We determined the following critical audit matter
Description of the Matter: Impairment Assessment of Investment in BOUMARANG Inc.
The Company holds an equity investment of $5 million in BOUMARANG Inc. that is accounted for at cost. During 2025, management evaluated whether indicators of impairment existed and whether the carrying value of the investment remained recoverable. BOUMARANG Inc. is a development-stage company that has not generated revenue since inception and has incurred recurring operating losses. This matter involved especially challenging due to the significant estimation uncertainty associated with evaluating the recoverability of the investment, including the assessment of future revenue projections, expected commercialization of products and services, The absence of historical revenue and the reliance on projected operating results increased the degree of judgment required in evaluating management's impairment assessment. The Company determined to record a 50% impairment of its investment in Boumarang’s Shares which resulted in a material charge for impairment of $2.5 million under U.S. generally accepted accounting principles.
How the Critical Audit Matter Was Addressed in the Audit
The primary procedures performed to address this matter included obtaining and evaluating management's impairment assessment; reviewing the investee's audited financial statements, operating results, liquidity position, and business plans; evaluating the independent valuation report obtained by management; assessing the reasonableness of significant assumptions used in the valuation analysis, including projected revenues, assessing whether the continued absence of revenue generation and recurring losses represented indicators of impairment.
Bush & Associates CPA LLC
We have served as the Company’s auditor since 2024.
Las Vegas, Nevada
June 12, 2026
PCAOB ID Number 6797
BIO-key International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
|
December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
ASSETS |
||||||||
|
Cash and cash equivalents |
$ | 2,694,663 | $ | 437,604 | ||||
|
Accounts receivable, net |
1,220,822 | 718,229 | ||||||
|
Due from factor |
- | 74,170 | ||||||
|
Inventory, net of reserve |
370,879 | 378,307 | ||||||
|
Prepaid expenses and other |
251,323 | 278,648 | ||||||
|
Total current assets |
4,537,687 | 1,886,958 | ||||||
|
Equipment and leasehold improvements, net |
67,751 | 140,198 | ||||||
|
Capitalized contract costs, net |
311,591 | 409,426 | ||||||
|
Deposits and other assets |
7,976 | 7,976 | ||||||
|
Operating lease right-of-use assets |
47,953 | 73,372 | ||||||
|
Investment |
2,500,000 | 5,000,000 | ||||||
|
Intangible assets, net |
830,357 | 1,097,630 | ||||||
|
Total non-current assets |
3,765,628 | 6,728,602 | ||||||
|
TOTAL ASSETS |
$ | 8,303,315 | $ | 8,615,560 | ||||
|
LIABILITIES |
||||||||
|
Accounts payable |
$ | 507,357 | $ | 818,186 | ||||
|
Accrued liabilities |
1,333,930 | 1,278,732 | ||||||
|
Note payable |
604,102 | 1,525,977 | ||||||
|
Government loan – BBVA Bank, current portion |
50,530 |
132,731 | ||||||
|
Deferred revenue – current |
572,513 | 773,267 | ||||||
|
Operating lease liabilities, current portion |
27,728 | 24,642 | ||||||
|
Total current liabilities |
3,096,160 | 4,553,535 | ||||||
|
Deferred revenue, net of current portion |
62,584 | 196,237 | ||||||
|
Deferred tax liability |
16,500 | - | ||||||
|
Government loan – BBVA Bank, net of current portion |
- | 44,762 | ||||||
|
Operating lease liabilities, net of current portion |
21,266 | 48,994 | ||||||
|
Total non-current liabilities |
100,350 | 289,993 | ||||||
|
TOTAL LIABILITIES |
3,196,510 | 4,843,528 | ||||||
|
Commitments (Note L) |
||||||||
|
STOCKHOLDERS’ EQUITY |
||||||||
|
Common stock — authorized, 170,000,000 shares; issued and outstanding; 1,085,360 and 371,696 of $.0001 par value at December 31, 2025 and December 31, 2024, respectively |
109 | 37 | ||||||
|
Additional paid-in capital |
141,497,741 | 133,030,607 | ||||||
|
Accumulated other comprehensive loss |
74,803 | 49,290 | ||||||
|
Accumulated deficit |
(136,465,848 | ) | (129,307,902 | ) | ||||
|
TOTAL STOCKHOLDERS’ EQUITY |
5,106,805 | 3,772,032 | ||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 8,303,315 | $ | 8,615,560 | ||||
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.
BIO-key International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
2025 |
2024 |
|||||||
|
Revenues |
||||||||
|
Services |
$ | 1,172,107 | $ | 1,108,506 | ||||
|
License fees |
3,423,300 | 5,189,370 | ||||||
|
Hardware |
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 | ||||||
|
Gross Profit |
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 |
3,787 | 110 | ||||||
|
Loss on foreign currency transactions |
- | (13,004 | ) | |||||
|
Loan fee amortization |
(256,833 | ) | (124,000 | ) | ||||
|
Interest expense |
(60,793 | ) | (175,755 | ) | ||||
|
Total other income (expense) |
(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 | |||||
|
Net loss |
$ | (7,157,946 | ) | $ | (4,300,692 | ) | ||
|
Comprehensive loss: |
||||||||
|
Net loss |
$ | (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 |
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.
BIO-key International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
Accumulated |
||||||||||||||||||||||||
|
Additional |
Other |
|||||||||||||||||||||||
|
Common Stock |
Paid-in |
Comprehensive |
Accumulated |
|||||||||||||||||||||
|
Shares (1) |
Amount |
Capital |
Income (Loss) |
Deficit |
Total |
|||||||||||||||||||
|
Balance as of December 31, 2023 |
103,426 | $ | 10 | $ | 126,047,945 | $ | 22,821 | $ | (125,007,210 | ) | $ |
1,063,566 |
||||||||||||
|
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 |
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 | ) | ||||||||||||||||
|
Net loss |
- | - | - | - | (4,300,692 | ) | (4,300,692 | ) | ||||||||||||||||
|
Balance as of December 31, 2024 |
371,696 | $ | 37 | $ | 133,030,607 | $ | 49,290 | $ | (129,307,902 | ) | $ | 3,772,032 | ||||||||||||
|
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 |
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 | ) | ||||||||||||||||
|
Net loss |
- | - | - | - | (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-10 reverse stock split, which was effective April 30, 2026.
The accompanying notes are an integral part of these statements.
BIO-key International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Years ended December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
CASH FLOW FROM OPERATING ACTIVITIES: |
||||||||
|
Net loss |
$ |
(7,157,946 |
) | $ | (4,300,692 | ) | ||
|
Adjustments to reconcile net loss to cash used for operating activities: |
||||||||
|
Depreciation |
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 |
- | 13,004 | ||||||
|
Reserve for inventory |
(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 |
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 | ) | ||||
|
Deposits |
- | (7,976 | ) | |||||
|
Right of use asset |
- | (115,988 | ) | |||||
|
Inventory |
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 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 |
10,076 | 3,740 | ||||||
|
Net cash (used in) provided by financing activities |
6,912,247 | 2,826,854 | ||||||
|
Effect of exchange rate changes |
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 |
$ | 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.
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
|
Years ended December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Cash paid during the year for: |
||||||||
|
Interest |
$ | 60,793 | $ | 175,755 | ||||
|
Noncash investing and financing activities: |
||||||||
|
Operating lease right-of-use asset and liability for new lease |
$ | - | $ | 79,521 | ||||
|
Issuance of common stock for repayment of debt |
1,786,991 | - | ||||||
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.
BIO-key International, Inc. and Subsidiaries
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2025 and 2024
NOTE A —THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company, founded in 1993, develops and markets proprietary fingerprint identification biometric technology and software solutions enterprise-ready identity access management solutions to commercial, government and education customers throughout the United States and internationally. The Company was a pioneer in developing automated, finger identification technology that supplements or compliments other methods of identification and verification, such as personal inspection identification, passwords, tokens, smart cards, ID cards, PKI (public key infrastructure), credit cards, passports, driver’s licenses, OTP or other form of possession or knowledge-based credentialing. Additionally, advanced BIO-key® technology has been, and is, used to improve both the accuracy and speed of competing finger-based biometrics.
Going Concern and Basis of Presentation
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 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 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
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. dollar, which is the currency of the primary economic environment in which it operates. In accordance with ASC 830, monetary balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date. For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. 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.
The functional currency of Swivel Secure Europe, SA is the Euro. Under ASC 830, all assets and liabilities are translated into U. S. dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. All transaction gains and losses from the measurement of monetary balance sheet items denominated in Euros are reflected in the statement of operations as appropriate. 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. S. dollars. Under ASC 830, all assets and liabilities are translated into U. S. 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. S. 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
A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:
1. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of BIO-key International, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). Intercompany accounts and transactions have been eliminated in consolidation.
2. Use of Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) and consider the various staff accounting bulletins and other applicable guidance issued by the U.S. Securities and Exchange Commission (SEC). 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. Certain significant accounting policies that contain subjective management estimates and assumptions include those related to accounts receivable, inventory, intangible assets and goodwill, fair value of convertible note payable, and income taxes.
3. Revenue Recognition
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:
|
● |
Identify the contract with a customer |
|
● |
Identify the performance obligations in the contract |
|
● |
Determine the transaction price |
|
● |
Allocate the transaction price to performance obligations in the contract |
|
● |
Recognize revenue when or as the Company satisfies a performance obligation |
All of the Company's performance obligations, and associated revenues, are generally transferred to customers at a point in time, with the exception of support and maintenance, and professional services, which are generally transferred to the customer over time.
Software licenses
Software license revenue consists of fees for perpetual and subscription licenses for one or more of the Company’s biometric fingerprint solutions or identity access management solutions. Revenue is recognized at a point in time once the software is available to the customer for download. Software license contracts are generally invoiced in full on execution of the arrangement.
Hardware
Hardware revenue consists of fees for associated equipment sold with or without a software license arrangement, such as servers, locks and fingerprint readers. Customers are not obligated to buy third party hardware from the Company, and may procure these items from a number of suppliers. Revenue is recognized at a point in time once the hardware is shipped to the customer. Hardware items are generally invoiced in full on execution of the arrangement.
Support and Maintenance
Support and maintenance revenue consists of fees for unspecified upgrades, telephone assistance and bug fixes. The Company satisfies its support and maintenance performance obligation by providing “stand-ready” assistance as required over the contract period. The Company records deferred revenue (contract liability) at time of prepayment until the term of the contract begins. Revenue is recognized over time on a ratable basis over the contract term. Support and maintenance contracts are one to five years in length and are generally invoiced in advance at the beginning of the term. Support and Maintenance revenue for subscription licenses is carved out of the total license cost at 18% and recognized on a ratable basis over the license term.
Professional Services
Professional services revenues consist primarily of fees for deployment and optimization services, as well as training. The majority of the Company’s consulting contracts are billed on a time and materials basis, and revenue is recognized based on the amount billable to the customer in accordance with practical expedient ASC 606-10-55-18. For other professional services contracts, the Company utilizes an input method and recognizes revenue based on labor hours expended to date relative to the total labor hours expected to be required to satisfy its performance obligation.
Contracts with Multiple Performance Obligations
Some contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The standalone selling prices are determined based on overall pricing objectives, taking into consideration market conditions and other factors, including the value of the contracts, the cloud applications sold, customer demographics, geographic locations, and the number and types of users within the contracts.
The Company considered several factors in determining that control transfers to the customer upon shipment of hardware and availability of download of software. These factors include that legal title transfers to the customer, the Company has a present right to payment, and the customer has assumed the risks and rewards of ownership.
Accounts receivable from customers are typically due within 30 days of invoicing. The Company does not record a reserve for product returns or warranties as amounts are deemed immaterial based on historical experience.
Costs to Obtain and Fulfill a Contract
Costs to obtain and fulfill a contract are predominantly sales commissions earned by the sales force and are considered incremental and recoverable costs of obtaining a contract with a customer. 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. The period of benefit was determined by taking into consideration customer contracts, technology, and other factors based on historical evidence. Amortization expense is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.
Deferred Revenue
Deferred revenue includes customer advances and amounts that have been paid by customers for which the contractual maintenance terms have not yet occurred. The majority of these amounts are related to maintenance contracts for which the revenue is recognized ratably over the applicable term, which generally is 12-60 months. Contracts greater than 12 months are segregated as long term deferred revenue. Maintenance contracts include provisions for unspecified when-and-if available product updates and customer telephone support services. See Note B.
4. Business Combinations
In accordance with ASC 805, Business Combinations (ASC 805), the Company recognizes the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Determining these fair values requires management to make significant estimates and assumptions, especially with respect to intangible assets.
The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair value. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net acquisition date fair value of the assets acquired and the liabilities assumed and represents the expected future economic benefits arising from other assets acquired that are not individually identified and separately recognized. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement. Assumptions may be incomplete or inaccurate, and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
5. Goodwill and acquired intangible assets
Goodwill is not amortized, but is evaluated for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company has determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. For purposes of assessing potential impairment, the Company estimates the fair value of the reporting unit, based on the Company’s market capitalization, and compares this amount to the carrying value of the reporting unit. If the Company determines that the carrying value of the reporting unit exceeds its fair value, an impairment charge would be required. The annual goodwill impairment test will be performed as of December 31st of each year.
Intangible assets acquired in a business combination are recorded at their estimated fair values at the date of acquisition. The Company amortizes acquired definite-lived intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.
6. Cash Equivalents
Cash equivalents consist of liquid investments with original maturities of three months or less. At December 31, 2025 and 2024, cash equivalents consisted of a money market account.
7. Accounts Receivable
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. Accounts receivable are written off when deemed uncollectible.
Accounts receivable at December 31, 2025 and 2024 consisted of the following:
|
December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Accounts receivable |
$ | 1,604,075 | $ | 1,351,482 | ||||
|
Allowance for Credit Losses |
(383,253 | ) | (633,253 | ) | ||||
|
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 credit losses for the years ended December 31, 2025 and 2024 is as follows:
|
Balance at Beginning of Year |
Charged to Costs and Expenses |
Deductions from Reserves |
Balance at End of Year |
|||||||||||||
|
Year ended December 31, 2025 Allowance for Credit Losses |
$ | 633,253 | $ | - | $ | (250,000 | ) | $ | 383,253 | |||||||
|
Year ended December 31, 2024 Allowance for Credit Losses |
$ | 1,005,785 | $ | 16,265 | $ | (388,797 | ) | $ | 633,253 | |||||||
8. Equipment and Leasehold Improvements, Intangible Assets and Depreciation and Amortization
Equipment and leasehold improvements are stated at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over the estimated service lives, principally using straight-line methods. Leasehold improvements are amortized over the shorter of the life of the improvement or the lease term, using the straight-line method.
The estimated useful lives used to compute depreciation and amortization for financial reporting purposes are as follows:
|
Years |
|||
|
Equipment and leasehold improvements |
|||
|
Equipment |
3 - 5 | ||
|
Furniture and fixtures |
3 - 5 | ||
|
Software |
3 | ||
|
Leasehold improvements |
life or lease term |
Intangible assets other than goodwill consist of patents, trade name, proprietary software, and customer relationships. Patent costs are capitalized until patents are awarded. Upon award, such costs are amortized using the straight-line method over their respective economic lives. If a patent is denied, all costs are charged to operations in that year. Trade names, proprietary software, and customer relationships are amortized over the economic useful life.
9. Impairment or Disposal of Long Lived Assets, including Intangible Assets
The Company reviews long-lived assets, including intangible assets subject to amortization, whenever events or changes in circumstances indicate that the carrying amount of such an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amount to the future undiscounted cash flows the assets are expected to generate. If such assets are considered impaired, the impairment to be recognized is equal to the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique. In assessing recoverability, the Company must make assumptions regarding estimated future cash flows and discount factors. If these estimates or related assumptions change in the future, the Company may be required to record impairment charges. 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. Impairment expenses in 2025 and 2024. were $2,500,000 and $0. respectively.
10. Advertising Expense
The Company expenses the costs of advertising as incurred. Advertising expenses for 2025 and 2024 were approximately $287,000 and $353,000, respectively.
11. Research and Development Expenditures
Research and development expenses include costs directly attributable to the conduct of research and development programs primarily related to the development of our software products and improving the efficiency and capabilities of our existing software. Such costs include salaries, payroll taxes, employee benefit costs, materials, supplies, depreciation on research equipment, services provided by outside contractors, and the allocable portions of facility costs, such as rent, utilities, insurance, repairs and maintenance, depreciation and general support services. All costs associated with research and development are expensed as incurred.
12. Earnings Per Share of Common Stock (“EPS”)
The Company’s EPS is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. 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. See Note Q. 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.
13. Accounting for Stock-Based Compensation
The Company accounts for share based compensation in accordance with the provisions of ASC 718-10, “Compensation — Stock Compensation,” which requires measurement of compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The majority of its share-based compensation arrangements vest over a three year vesting schedule. The Company expenses its share-based compensation under the ratable method, which treats each vesting tranche as if it were an individual grant. The fair value of stock options is determined using the Black-Scholes valuation model and requires the input of certain assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (the “expected option term”), the estimated volatility of its common stock price over the option’s expected term, the risk-free interest rate over the option’s expected term, and the Company’s expected annual dividend yield. Changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amount recognized as an expense in the consolidated statements of operations. As required under the accounting rules, the Company reviews its valuation assumptions at each grant date and, as a result, the Company is likely to change its valuation assumptions used to value employee stock-based awards granted in future periods. The values derived from using the Black-Scholes model are recognized as expense over the service period, net of estimated forfeitures (the number of individuals that will ultimately not complete their vesting requirements). The estimation of stock awards that will ultimately vest requires significant judgment. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Actual results, and future changes in estimates, may differ substantially from current estimates. Options and warrants to outsiders are accounted for under ASC 718.
The following table presents share-based compensation expenses included in the Company’s consolidated statements of operations:
|
Year ended |
||||||||
|
December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Selling, general and administrative |
$ | 139,131 | $ | 201,100 | ||||
|
Research, development and engineering |
27,444 | 42,150 | ||||||
| $ | 166,575 | $ | 243,250 | |||||
14. Income Taxes
The provision for, or benefit from, income taxes includes deferred taxes resulting from the temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from the differences in the carrying value of assets and liabilities. Future realization of deferred income tax assets requires sufficient taxable income within the carryback, carryforward period available under tax law. The Company evaluates, on a quarterly basis whether, based on all available evidence, if it is probable that the deferred income tax assets are realizable. Valuation allowances are established when it is more likely than not that the tax benefit of the deferred tax asset will not be realized. The evaluation, as prescribed by ASC 740-10, “Income Taxes,” includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. Because of the Company’s historical performance and estimated future taxable income, a full valuation allowance has been established.
The Company accounts for uncertain tax provisions in accordance with ASC 740. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. See Note O.
15. Leases
In accordance with ASC 842, Leases (ASC 842), the Company records a right-of-use (ROU) asset and a lease liability on the balance sheet for all leases with terms longer than 12 months and classifies them as either operating or finance leases.
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present and the classification of the lease including whether the contract involves the use of a distinct identified asset, whether the Company obtains the right to substantially all the economic benefit from the use of the asset, and whether the Company has the right to direct the use of the asset. Leases with a term greater than one year are recognized on the balance sheet as ROU assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less under practical expedient in paragraph ASC 842-20-25-2. For contracts with lease and non-lease components, the Company has elected not to allocate the contract consideration, and to account for the lease and non-lease components as a single lease component.
Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The implicit rate within our operating leases are generally not determinable and, therefore, the Company uses the incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company determines the incremental borrowing rate for each lease using our estimated borrowing rate, adjusted for various factors including level of collateralization, term and currency to align with the terms of the lease. The operating lease ROU asset also includes any lease prepayments, offset by lease incentives.
An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain we will exercise that option. An option to terminate is considered unless it is reasonably certain we will not exercise the option. See Note K.
16. 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.
17. 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
Disaggregation of Revenue
The following table summarizes revenue from contracts with customers for the years ended December 31, 2025 and 2024:
|
North |
December 31, |
|||||||||||||||||||
|
America |
Africa |
EMESA* |
Asia |
2025 |
||||||||||||||||
|
License fees |
$ | 1,726,401 | $ | 526,465 | $ | 1,170,434 | $ | - | $ | 3,423,300 | ||||||||||
|
Hardware |
115,052 | 653 | 997,273 | 229,170 | 1,342,148 | |||||||||||||||
|
Services |
829,756 | 254,648 | 84,609 | 3,094 | 1,172,107 | |||||||||||||||
|
Total revenues |
$ | 2,671,209 | $ | 781,766 | $ | 2,252,316 | $ | 232,264 | $ | 5,937,555 | ||||||||||
|
North |
December 31, |
|||||||||||||||||||
|
America |
Africa |
EMESA* |
Asia |
2024 |
||||||||||||||||
|
License fees |
$ | 2,410,624 | $ | 1,490,256 | $ | 1,282,176 | $ | 6,314 | $ | 5,189,370 | ||||||||||
|
Hardware |
154,931 | - | 391,764 | 85,000 | 631,695 | |||||||||||||||
|
Services |
898,686 | 162,467 | 47,353 | - | 1,108,506 | |||||||||||||||
|
Total revenues |
$ | 3,464,241 | $ | 1,652,723 | $ | 1,721,293 | $ | 91,314 | $ | 6,929,571 | ||||||||||
* EMESA – Europe, Middle East, South America
Revenue recognized during the year ended December 31, 2025 from amounts included in deferred revenue at the beginning of the year was approximately $455,000. Revenue recognized during the year ended December 31, 2024 from amounts included in deferred revenue at the beginning of the year was approximately $508,000. Total deferred revenue (contract liability) was approximately $635,000 and $970,000 at December 31, 2025 and 2024, respectively. 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.
Transaction Price Allocated to the Remaining Performance Obligations
ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied. The guidance provides certain practical expedients that limit this requirement, which the Company’s contracts meet as follows:
|
● |
The performance obligation is part of a contract that has an original expected duration of one year or less, in accordance with ASC 606-10-50-14. |
Deferred revenue represents the Company’s remaining performance obligations related to prepaid support and maintenance, all of which is expected to be recognized from one to five years.
NOTE C—FAIR VALUES OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, accounts receivable, due from factor, accounts payable and accrued liabilities are carried at, or approximate, fair value because of their short-term nature. 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.
NOTE D—CONCENTRATION OF RISK
Financial instruments which potentially subject the Company to risk primarily consist of cash, and cash equivalents, investment in debt security, and accounts receivables.
The Company maintains its cash and cash equivalents with various financial institutions, which, at times may exceed insured limits. 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, 2025 and 2024. The Company has not incurred any losses on these accounts.
The Company extends credit to customers on an unsecured basis in the normal course of business. The Company’s policy is to perform an analysis of the recoverability of its receivables at the end of each reporting period and to establish allowances where appropriate. 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, 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, 2024, two customers accounted for 36% of total accounts receivable.
NOTE E—INVENTORY
Inventory is stated at the lower of cost, determined on a first in, first out basis, or realizable value. The Company periodically evaluates inventory items and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow moving goods, and for other impairment of value based upon assumptions of future demand and market conditions. The reserve on inventory 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. The total inventory below accounts for selective product that ships quarterly to customers worldwide and through Amazon.
Inventory is comprised of the following as of December 31:
|
2025 |
2024 |
|||||||
|
Finished goods |
$ | 2,880,593 | $ | 4,098,513 | ||||
|
Fabricated assemblies |
750,381 | 53,289 | ||||||
|
Reserve on finished goods |
(3,260,095 | ) | (3,773,495 | ) | ||||
|
Total inventory |
$ | 370,879 | $ | 378,307 | ||||
NOTE F—EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consisted of the following as of December 31:
|
2025 |
2024 |
|||||||
|
Equipment |
$ | 791,140 | $ | 1,016,802 | ||||
|
Furniture and fixtures |
201,679 | 225,978 | ||||||
|
Software |
- | 49,143 | ||||||
|
Leasehold improvements |
44,106 | 44,106 | ||||||
| 1,036,925 | 1,336,029 | |||||||
|
Less accumulated depreciation and amortization |
(969,174 | ) | (1,195,831 | ) | ||||
|
Total |
$ | 67,751 | $ | 140,198 | ||||
Depreciation was $84,458 and $93,026 for 2025 and 2024, respectively. Amounts are recorded in selling, general, and administrative expense as well as in cost of services.
NOTE G—INTANGIBLE ASSETS
Intangible assets consisted of the following as of December 31:
|
2025 |
2024 |
|||||||
|
Trade name |
$ | 130,000 | $ | 130,000 | ||||
|
Proprietary software |
420,000 | 420,000 | ||||||
|
Customer relationships |
1,692,583 | 1,692,583 | ||||||
|
Patents and patents pending |
287,248 | 365,080 | ||||||
| 2,529,831 | 2,607,663 | |||||||
|
Less accumulated amortization |
(1,699,751 | ) | (1,510,310 | ) | ||||
|
Total |
$ | 830,080 | $ | 1,097,353 | ||||
Aggregate amortization expense for 2025 and 2024 was approximately $267,273 and $304,983, respectively. Estimated minimum amortization expense based on straight line amortization of the software license rights for each of the next five years and thereafter approximates the following:
|
Years ending December 31 |
||||
|
2026 |
$ | 224,000 | ||
|
2027 |
223,000 | |||
|
2028 |
141,000 | |||
|
2029 |
117,000 | |||
|
2030 |
14,000 | |||
|
Thereafter |
111,080 | |||
|
Total |
$ | 830,080 |
NOTE H - INVESTMENTS
Equity Investment in Privately Held Company
On November 27, 2024, the Company purchased 5,000,000 shares (the “Boumarang Shares”) of common stock of Boumarang, Inc., an early-stage private technology company developing sustainable long-range drone technology for commercial applications. The Boumarang Shares represent approximately 7.69% of the issued and outstanding shares of Boumarang, Inc. and the Company has no corporate governance or control rights. 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 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 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. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use in pricing the asset or liability, such as inherent risk, non-performance risk and credit risk. The Company follows ASC Topic 820 – “Fair Value Measurement,” which establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived from observable market data by correlation or other means.
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Boumarang Shares are classified as a Level 3 asset and have been valued based on a combination of recent sales of Boumarang common stock to third parties and a third party valuation applying a discounted cash flow analysis which included discounts for lack of control and lack of marketability, small company risk premium, and specific company risk premium based on Boumarang being an early-stage pre-revenue company. The lack of control and marketability discounts were based on published studies and transfer restrictions contained in Boumarang’s corporate governance documents.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Boumarang Shares may fluctuate from period to period and the fair value of the Boumarang Shares may differ significantly from the values that would have been used had a ready market existed for such shares and may differ materially from the values that the Company may ultimately realize. The early-stage pre-revenue status and unproven technology of Boumarang raise uncertainties that could impact the recoverability of the investment in the Boumarang Shares.
ASC 321-10-35 requires annual impairment testing for equity securities without readily determinable fair values. 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
Accrued liabilities consisted of the following as of December 31:
|
2025 |
2024 |
|||||||
|
Compensation |
$ | 388,072 | $ | 549,217 | ||||
|
Compensated absences |
344,917 | 299,152 | ||||||
|
Accrued legal and accounting fees |
221,600 | 161,000 | ||||||
|
Taxes |
15,986 | 55,986 | ||||||
|
Employee expenses reimbursement |
145,209 | 154,209 | ||||||
|
Sales tax payable |
27,434 | 18,147 | ||||||
|
Other |
190,712 | 41,021 | ||||||
|
Total |
$ | 1,333,930 | $ | 1,278,732 | ||||
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 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. All repayments of principal due under the 2025 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 2025 Note (the “Redemption Start Date”), Lender shall have the right to redeem up to $135,000 of principal amount under the 2025 Note each month which amount plus the Exit Fee will be due and payable three (3) business days after Lender’s delivery of a redemption notice to the Company. At the end of each month following the Redemption Start Date, if the Company has not reduced the outstanding balance under the 2025 Note by at least $135,000, then by the fifth (5th) day of the following month, the Company must either pay to Lender the difference between $135,000 and the amount, if any, redeemed in such month plus the Exit Fee, or the outstanding balance due under the Note will automatically increase by one percent (1%). As of 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. In the event that the Company receives any proceeds in connection with any fundraising or financing transaction (including any warrant exercises), it will be required to make a mandatory prepayment equal to the lesser of (i) forty percent (40%) of the amount raised in such transaction and (ii) the full amount due under the 2025 Note.
The 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. 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
On June 24, 2024, the Company entered into and closed a note purchase agreement (the “Purchase Agreement”) which provided for the issuance of a $2,360,000 principal amount senior secured promissory note (the “2024 Note”). The 2024 Note 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.
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
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. The property leased in China is paid monthly as used, without a formal agreement. The following tables present the components of lease expense and supplemental balance sheet information related to the operating leases were:
|
Year ended |
Year ended |
|||||||
|
December 31, |
December 31, |
|||||||
|
2025 |
2024 |
|||||||
|
Lease cost |
||||||||
|
Operating lease cost |
$ | 28,195 | $ | 45,787 | ||||
|
Total lease cost |
$ | 28,195 | $ | 45,787 | ||||
|
Balance sheet information |
||||||||
|
Operating lease right-of-use assets |
$ | 47,953 | $ | 73,372 | ||||
|
Operating lease liabilities, current portion |
$ | 27,728 | $ | 24,642 | ||||
|
Operating lease liabilities, non-current portion |
21,266 | 48,994 | ||||||
|
Total operating lease liabilities |
$ | 48,994 | $ | 73,636 | ||||
|
Weighted average remaining lease term (in years) – operating leases |
1.67 | 2.67 | ||||||
|
Weighted average discount rate – operating leases |
5.50 | % | 5.50 | % | ||||
|
Supplemental cash flow information related to leases were as follows: |
||||||||
|
Cash paid for amounts included in the measurement of operating lease liabilities |
$ | 47,640 | $ | 63,914 | ||||
|
Maturities of operating lease liabilities were as follows as of December 31, 2023: |
||||||||
|
2026 |
$ | 29,267 | ||||||
|
2027 |
22,477 | |||||||
| 2028 | - | |||||||
|
Total future lease payments |
$ | 51,744 | ||||||
|
Less: imputed interest |
(3,791 | ) | ||||||
|
Total |
$ | 47,953 | ||||||
NOTE L— CONTINGENCIES
Litigation
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 M— EQUITY
1. Preferred Stock
Within the limits and restrictions provided in the Company’s Certificate of Incorporation, the Board of Directors has the authority, without further action by the shareholders, to issue up to 5,000,000 shares of preferred stock, $.0001 par value per share, in one or more series, and to fix, as to any such series, any dividend rate, redemption price, preference on liquidation or dissolution, sinking fund terms, conversion rights, voting rights, and any other preference or special rights and qualifications.
2. Common Stock
Holders of common stock have equal rights to receive dividends when, as and if declared by the Board of Directors, out of funds legally available therefor. Holders of common stock have one vote for each share held of record and do not have cumulative voting rights.
Holders of common stock are entitled, upon liquidation of the Company, to share ratably in the net assets available for distribution, subject to the rights, if any, of holders of any preferred stock then outstanding. Shares of common stock are not redeemable and have no preemptive or similar rights. All outstanding shares of common stock are fully paid and nonassessable.
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. 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
Restricted stock consists of shares of common stock that are subject to restrictions on transfer and risk of forfeiture until the fulfillment of specified conditions. The fair value of nonvested shares is determined based on the market price of the Company's common stock on the grant date. Restricted stock is expensed ratably over the term of the restriction period.
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.
Restricted stock compensation for the years ended December 31, 2025 and 2024 was $144,321 and $224,470, respectively.
Issuances to Directors, Executive Officers & Consultants
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
Warrants
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 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:
The Company records the warrants at their fair value which is determined using the Black-Scholes valuation model on the date of the grant. The fair value of the warrants issued in 2025 and 2024 were estimated with the following assumptions:
|
Years ended |
||||||||
|
December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Weighted average risk-free interest rate |
3.84 | % | 3.34 | % | ||||
|
Weighted average exercise price |
$ | 10.20 | $ | 18.50 | ||||
|
Weighted average exercise period |
5 | 5 | ||||||
|
Weighted average Volatility of stock price |
451 |
% | 577 | % | ||||
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, 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 (as adjusted to reflect our 1-for-10 reverse stock split, which was effective April 30, 2026) is as follows:
|
Weighted |
||||||||||||||||
|
Weighted |
average |
|||||||||||||||
|
average |
remaining |
Aggregate |
||||||||||||||
|
Total |
exercise |
life |
intrinsic |
|||||||||||||
|
Warrants |
price |
(in years) |
value |
|||||||||||||
|
Outstanding, as of December 31, 2023 |
262,649 | 1,049.50 | 4.37 | — | ||||||||||||
|
Granted |
206,111 | 18.50 | ||||||||||||||
|
Exercised |
(190,322 | ) | 10.20 | |||||||||||||
|
Forfeited |
— | — | ||||||||||||||
|
Expired |
(1,389 | ) | — | |||||||||||||
|
Outstanding, as of December 31, 2024 |
277,049 | $ | 109.90 | 4.19 | — | |||||||||||
|
Granted |
927,500 | 10.20 | ||||||||||||||
|
Exercised |
(515,278 | ) | 10.20 | |||||||||||||
|
Forfeited |
— | — | ||||||||||||||
|
Expired |
(24,521 | ) | 1,007.70 | |||||||||||||
|
Outstanding, as of December 31, 2025 |
664,750 | $ | 12.40 | 4.70 | — | |||||||||||
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 warrant holders had all warrant holders exercised their options as of that date. There were no in-the-money warrants exercisable as of December 31, 2025, 2024 and 2023.
NOTE N—STOCK OPTIONS
2023 Stock Incentive Plan
On December 14, 2023, the stockholders approved the 2023 Stock Incentive Plan. 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. Options issued under the 2023 Plan vest pursuant to the terms of stock option agreements with the recipients. In the event of a change in control, certain awards issued under this plan may be subject to additional acceleration of vesting as may be provided in the participants’ written agreement or as determined by the Board or Compensation Committee. 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. The Company also issued 2,316 shares to the Board of Directors for payments of Board fees.
2015 Stock Option Plan
On January 27, 2016, the stockholders approved the 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan initially reserved 1,042 shares of common stock for issuance of options, restricted stock, and other equity based awards to employees, officers, directors, and consultants of the Company. In 2021, the stockholders approved an amendment to the 2015 to increase the shares of common stock authorized for issuance under the 2015 Plan from 1,042 shares to 4,383 shares together with other technical changes. The term of stock options granted under the 2015 Plan, may not exceed ten years, exercise prices may not be below 100-110% of fair market value, and vesting occurs over time periods set forth in written agreements with the recipients. 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 expired in December 2025.
Non-Plan Stock Options
Periodically, the Company has granted options outside of the 2015 Plan to various employees and consultants. In the event of change in control, as defined, certain of the non-plan options outstanding vest immediately.
Stock Option Activity
Information summarizing option activity is as follows:
|
Weighted |
||||||||||||||||||||||||
|
Weighted |
average |
|||||||||||||||||||||||
|
Number of Options |
average |
remaining |
Aggregate |
|||||||||||||||||||||
|
2015 |
Non |
Total |
exercise |
life |
intrinsic |
|||||||||||||||||||
|
Plan |
Plan |
price |
(in years) |
value |
||||||||||||||||||||
|
Outstanding, as of December 31, 2023 |
454 | 472 | 926 | $ | 3,112.00 | 0.96 | $ | 0 | ||||||||||||||||
|
Granted |
— | — | — | — | ||||||||||||||||||||
|
Exercised |
— | — | — | — | ||||||||||||||||||||
|
Forfeited |
(35 | ) | — | (35 | ) | 936.00 | ||||||||||||||||||
|
Expired |
(119 | ) | (472 | ) | (591 | ) | 3,805.10 | |||||||||||||||||
|
Outstanding, as of December 31, 2024 |
300 | — | 300 | $ | 1,973.10 | 1.14 | $ | 0 | ||||||||||||||||
|
Granted |
— | — | — | — | ||||||||||||||||||||
|
Exercised |
— | — | — | — | ||||||||||||||||||||
|
Forfeited |
— | — | — | — | ||||||||||||||||||||
|
Expired |
(104 | ) | — | (104 | ) | 2,822.40 | ||||||||||||||||||
|
Outstanding, as of December 31, 2025 |
196 | — | 196 | $ | 1,453.15 | 0.69 | $ | 0 | ||||||||||||||||
|
Vested or expected to vest at December 31, 2025 |
— | $ | — | — | $ | 0 | ||||||||||||||||||
|
Exercisable at December 31, 2025 |
— | $ | — | — | $ | 0 | ||||||||||||||||||
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 |
Options Exercisable |
|||||||||||||||||||
|
Weighted |
Weighted |
Weighted |
||||||||||||||||||
|
average |
average |
average |
||||||||||||||||||
|
Number of |
exercise |
remaining |
Number |
exercise |
||||||||||||||||
|
Range of exercise prices |
shares |
price |
life (in years) |
exercisable |
price |
|||||||||||||||
|
$936.00 - 1,699.20 |
196 | $ | 1,453.15 | 0.69 | 196 | $ | 1,453.15 | |||||||||||||
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. There were no in-the-money options exercisable as of December 31, 2025, 2024 and 2023.
The weighted average fair value of options granted during the years ended December 31, 2025 and 2024 was $0 as no options were granted in either year. 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, 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 O—INCOME TAXES
For financial reporting purposes, the net pre-tax book loss for the United States and foreign entities, in the aggregate, was:
|
Year ended |
Year ended |
|||||||
|
December 31, |
December 31, |
|||||||
|
2025 |
2024 |
|||||||
|
United States |
$ | (6,179,476 | ) | $ | (2,767,752 | ) | ||
|
Hong Kong |
(74,045 | ) | (222,901 | ) | ||||
|
Nigeria |
(164,518 | ) | (223,426 | ) | ||||
|
Spain |
(723,407 | ) | (1,109,611 | ) | ||||
| Portugal | - | - | ||||||
|
Total |
$ | (7,141,446 | ) | $ | (4,323,690 |
) |
||
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 taxes (tax benefits) benefits consists of the following:
|
Year ended |
Year ended |
|||||||
|
December 31, |
December 31, |
|||||||
|
2025 |
2024 |
|||||||
| Current | ||||||||
|
Federal and States |
$ | - | $ | - | ||||
|
Foreign: |
||||||||
| Subtotal | - | $ | - | |||||
|
Deferred: |
||||||||
|
Federal and States |
||||||||
|
Foreign |
16,500 | (22,998 | ) | |||||
|
Subtotal |
16,500 | (22,998 | ) | |||||
|
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 :
|
December 31, |
December 31, |
||||||||
|
2025 |
2024 |
||||||||
|
Accrued compensation |
$ | 140,490 | $ | 154,457 | |||||
|
Allowance for credit losses |
20,626 | 20,513 | |||||||
|
Research and development expenses |
724,038 | 1,261,601 | |||||||
|
Capital loss carry forward |
114,885 | 114,251 | |||||||
|
Right-of-use operating lease assets |
(5,979 | ) | (16,346 | ) | |||||
|
Operating lease liabilities |
- | 16,406 | |||||||
|
Stock-based compensation |
54,258 | 34,299 | |||||||
|
Equipment and leasehold improvements |
(1,951 | ) | (6,268 | ) | |||||
| Impairment of investment | 712,500 | - | |||||||
|
Intangible assets - Foreign |
(89,000 | ) | - | ||||||
|
Allowance for credit losses - Foreign |
72,500 | - | |||||||
|
Inventory reserve |
589,271 | 781,213 | |||||||
|
Other |
1,006 | 1,000 | |||||||
|
Tax credits |
1,116,119 | 1,554,541 | |||||||
|
Net operating loss and research and credit carryforwards |
11,686,140 |
11,824,622 | |||||||
|
Valuation allowance |
(15,083,017 | ) | (15,740,289 | ) | |||||
|
Net deferred tax liability |
$ | - | $ | - | |||||
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. The valuation allowance could be reduced or eliminated based on future earnings and future estimates of taxable income. With a full valuation allowance, any change in the deferred tax asset or liability is fully offset by a corresponding change in the valuation allowance. At December 31, 2025 and 2024, the Company provided a valuation allowance on its net deferred tax assets of $15,083,017 and $15,740,289 respectively.
As of December 31, 2025, the Company has U.S. federal net operating loss carryforwards of approximately $53.3 million. Approximately $19.6 million are subject to expiration between 2026 and 2037, and $33.7 million net operating loss carryforwards have no expiration date. These net operating loss carryforwards could be subject to the limitations under Section 382 of the Internal Revenue Code due to changes in the equity ownership of the Company. 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 tax rate on loss from operations and the US federal statutory rate is presented below for the years ended December 31, 2025 and 2024.
|
Year ended |
||||||||
|
December 31, |
||||||||
|
2025 |
||||||||
|
Federal statutory income tax rate |
$ | (1,673,013 | ) | 21 | % | |||
|
State taxes, net of federal benefit |
- | - | ||||||
|
Permanent differences |
||||||||
| 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 | ) | |||||
|
Foreign rate differential - all |
187,823 | (4.1) | ||||||
|
True ups and other |
175,955 | (3.9 | ) | |||||
|
Valuation allowance |
(585,386 | ) | 28.5 | |||||
| - | ||||||||
|
Effective tax rate |
$ | 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.
|
Year ended |
||||
|
December 31, |
||||
|
2024 |
||||
|
Federal statutory income tax rate |
21 | % | ||
|
State taxes, net of federal benefit |
0.82 | |||
|
Permanent differences |
(1.84 | ) | ||
|
Expiration of net operating loss and research credit carryforwards |
(46.14 | ) | ||
|
Foreign rate differential |
(7.23 | ) | ||
|
Rate change |
(0.41 | ) | ||
|
Other |
0.14 | |||
|
Valuation allowance |
33.98 | |||
|
Effective tax rate |
0.32 | % | ||
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. The Company files income tax returns in the U.S. 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.
The Company's subsidiary in Nigeria has not filed its required returns since inception. Management believes that when the returns are filed, no taxes will be owed due to the losses incurred during those periods. The Company is not subject to minimum tax during the first four years of operations. As a result, management could not calculate the amount of net operating loss carryforwards that are available to offset future taxable income. 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. 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. 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 2026.
NOTE P—SAVINGS PLAN
The Company has established a savings plan under section 401(k) of the Internal Revenue Code. All employees of the Company, after completing one day of service, are eligible to enroll in the 401(k) plan. Participating employees may elect to defer a portion of their salary on a pre-tax basis up to the limits as provided by the IRS Code. The Company is not required to match employee contributions but may do so at its discretion. The Company made no matching contributions during the years ended December 31, 2025 and 2024. The plan passed its 2024 annual non-discrimination test and expects to pass the 2025 annual non-discrimination test.
NOTE Q—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 (as adjusted to reflect our 1-for-10 reverse stock split, which was effective April 30, 2026):
:
|
Years ended December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Stock options |
196 | 300 | ||||||
|
Warrants |
664,750 | 277,049 | ||||||
|
Total |
664,946 | 277,349 | ||||||
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 EVENTS
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
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10.2*** |
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10.3*** |
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10.4*** |
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10.5 |
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10.6*** |
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10.7 |
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10.8*** |
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10.9 |
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10.10 |
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10.11 |
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10.12 |
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10.13 |
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10.14 |
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10.15 |
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10.16 |
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10.17 |
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10.18*** |
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101.INS* |
Inline XBRL Instance |
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101.SCH* |
Inline XBRL Taxonomy Extension Schema |
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101.CAL* |
Inline XBRL Taxonomy Extension Calculation |
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101.DEF* |
Inline XBRL Taxonomy Extension Definition |
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101.LAB* |
Inline XBRL Taxonomy Extension Labels |
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101.PRE* |
Inline XBRL Taxonomy Extension Presentation |
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104 |
Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
* filed herewith
** Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted sections have been filed separately with the Securities and Exchange Commission.
*** Management compensatory plan.
+ Certain portions of this exhibit (indicated by “[***]”) have been omitted as the Company has determined that such portions are (a) not material and (b) would likely cause competitive harm to the Company if publicly disclosed.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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BIO-KEY INTERNATIONAL, INC. |
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Date: June 12, 2026 |
By: |
/s/ MICHAEL W. DEPASQUALE |
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Michael W. DePasquale |
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CHIEF EXECUTIVE OFFICER (Principal Executive Officer) |
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Each person whose signature appears below constitutes and appoints Michael W. DePasquale and Cecilia Welch, or either of them, as such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and any documents related to this report and filed pursuant to the Securities Exchange Act of 1934, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney shall be governed by and construed with the laws of the State of Delaware and applicable federal securities laws.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the dates indicated.
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Signature |
Title |
Date |
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/s/ MICHAEL W. DEPASQUALE |
Chairman of the Board of Directors, Chief Executive Officer and Director (Principal Executive Officer) |
June 12, 2026
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Michael W. DePasquale |
||||
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/s/ CECILIA WELCH |
Chief Financial Officer (Principal Financial and Accounting Officer) |
June 12, 2026 | ||
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Cecilia Welch |
||||
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/s/ROBERT J. MICHEL |
Director |
June 12, 2026 | ||
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Robert J. Michel |
||||
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/s/ WONG KWOK FONG |
Director |
June 12, 2026 | ||
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Wong Kwok Fong |
||||
| /s/ CAMERON WILLIAMS | Director | June 12, 2026 | ||
| Cameron Williams | ||||
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/s/ EMMANUEL ALIA |
Director |
June 12, 2026 | ||
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Emmanuel Alia |
Exhibit 21.1
Subsidiaries
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Name |
State/Country of Incorporation |
|
BIO-key Hong Kong Limited |
Hong Kong |
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Public Safety Group, Inc. |
Delaware |
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PistolStar, Inc. |
New Hampshire |
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BIOKEY AFRICA LIMITED |
Nigeria |
|
Swivel Secure Europe, SA |
Spain |
|
Swivel Secure, Unipessoal LDA. |
Portugal |
| BIO-key Europe SL | Spain |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference into the Registration Statements of BIO-key International Inc. on Form S-8 (file nos. 333-233737, 333-212066, 333-257520, 333-257754, 333-280497, 333-289890 and 333-289919) and Form S-1 (file nos. 333-275003, 333-276773, 333-282618, 333-286776, and 333-291728) of our Report of Independent Registered Public Accounting Firm, dated June 12, 2026 relating to the financial statements of BIO-key International, Inc. included in this Annual Report on Form 10-K/A for the year ended December 31, 2025.
Very truly yours,
/s/ Bush & Associates CPA LLC
Bush & Associates CPA LLC (PCAOB 6797)
Las Vegas, Nevada
June 12, 2026
9555 S. Eastern Eve., Suite 280, Las Vegas, NV, 89123 l 702.703.5979 l www.bushandassociatescpas.com
Exhibit 31.1
CERTIFICATION
I, Michael W. DePasquale, certify that:
1. I have reviewed this annual report on Form 10-K/A of BIO-key International, Inc. (the “Company”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
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Dated: June 12, 2026 |
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|
/s/ Michael W. DePasquale |
|
|
Michael W. DePasquale |
|
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Cecilia C. Welch, certify that:
1. I have reviewed this annual report on Form 10-K/A of BIO-key International, Inc. (the “Company”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
|
Dated: June 12, 2026 |
|
|
/s/ CECILIA C. WELCH |
|
|
Cecilia C. Welch |
|
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of BIO-key International, Inc. (the “Company”) on Form 10-K/A for the period ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael W. DePasquale, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
|
BIO-KEY INTERNATIONAL, INC. |
||
|
By: |
/s/ Michael W. DePasquale |
|
|
Michael W. DePasquale |
||
|
Chief Executive Officer |
||
|
Dated: June 12, 2026 |
||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of BIO-key International, Inc. (the “Company”) on Form 10-K/A for the period ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Cecilia Welch, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that to my knowledge:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
|
BIO-KEY INTERNATIONAL, INC. |
||
|
By: |
/s/ CECILIA C. WELCH |
|
|
Cecilia C. Welch |
||
|
Chief Financial Officer |
||
|
Dated: June 12, 2026 |
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