BIO KEY INTERNATIONAL INC

September 30, 2025 (Unaudited)

Nature of Business

BIO-key International, Inc. and its wholly-owned subsidiaries (collectively, the “Company” or “BIO-key”), founded in1993, 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, 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.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BIO-key and include all normal and recurring adjustments which are necessary for a fair presentation in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim consolidated financial statements and Rule8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). The operating results for interim periods arenot necessarily indicative of results that* maybe expected for any other interim period or for the full year ended December 31, 2025.*Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. Intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the related notes thereto included in the Company’s Annual Report on Form10-K for the fiscal year ended* December 31, 2024,filed with the SEC on April 23, 2025,from which the accompanying condensed consolidated balance sheet dated December 31, 2024*was derived.

Foreign Currencies

The Company accounts for foreign currency transactions pursuant to Accounting Standards Codification ("ASC")830, Foreign Currency Matters (“ASC830”). 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 ASC830, 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 income (loss).

Recently Adopted Accounting Pronouncements

Effective* January 1, 2024,the Company adopted ASU2020*-06, Debt - Debt with Conversion and Other Options (Subtopic470*-20) and Derivatives and Hedging - Contracts in Entity*’s Own Equity (Subtopic815*-40)* (“ASU2020-06”) to simplify accounting for certain financial instruments. ASU2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. The adoption of ASU2020-06 didnot have a material effect on the consolidated financial statements of the Company.

Effective* January 1, 2024,the Company adopted ASU2023*-07, Segment Reporting (Topic280*):“Improvements to Reportable Segment Disclosures” (“ASU2023*-07”) to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The adoption of ASU2023-07 didnot have a significant impact on the Company’s consolidated financial statements. See Note16 – Segment Information.

Recently Issued Accounting Pronouncements

In* October 2023,the Financial Accounting Standards Board (“FASB”) issued ASU2023*-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU2023-06”). 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 werenot 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 isnot* effective for any entities. Early adoption isnot permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and disclosures.

In* December 2023,the FASB issued ASU2023*-09, “Improvements to Income Tax Disclosures” (“ASU2023-09”) to enhance the transparency and decision-usefulness of income tax disclosures, particularly in the rate reconciliation table and disclosures about income taxes paid. This ASU applies to all entities subject to income taxes. This ASU will be effective for public companies for annual periods beginning after* December 15, 2024 (year ended December 31, 2025for the Company). The adoption of this standard isnot* expected to a material impact on the Company’s consolidated financial statements and disclosures.

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In* November 2024,the FASB issued ASU2024*-03, “Income Statement: Reporting Comprehensive Income— Expense Disaggregation Disclosures,” which requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement, as well as disclosures about selling expenses. This ASU is effective for fiscal years beginning after* December 15, 2026and for interim periods within fiscal years beginning after December 15, 2027.Early adoption is permitted. The amendments maybe applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this guidance to determine the impact it may*have on its consolidated financial statements disclosures.

Management doesnot believe that any other recently issued, butnot yet effective, accounting standard, if currently adopted, would have a material effect on the accompanying consolidated financial statements.

In accordance with ASUNo. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic205*-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern withinone* year after the date that the consolidated financial statements are issued.

The Company has historically financed operations through access to the capital markets by issuing convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. As of the date of this report, the Company does have enough cash fortwelve 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 addition, the Company has purchased inventory for projects in Nigeria, which have been delayed in deployment, and has slowly been selling into other markets to generate additional cash. The accompanying condensed consolidated financial statements donot 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.

Disaggregation of Revenue

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

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

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*EMESA – Europe, Middle East, South America

Deferred Revenue

Deferred revenue includes customer advances and amounts that have been paid by customer for which the contractual maintenance terms havenot 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 than12 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. At* September 30, 2025* and* December 31, 2024*, amounts in deferred revenue were approximately $735,000 and $970,000, respectively. Revenue recognized during thethree months andnine months ended* September 30,2025 from amounts included in deferred revenue as of December 31, 2024was approximately $82,000 and $404,000, respectively. Revenue recognized during thethree* andnine months ended* September 30, 2024from amounts included in deferred revenue at December 31, 2023*was approximately $51,000 and $482,000, respectively.

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 credit losses by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, current economic conditions and other relevant factors, including specific reserves for certain accounts. Accounts receivable are written off when deemed uncollectible.

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

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

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

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Inventory is stated at the lower of cost, determined on afirst in,first out basis, or net realizable value. The Company periodically evaluates inventory items and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow moving goods, and for other impairment of value based upon assumptions of future demand and market conditions. The reserve on inventory is due to slow moving inventory purchased for projects in Nigeria, and slow-moving inventory elsewhere. The Company has been selling these units in small quantities and continues to explore other markets and opportunities to sell the product. Inventory is comprised of the following as at* September 30, 2025* and* December 31, 2024*:

7. 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 7.92% of the issued and outstanding shares of Boumarang, Inc. and the Company hasno* 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 595,000 shares of the Company’s common stock. Fiber Food isnot a principal stockholder of Boumarang, Inc. and hasno corporate governance or control rights.

The purchase agreement between the Company and Fiber Food contemplates collaboration between the parties regarding potential strategic and commercial transactions, including acquiring assets or equity interests in other operating companies, integrating the Company’s identity access management solutions into Fiber Food’s offerings, and introducing the Company to its customers, affiliates and business contacts who are potential users of the Company’s solutions, in each case pursuant to future definitive agreements on terms to be negotiated by the parties. The Company has engaged in discussions with Fiber Food and Boumarang, Inc. regarding the contemplated collaboration, butno definitive agreements have been executed. Under the purchase agreement, the Company had the right to cause Fiber Food to repurchase the Boumarang Shares from the Company in exchange for the return of the shares of Company common stock issued in exchange for the Boumarang Shares if at any time during thenine-month period after the closing of the transaction the Company valued the Boumarang Shares at less than $5,000,000 on its balance sheet. This repurchase right has expired. The purchase agreement also contains a standstill which prohibits the Company, Fiber Food, Boomerang and their respective affiliates and representatives for a period oftwo 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 anythird party from doing any of the forgoing, or acquiring any debt or equity securities of any other party.

The Company accounts for the investment under ASC321, Investments - Equity Securities. The Boumarang Shares constitute an investment in a privately held company for which there isno 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 ASC820, –Fair Value Measurement, which establishes athree-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value intoone ofthree different levels depending on the observability of the inputs employed in the measurement. Thethree levels are defined as follows:

Level1: Quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level2: Inputs other than quoted prices included within Level1 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.

Level3: Inputs for the asset or liability that arenot based on observable market data (unobservable inputs).

The Boumarang Shares are classified as a Level3 asset and have been valued based on a combination of recent sales of Boumarang common stock tothird parties and athird 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 donot have a readily available market value, the fair value of the Boumarang Shares* mayfluctuate from period to period and the fair value of the Boumarang Shares maydiffer significantly from the values that would have been used had a ready market existed for such shares and maydiffer materially from the values that the Company may*ultimately realize. The early-stage pre-revenue status and unproven technology of Boumarang, Inc. raise uncertainties that could impact the recoverability of the investment in the Boumarang Shares.

ASC321-10-35 Equity Securities - Subsequent Measurement requires annual impairment testing for equity securities without readily determinable fair values.

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Litigation

From time to time, the Company* maybe involved in litigation relating to claims arising out of our operations in the normal course of business. As of September 30, 2025*, the Company wasnot a party to any pending lawsuits.

The Company’s leases office space in New Jersey, Minnesota, New Hampshire, Madrid and Hong-Kong with lease termination dates in2027. 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:

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

Note Purchase Agreement dated* June 24, 2024*

On* June 24, 2024,the Company entered into and closed a note purchase agreement with Streeterville Capital, LLC (the "Lender") which provided for the issuance of a $2,360,000 principal amount senior secured promissory note (the“2024* Note”). The2024 Note carries an original issue discount of $350,000 and the Company agreed to pay $10,000 to the lender (the "Lender") to cover its transaction costs, which were deducted from the proceeds of the2024 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 the2024 Note was due18 months following the date of issuance. Interest under the2024 Note accrued at a rate ofnine percent (9%) per annum. All repayments of principal due under the2024 Note were subject to an exit fee ofseven percent (7%) of the principal amount being repaid (the “Exit Fee”). Commencingsix months after the date of issuance of the2024 Note (the “Redemption Start Date”), Lender has the right to redeem up to $270,000 of principal amount under the2024 Note each month which amount plus the Exit Fee will be due and payablethree (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 hadnot reduced the outstanding balance under the2024 Note by at least $270,000, then by thefifth (5th) day of the following month, the Company must either pay to Lender the difference between $270,000 and the amount, if any, redeemed in such month plus the Exit Fee, or the outstanding balance due under the Note will automatically increase byone percent (1%). As of* September 30, 2025,there wereno* redemptions by the Lender.

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The2024 Note was secured by a lien on substantially all of the Company’s assets and properties and the Company’s obligations under the2024 Note were guaranteed by Pistol Star, Inc. (“Pistol”), a wholly owned subsidiary of the Company. The2024 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 the2024 Note.

In thethird quarter of2024, the Company received gross proceeds of approximately $1.9 million in connection with a financing transaction (see Note12 Stockholders' Equity). In accordance with the terms of the2024 Note,40% of the proceeds received, or approximately $762,600, was used to prepay amounts due under the2024 Note.

Between* Januaryand September 2025,the Company entered into a number of Exchange Agreements with the holder of the2024* Note pursuant to which it partitioned from the2024 Note new promissory notes in the aggregate principal amount of*$1,434,000* reducing the outstanding principal amount of the2024 Note to approximately $338,400. All of the partitioned notes were subsequently exchanged for shares of common stock. (see Note17 Subsequent Events).

Note Purchase Agreement dated* September 30, 2025*

On* September 30, 2025,the Company entered into and closed a note purchase agreement with the Lender which provided for the issuance of a $1,130,000 principal amount senior secured promissory note (the“2025* Note”). The2025 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 the2025 Note resulting in a total of $1,000,000 being funded to the Company at closing. The proceeds will be used for general working capital.

The principal amount of the2025 Note is due18 months following the date of issuance. Interest under the2025 Note accrues at a rate ofnine percent (9%) per annum. All repayments of principal due under the2025 Note will be subject to an exit fee ofseven percent (7%) of the principal amount being repaid (the “Exit Fee”). Commencingsix months after the date of issuance of the2025 Note (the “Redemption Start Date”), Lender shall have the right to redeem up to $135,000 of principal amount under the2025 Note each month which amount plus the Exit Fee will be due and payablethree (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 hasnot reduced the outstanding balance under the2025 Note by at least $135,000, then by thefifth (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 byone percent (1%). As of* September 30, 2025,*there have beenno redemptions by the Lender.

The2025 Note is secured by a lien on substantially all of the Company’s assets and properties and the Company’s obligations under the2025 Note are guaranteed by Pistol. The2025 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 the2025 Note.

The Company’s basic EPS is calculated using net income (loss) available to common shareholders and the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes the effect from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options and warrants and the assumed conversion of preferred stock.

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:

Issuances of Common Stock

During thenine-month periods ended* September 30, 2025*, and2024, there havenot been any shares of common stock issued to anyone outside the Company, except as noted in this Note12.

On* June 18, 2021,the stockholders approved the Employee Stock Purchase Plan. Under the terms of this plan,43,334 shares of common stock are reserved for issuance to employees and officers of the Company at a purchase price equal to 85% of the lower of the closing price of the common stock on thefirst* day or the last day of the offering period as reported on the Nasdaq Capital Market. Eligible employees are granted an option to purchase shares under the plan funded by payroll deductions. The Company* maysuspend or terminate the plan at any time, otherwise the plan expires June 17, 2031.On June 30, 2025,1,251 shares were issued to employees which resulted in a $876 non-cash compensation expense for the Company. On June 28, 2024,*1,390 shares were issued to employees which resulted in a $456 non-cash compensation expense for the Company.

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

During thenine-month periods ended* September 30, 2025and2024*, the Company issued 280,500 and 168,963 shares of restricted common stock, respectively, to certain employees and directors. These shares vest in equal annual installments over athree-year period from the date of grant and had a fair value on the date of issuance of $213,645 and $31,200, respectively.

During thenine-month periods ended* September 30, 2025and2024*,25,748 and 1,351 shares of restricted common stock were forfeited, respectively.

Share based compensation for thenine-month periods ended* September 30, 2025and2024*, was $125,989 and $171,67, respectively.

Issuances to Directors

During thenine-month periods ended* September 30, 2025*, and2024, the Company issued 22,136 and 4,287, shares of common stock to its directors in lieu of payment of board and committee fees valued at $20,002 and $9,003, respectively.

Employees’* exercise options*

During thenine-month periods ended* September 30, 2025and2024*, no employee stock options were exercised.

Warrants

On* January 15, 2025,the Company entered into a warrant exercise agreement (the "Warrant Exercise Agreement") with an existing institutional investor (the "Investor") to exercise certain outstanding warrants to purchase an aggregate of 2,061,112 shares of the Company’s common stock at an exercise price of $1.85 per share which were originally issued to the Investor on September 13, 2024 (the "Existing Warrants"). 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 Series A warrants to purchase up to an aggregate of 1,545,834 shares of the Company’s common stock (the “Series A Warrants”) and new unregistered Series B warrants to purchase up to an aggregate of 1,545,834 shares of the Company’s common stock (the “Series B Warrants”, and together with the “Series A Warrants, the “New Warrants”). The New Warrants have substantially the same terms, are immediately exercisable at an exercise price of $2.15 per share, and will expire five years from the date of issuance. The New Warrants each 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 Company realized gross proceeds under the 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 the2024* Note.

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

Partitioned Notes

During thenine-month period ended* September 30, 2025,partitioned notes in the aggregate principal amount of $600,000 were exchanged for 753,084 shares of common stock (See Note10* Note Payable).

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 government loan payable approximates fair value as the interest rate related to the financial instruments approximated market.

During each of thethree-month periods ended* September 30, 2025*, and2024, two customers accounted for 42% andthree customers accounted for 47% of the revenue, respectively.

Two customers accounted for 45% of current accounts receivable at* September 30, 2025*. At* December 31, 2024*, two customers accounted for 36% of current accounts receivable.

United States, Hong Kong and Nigeria

The Company recordedno income tax expense for thethree andnine months ended* September 30, 2025and2024* because the estimated annual effective tax rate waszero. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company’s annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.

As of* September 30, 2025* and* December 31, 2024*, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely thannot that its deferred tax assets willnot be realized.

Spain

Due to the current loss for thenine months ended* September 30, 2025*, the Company didnot record income taxes.

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The Company operates asone operating segment. The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM used consolidated revenues, gross profit and loss before provision for income taxes to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the need to allocate its budget to operating expenses and invest in additional equipment. The segment assets are equal to the assets presented in the condensed consolidated balance sheets.

The significant expenses that are regularly provided to the CODM are disclosed in the consolidated statements of operations as a part of the condensed consolidated net loss. See the condensed consolidated financial statements for all financial information regarding the Company’s operating segment.

See Note4 for the Company’s revenues by geographic region.

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

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 3,091,668 shares of the Company’s common stock, which were originally issued to the Investor on January 15, 2025 (the “Existing Warrants”). Pursuant to the Warrant Exercise Agreement, the exercise price of the Existing Warrants was reduced from $2.15 per share to $1.02 per share. In consideration for the exercise of the Existing Warrants, subject to compliance with the beneficial ownership limitations included in the Existing Warrants, the Investor received new unregistered warrants to purchase up to an aggregate of 6,183,336 shares of the Company’s Common Stock (the “New Warrants”). The New Warrants have substantially the same terms, are immediately exercisable at an exercise price of $1.02 per share and will expire five years from the date of issuance. The Company agreed to file a resale registration statement covering the public resale of the shares of Common Stock issuable upon exercise of the New Warrants with the SEC, and to use commercially reasonable efforts to have such Resale Registration Statement declared effective by the SEC within90* calendar days following the date of the Warrant Exercise Agreement. The New Warrants include a beneficial ownership limitation that prevents the Investor from beneficially owning more than 4.99% of the Company’s outstanding common stock at any time. The gross proceeds to the Company under the Warrant Exercise Agreement were approximately $3.1 million, prior to deducting placement agent fees and estimated offering expenses. The Company intends to use the net proceeds for working capital and general corporate purposes, including repayment of a portion of the Company’s outstanding secured note. Maxim Group LLC acted as the exclusive placement agent to the Company and the Company agreed to pay Maxim an aggregate cash fee equal to 6.0% of the gross proceeds received by the Company under the Warrant Exercise Agreement.

On* October 27, 2025,the Company entered intotwo* Exchange Agreements (the “Exchange Agreements”) with the Lender, to whom the Company previously issued the2024 Note in the original principal amount of $2,360,000. Pursuant to the Exchange Agreements, the Company and Lender agreed to (i) partition from the2024 Notetwo new Promissory Notes (the “Partitioned Notes”) in the original principal amounts of $261,841 and $66,150, respectively, (ii) cause the outstanding balance of the2024 Note to be reduced by $327,991, the aggregate principal amount of the Partitioned Notes, and (iii) exchange the Partitioned Notes for an aggregate of 429,027 shares of the Company’s Common Stock. As a result of the Exchange Agreements, the2024 Note has been paid in full.

In connection with the* October 27, 2025warrant exercise agreement described above, the Company prepaid approximately $455,000 of the amount due under the2025* Note.

On* November 6, 2025,the Company issued 2,500 shares of restricted stock to a new employee with three-year vesting. All the shares were issued at $0.63 the closing price of the Company's common stock on November 6, 2025,*as reported on the Nasdaq Capital Market.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, 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 the restatement of our financial statements including any consequences of non-compliance with the Securities and Exchange Commission (“SEC”) and Nasdaq periodic reporting requirements; 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 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 our Annual Report on Form 10-K for the year ended December 31, 2024 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.