BIO KEY INTERNATIONAL INC

Previous wording

THREE MONTHS ENDED September 30, 2025 AS COMPARED TOSeptember 30, 2024

Current wording

THREE MONTHS ENDED March 31, 2026 AS COMPARED TOMarch 31, 2025

Previous wording

For the three months ended September 30, 2025, and 2024, service revenues included approximately $263,000 and $214,000, respectively, of recurring maintenance and support revenue, and approximately $5,000 and $53,000 respectively, of non-recurring custom services revenue. Recurring service revenue increased $49,000 or 23% in 2025 which was due to the timing of renewals of service agreements. Non-recurring custom services decreased 90% due to an upgrade for one large customer in 2024. Overall, service revenues remained flat at $268,113 as compared to $267,371 in the corresponding period in 2024.

Current wording

For the three months ended March 31, 2026, and 2025, service revenues included approximately $229,000 and $265,000, respectively, of recurring maintenance and support revenue, and approximately $19,000 and $8,000 respectively, of non-recurring custom services revenue. Recurring service revenue decreased $36,000 or 14% in 2026 which was due to the timing of renewals of service agreements. Non-recurring custom services increased $11,000 due to a small increase in customization. Overall, service revenues decreased to $248,384 as compared to $272,598 in the corresponding period in 2025.

Previous wording

For the three months ended September 30, 2025, license revenue decreased $523,060 or 36% to $917,951 from $1,441,011 in the corresponding period in 2024, as several long-term customers expanded their license deployments in the corresponding period in 2024.

Current wording

For the three months ended March 31, 2026, license revenue increased $267,135 or 24% to $1,365,893 from $1,098,758 in the corresponding period in 2025 as several long-term customers expanded their license deployments in 2026.

Previous wording

For the three months ended September 30, 2025, hardware sales decreased 17% to $363,642 from $436,422 in the corresponding period in 2024. The decrease was one new customer large deploy, several new customer deploys of fully reserved inventory in the 2025 period, and to one long-term customer expanding its purchase of biometric cybersecurity solutions in the 2024 period.

Current wording

For the three months ended March 31, 2026, hardware sales increased 125% to $531,256 from $235,803 in the corresponding period in 2025. The increase was due to a large deployment from one long-term customer, several customer deploys of fully reserved inventory in the 2026 period, and several long-term customers expanding their deployments of biometric cybersecurity solutions.

Previous wording

For the three months ended September 30, 2025, cost of service decreased $30,021 or 27% to $80,702 from $110,723 in the three months ended September 30, 2024, due to an upgrade for one large customer for the 2024 period. For the three months ended September 30, 2025, license fees decreased to $74,077 from $146,732 in the three months ended September 30, 2024, due to the absence of license fees for third-party software included in our previous Swivel Secure product offerings. For the three months ended September 30, 2025, hardware costs decreased to net cost of $203,209 (after giving effect to the $231,625 reversal of the reserve for inventory) from $207,655 in the three months ended September 30, 2024, for a net decrease of 2%

Current wording

For the three months ended March 31, 2026, cost of service decreased $19,646 or 20% to $78,498 from $98,114 in the three months ended March 31, 2025. For the three months ended March 31, 2026, license fees remained relatively flat increasing less than one percent to $73,234 from $72,885 in the three months ended March 31, 2025, For the three months ended March 31, 2026, hardware costs increased to net cost of $224,568 (after giving effect to the $98,970 reversal of the reserve for inventory) from $108,469 in the three months ended March 31, 2025, for a net increase of 100%, based on the increase in hardware revenue.

Previous wording

Selling, general and administrative expenses for the three months ended September 30, 2025, decreased 13% from $1,607,925 in the corresponding period in 2024 to $1,400,288 in the current quarter. The decreases included reductions in administration and professional services fees, and non-recurring write-off of administration fees.

Current wording

Selling, general and administrative expenses for the three months ended March 31, 2026, decreased 5% from $1,372,524 in the corresponding period in 2025 to $1,310,066 in the current quarter. The decreases included reductions in administration and professional services fees.

Previous wording

For the three months ended September 30, 2025, research, development, and engineering costs increased 5% to $683,620 compared to $652,174 in the corresponding period in 2024. The increase consisted primarily of professional services and personnel costs, offset by a decrease in rent costs.

Current wording

For the three months ended March 31, 2026, research, development, and engineering costs increased 4% to $616,880 compared to $595,775 in the corresponding period in 2025. The increase consisted primarily of professional services and personnel costs.

Previous wording

Other income (expense) for the three months ended September 30, 2025 consisted of interest income of $515, interest expense of $13,174 on the note payable and the government loan through the BBVA bank, and a loan fee amortization amount of $60,000. Other income (expense) for the three months ended September 30, 2024 consisted of interest income of $2 and interest expense of $98,556 comprised of approximately $4,200 on the government loan through the BBVA bank and the balance on the 2024 Note, and a loan fee amortization amount of $60,000.

Current wording

Other income (expense) for the three months ended March 31, 2026 consisted of interest income of $675, interest expense of $27,166 on the note payable and the government loan through the BBVA bank, and a loan fee amortization amount of $20,833. Other income (expense) for the three months ended March 31, 2025 consisted of interest income of $3 and interest expense of $35,910 comprised of the note payable and the government loan through the BBVA bank, and a loan fee amortization amount of $60,000.

Previous wording

Net cash used in operations during the nine months ended September 30, 2025 was $2,838,088. Items of note included:

Current wording

Net cash used in operations during the three months ended March 31, 2026 was $358,001. Items of note included:

Previous wording

Net cash provided by financing activities during the nine months ended September 30, 2025 was $4,456,013 which included $3,813,057 of proceeds from the exercise of warrants, and $876 from the purchase of shares in the Employee Stock Purchase Plan, which was offset by repayment of $109,137 of the government loan through the BBVA bank and $248,783 for offering costs.

Current wording

Net cash used by financing activities during the three months ended March 31, 2026 was $38,179 of the government loan through the BBVA bank.

Previous wording

Net cash used in investing activities during the nine months ended September 30, 2025 consisted of capital expenditures of $7,373 for computers.

Current wording

There was no cash used in investing activities during the three months ended March 31, 2026 .

Previous wording

The following sets forth our investment sources of capital during the previous two years:

Current wording

The following sets forth our sources of liquidity during the previous two years:

Previous wording

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 2024 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 of, 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 10 to Our Condensed Consolidated Financial Statements included in Part I Item 1 of this report.

Current wording

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 10 to Our Condensed Consolidated Financial Statements included in Part I Item 1 of this report.

Previous wording

On January 15, 2025, we entered into a warrant exercise agreement with an existing investor (the “Investor”) to exercise certain outstanding warrants to purchase an aggregate of 2,061,112 shares of common stock, at an exercise price of $1.85 per share which were originally issued to the Investor on September 12, 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 warrants to purchase up to an aggregate of 3,091,668 shares of Common Stock ("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 gross proceeds to the Company were approximately $3.8 million, prior to deducting placement agent fees and estimated offering expenses.

Current wording

On January 15, 2025, we entered into a warrant exercise agreement with an existing 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 12, 2024 (the "Existing Warrants"). In consideration for the exercise of the Existing Warrants, the investor received new warrants to purchase up to an aggregate of 309,167 shares of Common Stock ("New Warrants"). The New Warrants have substantially the same terms, are immediately exercisable at an exercise price of $21.50 per share and will expire five years from the date of issuance. The gross proceeds to the Company were approximately $3.8 million, prior to deducting placement agent fees and estimated offering expenses.

Previous wording

On September 12, 2024, we entered into a warrant exercise agreement with the Investor to exercise certain outstanding warrants to purchase an aggregate of 1,030,556 shares of common stock. The warrants were originally issued to the Investor on October 31, 2023 and had an original exercise price of $3.15 per share. In consideration for the immediate exercise of the warrants, we reduced the exercise price of the warrants to $1.85 per share and issued to the Investor unregistered Series A Warrants to purchase an aggregate of 1,030,556 shares of common stock and unregistered Series B Warrants to purchase an aggregate of 1,030,556 shares of common stock, each with an exercise price of $1.85 per share. The Series A and Series B warrants share substantially the same terms, are immediately exercisable and will expire five years from the date of issuance. The forgoing transaction resulted in gross proceeds of approximately $1.9 million prior to deducting placement agent fees and estimated offering expenses.

Current wording

On September 12, 2024, we entered into a warrant exercise agreement with an existing 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 the warrants, we reduced the exercise price of the warrants to $18.50 per share and issued to the Investor unregistered Series A Warrants to purchase an aggregate of 103,056 shares of common stock and unregistered Series B Warrants to purchase an aggregate of 103,056 shares of common stock, each with an exercise price of $18.50 per share and issued 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.

Previous wording

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 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 of, the lender shall have the right to redeem up to $270,000 of principal amount each month. In connection with the September 12, 2024 warrant exercise agreement described above, we prepaid approximately $762,600 of the amount due under the 2024 Note. As of the date of this report, the loan has been paid in full. For a more complete description of the 2024 Note, please see Note 10 to Our Condensed Consolidated Financial Statements included in Part I Item 1 of this report.

Current wording

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, accrued interest at a rate of nine percent (9%) per annum, and commencing six months after the date of issuance of, the lender had the right to redeem up to $270,000 of principal amount each month. In connection with the September 12, 2024 warrant exercise agreement described above, we prepaid approximately $762,600 of the amount due under the 2024 Note. As of the date of this report, the loan has been paid in full. For a more complete description of the 2024 Note, please see Note 10 to Our Condensed Consolidated Financial Statements included in Part I Item 1 of this report.

Previous wording

At September 30, 2025, our total cash and cash equivalents were $2,039,853, as compared to $437,604 at December 31, 2024. At September 30, 2025, we had a working capital of approximately $782,000. On October 27, 2025, we enhanced our liquidity by closing a warrant exchange agreement resulting in net proceeds of approximately $2,500,000, after deduction of placement fees and repayment of certain indebtedness.

Current wording

At March 31, 2026, our total cash and cash equivalents were $2,247,984, as compared to $2,694,663 at December 31, 2025. At March 31, 2026, we had a working capital of approximately $1,296,000.

Previous wording

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, warrants, and through factoring receivables. We currently require approximately $830,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. We also have approximately $2.8 million of inventory (currently reserved) initially purchased for projects in Nigeria. We continue to explore other markets and opportunities to sell the product to generate additional cash. If we are unable to generate sufficient revenue to fund current operations and execute our business plan, we will need to obtain additional third-party financing. Unless we generate sufficient positive cash flow from operations or liquidation of existing inventory, we expect that we will need to obtain additional financing during the next twelve months to support operations.

Current wording

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, warrants, 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. We also have approximately $2.8 million of inventory (currently reserved) initially purchased for projects in Nigeria. We continue to explore other markets and opportunities to sell the product 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 over the next twelve months.