Core Points - BIO-key International, Inc. held its Second Quarter 2025 Earnings Conference Call on August 13, 2025, featuring key executives including Chairman and CEO Michael W. DePasquale and CFO Cecilia C. Welch [1][3]. Group 1 - The conference call was hosted by Bill Jones from Investor Relations, indicating a structured approach to investor communication [2][3]. - The call included forward-looking statements that are subject to risks and uncertainties, highlighting the company's commitment to transparency regarding potential future performance [4]. Group 2 - Michael W. DePasquale initiated the call with brief remarks, setting the stage for a financial review by CFO Ceci Welch [5].

Part I: Financial Information [Financial Statements](index=4&type=section&id=Item%201%E2%80%94%20Financial%20Statements%3A) This section presents the unaudited condensed consolidated financial statements for Q2 2025 and 2024, showing increased revenue, reduced net loss, and improved cash and equity from financing activities Condensed Consolidated Balance Sheets | Financial Metric | June 30, 2025 (Unaudited) ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | **Assets** | | | | Total Current Assets | $4,035,230 | $1,886,958 | | Total Assets | $10,516,551 | $8,615,560 | | **Liabilities & Equity** | | | | Total Current Liabilities | $3,531,910 | $4,553,536 | | Total Liabilities | $3,664,374 | $4,843,529 | | Total Stockholders' Equity | $6,852,177 | $3,772,031 | Condensed Consolidated Statements of Operations | Metric (Q2) | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Total Revenues | $1,696,907 | $1,141,286 | | Gross Profit | $1,232,727 | $879,014 | | Operating Loss | $(1,083,850) | $(1,654,086) | | Net Loss | $(1,167,396) | $(1,666,950) | | Basic and Diluted Loss per Share | $(0.20) | $(1.00) | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 ($) | Six Months Ended June 30, 2024 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,715,324) | $(1,123,533) | | Net cash used in investing activities | $(6,048) | $(1,869) | | Net cash provided in financing activities | $3,493,505 | $1,912,408 | | **Net Increase in Cash** | **$1,837,741** | **$748,951** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide critical context, including a 'Going Concern' warning, disaggregated revenue showing strong EMESA hardware sales, significant customer concentration, and details on financing activities - The company's history of significant losses, negative cash flow from operations, and dependence on obtaining additional financing raises **substantial doubt** about its ability to continue as a going concern[29](index=29&type=chunk)[30](index=30&type=chunk) - In Q2 2025, revenue from the EMESA region (Europe, Middle East, South America) grew significantly to **$969,437** from **$235,987** in Q2 2024, primarily driven by hardware sales[31](index=31&type=chunk) - The company has significant customer concentration, with two customers accounting for **47%** of Q2 2025 revenue and **49%** of current accounts receivable at June 30, 2025[68](index=68&type=chunk) - In January 2025, the company raised approximately **$3.8 million** in gross proceeds through a warrant exercise agreement with an institutional investor[64](index=64&type=chunk) [Management's Discussion and Analysis (MD&A)](index=23&type=section&id=Item%202%E2%80%94Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses Q2 2025 performance, highlighting a 49% revenue increase driven by hardware sales, narrowed operating loss, and reiterates the 'going concern' risk due to ongoing financing needs - The company's strategic outlook focuses on expanding its role in the **Identity Access Management (IAM)** market, particularly within government, financial services, higher education, and healthcare[82](index=82&type=chunk)[83](index=83&type=chunk) - The company requires approximately **$812,000** per month for operations and expects to need additional financing within the next twelve months unless it can generate sufficient positive cash flow[117](index=117&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section details Q2 2025 results, showing a 49% revenue increase driven by hardware sales, and a smaller operating loss due to decreased expenses Revenue (Q2 2025 vs Q2 2024) | Revenue (Q2 2025 vs Q2 2024) | $ Change ($) | % Change | | :--- | :--- | :--- | | Service | $38,427 | 14% | | License | $31,862 | 4% | | Hardware | $485,332 | 581% | | **Total Revenue** | **$555,621** | **49%** | - Selling, general and administrative (SG&A) expenses for Q2 2025 decreased by **13%** to **$1.68M** from **$1.94M** in Q2 2024, due to reductions in administration, sales personnel costs, and professional services fees[95](index=95&type=chunk) Revenue (H1 2025 vs H1 2024) | Revenue (H1 2025 vs H1 2024) | $ Change ($) | % Change | | :--- | :--- | :--- | | Service | $97,904 | 20% | | License | $(819,814) | -30% | | Hardware | $703,487 | 696% | | **Total Revenue** | **$(18,423)** | **-1%** | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved due to warrant exercises, but ongoing operational cash burn and insufficient resources necessitate additional financing for the next twelve months - Net cash provided by financing activities was **$3.5M** for the six months ended June 30, 2025, primarily from **$3.8M** in proceeds from the exercise of warrants[109](index=109&type=chunk) - The company has approximately **$3.1 million** of fully reserved inventory purchased for delayed projects in Nigeria and is exploring other markets to sell the product and generate cash[117](index=117&type=chunk) - The company's long-term viability depends on the successful commercialization of its technologies and its ability to obtain adequate financing, as current resources are insufficient to fund operations for the next twelve months[118](index=118&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203%E2%80%94Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) As a smaller reporting company, BIO-key is not required to provide disclosures regarding market risk - The company is not required to provide information regarding market risk as it qualifies as a smaller reporting company[119](index=119&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204%E2%80%94Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[120](index=120&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[121](index=121&type=chunk) Part II: Other Information [Legal Proceedings](index=35&type=section&id=Item%201%E2%80%94Legal%20Proceedings.) As of the report date, the company is not a party to any pending lawsuits - The company is not currently a party to any pending lawsuits[123](index=123&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202%E2%80%94Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) During Q2 2025, the company issued common stock in two transactions to an accredited investor, exchanging shares for $400,000 in promissory notes - On May 30, 2025, the company issued 259,403 shares of common stock in exchange for a **$200,000** promissory note[125](index=125&type=chunk) - On June 9, 2025, the company issued 239,034 shares of common stock in exchange for a **$200,000** promissory note[126](index=126&type=chunk) [Other Items (1A, 3, 4, 5, 6)](index=35&type=section&id=Other%20Items) This section confirms that as a smaller reporting company, Risk Factors are not required, and reports no defaults on senior securities or changes in Rule 10b5-1 trading plans - As a smaller reporting company, BIO-key is not required to provide Risk Factors in its 10-Q[124](index=124&type=chunk) - The company reports no defaults upon senior securities[127](index=127&type=chunk)

Financial Data and Key Metrics Changes - Company reported a solid Q2 performance with revenue rising 49% year-over-year to $1.7 million from $1.1 million in Q2 2024, and a sequential increase of 6% [4][12] - Gross profit increased by $354,000 or 40% to $1.2 million, although gross margin declined to 73% from 77% due to a higher percentage of lower-margin hardware sales [13] - Net loss improved to $1.2 million or $0.20 per share from a net loss of $1.7 million or $1 per share in Q2 2024 [13][14] Business Line Data and Key Metrics Changes - Hardware revenue increased significantly by $458,000, primarily due to additional deployments of biometric scanners for a long-time customer [12] - License fee revenue grew by 4%, reflecting an increase in subscription contracts, while service revenue rose by 11% due to customer service for a large upgrade [12] Market Data and Key Metrics Changes - The company is focusing on expanding its presence in the defense intelligence market, particularly in Europe, where military and defense investments are expected to increase significantly [6][8] - The EU plans to mobilize over €800 billion in defense investment over the next four years, with NATO members agreeing to increase defense spending to at least 5% of GDP by 2035 [6][7] Company Strategy and Development Direction - The company announced the formation of the BIO key cyber defense initiatives to expand market reach and engage with leading defense contractors [6] - There is a strategic refocus on BIO key branded solutions, moving away from previous licensed solutions, which is expected to enhance margins and growth opportunities [9] - The company is revitalizing its North American sales efforts and returning to an in-office model for sales and marketing teams [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for growth in the defense and intelligence markets, citing robust contract activity and a strong pipeline [21][30] - The company believes that the current stock price does not reflect its performance and future opportunities, with expectations for revenue generation from contracts already closed [26][29] Other Important Information - The company is actively seeking opportunities to reduce costs to lower its breakeven level and support a path to positive cash flow and profitability [11] - Current assets as of June 30, 2025, were reported at $4 million, including $2.3 million in cash, an increase from $1.9 million at year-end 2024 [15] Q&A Session Summary Question: Should we expect the recent trend towards reduced operating expenses to reverse? - Management indicated that the recent increase in expenses was a temporary blip due to restructuring and event timing, and they expect to maintain the expense run rate moving forward [17][19] Question: Can you provide additional color on meaningful contract activity in the first half of next year? - Management confirmed that they have closed contracts that will generate revenue in Q3 and emphasized the robust market for their specific solutions [20][21] Question: Do you expect these contracts to ramp up significantly? - Management affirmed that they expect iterative growth from these contracts, with opportunities increasing in size and quantity [30][31] Question: How much of the reserve inventory did you sell? - Management stated that they are selling inventory every quarter and aim to move the bulk of it by the end of the year [36] Question: Do you think you have enough cash to get through the end of the year? - Management confirmed that they have sufficient cash and equivalents to sustain operations through the end of the year [44]

[Business & Strategic Highlights](index=1&type=section&id=Business%20%26%20Strategic%20Highlights) BIO-key's Q2 2025 revenue grew 49% YoY, driven by broad segment growth and a new CyberDefense Initiative targeting defense markets - **Q2 revenue** improved both sequentially and year-over-year, with a strategic focus on BIO-key branded solutions in Europe, the Middle East, Africa (EMEA), and domestic markets[2](index=2&type=chunk) - Launched the **"BIO-key CyberDefense Initiative"** to target the global defense market, leveraging a significant increase in European defense spending commitments, and assembling a specialized team to engage with prime defense contractors[3](index=3&type=chunk)[4](index=4&type=chunk) - A follow-on order exceeding **$600K** from a foreign Defense Ministry[5](index=5&type=chunk) - First major IAM deployment with a national bank in Mozambique[5](index=5&type=chunk) - New partnerships to expand into the Middle East, Spain, and Portugal[5](index=5&type=chunk) - Completed initial phase of biometric deployment for a new international defense agency[5](index=5&type=chunk) - The company is advancing a significant platform modernization for **PortalGuard IDaaS**, with a targeted release in **Q4 2025**, marking the first major upgrade since 2018[7](index=7&type=chunk) [Financial Performance Analysis](index=2&type=section&id=Financial%20Performance%20Analysis) BIO-key's Q2 2025 revenue grew 49% to **$1.7 million**, with improved net loss and strengthened balance sheet [Q2 2025 Financial Results](index=2&type=section&id=Q2%202025%20Financial%20Results) | Metric | Q2 2025 ($) | Q2 2024 ($) | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **1,696,907** | **1,141,286** | **+49%** | | Gross Profit | 1,232,727 | 879,014 | +40% | | Gross Margin | 73% | 77% | -4 p.p. | | Total Operating Expenses | 2,316,577 | 2,533,100 | -8.5% | | Net Loss | (1,167,396) | (1,666,950) | Improved | | EPS (basic & diluted) | (0.20) | (1.00) | Improved | | Revenue Stream | Q2 2025 ($) | Q2 2024 ($) | Change | | :--- | :--- | :--- | :--- | | Software License Fees | 806,087 | 774,225 | +4% | | Services | 321,996 | 283,569 | +14% | | Hardware | 568,824 | 83,492 | +581% | - The decline in gross margin to **73%** from **77%** YoY was primarily due to the significant increase in lower-margin hardware revenues[11](index=11&type=chunk) - Operating expenses decreased by **8.5%** YoY, driven by a **13.5%** reduction in SG&A expenses, while R&D expenses increased by **7.6%** for platform modernization[12](index=12&type=chunk) [Balance Sheet Highlights](index=3&type=section&id=Balance%20Sheet%20Highlights) - As of June 30, 2025, cash and cash equivalents stood at **$2.3 million**, a substantial increase from **$0.4 million** at December 31, 2024[14](index=14&type=chunk) - The company reduced its note payable by **$0.4 million** during Q2'25, leaving a remaining balance of **$0.3 million** on the original **$2.3 million** note[15](index=15&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents BIO-key's unaudited condensed consolidated financial statements, including Operations, Balance Sheets, and Cash Flows [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025 ($)** | **2024 ($)** | **2025 ($)** | **2024 ($)** | | **Total revenues** | **1,696,907** | **1,141,286** | **3,304,066** | **3,322,489** | | **Gross profit** | **1,232,727** | **879,014** | **2,560,388** | **2,760,574** | | **Operating loss** | **(1,083,850)** | **(1,654,086)** | **(1,724,488)** | **(2,163,020)** | | **Net loss** | **(1,167,396)** | **(1,666,950)** | **(1,903,941)** | **(2,177,236)** | | **Basic and diluted loss per common share** | **(0.20)** | **(1.00)** | **(0.36)** | **(1.33)** | | Weighted average common shares outstanding (shares) | 5,821,133 | 1,663,042 | 5,267,109 | 1,639,183 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | | June 30, 2025 ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | 2,275,344 | 437,604 | | Total current assets | 4,035,230 | 1,886,958 | | **TOTAL ASSETS** | **10,516,551** | **8,615,560** | | **LIABILITIES & EQUITY** | | | | Total current liabilities | 3,531,910 | 4,553,536 | | **TOTAL LIABILITIES** | **3,664,374** | **4,843,529** | | **TOTAL STOCKHOLDERS' EQUITY** | **6,852,177** | **3,772,031** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (For the Six Months Ended June 30,) | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (1,715,324) | (1,123,533) | | Net cash used in investing activities | (6,048) | (1,869) | | Net cash provided in financing activities | 3,493,505 | 1,912,408 | | **Net increase in cash and cash equivalents** | **1,837,741** | **748,951** | | **Cash and cash equivalents, end of period** | **2,275,345** | **1,260,351** | [Other Information](index=3&type=section&id=Other%20Information) This section provides supplementary details, including a corporate overview and the Safe Harbor Statement on forward-looking statements [About BIO-key International, Inc.](index=3&type=section&id=About%20BIO-key%20International%2C%20Inc.) - BIO-key specializes in **biometric-centric**, **multi-factor identity and access management (IAM)** software, offering customers flexible authentication factors including phoneless, tokenless, and passwordless biometric options through its **PortalGuard IAM** solution[17](index=17&type=chunk) [Safe Harbor Statement](index=4&type=section&id=Safe%20Harbor%20Statement) - The report contains **forward-looking statements** that are not guarantees of future performance, subject to risks and uncertainties including a history of losses, ability to raise capital, market acceptance of products, competition, and other factors detailed in SEC filings[18](index=18&type=chunk)

Company Overview - BIO-key International, Inc. is an innovative provider of workforce and customer Identity and Access Management solutions featuring passwordless, phoneless, and tokenless Identity-Bound Biometric authentication [1] - The company secures access for over forty million users through its biometric-centric, multi-factor identity and access management (IAM) software [2] Upcoming Events - BIO-key will host its second quarter 2025 investor call on August 13th at 10 a.m. ET, with results released before the stock market opens [1] - The call will be led by Mike DePasquale, Chairman & CEO, and Cecilia Welch, CFO, and will include a Q&A session [1] Call Details - The investor call can be accessed via dial-in numbers: 1-877-418-5460 for U.S. and 1-412-717-9594 for international participants [2] - A live webcast and replay will be available for three months [2] - Audio replay can be accessed at 1-877-344-7529 for U.S. and 1-412-317-0088 for international, using code 8281392 [2] Engagement Channels - BIO-key maintains a presence on various social media platforms including Facebook, LinkedIn, and X [3] - Investor contacts are available through Catalyst IR for further inquiries [3]

Core Insights - BIO-key International, Inc. has joined ISMS Forum, Spain's leading cybersecurity association, to enhance its commitment to cybersecurity resilience and robust security strategies in Spain [1][2] - The collaboration aims to drive innovation in identity and access management, Zero Trust security, and regulatory compliance [2] Company Overview - BIO-key is a leader in Identity and Access Management (IAM) and biometric authentication solutions, securing access for over 40 million users [4] - The company offers a range of authentication options, including phoneless, tokenless, and passwordless biometric solutions, through its PortalGuard IAM software [4] Industry Context - ISMS Forum promotes best practices, innovation, and knowledge-sharing to strengthen cybersecurity resilience across various industries in Spain [3] - The organization plays a key role in shaping the cybersecurity landscape through working groups, research initiatives, and conferences [3]

Core Insights - BIO-key International, Inc. has received over $600K in new orders from a prominent defense ministry for its biometric user authentication solutions, which include both hardware and software to be delivered in the current quarter [1][2]. Group 1: Company Overview - BIO-key specializes in identity and access management (IAM) solutions that utilize Identity-Bound Biometrics (IBB) for secure authentication without the need for tokens or passwords [1][5]. - The company’s biometric authentication platform is noted for being more reliable, cost-effective, and secure compared to traditional hardware security keys [3]. Group 2: Recent Developments - The defense ministry has integrated BIO-key's biometric solution into programs that provide authentication access to digital services for over 47,000 users, utilizing more than 40,000 fingerprint scanners [2]. - BIO-key anticipates further awards as the defense ministry expands its use of the biometric solutions [2]. Group 3: Strategic Importance - The deployment of BIO-key's technology is seen as a significant endorsement of its innovation and capability, as the defense ministry is recognized as a leader in cybersecurity technologies [4]. - The company aims to grow its presence in high-stakes applications within the defense sector, building on its existing customer base across various industries including government, manufacturing, finance, and retail [4].

Core Insights - BIO-key International, Inc. has formed a strategic partnership with Runlevel to enhance cybersecurity solutions in Portuguese-speaking African countries and Timor-Leste [1][2] - The partnership aims to address increasing cybersecurity challenges faced by businesses and government institutions in these regions [2][3] Company Overview - BIO-key is a leader in Identity and Access Management (IAM) solutions, focusing on Identity-Bound Biometrics (IBB) [1][5] - The company secures access for over 40 million users with its biometric-centric, multi-factor IAM software [5] Partnership Details - Runlevel joins BIO-key's Channel Alliance Partner program as a Value-Added Reseller, providing pre-sales consulting, deployment support, and technical training tailored to local regulatory requirements [2][3] - The first major deployment involves a National Bank in Mozambique, utilizing a comprehensive suite of BIO-key's biometric-based IAM solutions [3] Market Opportunity - The partnership is positioned to expand the adoption of BIO-key solutions across the region, particularly in the financial sector, which is experiencing a growing need for robust IAM solutions [3][4] - Runlevel's expertise in the local cybersecurity landscape and relationships with key enterprises and public institutions enhance BIO-key's market reach [3]

Summary of BIO-key International (BKYI) Conference Call - May 22, 2025 Company Overview - **Company Name**: BIO-key International - **Ticker Symbol**: BKYI - **Industry**: Identity and Access Management Solutions - **Market Presence**: Public for over 25 years, trading on NASDAQ - **Current Market Capitalization**: Approximately $5 million with 6.3 million shares outstanding [8] Core Business Insights - **Product Offering**: Provides phone-less, token-less solutions for authentication and access management [7] - **Revenue Growth**: LTM revenue slightly over $6 million, with an ARR of approximately $6 million, indicating strong recurring revenue growth potential [8][10] - **Gross Margins**: Blended gross margins exceed 80%, highlighting a high-margin business model [10] Market Position and Valuation - **Stock Price Range**: Traded between $0.50 and $3.60 over the past year [8] - **Valuation Comparison**: Currently trading at a 70% discount to average tech sector multiples, which range from 2.2 times sales to over 10 times [9] Industry Trends and Demand - **Cybersecurity Demand**: Increasing demand for cybersecurity solutions, particularly multi-factor authentication (MFA), driven by mandates from major tech companies like Amazon, Microsoft, and Google [12] - **Use Cases**: Solutions applicable in various sectors including banking, healthcare, education, and government, with a focus on reducing cyber risk and improving usability [13][20] Strategic Partnerships and Growth - **New Partnerships**: Recent partnership with Cloud Distribution Inc. to expand presence in the Middle East, expected to generate significant revenue [27][28] - **Customer Base Expansion**: Added significant clients such as the National Bank of Egypt, indicating growth in international markets [21] Competitive Landscape - **Competitors**: Competes with companies like Okta, SailPoint, and ForgeRock, while also partnering with them for biometric authentication solutions [33] - **Market Strategy**: Focus on capturing market share through unique biometric offerings that enhance security and usability [33] Future Outlook - **Growth Strategy**: Plans to continue launching new products, expanding channel alliances, and enhancing solutions, particularly in AI and drone-based markets [25] - **Defense Sector Opportunities**: Positioned to benefit from increased defense budgets in Europe, particularly in Germany, which plans to invest $1 trillion over the next decade [31][32] - **Operational Stability**: Reduced operating expenses and stable support structure, with no plans for additional capital raising, focusing on scaling operations [29][30] Conclusion - **Investment Opportunity**: BIO-key International presents a compelling investment opportunity due to its unique product offerings, strong market position, and growth potential in a rapidly evolving cybersecurity landscape [7][10]

Company Participation - BIO-key International, Inc. will participate in the Aegis Capital Corp. 2025 Virtual Conference on May 22, 2025, and the Maxim Virtual Tech Conference on June 4, 2025 [1][2] Conference Details - The Aegis Capital Virtual Conference presentation is scheduled for May 22, 2025, from 11:30 to 11:55 a.m. ET [2] - The Maxim Virtual Tech Conference will feature a fireside chat with Maxim Analyst Jack Vander Aarde on June 4, 2025, at 11:00 a.m. ET [2] Company Overview - BIO-key is a provider of Identity and Access Management (IAM) solutions, focusing on passwordless, phoneless, and tokenless biometric authentication, securing access for over 40 million users [4] - The company's PortalGuard IAM solution offers a cost-effective and secure way to access computers, information, applications, and high-value transactions [4]