BKYI

Good morning, everyone. Thank you for standing by, and welcome to BIO-key International second quarter 2026 conference call. During management's prepared remarks, all participants will be in listen-only mode. Afterwards, listeners will be invited to participate in a question and answer session. As a reminder, this conference is being recorded today, Friday, August 14th, 2026. I will now turn the call over to Bill Jones of Investor Relations. Please go ahead.

Thank you, Chloe. Hosting today are BIO-key's Chairman and CEO, Mike DePasquale, and its CFO, Ceci Welch. As a reminder, today's call and webcast, as well as answers to investor questions, include forward-looking statements. These are subject to risks and uncertainties that may cause actual results to differ materially from current expectations. Words such as "anticipate," "believe," "expect," "plan," or "project," and similar words, identify and express forward-looking statements. These statements are made based on beliefs, assumptions and information currently available to management pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act. For a more complete description of these risks and uncertainties that affect future performance, please see risk factors in the company's annual report on Form 10-K and the current Form 10-Q filed with the SEC.

Listeners are cautioned not to place undue reliance on forward-looking statements made as of today, and the company makes no obligation to revise or disclose revisions to forward-looking statements to reflect circumstances or events occurring after this call. Now I'll turn the call over to Mike to begin. Mike?

Thanks, Bill, and thank you all for joining us this morning. After my remarks, Ceci will review the financials, and then we will take investor questions. Let me start with the headline. Our second quarter bottom line improved 51% on 13% revenue growth. For the first half of the year, our net loss improved almost 60% on 23% growth in revenues. To be clear, these results didn't meet our proposed expectations, not because of any softness in demand, but due to a delayed shipment for a hardware order that we had anticipated in Q2. The order was delayed, and we expect to ship it in the second half of the year. Considering that shift, combined with the opportunities already in our pipeline, we expect continued growth and are targeting profitability for the second half of 2026. Let me spend some time talking about what's driving our outlook.

It's really about the broader momentum we're building, particularly across Europe, the Middle East, and Africa, or EMEA, which is really starting to bear fruit. We're closing deals, adding productive channel partners, and developing new project discussions at an accelerated pace, all of which fundamentally underlie our business momentum. Our revenue gains are also supported by strong secular backdrops. According to Future Market Insights, the global market for authentication solutions is projected to grow rapidly over the next 10 years, from roughly $26 billion this year to over $114 billion by 2036. This represents a 16% compounded annual growth rate as organizations of all kinds and all sizes take action to defend against increasingly sophisticated cyber threats.

In the area of passwordless authentication, where BIO-key delivers industry-leading solutions, a recent FIDO Alliance report found that 68% of organizations are actively deploying or piloting Passkeys for employee sign-in. In addition to our biometric and Passkey:YOU passwordless solutions, our flexible authentication platform, PortalGuard, supports 16 different authentication factors and doesn't depend on any single device. This provides us with a unique ability to support complex authentication environments because when it comes to enterprise and government authentication needs, one size simply doesn't fit all. To put that in context, let me walk through several recent wins and partnerships, most of which were announced just in the past few weeks. In the Middle East, we partnered with Maktabi Tech to bring PortalGuard, including passwordless authentication and Identity-Bound Biometrics, to educational institutions in Saudi Arabia, supporting their Vision 2030 digital transformation agenda, as well as to Jordan and the UAE.

Separately, the Central Bank of Jordan is working with us on a national initiative to modernize authentication across the country's financial sector using our PortalGuard and WEB-key technologies to move away from passwords and tokens entirely. We believe growing examples of national scale mandates, including sovereign ID, represent the future of authentication in the region, a future where we intend to play a substantial role. Turning to Europe, a national security agency in Portugal selected BIO-key and our in-country partner, Visualforma, to deploy PortalGuard and WEB-key with our FBI-certified EcoID III fingerprint scanners. This follows our earlier nationwide public sector rollout and a digital identity contract we secured with Visualforma for deployment in a major Portuguese tourist city. It's an example of how one successful public sector deployment can help foster additional opportunities as trust and reference relationships continue to build over time.

In the U.S., Alabama's AOD Federal Credit Union, which serves more than 37,000 members, deployed our phishing-resistant biometric-based authentication solution through our partner, BlueAlly, citing our platform's flexibility versus alternatives that they evaluated, as well as reduced help desk burden from eliminating frequent password resets. As phishing and MFA fatigue attacks escalate against financial institutions, our Identity-Bound Biometrics is gaining traction as smart and powerful protection with a compelling cost of ownership. I'll also note we continue to see attractive second-half opportunities building in our EMEA pipeline, as our momentum in the region is broad-based, spanning government, defense, financial services, and now education. We believe this reflects rising urgency among these customers, driven both by increasing cybersecurity incidents and growing geopolitical tensions, and supported by generally more favorable regulatory frameworks that let us move from first conversation to signed contracts much more quickly.

In the second quarter, we completed a 1-for-10 reverse stock split to support our continued Nasdaq listing. In July, we regained compliance with the Nasdaq listing rules and resumed trading on the NASDAQ Capital Market, which provides a visible and respected platform for our common stock. Earlier this week, we enhanced our financial liquidity and balance sheet through a warrant transaction that raised gross proceeds of $2.5 million. This new capital will continue to support our operations, more importantly, our growth initiatives and perceived financial strength with prospective customers, while also bolstering our compliance with current and proposed listing requirements. Most importantly, we are focused on executing against the significant opportunities in front of us. Our go-to-market model continues to scale efficiently through partners. Roughly half of our new U.S. business and virtually all of our international business is developed through our channel network.

On the domestic public sector side, we are building out our working relationship with our new partner, DLT Solutions, a division of TD SYNNEX. This relationship provides a streamlined procurement path into DLT's very large base of public sector customers, most of whom must work with pre-approved vendors to meet Zero Trust and MFA mandates. On the product side, our major PortalGuard 7.0 platform upgrade is now being demonstrated to prospects and has already begun to roll out more broadly across our existing customer base. I will now touch on an area of exciting potential, which is the role biometric authentication can play in securing the AI ecosystem, as we believe that human oversight of agentic operations really is a killer app opportunity for biometrics.

Several recent high-profile AI control failures have helped to highlight the need and the potential for biometrics to play a critical role in providing non-repudiable authentication and approval for material AI agent actions. This is not just our internal view. In January, the first government's framework built specifically for Agentic AI was released at the World Economic Forum's annual meeting with a central pillar that humans must remain meaningfully accountable for decisions and actions taken by autonomous systems. We see biometrics as the ideal method for enabling such human control. Separately, the Cloud Security Alliance have described a governance vacuum around non-human identities as service accounts, bots, and AI agents now outnumber human users inside many enterprises by more than 100 to one. Most organizations have no reliable way to tie an agent's actions back to an accountable person.

Chief Information Security Officers rank identity assurance for an AI world as a top security priority in 2026 and 2027. We think that is exactly the gap that biometric Identity-Bound Biometrics authentication is built to close, anchoring high-stakes approvals to a real person rather than a device or a credential that can be shared, stolen, or cloned. We are actively working to develop strategies around our existing solutions such as Passkey:YOU and working to identify and develop strategic partners to build out AI governance connection points around this opportunity. Before I turn the call over to Ceci, I want to reiterate our excitement about the business progress so far this year and the strength of our outlook for the second half and moving forward.

It's a genuinely exciting time for BIO-key, as the work we put into this business over many years is increasingly being recognized and, more importantly, validated by a growing base of private and public sector customers around the world. With that, I'll turn the call over to Ceci for her financial review.

Thank you, Mike. We released our results after yesterday's close via press release and also filed our Form 10-Q. Let me walk you through some of the important highlights. Total revenue for Q2 2026 increased 13% to $1.92 million, compared to $1.7 million in Q2 2025. That growth was driven by a 53% increase in license fee revenue to $1.2 million from $800,000, reflected several new customer license agreements signed during the quarter. Hardware revenue decreased 19% to $460,000 from $569,000, principally due to the timing of customer deployments, including the absence of a large order Mike mentioned that shifted from Q2 into our second half, compared with a large deployment for a long-term customer in prior year period. Service, maintenance, and other revenue decreased 28% to $231,000 from $322,000 due to lower non-recurring service revenues tied to product customization and the timing of recurring revenue service agreements renewals.

The first half of the year, total revenue grew 23%, also driven primarily by the license fee growth. Gross profit for the quarter increased 36% to $1.7 million from $1.2 million in Q2 2025, and gross margin improved to 87%, up from 73% a year ago. That improvement reflects growth as well as larger concentration of high-margin license fee revenue and increased benefit from sales of hardware inventory that had previously been fully reserved. Much of the reserved inventory relates to units originally purchased for projects that were delayed indefinitely during the pandemic. We have been selling that inventory into other markets, and since it's been fully reserved, those sales carry 100% gross profit contribution.

Total operating expenses decreased 5% to $2.2 million, principally reflecting lower selling, general, and administrative expense from our ongoing cost containment efforts, partially offset by higher expenses related to the reverse stock split and audit and tax-related costs. In all, our Q2 2026 net loss improved to $577,000, or $0.56 per share, compared to a net loss of $1.17 million or $2.01 per share in Q2 2025, a 51% improvement. For the first half, our net loss improved 59% to $782,000 or $0.75 per share compared to $1.9 million or $3.61 per share in the first half of 2025. Weighted average common shares outstanding and per share results reflect an impact of the April 30th one-for-10 reverse stock split, as well as warrant exercises and other financing activities through June 30th.

Turning to the balance sheet, stockholders' equity was $4.3 million as of June 30, and we had $3.8 million of current assets at the quarter end, including $1.4 million of cash and $1.7 million of accounts receivable and $376,000 of inventory. Following the quarter end, we reduced the outstanding balance due for our outstanding note by $350,000 or 51% to $325,000 in exchange for the issuance of 81,100 BIO-key shares or approximately $4.32 per share. As Mike mentioned, we raised gross proceeds of $2.5 million earlier this week through a warrant inducement transaction involving the share sale of 681,334 shares of common stock upon the exercise price of $4.06 per share, and the new issuance of warrants to purchase 1.2 million shares of common stock at an exercise price also $4.06 per share.

Given the effect of the financing proceeds, the company's current cash position is now over $4.5 million, which provides ample working capital support for our operations and growth. As Mike outlined, we expect continued growth, and we are targeting profitability for the second half of the year. Operator, we can now proceed with questions and answers.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Jack Vander Aarde with Maxim Group. Please go ahead.

Okay. Good morning. Great update, Mike. Thanks for taking my questions. So Mike, maybe I'll start with a question on your business outlook for the back half of the year. You're expecting revenue growth and profitability, which is great to hear. Can you just maybe touch on that, I guess, specifically that large hardware order that got pushed into the second half? Do you have any line of sight there, visibility, how that's going to be allocated as it ships? And is it going to be or is it going to be allocated across both the third and the fourth quarter?

It's hard for me to say right now. We'd like to see it all ship in the third quarter, but we'll see as things evolve. More importantly, Jack, that's not the only large order or let's say project or contract that we're working for the second half. What I didn't mention in my prepared remarks is what we're really enthused and excited about is the size of our orders, and the size of our contracts are going up significantly. As we work in the regulated industries, especially in government, defense, and in banking, the opportunities in general themselves are bigger, right? The user counts and user population are larger, and so therefore, so are the value of those contracts.

The reason that we're enthused and excited about continued growth in the second half and obviously getting to profitability is we need just a couple of those large ones to fall and we should easily get there. So it's that order and many others that we're working in the second half as well in our pipeline.

Okay, great. No, I appreciate all that. Of course, it's really growth across the board here. If I look at your license revenue as well, that did look like it picked up a bit here in the second quarter. Just sort of kind of housekeeping question. Normally, you have that a slower third quarter sometimes in the licensing front because of EMEA. Now, things have changed a little bit in your business model, but do we expect growth across, I guess, all the segments as well then in the back half, including license revenue?

Yeah. Well, first of all, license revenue is growing, and that's really what we're after, right? I mean, that's what drives our gross margin and maintaining a high gross margin because most of our customers who buy our biometric, Identity-Bound Biometrics solutions, buy both hardware and software. But for sure, the third quarter given, again, EMEA, like right now, virtually everyone is off in August, so things don't pick up until first or so, first, second week of September. But I still feel like we have enough in the pipeline to have growth in the third quarter and absolutely, certainly significant growth in the fourth quarter as we close out the year. So, yeah, I think we're going to continue to see growth across the board. And license is what we're after, right? That's the business here.

Recurring revenue, signing customers up, getting more contracts in play, and building a recovering revenue base. That and maintaining our expense levels. We had a little bit of a blip in the second quarter with one-time expenses. That was a one-time event. Our expenses have been very stable, if not declining. We need to hold in that realm, and we need to build that license revenue with gross margins in the 85% range. Most of what we sell drops to the bottom line.

Yep. No, definitely. This is actually might be a historical record quarter on the gross margin front. I am looking back at my model here, but no, that was great to see. Plus you got this cash that came in with these warrant inducements. I think you are over $4 million of cash now kind of pro forma-wise. As you look forward and you are going to be profitable, I mean, what are the specific use cases for cash? Or is this just good working capital on hand to have and no further dilution expected?

Well, there is no further dilution expected, that is for sure. At this point, we have adequate cash resources to not only operate our business, but to continue to invest in the areas, as I mentioned, around Agentic AI and securing that whole ecosystem right now is really a wonderful opportunity for biometrics. No one does it better than us. I mean, it is pretty clear, and we have been validating this, as I mentioned in my prepared remarks, with many prospect customers and in particular partners, that we have a very unique offering for roaming users and use cases where phones and tokens just don't work. Because, again, users cannot have, for example, a phone in their hand if they are in a service bay, or they don't want them with a phone in a call center where you can take photographs of customer records and that kind of thing.

We have got the perfect solution, and our Passkey:YOU offering, which is now ramping, is going to be a really big benefit for us. We are just really optimistic about being able to take advantage of that. But yeah, we are not anticipating any additional dilution at this point. We have got adequate cash on hand to continue to operate our business, and we would like to keep working capital at the highest level we can. It gives us credibility with our prospects and our customers. That was the impetus behind doing this last raise that we did.

Okay, great to hear. Just because you mentioned it, maybe one more question is asking you, just do you have a rough sense what percentage or just roughly how much of that is a business driver for your results, I guess in the back half to get profitable or your revenues recently? Just what does that make up in terms of BIO-key's overall revenue mix?

Well, we're just scaling up. It's hard for me to give you a percentage, but it's the kind of solution. Maybe put it in context. It's a solution that can be sold anywhere to anyone, even if they're running today a competitive offering. Let's just take a classic Okta, ForgeRock, Duo, SailPoint customer that has those use cases that I just mentioned. They have employees in the call center. They have service employees that cannot utilize a phone or a token. They can take advantage of our solution because it can just bolt on to their existing, what we call IDP. It can just bolt on and can be utilized today without changing out their infrastructure. That's pretty powerful. We don't really know what the potential is over the next probably 12 months, but it's significant.

As we continue to. Right now we're in a number of different evaluations and pilots with some large customers. As we get more data and information on that, I think we'll be able to predict. At this point, we know it's large. We'll see how large. By the way, if we can attach this directly to those partners for them to make available to their customers that are in those fringe use cases, it can be even bigger. It could be really significant. But we have work to do.

Excellent. Well, great to hear, Mike. I appreciate all the time, and I'll hop back in the queue. Thanks.

Thank you.

Again, if you have a question, please press star then one. The next question comes from Dan Khamis, private investor. Please go ahead.

Good morning.

Morning.

Hi. The Bank of Jordan, the release said that the central bank was developing an initiative. Does that mean that they're studying what they want to do, or have they been? Are you contracted and actually receiving revenues, like in the second quarter or expect in the third quarter?

Yes. We are, and we are expecting it to be much more significant going forward. In the second half, and then obviously into the first part of 2027. As we described in that press release, it is a significant initiative that could impact their entire user population. If you think about our South African bank customer, where we are generating well over $1 million in ARR, it certainly has that potential and capability. But we will crescendo to that over the next probably two to three quarters.

I see. Will you be selling hardware?

Both hardware and software, but obviously our focus is on the software, right? The user counts. That is always driving. Well, again, our blended gross margins are really, really good, 75%+. But obviously, software is a higher gross margin.

I see. What has to happen for you to actually ramp up and make some of these bigger sales? Is there some pilot that happens?

We're really in the deployment planning stage right now. It's how we go from point A to point B. There's a lot of work when you're doing a deployment this large, right? There's not only, there's logistics, there's everything, right? Provisioning, logistics, all that kind of stuff. We're in the planning stages with them right now.

I see. My question is this like a pilot where they'll then decide whether they want to continue to ramp?

No, no. We're well beyond that. Yeah, we've been selected. I think the press release was clear on that, as was the quote from the senior cyber resource who's been working with us.

I see. Was that a competitive bid?

Believe it or not, it was a competitive situation, and we were selected sole source.

Okay. All right, let's switch to the Portugal release. How do we estimate the value of the rollout of BIO-key's IAM and biometric authentication technologies to the Portugal's public sector ecosystem? And what is your margin considering you're partnering with Visualforma?

The margins are the same. Typically, a partner, it could be Visualforma or it could be DLT, could be any one of our partners, domestic or international. Typically, they get a 25%, anywhere from 20%-30% on the high-end discount off the software. But again, the gross margin to us, because it's software, is the same. So it's 85% of a lower number, but it's 85%. So typically, again, Dan, that's the classic partner discount that these partners get. So generally, they get a discount on the software, and then they're providing services to the customer, right? That's where they really make most of their money, right? Obviously they get a margin on selling the product, but their real business is providing the services and all of the support to the end customers. In EMEA, 100%.

It doesn't matter how large the enterprise is or how small they are, they're generally buying through an MSP, MSSP, or reseller, or a distributor. So that's the way that model works, and it really is a force multiplier. We bought the Swivel Secure Europe business. When we bought it almost five years ago now, we bought that to get the distribution channel and the resources that we have there now in EMEA to sell through our products, right? We were always planning on a transition from selling the Swivel product to BIO-key product, right? The Swivel product had a 50% gross margin. Our BIO-key products have margins that are significantly higher than that.

What's astounding to me, especially over the last year, given that we jettisoned the SSE product and decided not to renew that contract, it's amazing how these partners have very rapidly picked up on the BIO-key solutions and the biometric component in the BIO-key solutions that they're now selling through to all these customers. It really is amazing, and that's why we have such a significant pipeline there.

Okay. The first part of that question was, how do we value the rollout to the public sector for modeling?

You're talking about a country, you're talking about a public sector component in, I call it state and local, right? We did sell a large municipality a solution that now can be replicated into 50 or 100 types of scenarios like that. Then you have what we announced last week or the week before was a federal government agency that secured our product for a very high profile defense-related initiative. So that was federal. We sold about four to six months ago, a municipal type scenario, and now connect the dots, you got references. What is that potential? It's certainly in the millions of ARR over the next quarters. But again, that business will be developed in combination with that partner and other partners as well that are selling in that space.

I see. Now, I think Portugal's got about 1 million people in their public sector. So are you basically looking to get that whole niche over the next couple of years or something like that? Is that what we're looking at?

Well, again, if you're thinking about state and local, that's one thing. Think about all the government-related initiatives in security, in military, in intelligence, right? These are all the things that are ramping up, not just in Portugal. They're ramping up in every country in the region, in the fuller EMEA region, not just in Europe, in the Middle East. Look at the way the countries in the Middle East are ramping from a defense initiative perspective, from an intelligence perspective. This is why I think our business there has just astounding potential because we're now collaborative. As a country, we are collaborating more with those Middle Eastern countries than we ever have before. They're buying a lot from us on the defense side, right? Not just weapons, but we're collaborating from an intelligence perspective. We're collaborating from a financial perspective.

I just think the potential is incredible.

Got it. Well, Saudi Arabia.

One other thing, Dan. We have references.

Yeah.

Like real references.

Right.

When we find an opportunity or an opportunity comes to the doorstep through a partner, it is easy for us to refer them to someone who is already using the solution to solve a similar problem. To me, that is huge. That is 60% of what you need to continue to build and scale a business.

Yeah, I understand. On Saudi Arabia, I found it interesting that they were interested in your technology for education, not necessarily for finance and defense. Is there an opportunity there?

Well, there is. Again, it all comes down to the partners, right? We signed on a partner that has a very strong base in education. We have the references in other applications where it is being used. Here to what I just described is a proof point that we can continue to find ourselves expanding into other sectors of the economy, and education is just one of them. We have a very large project in healthcare in a Middle Eastern country that we are deploying right now. A lot going on.

Okay. You said Jordan wasn't with sole source. Is that true of some of these other ones, too? Is there any competition? I'm just kind of wondering, who are you competing against on these.

Yeah.

Things you're winning?

Many of these projects come in through partners, but also come in through large technology partner companies as well. For example, we have been working very closely with SailPoint in the Middle East, who has multi-million dollar contracts to provide security solutions, mostly for governance and not necessarily authentication. They need an authentication partner, someone who has the flexibility and someone who provides the biometrics like we do, which is very unique. That's why our business is growing. It's the relationships with the partners and the big technology companies that are driving these large contracts on these international opportunities. That's where our group, in particular in EMEA, has done an incredible job. They've been doing this for 15 years. That partner network that we built there is very valuable because it takes a lot of time to build that network.

It takes even more time to get real deals going with them. It takes just really good relationship management to continue to grow and scale the business.

Got it. Let's move to the U.S. The U.S. financial system seems to me like it's been quite resistant to moving towards Identity-Bound Biometrics. Is the Alabama Federal Credit Union any kind of even minor harbinger of change for that in the U.S.?

I think it is, Dan. I think that the whole First of all, the cyber attack acceleration, especially since we've been engaged with the international altercations and geopolitical stuff that we're going through, is kind of escalating. That's number one. Number two, I think the Agentic AI situation has everyone on edge. You're right. Biometrics in general. There was this perception that biometrics infringed on privacy, and the U.S. was all about protecting your privacy. Not caring necessarily about your security. I shouldn't say not caring, but caring less about the security and more about your privacy. That line is moving, for sure, because good security protects your privacy. It doesn't impinge or impinge on your privacy. That perception of biometrics potentially impinging on privacy is really starting to move. I think consumers are starting to recognize that as well.

They're also recognizing the convenience of a biometric. They're also seeing that the traditional SMS multi-factor type authentication, that the hard token that we've been using for years to validate accounts are going away. I mean, Microsoft announced it fundamentally that they're killing SMS authentication in Entra over the next couple of quarters, and they're going to Passkeys. Passkeys connote a direct, convenient biometric option, which I think is going to accelerate the use of biometrics in general across the enterprise, and across consumer apps in the coming quarters. It's going to happen pretty quick.

I see. Is there an opportunity with Microsoft there to partner in any way?

I'd like to say yes, but on the other hand, if you look at Google and Microsoft, Google Authenticator and Microsoft with Entra, they've kind of gone it alone, I should say. They're trying to entrap all of their customers into utilizing everything that they make available. Most of the high-end, more experienced CISOs are rebelling against that because they don't want all their eggs in one basket. There, in my opinion, is the opportunity. It's not necessarily partnering with them. It's offering an alternative which is better, faster, and cheaper than they can provide.

Okay.

Because they may lure you in and offer you a new component for free, then next year when you get your renewal contract, you notice that you just got a 20% hit. Now you're already using the solution and it's very difficult to switch out. I think we play to that and we play very well there. Plus, we offer the 16 factors of authentication, including the biometrics, if that's in your bailiwick and you want to use it. That's our differentiator.

I understand. Let's talk about AI a little bit. In this non-repudiable authenticational approval for these AI agents, what stops an AI agent from, say, intercepting a fingerprint and using it to authenticate later or identify later?

Well, that's a simple one, Dan. What stops that is the ecosystem and the technology infrastructure that you have around your biometric. Because your biometric is public information. When you walk into your office or you go into a store and you put your hand on the door, you leave your fingerprint there. If somebody really wanted your fingerprint, they could lift it. Again, this is all theoretical, right? Your face is surveilled. You walk through Times Square, now it could be 500 times. I used to say 200, but it could be 500 times your face is surveilled and if someone wanted your face, they could take a picture of your face. What makes biometrics systems secure and protect from agentic scenarios is the ecosystem around the biometric. So what is that? That's liveness detect, right?

To ensure that it's real and your face is real, or your finger is real, or your palm is real, or your iris is real. That's number one. It's all the encryption around the biometric. Remember, we're never matching a fingerprint or a face or a palm. We're matching a digital representation of that. What are we doing? We are algorizing and we are encrypting. We're encrypting the templates that we. Then we're encrypting the transportation, the way we move the template from one place to another, whether it's on device or it's into a central system to match and back down for approval to, let's say a mobile device, a phone or a tablet or a computer. It's that secure ecosystem that protects against that potential agentic formation. That's where we have 30 years experience in doing that.

Why in very high profile, high secure venues and environments, WEB-key, our product, our full and complete encrypted ecosystem for biometrics, has been selected by some of the most sophisticated, if not the most sophisticated security organizations in the world. Long-winded answer, but.

No, I got it. That was good. A couple of questions on the warrants, and then I'll be off here. What were the net proceeds on the warrants?

$2.5 million.

Is that net or gross?

There is a commission for the bankers was 5%, so I guess that is what, $2.350 million, somewhere in that range. $2.3 million-$2.4 million.

Okay. Does that mean, I think there were $600,000 of them. You had $1.1 million. Does that mean that somebody now owns a third of the company? If they exercise the other $1.2 million warrants, what happens then?

Yeah. The way that works, and you can look at the filings. It is all detailed out there in the 8-K and so forth, is that the warrant holder will never own more than 10%, 9.9% of the company. There is a blocker in place. So they bought all the warrants, and they only take ownership of 9.9% at a time of the warrants. The rest are held in abeyance. The company gets the money upfront because they exercised all of the $618,000 warrants that they had. So, the answer is no, they will never own a third of the company.

I see. Do we know how many of the warrants have been exercised so far?

Well, they've all been exercised. How many of them have been taken out of abeyance? I would say nearly half, give or take.

Oh, I see. Okay.

Quite a few. Quite a large number.

Yeah.

$275,000, $300,000. In that range, 300,000, give or take, have already been taken out of abeyance, so about half in the last four days.

That by itself, I guess could explain some of the price drop in the stock.

There's no question. There's no question. That is one. It's also the general market. It's an interesting point you bring up. I've been watching a series of companies. They're not necessarily peers to us in the context of what they offer, but they're size-wise small public Nasdaq companies. There seems to be a mantra in the market this past couple of weeks, and it's sell on the news. I've seen really good earnings announcements, I've seen good contract announcements, and I've seen these stocks trade down 15%-20%. I don't think you can look at the stock price and say, "Well, it happened because of this," or, "It happened because of that." I think it's just a series of things, and it's a fact that the low end of the market has been experiencing this kind of volatility right now. It is what it is.

Look.

Yes.

We clearly were disappointed in our anticipated revenue for the second quarter. Again, that hardware order would've put us well over the top and obviously would've been a profitability. That's one thing. Our business is still growing. For sure, that's a factor. The second thing, though, on the other side is, our balance sheet is very strong right now. Our equity position is very strong right now. Having a few more shares outstanding strengthens our compliance requirements and so forth. That's very positive. You look at the pipeline and the things that I described over the last 45 minutes, all very positive. I think there are more positives than negatives out there right now, and we'll catch up. We'll catch back up, I'm sure. Because we're so.

Yeah.

Undervalued by any metric that all ships rise with the tide, and at some point, we will get our due fair value.

Well, your cash is, I think just based on your cash, that's $2.50 a share, I think, if I'm computing this right, assuming you have about 1.8 million shares outstanding. One question on the cash. I think you had $1.4 million at the end of the last quarter, the second quarter, and you got $2.3 million, but suddenly you have $4.5 million now. That's not the $800,000 in hardware. You pulled in some of the receivables or something in this quarter, or something like that happen? How'd you get that extra cash?

I'm a little confused. I think, Ceci.

Well, I don't know.

I didn't understand your question.

Yes. We have collected receivables from the June close through July.

Okay.

And added more.

Okay, that's good. All right, last question. In your 2025 Form 10-K, I saw the line, "We expect that the growth in revenue will alleviate our going concern within the next 12 months." I'm not sure. Has that line remained in the recent Q?

Ceci handle that.

No, that did not remain, but that normally the end of the year is where it matters the most, and that's where we're headed.

I see. So you guys, is that still something that you feel is valid?

Yes, absolutely.

What has to happen? What do the auditors or what do the SEC regulations say about allowing you to say something like that? Because I do not think I have ever seen that in any of your Form 10-Ks.

Well, the auditors approved us saying that.

I think, Dan, it is pretty straightforward, right? It is you are on the right path, meaning that you are crossing the line between using cash and being cash neutral. You have enough cash on the balance sheet to operate the business for a couple of years, even with the burn that you have. That gives you comfort to say, "Listen, this is not a going concern scenario because if there is a blip or a downturn, the company has enough cash to continue to operate." I mean, it is not that complex.

Okay.

That is it.

Okay. Hey, I appreciate all the time you guys gave me. Thank you.

You are welcome.

Showing no further questions, this concludes today's Q&A session. I will ask Mike DePasquale to provide closing remarks.

Thank you again for joining today's call. We genuinely appreciate your continued interest in BIO-key, and I look forward to updating investors on our progress on our next call. We will be participating in the H.C. Wainwright Conference in mid-September. As always, we'll continue to update investors via press release on significant developments in the interim. If you have any additional questions, please reach out to our IR team, whose contact information is provided in today's press release. Thank you, everyone, and have a terrific weekend.

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

Good morning, everyone. Thank you for standing by, and welcome to the BIO-key International's first quarter 2026 conference call. During management's prepared remarks, all participants will be in a listen-only mode. Afterwards, listeners will be invited to participate in a question-and-answer session. As a reminder, this conference call is being recorded today, Monday, May 18th, 2026. I would now like to turn the call over to Mr. William Jones of Investor Relations. You may proceed.

Thank you, Chuck. Hosting today are BIO-key's Chairman and Chief Executive Officer, Michael DePasquale, and its Chief Financial Officer, Cecilia Welch. As a reminder, today's call and webcast, as well as answers to investor questions, include forward-looking statements which are subject to risks and uncertainties that may cause actual results to differ materially from current expectations. Words such as anticipate, believe, expect, plan, and project or similar words identify and express forward-looking statements. Such statements are made based on beliefs, assumptions, and information currently available to management pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. For a more complete description of risks and uncertainties which affect future performance, please see risk factors in the company's annual report, Form 10-K, as filed with the SEC.

Listeners are cautioned not to place undue reliance on forward-looking statements made as of today, and the company makes no obligation to revise or disclose revisions to these statements to reflect circumstances or events occurring after this call. Now, I'll turn the call over to Michael DePasquale to begin.

Thanks, Bill, and thanks to everyone for joining us today. After my remarks, CC will review the financials, and we'll open up the call to investor questions. Our Q1 2026 results and Q2 2026 outlook reflect the benefit of our team's hard work, particularly over the last year. We're also seeing expanded appreciation for the unparalleled value that our biometric identity and access management solutions provide in securing mission-critical applications and data. Borrowing the old phrase, BIO-key has built a powerful suite of biometric solutions with the belief that customers will come. That strategy is really starting to play out for us in a meaningful way, and I will discuss that. Our Q1 2026 revenues reflect both new customer wins and growing long-term customer deployments in defense and financial services.

Last year, we launched our defense and intelligence cybersecurity initiative, targeted primarily in foreign markets for more secure identity and access management solutions. Our customer base now includes several of the world's most prominent and significant defense organizations, and our success in meeting their strategic needs is proving very valuable in supporting new opportunities. It's not just government, defense, and highly regulated industries. We're also seeing traction with enterprise customers, particularly in EMEA and the EMEA markets. Our progress in these regions is supported by an expanding base of strong regional distribution partners as well as foreign regulatory frameworks that are favorable to our strong biometric options. Outside of EMEA, we have also added new partners in India and Vietnam, where we are seeing solid opportunities in future periods as these partners ramp up their marketing and sales efforts.

To better reach public sector opportunities in the U.S., which often require working with a pre-approved vendor, we recently partnered with DLT Solutions, a division of TD SYNNEX, the world's largest IT distributor and solutions aggregator. TD SYNNEX, SYN-SYNNEX employs 23,000 people globally and offers a massive portfolio of IT hardware, software, cybersecurity, and cloud services to over 150,000 customers in more than 100 countries. While DLT is their kind of public sector arm domestically. We're integrating our PortalGuard IAM and Passkey:YOU biometric solutions into DLT's platform of offerings. The partnership provides a streamlined procurement path, enabling their extensive base of public sector customers to easily purchase and deploy our solutions, many of which face mandates to adopt zero trust digital infrastructure and implement multi-factor authentication.

With our solutions, customers can easily meet these requirements and anchor digital access to a person rather than to just a device. We're working closely with the DLT team to help them educate public sector customers on the solutions and compelling ROI that BIO-key can provide. On our year-end call, I reviewed several factors that are shaping the market for our solutions today, so I'll just provide a brief overview of those. First, the continued expansion of digital services and mobile use cases that require secure authentication is widening our market opportunity.

Second, we believe demand for the secure digital access BIO-key uniquely provides will continue to expand as organizations confront a more sophisticated and persistent cybersecurity threat landscape. Third, we expect passwordless authentication to continue to gain traction and become the standard this year and beyond as enterprises look to reduce risk from phishing, credential reuse and misuse, as well as account takeover attacks. BIO-key enables unique and highly secure passwordless solutions. Fourth, biometric authentication should see growing adoption in the highest value use cases, as we've seen in military, defense, financial services, healthcare and other highly regulated industries where security and trust are most critical. Fifth, the rise of AI-driven threats really escalates the need for more resilient identity strategies that surpass vulnerable yet widely deployed authentication methods like phones.

Finally, the market is moving towards more unified access platforms that unite workforce, partner and privileged access under a single flexible foundation. These trends play directly into BIO-key strengths, and we are starting to see them in our financial results. Today, our business is predominantly a subscription-based business with recurring revenues. Approximately 50% of our new business comes through our partnership model domestically. As I've mentioned a number of times before, 100% of our business is sold through channel partners internationally, providing a very efficient and more importantly, scalable model. I also want to mention that we launched a new website in mid-April that is designed to better support our partners and customers in understanding how BIO-key can meet their needs. We believe it's an important step to support our growth goals.

I wanna thank our team who put a lot of hard work and effort into this launch, I encourage investors to review it at www.bio-key.com. As always, we welcome any feedback that you can provide. From a financial standpoint, BIO-key is in a solid position to continue to fund our growth. We ended Q1 with a book value of $7.6 million or approximately $7 a share, including over $2 million or $2.07 per share in cash. We expect this position to continue to hold or improve as we approach the second quarter, the end of the second quarter. As we mentioned a few days ago, our shares were recently suspended from Nasdaq.

Today, we are actively working to return our shares to the Nasdaq Capital Market and have secured an appeals hearing, which will be held on June 16th, which is next month, about 4 weeks from tomorrow. In the interim, our shares continue to trade on the OTC Markets under the symbol BKYY. Although we cannot be certain of the success or timing of the panel's decision, our advisors believe there is reason for optimism regarding a return to Nasdaq trading by the summer. In summary, our business is off to a very strong start and we are confident in our first half outlook and very optimistic regarding the balance of the year and beyond.

After years of hard work, we believe BIO-key has never been better positioned for growth and improved financial performance, and we will continue to update you, all of our shareholders, on our business and listing process as we proceed forward. With that, I'll turn the call over to Cecilia Welch to review the Q1 financial results.

Thank you, Mike. We released our results this morning via press release. We plan to file our 2025 Form 10-K this week, after which we will file the Form 10-Q and be up to date on our filings. Let me provide a brief overview of our Q1 results. Keep in mind that the review of our financial statements has not yet been completed by the independent public accounting firm. Results are therefore subject to adjustment. In Q1 2026, our revenues increased 34% to $2.1 million versus $1.6 million in Q1 2025. With the current year benefiting from expanded one-year software license renewal from a long-time banking customer who's serving over 30 million clients with our biometric identity solution. Overall, the license fee revenues increased 24% to $1.4 million.

Our hardware revenue increased more than 100% to approximately $531,000, due to increased purchase from biometrics hardware solutions, including hardware sales related to a foreign defense ministry defense expansion, as well as the sales from our previously fully reserved inventory. In line with revenue, our Q1 gross profit grew 33% versus the Q1 2025 $1.8 million, and we maintained a strong gross margin of 82% in both periods. This compares to the first year gross margin of 77.5% in 2025 and 81% in 2024. Gross margin benefited both in high margin license fee revenue and the sales of the fully reserved inventory. Our operating expenses were approximately $2 million in Q1 2025 and Q1 2026, as higher R&D was offset by lower SG&A expenses in Q1 2026.

Higher revenue and gross profit combined with relatively flat operating expenses led to a net loss improvement of $165,036, or $0.15 per share. In Q1 2026 versus the net loss of $736,545, or $1.57 per share in Q1 2025. Per share amounts and weighted average shares outstanding reflect the impact of the company's April thirtieth 1-for-10 reverse split, warrant exercises and other financing activities. Share counts are provided in today's press release. Turning to our financial position at 3/31/2026, our book value was $7.6 million or $7.04 per share, compared with $7.7 million or $7.07 per share at year-end.

IoT had approximately $4.5 million of current assets, including $2.2 million of cash and cash equivalents, and $1.6 million of accounts receivable. This compares to December 31, 2025, when IoT had current assets of $4.5 million, including $2.7 million of cash and $1.2 million of accounts receivable. As Michael DePasquale mentioned, we expect to be profitable and cash flow positive in Q2. Operator, we may now proceed with the questions and answers.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Jack Van Der Rohe. Please go ahead.

Hey, good morning, guys. Good morning, Mike, Cece. Congrats on the strong results and strong fundamental outlook. Obviously, there's been a noise here, and it's unfortunate with the Nasdaq delisting, but it sounds like things are on track. It sounds like you feel good about it. I guess there's maybe some housekeeping questions, Mike, just quickly. The Nasdaq appeal meeting's coming up, I think next month, you said. That puts you on track to get relisted. Just to revisit those comments quick. The ten-K sounds pretty confident that that's gonna be filed by next week. Can I just get a confirmation on that?

Yes. Thank you. By the way, good morning, Jack. Yes, our hearing was scheduled on Friday. We got notice that it was scheduled for the 16th of June. We're, you know, in the process of preparing for that. We expect that, as I mentioned in my prepared remarks, that we will get through that process and, God willing, without any bumps in the road, be fully compliant all the way around and get back on the capital markets, certainly, maybe late June or July. It depends on the timing for that panel. Everything is in motion there, and our advisors are very confident that we have, we should be optimistic about being able to do that.

You know, we traded for 9 days above $1 before we got suspended, which was a statutory scenario with the Nasdaq. It's their process. You know, that was our only issue at the time. We will get back on and we'll keep everybody posted as we proceed forward. That's for sure going to happen. As it relates to the filings, yes, we expect that we'll get everything filed. We're hoping to have both the K and the Q filed this week, so we will be fully compliant and up to date on everything out there. That's it.

Okay. No, I appreciate all that. That's very clear. These results seem to give you a good leg in that race, I would say, to get back to status. That's great to hear, Mike. Maybe just in terms of the cash and the balance sheet and given these, you know, recent results here, which it sounds like you're on track for potential profitability here. No issues with funding your existing growth initiatives, and also with just your customer discussions. There's no any implications there or distractions with the Form 10-K and the Nasdaq? Just to clarify, one more question there.

No. Quite frankly, no. I think you know, we have a very broad portfolio of customers in virtually every sector of the economy. You know, many of them have been with us for many, many years when we were an OTC company and then uplisted to the Nasdaq. It really isn't impacting anything that we do. We're on a greater solid footing from a financial perspective than we probably have been in many, many years. We have enough money to obviously operate our business and to continue to invest in the growth initiatives that we have. As I mentioned, it's all about scale for us right now. We've got a great product. We continue to improve and evolve that product as is required and is necessary.

We have built a very strong partners network, especially internationally. It's really in our hands right now just to continue to scale this business. It will scale very profitably, as you can see. You know, our gross margins have been hovering in that 75%-85% range for years. That will continue to be as we scale revenue into the $5 million-$10 million range on a quarterly basis. You can imagine what will drop to the bottom line.

Excellent. You know, Mike, just looking at your outlook, for the second quarter/the first half of this year, it's significant progress from last year, obviously, and also just historically, in recent memory. I guess, like, what's going on in your, I guess, pipeline here, your go-to market? Do you have more visibility than you've had in, you know, in the past two, three years in terms of this demand funnel? All of a sudden, you have this $5 million of revenue it looks like set up for the first half. How's the back half looking to you? Are you already thinking ahead that far?

Well, it looks very good. It looks very strong. I mentioned that in my prepared comments. There's no question we have better visibility. What's happening, Jack, is we are, first of all, we're going after larger opportunities. You know, when you have $500,000-$1 million or over $1 million transactions in the pipeline, and they're with larger partners who have, you know, very strong positions in those end user customer environments, the confidence goes up, right? It doesn't mean, again, you win every deal. We have a very strong pipeline for 2026. Full year, right? First half, certainly we're very honed in on, and we know exactly where we stand at this point.

For the rest of the year, we have a number of contracts that have already been won, but need to be you know, been awarded, but yet need to be papered, meaning we need to get orders and so forth and so on. We're feeling real good about the entirety of 2026.

Excellent. you know, maybe just if I'm looking at, I guess, the sort of it looks like hardware revenue really picked up this quarter. Is this just I know it could be lumpy, but is this a something that's, you know, a new dynamic that's being integrated in most of your deals that you're seeing now? You do have strong gross margins on the hardware side, it's just interesting to look at 'cause hardware can kind of go up and down while license revenue seems to be more steady. What are you seeing from the hardware side in terms of the deals that you are bringing to the table?

Well, I think, you know, as you close these larger license opportunities, the requirement for hardware is also significant. Many of our Ministry of Defense customers that utilize our technology have to put many touch points in place for access for all of their force members or their staff. Again, it can go hand in hand. As you mentioned, we maintain really good gross margins in our hardware. CeCe mentioned in her prepared remarks that we are selling our fully reserved inventory right now in greater volumes, and so that's going right to the bottom line. Obviously it's all cash and all margin. That's helping us certainly this year and will continue to help us as we evolve through the year.

But again, you know, hardware is part and parcel of our larger opportunities, so it's always gonna be there. Yes, it's certainly more lumpy than the software and license revenue is, but it's still a very strong part of our full and complete offering, which is what customers want. They want a full and complete offering from one vendor, and we provide that for them.

Yeah. Mike, just with all your main, your core verticals, obviously defense, has been very strong, there doesn't seem to be any shortage of development in the geopolitical world here today to keep driving that. Outside of defense, looking at education and financial services, I suppose, where do you see you're having where's the next leg up for you within those two segments? Do you feel like you're growing at Is there an opportunity in education in your business as well as financial services that you're seeing with defense?

Absolutely. We have a really good sizable base in education, as you know, and that's continuing to, you know, evolve. Yes, education is a great market for us. Does it have hyper-growth potential like financial services? No. I believe financial services has significant growth for us. We have been targeting with our partners internationally, national banks, right? The banks in countries that manage the currency. We've had a number of wins. We have a number of opportunities in our pipeline that you're gonna hear about over time as we knock them down. They have a very specific need for ultra-strong authentication. In the international venue, they have no restrictions or very few restrictions in the context of privacy and so forth that we deal with here in the U.S., right, on a daily basis.

Biometrics are a really good option for them because they can positively identify individual staff and the likes who enter their portals or their applications. I think financial services is a very strong and growing vertical for us, and you're gonna hear a lot more about that going forward.

Excellent. Mike, if I could just ask kind of one more semantic question. Just wondering if you could share any thoughts that you may have. Two of the kind of, I guess, growing industry dynamics that are these trends now, especially in the legal world. You have the Clarity Act that's coming up here seems to be moving further with just tokenization, real-world assets, and just crypto in general, given your financial services industry. Also with your cybersecurity and just protecting, you know, biometrics in general, quantum is becoming somewhat of a theme that people are focused on a bit. Just wondering if you have any thoughts on where BIO-key sees or fits in if in these themes of quantum down the road, as well as tokenization and crypto being more mainstream.

Great. Those are two great questions. You know, RWA, right? Real-world tokenization, all that stuff that everyone is hearing about and talking about is certainly evolving, but it's happening much, much slower than anyone had anticipated. I think this year you see it kind of hit the rails because there are other priorities. I kind of feel really good about where we are because we're serving the real world today, their needs and their requirements, while we're investing in things like quantum. You know, all of the latest and newest generation encryption theories around quantum proofing and so forth are all things that are on our plate right now and that we're researching. Don't get caught up in the hype is my comment on both of those scenarios.

Look at where we are today, look at the real-world issues that we have today, and look at real-world solutions that solve those problems today, but also have a perspective for where the puck is going and where we're gonna be tomorrow. Certainly, we're right in the heart of that. I mean, again, if you look at where the money's being spent today and where things are moving, it's taking much, much longer. That's why you're seeing, you know, a number of the companies that fundamentally have no current technology to address issues and problems and are only looking in the future are really struggling. Now, again, it's kinda like AI, right? There's no doubt that AI is currently impacting our lives, personal and business, and it's gonna continue to evolve.

It still has to find its footings, and the companies that are engaged in that technology are gonna come and go. We've been around a long time providing, you know, very, very basic and yet sophisticated, highly secure solutions for some of, you know, the most important applications on the globe. I think, again, you know, we're gonna continue to do that, right? We have proven that we can do that. We've been here for over 30 years.

Excellent. That's.

That's my, that's my perspective, Jack.

No, that's a great perspective, and I appreciate that rundown. It sounds like things are going very well right now for BIO-key. I appreciate the time. I'll hop back in the queue. Thanks.

Thanks, Jack.

The next question will come from Dan Kamys, Investor. Please go ahead.

Hi, guys. Yeah, very nice quarter. That's quite nice. I've got a couple housekeeping questions, I guess. Do you have a cash flow from operations number for the first quarter by any chance? I know you guys don't usually do that, but I'm just wondering.

I'd have to revert to Cecilia Welch. I think we ended the year with about $2.7 million or so in cash, and we ended the first quarter with about $2.3 million. I mean, back of the envelope.

Okay

not that sophisticated, right?

Yeah.

Probably use And timing, right, on collections, receivables, that kind of thing. I think we're pretty solid, let's put it this way. We're not hemorrhaging as we have in the past.

Right. What, Mike, your current ARR run rate, is that now improved with some of these contracts?

Similar, I guess, to answer. You know, it's episodal, right? If you have to look at our receivables, right, from quarter to quarter. I would say, yeah, as these larger projects, you know, land, obviously the receivables are pretty significant. Yeah, I think it's certainly improving as the business is improving.

Okay.

I'll just add, too. It depends on when some of the bigger shipments are, 'cause some of them come at the end of the quarter and, you know, some come at the beginning because we didn't get them the quarter before. Like Mike said, it's episodal based on timing.

Okay. CeCe, can you say how much of the hardware sales was the written-off inventory?

Yeah, it was in the financials, and I don't remember off the top of my head. Bear with me 1 second. Sorry. Too much open up here. Basically $100,000.

I see. I got it. Mike, were these inventory sales, kind of a one-off thing, or was there any software licensing associated with the sales?

There's a combination of both. You know, it's I think we're starting to see, I think it'll be reflected in our results in Q2 and beyond, more significant sales of that reserved inventory.

That's good. If you're profitable from the second quarter, would you be able to offset profits with prior losses to avoid taxes like we've been hoping for years?

You know, I assume. I mean, we have plenty of NOLs, right? Net operating losses. I'm sure our accountants and our tax accountants will help us with that. Yeah, for sure.

Okay. A couple more, conceptual questions, I guess. Is it harder to win the large U.S. contracts in the military and financial area than EMEA? If so, can you give some color on why that might be?

I think what you asked is, why are we so successful internationally on the defense side, and is it more difficult on the U.S. side to win those contracts?

Financial too.

I mean, you know, it's hard to say. I think there's a different dynamic internationally. There's no reticence at all to using biometrics, right? I mentioned in my comments the privacy and, you know, concerns about all the regulatory scenarios like BIPA in the U.S., right? They don't exist internationally. You know, we've had programs in the U.S., like for example, in Texas, where they were using biometrics to manage the food stamp program. The privacy mongers fundamentally, you know, killed that program, and their expenditure went up 4x because people were cheating. We have a different dynamic here in the U.S., and it permeates throughout not only the public sector, but also the private sector as well. That doesn't exist.

It is much less difficult on the international front to deploy these solutions. I mean, I think that's the simple answer. Now, do we have U.S. opportunities? Absolutely. Do we have U.S. customers? Absolutely. Do I believe that business is gonna grow? Absolutely. I do believe that. In particular, I am really excited about the TD SYNNEX DLT opportunity because they're a monster in that space, and they have customers in, you know, every state in the U.S. We are doing really well in state and local government. Like, we have the perfect solution for biometrics, right? For highly secure access. And with a partner that size, it just opens up a whole market for us. Working closely with those partners, that's really the force multiplier in how we're gonna scale our business.

Yeah, I do believe that there's a difference, and I do believe, though, however, there is an opportunity on both sides of the world.

Great. Well, on some of these global bank contracts or financial contracts, defense contracts, can you say who your competition is for these contracts? Again, maybe you've talked about this before, but just to reiterate, what's a differentiator in financial services for you in these global contracts?

It's clearly the full and complete authentication, biometric authentication option that we provide and the flexibility to use 16, 17 other factors. One size doesn't fit all. In banks, for example, in branch or for staff in office, biometrics may be perfect. However, they may have outsiders, meaning outside the physical infrastructure that need to access information. Because we have a full complete platform with PortalGuard, we can provide all of those different options using a phone, using a card, using a token or a key. I think that's our competitive differentiator. Bringing, again, that very strong option with biometrics really separates us from everybody else in this space.

You know, there are large biometric players like IDEMIA, for example, or NEC. They're going after airports and, you know, border control and all that other stuff. They don't have the authentication, you know, SSO, single sign-on, network logon. They don't have all of that software. That's the front end of companies and enterprises or a public sector agencies, portals and applications, right? We front end all of that. That's our competitive differentiator.

I see. Who when you go after these contracts, who do you see competitive-wise going for these contracts too?

Well, you know, if they're looking at and seriously considering biometric for everybody or even for just a piece, guess what? It's not Okta. It's not, you know, SailPoint. It's not ForgeRock. It's not them because they don't have that. They can partner with us. In fact, SailPoint is becoming a very big partner for us internationally, where they're providing all of the privileged access and, you know, all of the higher level authentication management, and we're providing the actual authentication technology, as I just mentioned, the 16 factors, including the biometric. It really is, I always think it's, everyone has a competitor, right? There's no such thing as, you know, one company that dominates a space without competition.

We just really don't see any of those players able to do the same things that we do for a customer. It's pretty unique. There are, you know, probably a bunch of regional or smaller players that we may compete against, or an MSP that's trying to pull together pieces of a solution to do what we do, but no one big player that actually matches exactly what we do for what we do, which is strictly authentication.

That's actually amazing. I got just a couple more. Outside of cash, I think the market is assigning the value of your business at about $ two and a half million. If you start generating cash, could you see the company buying back shares or declaring a dividend or something like that?

We'd love to do that. I don't think we're in a position to do that today. I don't think it would be prudent, right? Obviously, we wanna be able to reinvest in the things that are gonna help us scale, right, our partner network, you know, again, ensuring our technology is leading edge, right, not bleeding edge, as Jack had asked questions about, you know, what's the future, right? I call that bleeding edge. We wanna be on the leading edge, not the bleeding edge. Yeah, we'd love to be able to do that. Over time, I'm hoping we will be able to do that. We only have 1.1 million shares outstanding right now, anything we can do in that realm would be just incredible.

We are grossly undervalued, especially with the Nasdaq suspension. That certainly devalued us probably about 20%, below where we were when we were on the Nasdaq, and we were still undervalued at that time. I mean, if you think about our first half revenues projected to be about $5 million, we'd be trading, you know, 1.5x year's revenue. It's obscene. Again, bumps in the road with the Nasdaq suspension and the timing of that. It wasn't a, again, an issue with us from an operational perspective. It was strictly a miscalculation of the very specific date requirements for the Nasdaq, right? 10-day notice, 10 days trading above $1. That devalued us for sure, but I think that's recoverable, right? You know, all ships rise with the tide.

If the business continues to perform, right, we're gonna achieve the level of value that we should achieve. There aren't many. Look around the industry. There aren't many profitable companies, public companies that, you know, smaller companies like BIO-key and Security that are profitable, if any. I can name a couple. Trust Stamp.

Yeah.

Aware, you know. They're not profitable. I think we're gonna grow into that valuation, if we continue to perform.

Okay, last question. The associated hearing, I believe that has legal advisor fees, to get back on the Nasdaq. Will that be expensed against your revenue in the second quarter?

We don't believe so. We don't believe so. We have some help with that, we're not concerned at this stage. Yes, we do have advisors that we've hired who have deep experience in the process. We wanna put our best foot forward, all that'll be covered.

Okay, that's all I got. Thank you very much. Great quarter.

Thank you.

Again, if you have a question, please press star then 1. This will conclude our question and answer session. I would like to turn the conference back over to Mr. Michael DePasquale for any closing remarks. Please go ahead.

Thank you again for joining today's call. We genuinely appreciate your interest in BIO-key, and I look forward to updating investors on our progress on our next call. As always, we will update investors via press release of significant developments in the interim. If you have any additional questions, please reach out to our IR team, whose contact information is provided in today's press release. Have a great day.

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

Good morning, everyone. Thank you for standing by, and welcome to BIO-key International's 2025 year-end conference call. During management's prepared remarks, all participants will be in listen-only mode. Afterwards, listeners will be invited to participate in a question-and-answer session. As a reminder, this conference is being recorded today, Tuesday, March 31st, 2026. I will now turn the call over to Bill Jones, Investor Relations. You may proceed.

Thank you, Gary. Hosting today are BIO-key's Chairman and CEO, Mike DePasquale, and its CFO, Ceci Welch. As a reminder, today's call and webcast, as well as answers to investor questions, include forward-looking statements that are subject to risks and uncertainties, which may cause actual results to differ materially from current expectations. Words like anticipate, believe, expect and project or similar words identify and express forward-looking statements. These statements are made based on beliefs, assumptions and information currently available to management as of today and pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. For a more complete description of the risks and uncertainties that affect future performance, please see Risk Factors in the company's annual report Form 10-K with the SEC. Listeners are cautioned not to place undue reliance on forward-looking statements made as of today.

The company makes no obligation to revise or disclose revisions to forward-looking statements to reflect circumstances or events occurring after this call. Now, I will turn the call over to Mike to begin. Mike.

Thanks, Bill, and thank you all for joining us today. After my remarks and Ceci's financial overview, we will open the call to investor questions. As highlighted in today's press release, we had a broad base of achievements in 2025 that positioned BIO-key for improved top-line and bottom-line performance in 2026 and future periods. Kicking off the year, we now anticipate Q1 2026 revenue of approximately $2.2 million, representing a 37% increase over Q1 2025 and a larger sequential improvement over Q4 2025 as well. We also expect a substantial improvement in our Q1 2026 bottom-line performance exceeding each of our fiscal 2025 quarters.

Although we were disappointed by our 2025 revenue performance, we are now seeing much more urgency and focus from our customers and prospects to take action in better securing access to mission-critical systems, particularly in the military and defense, financial services, and regulated industries. Our 2025 revenue comparison versus 2024 was also impacted by two significant factors totaling roughly $2 million. The first related to a $1.5 million two-year license renewal with a foreign national bank, the bulk of which was recorded in 2024. This caused roughly an $800,000 decrease in recognized revenue related to this customer in 2025 versus 2024. Despite revenue recognition timing related to this customer, the relationship continues to grow nicely.

Earlier this month, they executed an expanded one-year license renewal of over $1 million for 2026, which represents an approximately 30% increase in revenue over the previous contract. Our year-over-year revenue comparison also reflected the completion in 2025 of our strategic transition to selling only BIO-key branded solutions in the EMEA region. As anticipated, this transition is beginning to benefit our gross margin and growth prospects as we rebuild our EMEA pipeline with BIO-key-only solutions and sales opportunities that carry substantially higher net margins. While these factors led to lower year-over-year software license, both hardware and services revenues grew in 2025 due to the expansion of our customer base and licensed endpoints. Turning to our outlook. Let me review key trends in the enterprise authentication market that support our optimism for 2026.

First is the increasing need for secure access to digital platforms and protection against growing cybersecurity threats, which is driving rapid growth in the authentication solutions market. Global sales are estimated to be $23 billion in 2025 and projected to reach almost $100 billion by 2035, representing a compound annual growth of almost 16%. As cybercrime becomes more sophisticated, we expect businesses and governments to increasingly embrace advanced authentication technologies, such as those that BIO-key provides, to safeguard sensitive information and maintain customer trust. This surge in demand for enhanced authentication solutions is being driven by the widespread adoption of digital services, e-commerce, online banking, and the growing use of mobile devices.

Authentication solutions, including biometrics, MFA, digital certificates, are all crucial to ensure that only authorized individuals gain access to private information or systems. A key gap we fill is that mainstream MFA solutions offer only device-assisted authentication. Whereas our PortalGuard platform is a complete MFA offering with phoneless and tokenless authentication that leverages biometrics. Our Passkey:YOU solution provides web key secured, hosted FIDO2 passkey authentication for tokenless, phoneless, and passwordless authentication with biometric efficiency. By year-end 2026, passwordless authentication will be the default for workforce access across almost every enterprise. The shift is being driven by the increased vulnerability of passwords to phishing, credential reuse, and account takeover attacks. More than 70% are already moving towards passwordless adoption, and about 3/4 of enterprises expect to invest in passkeys or passwordless tools this year.

Biometric authentication adoption is expected to continue to grow, particularly in the most sensitive and high-value use cases in the regulated spaces such as military and defense, financial services, and healthcare, where we all have already seen growing adoption. The traction we see is also aided by more supportive regulatory frameworks in many, many foreign jurisdictions as well as by escalating geopolitical risks, which we're all aware of. AI-driven threats are forcing security leaders to rethink how access decisions are made, emphasizing the need for much more resilient identity strategies where biometrics can play a pivotal role as opposed to conventional methods that are most vulnerable to AI-powered attacks. Authentication technologies are converging towards unified access for workforce, partner, and privileged access under single strategic foundations.

Our PortalGuard Passkey and biometric solutions provide infinite flexibility in deploying to any component of a company's employee population despite infrastructure and job function. Phones and tokens are no longer necessary, and with 16 types of auth factors, one size no longer fits all. These significant shifts in how enterprises approach authentication with a focus on security, convenience, compliance, and evolving regulations play directly to our strengths. In 2025, we launched our Defense and Intelligence Cybersecurity Initiative, which is discussed in today's press release. We also highlight several recent contract wins and momentum we are seeing in the defense and financial sectors, as well as significant new partnerships both domestically and internationally. Since that's in the press release, I won't repeat it here, but we can certainly address any questions regarding any of those areas in the Q&A session.

In terms of our continuing investment in R&D and new product development, in Q4, BIO-key formally introduced the new FBI FAP 20 certified EcoID III fingerprint scanner. EcoID III is our most advanced reader, which pairs encrypted device-to-host communication with liveness detection for faster, more secure authentication. EcoID III is primarily for highly regulated industries and the most sensitive Zero Trust environments such as defense and banking. We're also finishing up work on our most significant update ever for our PortalGuard identity platform, version 7.0. This includes a major platform monetization, significant new configurability and flexibility, and improved lower-cost deployment capabilities. It is currently undergoing comprehensive third-party security testing for an expected release during the second quarter. Our updated product offerings and unique biometric capabilities give us a sustainable competitive advantage, particularly as I discussed in the regulated industries, due to those strict compliance standards.

Our defense and banking niches, in particular, have significant global upside in 2026 and beyond. Today, our business is predominantly subscription-based, and we continue to utilize a partner-centric model in which roughly 50% of our new U.S. business and nearly 100% of our international business is sold through a network of sales channel partners, including Amazon and TD SYNNEX, which we have built relationships with over the last few years. Turning to overhead and cost, in 2025, we were able to reduce our total SG&A expense by almost $800,000 or 11% and total operating expenses by 7%. This mission continues, and we are optimistic about the potential benefits of AI adoption in our processes to drive even further operational efficiency, productivity, and lower cost.

These initiatives play an important role, along with our growth efforts, to progress the company toward our goal of reaching breakeven and profitability in 2026. Finally, we also made great strides in strengthening our financial position in 2025, ending the year with $2.7 million in cash. Up more than $2 million from 2024 and increasing our book value to $7.6 million versus $3.8 million at the end of 2024. Our current cash position and expected cash receipts provide a solid working capital base to support our growth plans for 2026. We're off to a strong start this year with building momentum in several key verticals. We expect top-line expansion combined with expense management to meaningfully advance our goal of reaching our target again of breakeven and profitability this year.

We are well-positioned in terms of financial liquidity to fund our growth plans. Given the growing adoption of BIO-key's flexible passwordless, tokenless, and phoneless authentication solutions that we are seeing, we expect 2026 to be a very exciting and productive year for our company and for our shareholders. We're entering the most exciting chapter in our company's history, one defined by innovation, strategic expansion, and relentless focus on delivering value to our customers and our shareholders. Significant growth and profitability are in sight, and with the right team, technology, and partnerships in place, we are poised to deliver long-term shareholder value. Now let me turn the call over to Cece for a review of the financials.

Thank you, Mike. We released our results this morning, so let me provide a quick review. Reflecting the factors Mike addressed earlier, the total 2025 revenues decreased 12% to $6.1 million versus $6.9 million in 2024. 2025 revenue did benefit from over 100% increase in hardware revenues to $1.3 million in 2025, largely due to increased purchases of our biometric solutions. Service revenue increased 6% to $1.2 million due to BIO-key's growing customer base and new customer deployments. In Q4 2025, license fee revenue decreased 26%, hardware revenue increased 85%, and service revenues decreased 10%, as reflecting the factors Mike discussed, as well as the timing of deployment.

Our 2025 gross margin was 77.5% as compared to 81.4% in 2024, primarily due to the mix of software fees, license fee revenue, and hardware revenue as a percent of total revenues. Gross margins on license fee improved 91% in 2025 from 88% in 2024, reflecting the benefit of selling branded products versus third-party products in the EMEA region. In 2025, we reduced our SG&A costs by 11% due to proactive cost management, including reorganization of sales personnel, reducing marketing show expenses, and lower audit fees, partially offset by higher professional fees related to BIO-key's financing activities. We will continue to focus on cost reduction opportunities as we move forward in 2026. Research and development engineering costs increased 4% in 2025 due to supporting the new product developments, as Mike discussed.

As a result, operating expenses decreased 7% overall in 2025. Lower operating costs helped to offset the impact of lower revenue in 2025, as BIO-key's net loss increased to $4.6 million or $0.69 per share from $4.3 million or $2.09 per share in 2024. BIO-key's Q4 2025 net loss increased to $1.7 million or $0.19 per share as compared to the $1.4 million in 2024 or $0.46 per share. Weighted average common shares outstanding, which reflect warrant exercises and other financial activities, are provided in today's press release. As of December 31, 2025, BIO-key had current assets of $4.6 million, including cash of $2.7 million, as compared to the prior year-end of $1.9 million, which included $438,000 of cash.

Accounts receivable increased 73% to $1.2 million at December 31, 2025, from $718,000 at the end of 2024. Our book value increased to $7.6 million at year-end 2025 from $3.8 million at the close of 2024. We plan to file the 10-K within the next week. With that, operator, let's please proceed to the question and answer session.

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question today is from Jack Vander Aarde with Maxim Group. Please go ahead.

Okay, great. Good morning. Hi, Mike. Thanks for taking my questions.

Good morning, Jack.

Mike, you already addressed it pretty well. I just wanna also just kind of get a little more clarity on the 2025 revenue was a little softer than you initially expected, but obviously great to see you're targeting a strong first quarter 2026 with, you know, $2.2 million revenue. That's fantastic. Just trying to better understand the 2025 result. One of the reasons mentioned was due largely to a significant contract renewal with a foreign retail bank in 2024 that did benefit 2025. Can you just maybe speak to this a little bit further? Is this an active customer? Are they due for an expansion or renewal in 2026? Just help me better understand that particular customer.

In my comments, Jack, by the way, good morning. In my comments, I mentioned that they did renew for one year at over $1 million, so about a 30% increase in value of that contract. It was a two-year contract that we closed in 2024. We took the revenue all in 2024 for that two years. That's why, again, in 2025, obviously it wasn't repeatable. That's what I was trying to say. You're looking for a little more color on 2025. I would sum it up this way, outside of the comments that I made in the prepared session.

We went through a significant transition in our EMEA division that took a little bit longer than we expected, but quite frankly, is going to have a huge benefit for us here too in 2026 and going forward because of two things. Number one, we're selling BIO-key only solutions with and including our biometrics, which are getting very, very good visibility, especially within the regulated industries, and that's banking, defense, you know, healthcare, that kind of thing. The second piece is the reason this again took a little bit longer. The deal size in EMEA is, you know, some of the deals are seven-figure, but most of them are in the high hundreds of thousands of dollars. So they're larger deals. They're all through channel partners. They're typically with larger customers. The benefits are incredible when they close.

That took us a little bit longer to get over the chasm in 2025, and I think that's why we underperformed our expectations there. Most of it was timing, but we are very bullish and very encouraged about 2026, and we will take advantage of that benefit. That should get us to our goal and objective of break-even profitability and obviously being cash flow positive, this year.

Okay, great. No, that I really appreciate that extra color, Mike. That actually makes a lot of sense. Then just to be extra crystal clear, is this in the press release you did? You referenced all these various specific deals and highlights. Is this the customer that I'm looking at or is this a different one under the financial sector? You secured a $1.04 million one-year license renewal with a foreign bank. Is this that customer from 2024 or is this a separate entity?

No, that's that customer.

Okay, great. Okay. Thank you for just connecting the dots there.

No problem.

Mike, let's talk about the first quarter because this is definitely a point of emphasis. I just, you know, it popped out to me. You know, here we are, we're basically the last day of the first quarter as of today, so it sounds like you've a pretty good read-through on that $2.2 million target. Is this any of the, I guess, one, any of the slippage from the fourth quarter that slipped into the first quarter? Two, do you have a good sense of the mix of that revenue? Is it mostly license revenue? How do I think about that? Is it growth across all three segments?

Well, the majority will likely be license revenue, but there's also some strong hardware revenue as well, but very good margins. As you know, our blended gross margins are always, you know, never lower than the high 70s all the way up through the low 80s. Depending upon that mix, you know, you're gonna be looking at an 80%+, if not more, gross margin across the board. Whether it's hardware or software combined, that's what you can expect.

Excellent. Okay. That's helpful. You know, just maybe if we just touch on some of these large deals you're seeing in some. You know, it sounds like you're seeing more urgency, as you mentioned, from customers across. You started listing a segment here and there, and then you started basically covering all your segments it seems that. Where would you say, if you could just highlight like maybe a handful of potential maybe deals that aren't in stone yet, but things that are kind of in the background that you're working on that could really move the needle. Would you say that these opportunities are in Europe and they're in your defense, your military and defense sector, primarily the financial banking, financial services primarily, or is it really all over the board?

Where are you seeing the largest needle mover opportunities that maybe you haven't talked about explicitly yet?

Well, you know, for sure, and we've discussed this before, we've developed quite a niche in defense and in government right now that including and incorporating our biometrics is getting significant uptake. I don't have to remind you of the geopolitical scenario we're dealing with and certainly the sense of urgency around security. Within that, within our niche, we have a sub-niche which is focused on intelligence and information. That's top-priority. Our solutions not only provide the level of security that's required, but convenience and availability and scalability, and that is critical and important in those segments. We're seeing the business on a global basis, and the expansion will be on a global basis. It will be in EMEA, in Europe, and in the Middle East.

We have a couple of very large opportunities in South America right now that we're working with some very large partners, notable partners, and the relationship that we announced just a couple of weeks ago with TD SYNNEX. As you know, they're one of the largest resellers and VARs. They're global, but certainly here in the U.S., and they're very focused on the state, local, and federal business, and they are going to help us, as a force multiplier, grow our business there as well. It's across the board. I mean, we have opportunities, for example, in the gambling space, right? To secure access to information in banking, in both large national banks as well as some regional banks as well.

In healthcare, some national ministries all the way down to hospitals. As you know, we've been in that business for a long time. You know, we cut across every sector of the economy, but certainly in the regulated space, that's where I see continued growth. Let's put it this way, if you're a defense or a government contractor right now, your business is going to blossom and grow. Each of those contractors, forget about the government themselves, has to secure at the NIST level, right? They have to secure and meet the compliance hurdles that are required to do business with the government, and that's a huge opportunity for us. That's why our relationship with TD SYNNEX, I think, is going to blossom and be significant here domestically.

Fantastic. I appreciate that, Mike. That's all I have for you. I wish you the best of luck, and I'll look forward to speaking soon.

Very good. Thank you, Jack.

Again, if you have a question, please press star then one. The next question is from Dan Camus, a private investor. Please go ahead.

Hello, guys.

Hi, Dan.

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

Well, we haven't reported the quarter, so I can't comment on you know the exact numbers for expense and so forth. We did and do believe, you know, our revenue is gonna be in the range that we predicted. I, you know, certainly, the first quarter, you know, should be similar to all of the other quarters. Sometimes events like, for example, when we attend a large event and we spend money perhaps there, it could be a little bit higher. We are relaunching our website right now and planning to do so early in the second quarter. You know, there might be some expense associated with that, but other than that, we're pretty stable.

Okay. We should see pretty significant improvement in cash flow in the first quarter, sounds like. Should we expect, or can you give us any clue as to what to expect for expenses in R&D in 2026?

I think I mentioned in my prepared remarks that we're about to launch one of the most significant upgrades and enhancements for our PortalGuard platform, version 7. So a lot of that money has already been spent. You know, we've been working on this for nearly a year and a half, two years. I would think our R&D expenses are gonna be relatively stable. I don't expect them to grow significantly. We're really hoping, and we have a very intensive initiative going on within the company to assess AI-related tools, and we have contracts with a number of them. We're assessing where and how we can use those, not only within all facets of the business, but within development to do two things.

Number one, become more efficient and more productive, but ultimately reduce costs and increase our time to market.

I see. Anything revolutionary about this version, or is it a marginal improvement, an upgrade in your offerings that you can talk about?

It's significant, and we'll be announcing that shortly. Especially for partners, Dan, where some of our larger partners want to be able to control, to mix and match, and to deploy because everything is subscription now. To be able to deploy licenses, pull them back if, for example, the customer, you know, decides to cancel and to utilize those licenses in other, you know, accounts and so forth. The ability to have multi-tenant management for those partners is a really big deal, and that's, you know, part and parcel of what we're doing here. Amongst many other enhancements for security, the incorporation of mobile technologies, a whole host of different options and availability. A lot of this focused on making our partners more involved in the dashboard and management of the solution set.

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

I'm excited about a couple of items. Number one, obviously the growth and the increase in the user population, but also the assessment of our more advanced technologies, like one-to-many that could dramatically change the way they operate and increase the size of this contract, as we continue through this year and into next. I'm very excited about that opportunity. I think it's revolutionary because it could be one of the largest deploys of this type and this nature in the world. We're enthused about that. There's a lot of growth potential ahead for that as well.

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

No. You know, they already do that. I mean, that's parochial. I'm talking about some more advanced use of the technology.

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

Hopefully.

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

I think, you know, we're saying that our goal this year, right, is to be break-even or profitable and to be cash flow positive, and that's our objective. You know, when we get there, I can't specifically say, but we should be there in the early part of 2026. That's our goal and objective.

I mean early-

It's not that sophisticated, right? You can look at our.

All right.

Expenses in the, you know, I'm saying $2 million range, right? Give or take, right? Could be higher, could be a little bit lower. You can look at our revenue in the $2 million-$3 million range. You can look at our gross margins in the 80% range, and you can figure it out. You know, that, again, that's our goal and objective, right? To get there, to be there. I believe we have, as I mentioned and closed in my prepared comments, I believe we have the team, we have the partners, we have the product, and now we have, I'll call it a very captive market, especially again in our niche and on the regulated side, to be able to get there.

Got it. Any evidence in the first quarter? I mean, I think one bug has always been U.S. businesses adopting passwordless adoption. You're indicating there's a significant move in that direction. I'm just wondering if there's any evidence in the first quarter that U.S. businesses are willing to purchase from BIO-key rather than their usual large competitors.

Yes.

And-

Yes. No doubt. New business, no question. Yes. Again, that partnership. Look, you know, SYNNEX is a large company. They're a large public company. You can look them up. They're very enthused about offering our solutions and technology, especially in their public sector business. So, I mean, that's a very strong proof point that we can expand and them as a force multiplier, right? With the customer base they have, nevertheless, the partner network they have, you know, we should see significant growth in that business.

Well, along that line, I think recently when you've mentioned a partner announcement, there's usually been some underlying deal that supports it. Is that what's going on with TD SYNNEX?

Yeah. We have a whole series of deals going with them, and, you know, you'll hear more about it as we're able to announce them.

All right. That sounds good. Can you say anything about your ARR? Where is that running in the first quarter, or are we still between $6 million and $7 million?

Yeah, we're in that range. You know, again, other than our legacy customers, we have a handful of legacy customers. For the most part, our business is a subscription business. Even those legacy customers we're, you know, migrating them, especially now that we have new and enhanced features and products. We have a good reason to be able to migrate them. That sector of our business is definitely substantial. Multi-year deals are our total focus. Even when we're on-prem, we can be subscription, and we can be multi-year, and still fit within the confines of their requirements. That's another really big advantage that we bring to the table, and that's why I believe in the regulated industries we're doing so well, where many, especially international, clients do not want hosted solutions.

You know, everything here is kinda moving to the web, right? To AWS or Oracle or, you know, Azure, no question, here domestically. However, internationally, there's still a penchant for storing and housing customer data on-prem, and we can go both ways. We can offer our customers the opportunity to do it either way. More importantly, and this is a new feature in version 7, to be able to do both at the same time and to be able to transition seamlessly. That's a powerful differentiator for us.

Got it. A couple more, I think. Any changes in the Boomerang asset or any news on that?

No. I know they have an S-1 filed now, which I think is public information and are looking at. They've done a couple of acquisitions of, like product, and, that's really all I have at this point. I have no other information.

No change in that asset value at all.

No.

Last question is, I think probably you have about 10 business days to get the stock above one buck to forestall a reverse split. At this point, is there anything you think that could still forestall such a split?

Yeah. You know, that's a great question. I didn't even think about quite honestly, the proxy that's out there. Obviously belt and suspenders, right? We're not gonna risk the potential to lose our Nasdaq listing, right? That's not gonna happen. Obviously, the board, it was prudent for us to file the proxy. We have until early May, I think the first week of May, to have the stock trade for 10 consecutive days over a dollar. If that happened, we certainly would not do the reverse split. If we need to, we certainly will. Our shareholder meeting is scheduled late April. I'm hoping that in the next month that we're gonna be able to find our way clear to seeing the stock trade up.

As you know, this geopolitical scenario hasn't been kind to anyone. It doesn't matter who you are, what space, what industry, it's been broad-based and it's a difficult market. Who knows? We certainly are in a position to do whatever we need to do to protect ourselves, especially now as the wind is at our back and we're feeling much more optimistic about, you know, significant scale of our business going forward. I hope we don't have to do it, Dan, but if we do, we will.

Okay. Well, sounds like the first quarter was a really good job and I hope moving forward we'll have some more good news. Thank you.

Great. Thank you.

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

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

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