BKYI

• Overall Financial Performance & H1 Results

  • Q2 2026 net loss improved 51% YoY to $577,000 ($0.56 per share) from $1.17 million ($2.00 per share) in Q2 2025
  • H1 2026 total revenue grew 23% YoY, and net loss improved 59% to $782,000 ($0.75 per share) from $1.9 million ($3.61 per share) in H1 2025
  • Gross profit increased 36% YoY to $1.7 million, with gross margin expanding to 87% from 73% YoY, driven by a higher mix of high-margin license revenue and 100% profit sales of fully reserved pandemic-era hardware inventory
  • Total operating expenses decreased 5% YoY to $2.2 million due to ongoing cost containment efforts, partially offset by one-time reverse stock split and audit/tax costs

• Business Development & Partnership Wins

  • Strong momentum across EMEA region, with accelerating deal closing, new channel partner additions, and growing project pipeline across government, defense, financial services, and education
  • Recent wins include: partnership with Maktabi Tech to deliver authentication solutions to education institutions across Saudi Arabia, Jordan, and the UAE; contracted national authentication modernization project for the Central Bank of Jordan; Portuguese national security agency deployment with partner Visualforma; Alabama's AOD Federal Credit Union U.S. deployment via partner Blue Ally
  • Expanded U.S. public sector go-to-market access via new partnership with DLT Solutions, a TD Cynics division, for streamlined procurement with DLT's large customer base working toward Zero Trust and MFA mandates

• Corporate & Balance Sheet Updates

  • Completed a one-for-ten reverse stock split in Q2 2026, regained NASDAQ listing compliance in July 2026, and resumed trading on the NASDAQ Capital Market
  • Raised $2.5 million in gross proceeds via a post-quarter-end warrant transaction, bringing the company's pro-forma current cash position to over $4.5 million, sufficient for operations and growth initiatives
  • Reduced outstanding note balance by 51% ($350,000) to $325,000 post-quarter via share issuance

• New Strategic Opportunity: AI Ecosystem Security

  • Management identifies biometric authentication as a critical solution to secure agentic AI operations, addressing the industry gap of tying high-stakes AI agent actions to accountable human users
  • Aligns with global industry and government frameworks requiring human accountability for autonomous AI system actions, and CISOs rank AI identity assurance as a top 2026-2027 security priority
  • Bio-key is actively developing solution strategies and identifying strategic partners to build out this capability leveraging existing product offerings

• Management maintained guidance for continued revenue growth in the second half of 2026, and reaffirmed the target of achieving profitability in H2 2026
• While the delayed large Q2 hardware order will now ship in H2 2026, management noted there are multiple additional large opportunities in the existing pipeline that are sufficient to achieve profitability, with contract sizes increasing significantly across regulated industry end markets
• Management expects license revenue growth to continue across the back half of 2026, with growth anticipated in both Q3 2026 and stronger growth in Q4 2026, despite typical seasonal slowdowns in EMEA during August
• No additional equity dilution is expected after the recent warrant transaction, as the company holds sufficient cash to fund operations and planned growth investments

Bio-key International operates across three core product/ revenue segments for Q2 2026: 1) License fee revenue: increased 53% year-over-year to $1.2 million from $800,000, accounting for 62.5% of total Q2 2026 revenue. 2) Hardware revenue: decreased 19% year-over-year to $460,000 from $569,000, accounting for 24% of total Q2 2026 revenue. The decline was driven by deployment timing, specifically a large order shifted from Q2 to H2 2026. 3) Service, maintenance, and other revenue: decreased 28% year-over-year to $231,000 from $322,000, accounting for 12% of total Q2 2026 revenue. The decline stemmed from lower non-recurring product customization service revenue and timing of recurring service agreement renewals. Total Q2 2026 revenue across all segments was $1.92 million, a 13% YoY increase.

• The Q2 2026 financial results missed management's original expectations due to the delayed shipment of a large hardware order, creating short-term revenue volatility from deployment timing uncertainty
• Small-cap NASDAQ-listed companies have faced recent market volatility, including post-positive-news selloffs that have pressured Bio-key's share price
• The emerging AI authentication opportunity is still in early development, with uncertain near-term revenue contribution and no clear timeline for large-scale commercialization
• The company faces ongoing competition from large technology providers like Microsoft and Google that bundle authentication solutions into existing broader offerings
• While the balance sheet has strengthened post the recent capital raise, the company was still operating at a net loss through the first half of 2026, and profitability depends on closing large pipeline opportunities as planned

Q: Analyst Jack Vanderaardy asks for visibility into the delayed large hardware order pushed to H2 2026, and whether it will split across Q3 and Q4, plus confirmation of growth across all segments in H2. / A: Management says the full order is targeted to ship in Q3, but timing is not finalized. More importantly, multiple other large opportunities are in the H2 pipeline, with average contract sizes growing substantially across government, defense, and banking, so only a couple of additional large wins are needed to hit profitability. Management expects continued license growth (the high-margin core of the business) in Q3 despite the typical August EMEA slowdown, with stronger growth in Q4, and overall growth across all segments while holding operating expenses stable. (281 characters)

Q: Vanderaardy asks what the company plans to use the new $2.5 million in gross proceeds for, and whether further dilution is expected. / A: Management confirms no additional dilution is expected at this point. The cash provides adequate working capital for operations and planned investment in the emerging agentic AI authentication opportunity, where Bio-key has a unique offering for restricted device environments that cannot use phones or tokens. Strong cash levels also improve credibility with prospective customers and support ongoing NASDAQ listing compliance, which was the core motivation for the recent capital raise. (297 characters)

Q: Private investor Dan Kamhis asks whether the Central Bank of Jordan project is contracted, and what stage of deployment it is in. / A: Management confirms Bio-key has been selected for the project, has moved past the pilot stage, and is already in deployment planning. The initiative is expected to scale to the entire sector user base, with significant long-term revenue potential that will ramp gradually over the next two to three quarters, including both hardware and software sales with a focus on higher-margin software licenses. (235 characters)

Q: Kamhis asks how Bio-key protects against AI agents stealing and reusing biometric data for unauthorized authentication. / A: Management explains that raw biometric data is never stored or matched; instead, encrypted digital templates of biometric data are used. Security comes from the full end-to-end encrypted ecosystem, which includes mandatory liveness detection to confirm a real human is authenticating, plus encryption of templates and all data transfers. Bio-key has 30 years of experience building this secure architecture for the world's most sensitive high-security environments. (284 characters)

Q: Kamhis asks whether the going concern disclosure from the 2025 10-K remains in place after the recent capital raise. / A: Management confirms the going concern disclosure is not included in the recent 10-Q. Auditors approved the 2025 10-K disclosure, and management remains on track to resolve going concern concerns by the end of 2026 by achieving the targeted profitability and positive cash flow. (182 characters)