BIO-key's Q3 Loss Widens Amid Revenue Dip, Cash Boosted by Warrants

TL;DR

**BKYI is burning cash and facing a 'going concern' warning, making it a high-risk bet despite recent warrant-fueled cash gains.**

AI Summary

BIO-KEY INTERNATIONAL INC (BKYI) reported a net loss of $964,849 for the three months ended September 30, 2025, an increase from a net loss of $738,959 in the prior-year period. For the nine months ended September 30, 2025, the net loss was $2,868,790, a slight improvement from $2,916,195 in the same period of 2024. Total revenues decreased to $1,549,706 for the three months ended September 30, 2025, down from $2,144,804 in 2024, primarily due to a significant drop in license fees from $1,441,011 to $917,951. Hardware revenue, however, saw a substantial increase for the nine-month period, rising from $537,562 in 2024 to $1,168,269 in 2025. The company's cash and cash equivalents significantly increased to $2,039,853 as of September 30, 2025, from $437,604 at December 31, 2024, largely driven by $3,813,057 from warrant exercises and a new $1,000,000 note payable. Despite the increased cash, the company continues to operate at a loss and management has evaluated conditions that raise substantial doubt about its ability to continue as a going concern within one year.

Why It Matters

For investors, BKYI's continued net losses and the 'going concern' warning are critical red flags, despite a temporary cash infusion from warrant exercises. The decline in license fee revenue, a core offering, suggests potential competitive pressures or market shifts in the biometric identity management space. Employees might face uncertainty given the company's financial instability. Customers could see potential disruptions if the company struggles to maintain operations or invest in product development. The broader market for biometric solutions will be watching to see if BKYI can stabilize its financial performance in a rapidly evolving and competitive industry.

Risk Assessment

Risk Level: high — The company explicitly states in Note 2, 'GOING CONCERN,' that management has evaluated conditions that 'raise substantial doubt about its ability to continue as a going concern within one year.' This is directly supported by a net loss of $2,868,790 for the nine months ended September 30, 2025, and consistent operating losses.

Analyst Insight

Investors should exercise extreme caution and consider avoiding BKYI given the explicit 'going concern' warning and persistent operating losses. Any investment would be highly speculative, relying on a significant turnaround in revenue generation and profitability, which is not evident in current trends.

Financial Highlights

debt To Equity

0.67

revenue

$1,549,706

operating Margin

N/A

total Assets

$10,113,313

total Debt

$4,068,235

net Income

-$964,849

eps

N/A

gross Margin

76.91%

cash Position

$2,039,853

revenue Growth

-27.75%

Revenue Breakdown

Key Numbers

• $964,849 — Net Loss (Q3 2025) (Increased from $738,959 in Q3 2024, indicating worsening quarterly profitability.)
• $2,868,790 — Net Loss (YTD 2025) (Slightly improved from $2,916,195 in YTD 2024, but still a significant loss.)
• $1,549,706 — Total Revenues (Q3 2025) (Decreased from $2,144,804 in Q3 2024, primarily due to lower license fees.)
• $2,039,853 — Cash and Cash Equivalents (Increased significantly from $437,604 at Dec 31, 2024, largely due to financing activities.)
• $3,813,057 — Proceeds from Warrant Exercise (Major contributor to increased cash, indicating reliance on equity financing.)
• $1,000,000 — Proceeds from Note Payable (Additional financing obtained, contributing to liquidity but also increasing debt.)
• $917,951 — License Fees (Q3 2025) (Decreased from $1,441,011 in Q3 2024, a significant revenue segment decline.)
• $1,168,269 — Hardware Revenue (YTD 2025) (Increased from $537,562 in YTD 2024, showing growth in this segment.)
• 10,836,618 — Common Stock Outstanding (As of November 13, 2025, indicating potential dilution from equity raises.)
• $1,459,000 — Common Stock for Debt Repayment (Noncash financing activity, showing debt being converted to equity.)

Key Players & Entities

• BIO-KEY INTERNATIONAL INC (company) — Registrant
• Nasdaq Capital Market (regulator) — Exchange where BKYI Common Stock is registered
• SEC (regulator) — Securities and Exchange Commission
• BBVA Bank (company) — Lender for government loan
• $964,849 (dollar_amount) — Net loss for three months ended September 30, 2025
• $2,868,790 (dollar_amount) — Net loss for nine months ended September 30, 2025
• $1,549,706 (dollar_amount) — Total revenues for three months ended September 30, 2025
• $2,039,853 (dollar_amount) — Cash and cash equivalents as of September 30, 2025
• $3,813,057 (dollar_amount) — Proceeds from exercise of warrants for nine months ended September 30, 2025
• $1,000,000 (dollar_amount) — Proceeds from note payable for nine months ended September 30, 2025

FAQ

Risk Factors

• Going Concern Uncertainty [high — financial]: Management has evaluated conditions that raise substantial doubt about the company's ability to continue as a going concern within one year. This is despite a significant increase in cash to $2,039,853 as of September 30, 2025, driven by financing activities.
• Dependence on Financing [high — financial]: The company's liquidity is heavily reliant on financing activities, such as $3,813,057 from warrant exercises and a $1,000,000 note payable. This indicates a potential ongoing need for external capital to fund operations.
• Declining Revenue Trends [medium — financial]: Total revenues decreased to $1,549,706 for Q3 2025 from $2,144,804 in Q3 2024, primarily due to a significant drop in license fees from $1,441,011 to $917,951.
• Increasing Net Loss [medium — financial]: The company reported a net loss of $964,849 for Q3 2025, an increase from $738,959 in the prior-year period, indicating deteriorating quarterly profitability.
• Hardware Cost Volatility [medium — operational]: The cost of hardware increased significantly to $1,080,109 for the nine months ended September 30, 2025, from $260,684 in the prior year. A reserve of ($509,040) was also recorded, suggesting potential issues with hardware inventory or sales.
• Dilution Risk [medium — financial]: With 10,836,618 common shares outstanding as of November 13, 2025, and significant proceeds from warrant exercises, there is a risk of further dilution for existing shareholders.

Industry Context

BIO-KEY INTERNATIONAL INC operates in the identity security and authentication market, a sector driven by increasing cybersecurity threats and the need for robust user verification. The industry is characterized by rapid technological advancements, including biometrics and multi-factor authentication solutions. Competition is fierce, with established players and emerging startups vying for market share.

Regulatory Implications

As a publicly traded company, BIO-KEY is subject to SEC regulations and reporting requirements. The company's financial condition, particularly the 'going concern' notice, may attract scrutiny from regulators and investors regarding its long-term viability and financial reporting accuracy.

What Investors Should Do

1. Monitor hardware revenue growth and profitability closely.
2. Evaluate the impact of declining license fees.
3. Assess the company's ability to manage its cash burn and operational losses.
4. Understand the terms and implications of new debt and equity financing.
5. Pay close attention to any updates regarding the 'going concern' assessment.

Key Dates

• 2025-09-30: End of Q3 2025 — Reported net loss of $964,849 and total revenues of $1,549,706, showing a decline in quarterly performance.
• 2025-09-30: End of Nine Months 2025 — Reported net loss of $2,868,790 and total revenues of $4,853,772, with significant growth in hardware revenue but a decline in license fees.
• 2025-09-30: Cash and Cash Equivalents — Increased to $2,039,853, a substantial rise from $437,604 at year-end 2024, primarily due to financing.
• 2024-12-31: End of Fiscal Year 2024 — Cash and cash equivalents stood at $437,604, highlighting the significant liquidity improvement in 2025.

Glossary

Accumulated deficit

The cumulative net losses of a company that have not been offset by net income. It represents the total loss incurred since the company's inception. (Indicates the company has historically operated at a loss, with a deficit of $132,176,692 as of September 30, 2025.)

Warrant exercises

The process by which holders of stock warrants (options to buy stock at a specific price) exercise their right to purchase shares, providing capital to the company. (A significant source of cash ($3,813,057) for BIO-KEY, indicating reliance on equity financing.)

Going concern

An assumption that a company will continue to operate for the foreseeable future, typically at least 12 months. If there's substantial doubt, it raises concerns about the company's viability. (Management has identified conditions that cast substantial doubt on BIO-KEY's ability to continue as a going concern.)

Deferred revenue

Revenue that has been received by a company for goods or services that have not yet been delivered or rendered. It is recorded as a liability until earned. (The company has $659,627 in current deferred revenue and $75,146 in long-term deferred revenue as of September 30, 2025.)

Cost of hardware - reserve

An accounting adjustment to reduce the carrying value of hardware inventory or related costs, often due to obsolescence, damage, or anticipated losses on sale. (A reserve of ($509,040) was recorded for the nine months ended September 30, 2025, impacting gross profit and indicating potential issues with hardware.)

Year-Over-Year Comparison

Compared to the prior year, BIO-KEY INTERNATIONAL INC. has seen a significant increase in cash position, rising from $437,604 to $2,039,853, largely due to financing activities like warrant exercises and new debt. However, this improvement is overshadowed by a worsening net loss in the third quarter ($964,849 vs. $738,959) and a substantial decline in total revenues ($1,549,706 vs. $2,144,804), primarily driven by lower license fees. While hardware revenue shows strong year-to-date growth, the overall financial picture remains concerning, with the company continuing to face substantial doubt about its ability to operate as a going concern.

Key Financial Figures

• $0.0001 — registered Common Stock, par value $0.0001 per share BKYI Nasdaq Capital Marke

Filing Documents

• bkyi20250930_10q.htm (10-Q) — 1306KB
• ex_856391.htm (EX-31.1) — 12KB
• ex_856392.htm (EX-31.2) — 12KB
• ex_856393.htm (EX-32.1) — 5KB
• ex_856394.htm (EX-32.2) — 5KB
• 0001437749-25-035227.txt ( ) — 5591KB
• bkyi-20250930.xsd (EX-101.SCH) — 44KB
• bkyi-20250930_cal.xml (EX-101.CAL) — 43KB
• bkyi-20250930_def.xml (EX-101.DEF) — 331KB
• bkyi-20250930_lab.xml (EX-101.LAB) — 284KB
• bkyi-20250930_pre.xml (EX-101.PRE) — 357KB
• bkyi20250930_10q_htm.xml (XML) — 800KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION 3

— Financial Statements

Item 1— Financial Statements: Condensed Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 3 Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2025 and 2024 (Unaudited) 4 Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2025 and 2024 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (Unaudited) 7 Notes to Condensed Consolidated Financial Statements 9

—Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations. 17

—Quantitative and Qualitative Disclosures about Market Risk

Item 3—Quantitative and Qualitative Disclosures about Market Risk. 24

—Controls and Procedures

Item 4—Controls and Procedures. 24

OTHER INFORMATION

PART II. OTHER INFORMATION 25

—Legal Proceedings

Item 1—Legal Proceedings. 25

—Risk Factors

Item 1A—Risk Factors. 25

—Unregistered Sales of Equity Securities and Use of Proceeds

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds. 25

—Defaults upon Senior Securities

Item 3—Defaults upon Senior Securities. 25

—Mine Safety Disclosures

Item 4—Mine Safety Disclosures. 25

—Other Information

Item 5—Other Information. 25

—Exhibits

Item 6—Exhibits. 25

Signatures

Signatures 26 Table of Contents

-- FINANCIAL INFORMATION

PART I -- FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS BIO-KEY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2025 2024 (Unaudited) ASSETS Cash and cash equivalents $ 2,039,853 $ 437,604 Accounts receivable, net 959,503 718,229 Due from factor - 74,170 Inventory 394,176 378,307 Prepaid expenses and other 352,375 278,648 Total current assets 3,745,907 1,886,958 Equipment and leasehold improvements, net 82,557 140,198 Capitalized contract costs, net 335,877 409,426 Deposits and other assets 7,976 7,976 Operating lease right-of-use assets 54,433 73,372 Investments 5,000,000 5,000,000 Intangible assets, net 886,563 1,097,630 Total non-current assets 6,367,406 6,728,602 TOTAL ASSETS $ 10,113,313 $ 8,615,560 LIABILITIES Accounts payable $ 655,647 $ 818,187 Accrued liabilities 1,214,377 1,278,732 Note payable, current 319,834 1,525,977 Government loan – BBVA Bank, current portion 88,115 132,731 Deferred revenue, current 659,627 773,267 Operating lease liabilities, current portion 26,522 24,642 Total current liabilities 2,964,122 4,553,536 Deferred revenue, long term 75,146 196,237 Note payable, long term 1,000,000 - Government loan – BBVA Bank – net of current portion - 44,762 Operating lease liabilities, net of current portion 28,967 48,994 Total non-current liabilities 1,104,113 289,993 TOTAL LIABILITIES 4,068,235 4,843,529 Commitments and Contingencies STOCKHOLDERS' EQUITY Common stock — authorized, 170,000,000 shares; issued and outstanding; 7,313,423 and 3,715,483 of $ .0001 par value at September 30, 2025 and December 31, 2024, respectively 731 372 Additional paid-in capital 138,180,051 133,030,271 Accumulated other comprehensive income 40,988 49,290 Accumulated deficit ( 132,176,692 ) ( 129,307,902 ) TOTAL STOCKHOLDERS' EQUITY 6,045,078 3,772,031 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,113,313 $ 8,615,560 S

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