Bio Key International: securities offering

Cover page 62 changes

bkyi20200717_s1a.htm

As filed with the Securities and Exchange Commission on July 17, 2020 June 15 , 2023

Registration No. 333-239782 333-

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3349 HI GHWAY HIGHWAY 138, BUILDING A, SUITE E

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

including area code, of registrant ' s principal executive offices)

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B IO-key BIO-key International, , Inc.

3349 HI GHWAY HIGHWAY 138, BUILDING A, SUITE E

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997 Lenox Drive, Building 3

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

Princeton Pike Corporate Center

Lawrenceville, NJ 08648 08648-2311

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If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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CALCULATION OF REGISTRATION FEE

Shares of common stock, $0.0001 par value per share

Warrants to purchase shares of common stock (4)

Shares of common stock issuable upon exercise of the Warrants

Pre-Funded Warrants to purchase shares of common stock

Shares of common stock issuable upon exercise of the Pre-Funded Warrants (4)

Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended, or the Securities Act.

Pursuant to Rule 416, the securities being registered hereunder include such indeterminate number of additional securities as may be issuable to prevent dilution resulting from stock splits, stock dividends or similar transactions.

Includes the offering price of any additional shares of common stock and warrants to purchase shares of common stock that the underwriters have the right to purchase from the Registrant.

No fee is required pursuant to Rule 457(i) under the Securities Act.

The proposed maximum aggregate offering price of the common stock proposed to be sold in the offering will be reduced on a dollar-for-dollar basis based on the offering price of any Pre-Funded Warrants offered and sold in the offering, and, as such, the proposed maximum aggregate offering price of the common stock and Pre-Funded Warrants (including the common stock issuable upon exercise of the Pre-Funded Warrants), if any, is $20,700,000.

$4,724.40 previously paid.

Pre-Funded Warrants to Purchase up to 15,000,000 Shares of Common Stock

Warrants to Purchase up to 15,000,000 Shares of Common Stock

We are offering 15,000,000 shares of common stock and warrants to purchase up to 15,000,000 shares of our common stock at a combined public offering price of $___ per share of common stock and accompanying warrant.

We are also offering to those purchasers whose purchase of our common stock in this offering would otherwise result in such purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, the opportunity, in lieu of purchasing common stock, pre-funded warrants to purchase 15,000,000 shares of our common stock, or Pre-Funded Warrants. Each Pre-Funded Warrant will be exercisable for one share of our common stock (subject to adjustment as provided for therein) at any time at the option of the holder until such Pre-Funded Warrant is exercised in full, provided that the holder will be prohibited from exercising Pre-Funded Warrants for shares of our common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued and outstanding. However, any holder may increase such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to us. The combined purchase price of each Pre-Funded Warrant and accompanying warrant to purchase common stock will equal $___, and the exercise price of each Pre-Funded Warrant will equal $0.01 per share of common stock. Pursuant to this prospectus, we are also offering the shares of common stock issuable upon the exercise of the warrants and Pre-Funded Warrants offered hereby.

Each share of our common stock, or Pre-Funded Warrant in lieu thereof, is being sold together with a warrant to purchase one share of our common stock. Each warrant will have an exercise price of $__ per share, will be immediately exercisable and will expire on the fifth anniversary of the original issuance date. The shares of our common stock and warrants are immediately separable and will be issued separately, but will be purchased together in this offering.

Our common stock is listed on The Nasdaq Capital Market under the symbol "BKYI." On July 16, 2020, the last reported sale price of our common stock on The Nasdaq Capital Market was $1.20 per share. The final public offering price of the securities offered hereby, as well as the exercise price of the warrants to purchase common stock, will be determined through negotiation between us and the underwriter in this offering and the recent market price used throughout the prospectus may not be indicative of the actual offering price. There is no established trading market for the warrants or Pre-Funded Warrants and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the warrants or Pre-Funded Warrants on any national securities exchange or other trading market. Without an active trading market, the liquidity of the warrants and the Pre-Funded Warrants will be limited.

Investing in our securities involves a high degree of risk. See " Risk Factors " beginning on page 7 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

Per Pre-Funded Warrant and

Accompanying Warrant

Public offering price

Underwriting discounts and commissions (1)

Proceeds, before expenses, to us

See "Underwriting" beginning on page 62 for additional disclosure regarding underwriting discounts and commissions and reimbursement of expenses.

We have granted the underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional 2,250,000 shares of common stock and/or warrants to purchase 2,250,000 shares of common stock at the public offering price, less the underwriting discounts.

We anticipate that delivery of the shares, Pre-Funded Warrants and warrants against payment will be made on or about [•], 2020.

Sole Book-Running Manager

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We The selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declares our registration statement effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED JULY 17, 2020 JUNE 15 , 2023

15,000,000 900,000 Shares of Common Stock

This prospectus relates to the resale, from time to time, by the selling stockholder identified in this prospectus under the caption "Selling Stockholder," of up to 900,000 shares of common stock, par value $0.0001 per share, of BIO-key International, Inc. issued and sold by us in a private placement transaction, consisting of up to 700,000 issued and outstanding shares and 200,000 shares issuable upon exercise of certain outstanding common stock purchase warrants.

All of the proceeds from the sale of the shares covered by this prospectus will be received by the selling stockholder. We will not receive any proceeds from the sale of these shares.

Our common stock is listed on the Nasdaq Capital Market under the symbol "BKYI." On June 9, 2023, the closing price of our common stock was $0.72 per share.

We will bear all costs, expenses and fees in connection with the registration of the shares. See " Plan of Distribution " beginning on page 22 for more information about how the selling stockholder may sell or dispose of the shares of common stock offered hereby.

INVESTING IN OUR SECURITIES INVOLVES RISKS. YOU SHOULD REVIEW CAREFULLY THE RISKS AND UNCERTAINTIES DESCRIBED HEREIN UNDER THE HEADING " RISK FACTORS " BEGINNING ON PAGE 5 OF THIS PROSPECTUS AND UNDER SIMILAR HEADINGS IN THE OTHER DOCUMENTS THAT ARE INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED of THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is , , 2020 . 2023.

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DETERMINATION OF OFFERING PRICE

PLAN OF DISTRIBUTION

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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Description of The Securities We Are Offering

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FINANCIAL STATEMENTS

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We have not and the underwriters have not, authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither the delivery of this prospectus nor the sale of our securities means that the information contained in this prospectus or any free writing prospectus is correct after the date of this prospectus or such free writing prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy our securities in any circumstances under which the offer or solicitation is unlawful.

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For investors outside the United States: We have not and the underwriters have not, taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities covered hereby and the distribution of this prospectus outside the United States.

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We have registered our trademarks "BIO-key", "True User Identification", "Intelligent Image Indexing", "WEB-key", "SideSwipe", "SidePass", "EcoID", "PistolStar®", "PortalGuard", "MobileAuth", "PASSIVEKEY®" and "The Biometric of Things" (application pending) "PISTOLSTAR®" with the U.S. Patent & Trademark Office, as well as many foreign countries, protecting the names of our name companies and PistolStar, Inc. ("PistolStar") our key technology offering names offerings discussed later in this prospectus. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this prospectus may appear (after the first usage) without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks and tradenames.

Prospectus summary 72 changes

We develop and market advanced fingerprint biometric identification and identity verification technologies, as well as related identity management and credentialing hardware and software solutions. We were pioneers in developing automated, finger identification technology that supplements or compliments other methods of identification and verification, such as personal inspection identification, passwords, tokens, smart cards, ID cards, PKI, credit card, passports, driver's licenses, OTP or other form of possession or knowledge-based credentialing. We have developed what we believe is the most discriminating and effective commercially available finger-based biometric technology.

Our primary market focus includes enterprise security, mobile payments and credentialing, healthcare records and data security, among other things. Our secondary focus includes government markets, large scale identity projects such as voter's registration, national ID programs, and SIM card registration.

We have also developed a robust products business. Our line of finger print readers, which we market under the brand names SideSwipe ® , EcoID ® and SideTouch™, can be used on any laptop, tablet or other device which contains a USB port.

We maintain a direct sales force and under our Channel Alliance Program utilize distributors, resellers, integrators and partners with substantial experience in selling technology solutions to government and corporate customers. We have built a global footprint which includes our executive offices in Wall, NJ, our research and development facility in Eagan, MN, and international operations in Hong Kong and Africa.

In 2020, we announced that we had secured two of the largest contracts in the Company's history, with our partner Technology Transfer Institute ("TTI"). The contracts, valued at a combined $75,000,000, are for large-scale identification projects in Africa and Nigeria. These historic opportunities are expected to showcase the Company's ability to support large scale projects utilizing our core biometric authentication software engine, WEB-key ® .

We continue to develop advancements in our capabilities and explore potential strategic relationships, including business combinations and acquisitions, which could help us leverage our capability to deliver our solutions. In furtherance of this strategy, in June, 2020 we acquired PistolStar, a New Hampshire based provider of enterprise-ready identity access management solutions, including multi-factor authentication, identity-as-a-service, single sign-on and self-service password reset to commercial, government and education customers throughout the United States and internationally. PistolStar has over 200 active customer subscribers to their products, which include PortalGuard™ multi-factor authentication (MFA), Nebula™ identity-as-a-service (IDaaS), PortalGuard single sign-on (SSO) and PortalGuard self-service password reset (SSPR).

PistolStar's PortalGuard MFA offers customers flexible policy-driven choices among 15 different methods of authentication, including BIO-key biometrics, FIDO U2F/2FA tokens, WebAuthn, Windows Hello, Google Authenticator, Microsoft Authenticator, RSA SecureID, Phone Push, OTP, SMS, phone-call, and bar-code, so every user can always be securely authenticated with whichever factor is most appropriate. For enterprises with existing IAM platforms, PortalGuard can be seamlessly integrated to add its complete MFA by supporting SAML, OpenID Connect, OAuth, WS-Federation, CAS, and Shibboleth, among other standards.

Combining PistolStar's proprietary authentication software with our biometric solutions creates an integrated turn-key multi-factor solution which we believe is unparalleled in the industry, and will allow us to provide a unified MFA solution that is differentiated in the market by our biometric user experience and who-you-are strong authentication.

Finger-based Biometric Identification and Personal Identity Verification We are a leader in finger-based biometric identification and personal identity verification, as well as authentication-transaction security. Stand-alone, or in partnerships with OEMs, integrators, and solution providers, we provide biometric security solutions to private and public sector customers. We help customers reduce risk by providing the ability to control access to facilities and services, in either the logical or physical domain. Our solutions positively identify individuals and verify, or confirm, their identity before granting access to, among other things, corporate resources, subscribed data and services, web portals, applications, physical locations or assets.

Our biometric identification technology improves both the accuracy and speed of screening individuals, for identification purposes or for personal identity verification, by extracting unique data from a fingerprint and comparing it to existing similar fingerprint data. The technology has been built to be scalable and to handle databases containing millions of fingerprints. We achieve the highest levels of discrimination without requiring any other identifying data (multi-factor) such as a user ID, smart ID cards, or tokens, although our technology can be used in conjunction with such additional factors. Users of our technology have the option of on device or cloud authentication. This flexible authentication option, in conjunction with our interoperable capabilities, is another key differentiator of our biometric identification solutions.

We also develop and distribute hardware components that are used in conjunction with our software, and sell third-party hardware components with our software in various configurations required by our customers. Our products are interoperable with all major fingerprint reader and hardware manufacturers and across Windows, Linux, and the Android mobile operating systems enabling application developers, value added resellers, and channel partners to integrate our fingerprint biometrics into their applications, while dramatically reducing maintenance, upgrade and life-cycle costs. This interoperability is unique in the industry, is a key differentiator for our products in the biometric market and, in our opinion, makes our technology more viable than competing technologies and expands the size of the overall market for our products.

We support industry standards, such as FIDO, BioAPI, and have received National Institute of Standards and Technology independent laboratory certification of our ability to support Homeland Security Presidential Directive #12 (HSPD-12) and ANSI/INCITS-378 templates, as well as validation of our fingerprint match speed and accuracy in large database environments.

In 2015, Microsoft announced native support for biometrics in the Windows 8.1 and Windows 10 Operating platforms as well as Office 2016. With Microsoft Hello, users can replace their PIN or password to access their device without any special software downloads by using our finger scanners which are plug and play compatible with the Microsoft platforms. We were the exclusive biometric partner at the Microsoft "Ignite your Business" Windows 10 and Office 2016 launch events, which generated a number of opportunities for both our hardware and software offerings.

Our Authentication Transaction Security Solution and Markets

Our authentication-transaction security technology, WEB-key®, provides the ability to conduct identification and identity verification transactions in potentially insecure environments, including the World Wide Web or in off-site cloud environments. We have developed our technology to enable on-device authentication as well as network or cloud-based authentication and believe we may be one of the few if not only technology vendors capable of providing this flexibility and capability.

WEB-key makes cloud-based biometric user-authentication viable and eliminates technology constraints on online service providers, who are otherwise dependent on handset provider hardware and software platform decisions. It extends all features and functionalities of the VST algorithm to customers looking to add an enhanced level of security to their thin client and client/server applications. WEB-key is currently supported by both Windows and Linux operating systems. Clients are available on Windows and Android operating systems.

We offer a full line of easy to use finger scanners for both enterprise and consumer markets. Our SideSwipe, SideTouch and EcoID scanners are plug and play compatible with Microsoft Windows and our Q-180 Touch reader is a Micro USB compatible fingerprint reader for Android devices. The readers are currently sold in the Microsoft stores, as well as through their on-line channel, on Amazon, and through our website.

Finally, our ID Director for Windows and ID Director for SAML offer biometric authentication to SAML enables apps such as Office 365, GoToMeeting, Zoom, SalesForce, Google G-Suite, and many others.

Pre-Funded Warrants offered by u s

We are also offering to those purchasers whose purchase of common stock in this offering would otherwise result in such purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, the opportunity, in lieu of purchasing common stock, to purchase Pre-Funded Warrants to purchase up to 15,000,000 shares of our common stock. The purchase price of each Pre-Funded Warrant will equal the price per share at which the shares of common stock and accompanying warrants to purchase common stock are being sold to the public in this offering, minus $0.01, and the exercise price of each Pre-Funded Warrant will be $0.01 per share of common stock. Each Pre-Funded Warrant will be exercisable immediately upon issuance and will not expire. This prospectus also relates to the offering of the shares of common stock issuable upon exercise of such Pre-Funded Warrants. See "Description of the Securities we are Offering–Pre-Funded Warrants" for a discussion on the terms of the Pre-Funded Warrants.

Each Pre-Funded Warrant is exercisable for one share of our common stock (subject to adjustment as provided therein) at any time at the option of the holder, provided that the holder will be prohibited from exercising its Pre-Funded Warrant for shares of our common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued and outstanding. However, any holder may increase such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to us.

Warrants offered by us

Warrants to purchase up to 15,000,000 shares of our common stock. Each share of our common stock, or Pre-Funded Warrant in lieu thereof, is being sold together with a warrant to purchase one share of our common stock. Each warrant will have an initial exercise price of $__ per share, will be immediately exercisable and will expire on the fifth anniversary of the original issuance date. This prospectus also relates to the offering of the shares of common stock issuable upon exercise of such warrants.

Each warrant is exercisable for one share of our common stock (subject to adjustment as provided therein) at any time at the option of the holder, provided that the holder will be prohibited from exercising its warrant for shares of our common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued and outstanding. However, any holder may increase such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to us.

Option to purchase additional shares and/or warrants

We have granted the underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional 2,250,000 shares of common stock and/or warrants to purchase 2,250,000 shares of common stock at the public offering price, less the underwriting discounts.

37,181,315 shares (including the shares of common stock underlying the Pre-Funded Warrants but assuming none of the warrants to purchase common stock issued in this offering are exercised).

We currently expect to use the net proceeds from this offering to (i) repay $4,226,250 of secured convertible notes and (ii) the balance for general corporate purposes and to fund ongoing operations and expansion of our business. For additional information, please refer to the section entitled "Use of Proceeds" of this prospectus.

Investing in our securities involves a high degree of risk. You should carefully review and consider the "Risk Factors" section of this prospectus for a discussion of factors to consider before deciding to purchase any of our securities in this offering.

Market Symbol and trading

Our common stock is listed on The Nasdaq Capital Market under the symbol "BKYI." There is no established trading market for the warrants or Pre-Funded Warrants and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the warrants or Pre-Funded Warrants on any national securities exchange or other trading market. Without an active trading market, the liquidity of the warrants and Pre-Funded Warrants will be limited.

Unless otherwise stated, all information contained in this prospectus assumes the exercise in full of all Pre-Funded Warrants sold in lieu of common stock in this offering and no exercise by the underwriters of their option to purchase additional shares and/or warrants in this offering.

3,643,320 shares of our common stock issuable upon the conversion of $4,226,250 principal amount of outstanding convertible notes with a conversion price of $1.16 per share; and ● 859,926 other shares of our common stock reserved for future issuance under our 2015 Equity Incentive Plan.

The following table summarizes our unaudited capitalization and cash and cash equivalents as of March 31, 2020 to reflect:

on an actual basis; and

on an as adjusted basis to give effect to the issuance of shares of common stock by us in this offering and the receipt of approximately $16,360,000 in net proceeds from the sale of such shares, assuming an initial public offering price of $1.20 per share, the closing price on July 16, 2020 of the Company's traded common shares listed on Nasdaq, after deducting underwriting discounts and commissions and estimated offering expenses.

You should read this table together with "Management's Discussion and Analysis of Financial Condition and Results of Operation," as well as our financial statements and related notes and the other financial information, incorporated by reference into this prospectus supplement.

As of March 31 , 2020

Cash and cash equivalents

Convertible notes payable - net

Common stock, $0.0001 par value, 170,000,000 shares authorized, 18,391,122, issued and outstanding, pro forma, and 33,391,122 issued and outstanding, as adjusted $ 1,839 $ 3,339 Additional paid in capital $ 91,793,124 $ 108,151,624 Accumulated deficit (93,205,984 ) (93,205,984 ) Total stockholders' equity (deficit) $ (1,411,021 ) $ 14,948,979 Total capitalization $ 890,935 $ 17,250,935

This summary highlights information contained in other parts of this prospectus or incorporated by reference into this prospectus from our filings with the Securities and Exchange Commission, or SEC. listed in the section of the prospectus entitled "Incorporation of Certain Information by Reference." Because it is only a summary, it does not contain all of the information that you should consider before purchasing our securities in this offering and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere or incorporated by reference into this prospectus. You should read the entire prospectus, the registration statement of which this prospectus is a part, and the information incorporated by reference herein in their entirety, including the " Risk Factors " and our financial statements and the related notes incorporated by reference into this prospectus, before purchasing our securities in this offering. Unless the context requires otherwise, references in this prospectus to " BIO-key, " the " Company, " " we, " " us " and " our " refer to BIO-key International, Inc. and our subsidiaries.

BIO-key International, Inc. is a leading identity and access management, or IAM, platform provider enabling secure work-from-anywhere for enterprise, education, and government customers. Our vision is to enable any organization to secure streamlined and passwordless workforce, customer, citizen and student access to any online service, workstation, or mobile application, without a requirement to use tokens or phones. Our products include PortalGuard® and PortalGuard Identity-as-a-Service (IDaaS) enterprise IAM, PINsafe, WEB-key® biometric civil and large-scale ID infrastructure, and accessory hardware to provide a complete solution for identity-innovating customers.

Millions of people use BIO-key every day to securely access a variety of cloud, mobile and web applications, on-premise and cloud-based servers from all of their devices. Employees, contractors, students and faculty sign in through PortalGuard to seamlessly and securely access the applications they need to do their work, without relying on personal phone use or per-user tokens. Organizations use our platform to securely collaborate with their supply chain and partners, and to provide their customers with flexible, resilient user experiences online or in-person.

BIO-key PortalGuard and hosted PortalGuard IDaaS are platforms that enable our customers to securely and easily assure that only the right people can access the right systems by utilizing our world-class biometric core platform among 17 other authentication factors. PortalGuard goes beyond traditional multi-factor authentication, or MFA, solutions by addressing sizeable gaps, such as allowing roving users to biometrically authenticate at any workstation without using their phones or tokens, eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification.

PortalGuard is used by our customers to manage and secure IT access by their employees, contractors and partners, which we call workforce identity. PortalGuard is also used to manage and secure the identities of an organization's customers through integration of APIs we have developed and industry-standard federation standards, which we call customer identity.

In 2022, we expanded our product offerings and customer base when we acquired Swivel Secure, a Madrid, Spain based provider of IAM solutions. Swivel Secure is the exclusive distributer of AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland. These solutions include a patented one-time-code extraction technology, helping enterprises manage the increasing data security risks posed by cloud services and bring your own device policies.

Large-scale customer and civil ID customers use our scalable biometric management platform and FBI-certified scanner hardware to manage enrollment, de-duplication and authentication for millions of users. One large bank has enrolled and identifies over 19 million of their customers in branches on a daily basis.

We sell our branded biometric and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution. Our NIST-certified fingerprint biometric platform is unique in that it supports interoperable mixing and matching combinations of different manufactures' fingerprint scanners in a deployment, so that the right scanner can be selected for the right use case, without mandating the user of a particular scanner.

We operate a SaaS business model with customers subscribing to term use of our software resulting in annual recurring revenue. We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners including resellers, system integrators, master agents and other distribution partners. Our subscription fees include a term license of hosted or on-premise product and technical support and maintenance of our platform. We base subscription fees primarily on the products used and the number of users enrolled in our platform. We generate subscription fees pursuant to noncancelable contracts with a weighted average duration of approximately one year.

Historically, our largest market has been access control within highly regulated industries such as government, financial services, and healthcare. During In 2019 we became a the go-to biometric authentication provider for board of election offices as eight offices, in two states, deployed which continue to deploy our hardware and software to secure internal access to the voter registration database. We will seek to extend this footprint Upon acquiring PortalGuard in 2020, and beyond. we now serve the higher education vertical.

We expect to grow our business within these highly-regulated industries and expect to continue to extend this footprint in 2023 and beyond. We believe that continued heightened security and privacy requirements in these industries, and as colleges and universities continue operating in remote environments, we will generate increased demand for security solutions, including biometrics. In addition, we expect that the compatible, yet superior portable biometric user experience offered by our technology for Windows 10 users will accelerate the demand for our computer network log-on solutions and fingerprint readers. Through value add-offerings via direct sales, resellers, and strategic partnerships with leading higher education platform providers, we expect to continue to grow our installed base. With the integration of Swivel Secure, we expect to expand our business into EMEA.

Our two primary sales strategies are focused on expanding (i) increased marketing efforts into the IAM market, along with a (ii) dedicated pursuit of large-scale identification projects across the globe, and (iii) growing our channel alliance program which includes more than one hundred and fifty participants and continues to generate incremental revenues.

A second component of our growth strategy is to pursue strategic acquisitions of select businesses and assets in the IAM space. In furtherance of this strategy, we are active in the industry and regularly evaluate businesses that we believe will either provide an entry into new market verticals or be synergistic with our existing operations and in either case, be accretive to earnings. We cannot provide any assurance as to whether we will be able to complete any acquisition and if completed, successfully integrate any business we acquire into our operations.

Our principal executive office is located at 3349 Highway 138, Building A, Suite E, Wall, New Jersey 07719 and our telephone number is (732) 359-1100. Our website is located at www.bio-key.com . The information on our website or any other website is not incorporated by reference into this prospectus supplement or the accompanying base prospectus. Our website address is included as an inactive textual reference only.

The BIO-key logo is our trademark. This prospectus and the documents we incorporate by reference into this prospectus may also contain trademarks and trade names of others.

BIO-key International, Inc.

Common stock offered by us selling stockholder:

900,000 shares of common stock

Shares of common stock outstanding after before this offering:

9,234,833 shares of common stock

Shares of common stock outstanding after completion of this offering (assuming full exercise of the common stock purchase warrants that are exercisable for shares of common stock offered hereby):

9,434,833 shares of common stock

Terms of this offering:

The selling stockholder, including its transferees, donees, pledgees, assignees and successors-in-interest, may sell, transfer or otherwise dispose of any or all of the shares of common stock offered by this prospectus from time to time on the Nasdaq Capital Market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. The shares of common stock may be sold at fixed prices, at market prices prevailing at the time of sale, at prices related to prevailing market price, or at negotiated prices.

The proceeds from the sale of the securities covered by this prospectus will be received by the selling stockholder. We will not receive any of the proceeds from any sale of the shares of common stock offered by this prospectus. If all of the 200,000 common stock purchase warrants exercisable for shares of common stock offered hereby are exercised, we will receive aggregate gross proceeds of $600,000 which we expect to use for working capital purposes. See " Use of Proceeds ".

Listing of common stock:

Our common stock is listed on the Nasdaq Capital Market under the ticker symbol "BKYI".

Investing in our securities involves a high degree of risk and purchasers of our securities may lose their entire investment. See the information under the caption " Risk Factors " beginning on page 5 of this prospectus and the other information included elsewhere in this prospectus and incorporated by reference herein for a discussion of factors you should consider before deciding to invest in our securities.

The number of shares of our common stock to be outstanding after this offering is based on 22,181,315 9,234,833 shares of our common stock outstanding as of July 15, 2020 June 9, 2023 and excludes as of such date:

1,610,054 172,734 shares of our common stock issuable upon the exercise of stock options, with a weighted-average exercise price of $2.42 $16.84 per share;

6,036,507 4,872,025 shares of our common stock issuable upon the exercise of outstanding warrants, with a weighted-average exercise price of $1.30 $5.81 per share; and ● 264,006 other shares of our common stock reserved for future issuance under our 2015 Equity Incentive Plan.

Risk factors 111 changes

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Based on our lack of sufficient revenue since inception and recurring losses from operations, our independent registered public accounting firm has included an explanatory paragraph in their audit opinion as to the substantial doubt about our ability to continue as a going concern.

Due to, among other factors, our history of losses limited revenue and negative cash flows from operations, insufficient revenue, our independent registered public accounting firm has included an explanatory paragraph in their audit opinion for the year ended December 31, 2019 2022 as to the substantial doubt about our ability to continue as a going concern. Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which contemplate that we will continue to operate as a going concern. Our financial statements do not contain any adjustments that might result if we are unable to continue as a going concern.

Since our formation, We have historically not generated significant revenue and have sustained substantial operating losses.

As of March 31, 2020, we had an accumulated deficit of approximately $93.2 million. In order to increase revenue, we have developed a direct sales force and anticipate the need to retain additional sales, marketing and technical support personnel and may need to incur substantial expenses. We cannot assure you that we will be able to secure these necessary resources, that a significant market for our technologies will develop, or that we will be able to achieve our targeted revenue. If we are unable to achieve revenue or raise capital sufficient to cover our ongoing operating expenses, we will be required to scale back operations, including marketing and research initiatives, or in the extreme case, discontinue operations.

We may need to obtain additional financing to execute our business plan over the long-term, which may not be available. If we are unable to raise additional capital or generate significant revenue, we may not be able to continue operations.

We have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $798,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. During 2022, we generated approximately $7.0 million of revenue, which is below our average monthly requirements. If we are unable to generate sufficient revenue to cover operating expenses and fund our business plan, we will need to obtain additional third-party financing. We may, therefore, need to obtain additional financing through the issuance of debt or equity securities. We cannot assure you that we will be able to secure any such additional financing on terms acceptable to us or at all. If we cannot obtain such financing, we will not be able to execute our business plan, will be required to reduce operating expenses, and in the extreme case, discontinue operations.

Our $2.2 million principal amount secured note matures on December 22, 2023 and we may not have sufficient cash flow from our business or the ability to raise sufficient funds to repay this note when due which may expose us to the risk of default which would materially and adversely affect our financial condition.

On December 22, 2022, we issued a $2.2 million secured promissory note (the "Note") to an investor which is due six months following the date of issuance, subject to one six-month extension by us. Interest under the Note accrues at a rate of 10% per annum, payable monthly through month six increasing to 12% per annum if we extend the term of the Note for an additional six months. The Note is secured by a lien on substantially all of our assets and properties. In addition to current interest payment obligations, the Note contains various covenants. Upon the occurrence of any event of default (as defined in the Note), whether for payment or covenant breach, and expiration of any applicable cure periods, all amounts due under the Note will immediately become due and payable in full, interest will accrue at the higher of 18% per annum or the maximum amount permitted by applicable law, the outstanding principal amount due under the Note will be increased by 30%, and the investor will have the right to convert all amounts due under the Note into shares of common stock at a conversion price equal to the 10 day volume weighted average sales price of our stock. Although the aggregate number of shares of common stock issuable upon conversion of the Note is capped at 985,576 shares, any such conversion could cause substantial dilution to existing stockholders and cause the price of our stock to drop. In April of 2023, we were in default under the Note due to our failure to timely file our annual report and timely file this registration statement covering the public resale of the shares issued to the holder of the Note in connection with the financing. We obtained a waiver and as of the date of this registration statement are not in default.

We plan to satisfy our obligations under the Note through a combination of cash from operations, liquidation of existing inventory, and proceeds from the issuance of additional debt or equity securities. Such payments will reduce the funds available to us for working capital, capital expenditures and other corporate purposes which may in turn limit our ability to implement our business strategy, heighten our vulnerability to downturns in our business, the industry, or in the general economy, and prevent us from taking advantage of business opportunities as they arise. While we believe that our plans to repay and or refinance this indebtedness are reasonable, as of the date of this report, we can provide no assurances that we will have cash resources from operations or be able to obtain the necessary financing on attractive terms or at all to repay the Note in full. Any plans to refinance are subject to the conditions in the capital and credit markets, which have been volatile due to, among other things, increases in interest rates. As a result, we may be forced to obtain capital on terms that are unattractive or that are dilutive to our stockholders and may need to pursue other alternatives to satisfy our obligation under the Note if we are unable to access the capital markets.

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In June 2015, we made a license sale in Africa for approximately $2.1 million, of which approximately $1.7 million remains unpaid. In December 2018, we made a license sale in Asia for approximately $1.1 million, of which approximately $0.5 million remains unpaid. These amounts were written off in full in the years ended December 31, 2018 and December 31, 2019, respectively and negatively impacted our financial position and results of operation.

We introduced our products in Asian markets recognized revenues from Africa and the European Union in 2016 2021 and 2022 and expect material continued revenues from Africa beginning these regions in 2020. future periods. Our financial performance will be subject to risks associated with changes in the value of the U.S. dollar versus local currencies.

Owing to the international scope of our operations, including our recent acquisition of Swivel Secure Europe, SA, we are exposed to foreign exchange risk. Our primary exposure to movements in foreign currency exchange rates relates to non-U.S. dollar-denominated sales and operating expenses worldwide. Weakening of foreign currencies relative to the U.S. dollar will adversely affect the U.S. dollar value of our foreign currency-denominated sales and earnings, if any, and could lead to us raising international pricing, potentially reducing the demand for our products. In addition, margins on sales of our products in foreign countries and on sales of products that include components obtained from foreign suppliers could be materially adversely affected by foreign currency exchange rate fluctuations. As a result, our business and the price of our common stock may be affected by fluctuations in foreign exchange rates, which may have a significant impact on our results of operations and cash flows from period to period. Currently, we do not have any exchange rate hedging arrangements in place.

Although we have made significant sales of our products throughout Asia and Africa in prior years, we have not been able to consistently enforce our contract rights and collect all receivables which has resulted in material write-offs.

We recently announced that we secured two contracts with Our partner TTI. These contracts are for large-scale identification projects in Africa. Our ability to enforce our international contracts is contingent on our relationships with foreign resellers, and their financial viability. Although we are making efforts to better enforce our contract rights, there can be no assurance that we will be able to fully collect all receivables originating in Asia and Africa or that we will not have to write-off future receivable receivables which may be material in amount. Any such write-offs have in the past and will negatively impact our financial position and results of operation.

We depend on key employees and members of our management team, including our Chairman of the Board and Chief Executive Officer, Chief Financial Officer, and our Chief Technology Legal Officer, in order to achieve our goals. We cannot assure you that we will be able to retain or attract such persons.

Our employment contracts with Michael W. DePasquale, our Chairman of the Board and Chief Executive Officer, Cecilia C. Welch, our Chief Financial Officer, and Mira LaCous, James D. Sullivan, our Chief Technology Legal Officer, expire annually, and renew automatically for successive one year one-year periods unless notice of non-renewal is provided by the Company. Although the contracts do not prevent them from resigning, they do contain confidentiality and non-compete clauses, which are intended to prevent them from working for a competitor within one year after leaving our Company. Our success depends on our ability to attract, train and retain employees with expertise in developing, marketing and selling software solutions. In order to successfully market our technology, we will need to retain additional engineering, technical support and marketing personnel. The market for such persons remains highly competitive and our limited financial resources will make it more difficult for us to recruit and retain qualified persons.

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We face inherent product liability or other liability risks that could result in large claims against us.

We have inherent risk of exposure to product liability and other liability claims resulting from the use of our products, especially to the extent customers may depend on our products in public safety situations that may involve physical harm or even death to individuals, as well as exposure to potential loss or damage to property. Despite quality control systems and inspection, there remains an ever-present risk of an accident resulting from a faulty manufacture or maintenance of products, or an act of an agent outside of our or our supplier's control. Even if our products perform properly, we may become subject to claims and costly litigation due to the catastrophic nature of the potential injury and loss. A product liability claim, or other legal claims based on theories including personal injury or wrongful death, made against us could adversely affect operations and financial condition. Although we may have insurance to cover product liability claims, the amount of coverage may not be sufficient.

We expect that we will need to obtain additional financing to execute our business plan over the long-term, which may not be available. If we are unable to raise additional capital or generate significant revenue, we may not be able to continue operations.

We have historically financed our operations through access to the capital markets by issuing secured and convertible debt securities, convertible preferred stock, common stock, and through factoring receivables. We currently require approximately $525,000 per month to conduct our operations, a monthly amount that we have been unable to consistently achieve through revenue generation. During 2019, we generated approximately $2,268,000 of revenue, which is below our average monthly requirements. If we are unable to generate sufficient revenue to cover operating expenses and fund our business plan, we will need to obtain additional third-party financing to (i) conduct the sales, marketing and technical support necessary to execute our plan to substantially grow operations, increase revenue and serve a significant customer base; and (ii) provide working capital. We may, therefore, need to obtain additional financing through the issuance of debt or equity securities. We cannot assure you that we will be able to secure any such additional financing on terms acceptable to us or at all. If we cannot obtain such financing, we will not be able to execute our business plan, will be required to reduce operating expenses, and in the extreme case, discontinue operations.

We have secured debt outstanding , which subjects us to potential defaults , that could adversely affect our ability to raise additional capital to fund our operations.

We have previously issued secured convertible notes in the aggregate amount of $4,226,250 to Lind Global Macro Fund, L.P ("Lind"). The notes are secured by all of our assets, including our intellectual property.

Our indebtedness could:

require us to dedicate a substantial portion of our cash flow from operations to payments of principal, interest on, and other fees related to such indebtedness, thereby reducing the availability of our cash flow to fund working capital and capital expenditures, and for other general corporate purposes;

limit our flexibility in planning for, or reacting to, changes in our business and the biometric authentication industry, which may place us at a competitive disadvantage compared to our competitors that have less debt; and limit among other things, our ability to borrow additional funds.

We plan to use a portion of the proceeds of this offering to repay amounts owed to Lind under these notes. To the extent we are unable to pay off our outstanding indebtedness with proceeds from this offering, our ability to make scheduled principal payments, to pay interest on or to refinance our indebtedness, depends on our future financial performance, which is subject to several factors including economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy our obligations under our indebtedness or any future indebtedness we may incur as well as our ability to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional capital on terms that may be onerous or highly dilutive. Our ability to refinance our existing or future indebtedness will depend on the conditions in the capital markets and our financial condition prior to maturity of the indebtedness. Any failure to make required principal or interest payments, or satisfy any other non-monetary obligations, including maintaining listing on the Nasdaq Capital Market, would result in an event of default and permit acceleration of all amounts due, and other remedies, including foreclosure on our assets.

We may not achieve sustainable profitability with respect to the biometric component of our business if we are unable to maintain, improve our offerings.

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The recent outbreak of COVID-19 has and may continue to have a negative impact on our business, sales, results of operations and financial condition.

The global outbreak of COVID-19 has led to severe disruptions in general economic activities, particularly retail operations and travel, as businesses and federal, state, and local governments take increasingly broad actions to mitigate this public health crisis. Individually and collectively, the consequences of the COVID-19 outbreak could have a material adverse effect on our business, sales, results of operations and financial condition. Although our employees have been accustomed to working remotely prior to the COVID-19 pandemic, the uncertainty has extended sales cycles, extended payment terms, impacted access to inventory overseas, and delayed the start of planned deployments, particularly in the continent of Africa which remains subject to shut-down and shelter at home orders.

Additionally, our liquidity could be negatively impacted if these conditions continue for a significant period of time and we may be required to pursue additional sources of financing to obtain working capital, maintain appropriate inventory levels, and meet our financial obligations. Currently capital and credit markets have been disrupted by the crisis and our ability to obtain any required financing is not guaranteed and largely dependent upon evolving market conditions and other factors. Depending on the continued impact of the crisis, further actions may be required. Our recent experience is that due to circumstances related to COVID-19, some of our customers have experienced delays in processing of orders for our products, which may delay certain anticipated revenues.

The extent to which the COVID-19 outbreak ultimately impacts our business, sales, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

We have taken measures to minimize the health risks of COVID-19 to our employees, as their safety and well-being are a top priority. Despite these efforts, there is a risk that one or more of our employees, including members of senior management, could contract COVID-19. Our U.S. employees are working remotely when possible, and we may experience reduced productivity due to the remote work environment. The extent to which COVID-19 impacts our business, sales and results of operations will depend on future developments, which are highly uncertain and cannot be predicted.

War, terrorism, other acts of violence or natural or manmade disasters such as a global pandemic may affect the markets in which the Company operates, the Company's customers, the Company's delivery of products and customer service, and could have a material adverse impact on our business, results of operations, or financial condition.

Our business may be adversely affected by instability, disruption or destruction in a geographic region in which we operate, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or manmade disasters, including famine, food, fire, earthquake, storm or pandemic events and spread of COVID-19, described above.

Such events may cause customers to suspend their decisions on using our products and services, make it difficult or impossible to access some of our inventory, and give rise to sudden significant changes in regional and global economic conditions and cycles that could interfere with purchases of goods or services. These events also pose significant risks to our personnel and to physical facilities which could materially adversely affect our financial results.

We are subject to risks and uncertainties associated with the continued growth of our international operations, which may harm our business.

We have international operations and recently expanded our international operations when we acquired Swivel Secure Europe SA, and plan to continue expanding abroad. Accordingly, our business is subject to risks and uncertainties associated with doing business outside of the United States and could be adversely affected by a variety of factors, including:

multiple, conflicting and changing laws and regulations such as privacy, security, and data use regulations, tax laws, export and import restrictions, economic and trade sanctions and embargoes, employment laws, anticorruption laws, regulatory requirements, reimbursement or payer regimes and other governmental approvals, permits and licenses;

failure by us, our collaborators or our distributors to obtain regulatory clearance, authorization or approval for the use of our product candidates in various countries;

additional potentially relevant third-party patent rights;

complexities and difficulties in obtaining intellectual property protection and enforcing our intellectual property;

difficulties in staffing and managing foreign operations;

financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our product candidates and exposure to foreign currency exchange rate fluctuations;

natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;

regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors' activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act (FCPA), its books and records provisions, or its anti-bribery provisions, or laws similar to the FCPA in other jurisdictions in which we may now or in the future operate; and anti-bribery requirements of several Member States in the European Union and other countries that may change and require disclosure of information to which U.S. legal privilege may not extend.

Any of these factors could significantly harm our business, operating results, financial condition or prospects.

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We recently acquired PistolStar. There can be no assurance that we will be able to manage PistolStar's business or successfully integrate the business with our historic operations without substantial costs, delays or other operational or financial problems. In addition, we cannot assure you that we will be to maintain and grow the revenues and operating margins of the combined business, realize cost synergies with PistolStar's products, services, and operations, or that we will be able to retain all of PistolStar's existing customers and employees. If we are unable to successfully manage the new business, we will not be able to generate sufficient revenue to offset the acquisition costs that we have incurred which would have a material adverse effect on our financial positon and results of operations.

We may pursue strategic acquisitions, including acquiring other identity access management companies, as part of our growth strategy and that may disrupt our growth.

We may pursue strategic acquisitions in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment, difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, the failure of counterparties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations for the acquired businesses. Fully integrating an acquired company or business into our operations may take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitions and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitions and could result in the failure to realize the full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time. Additional risks may include:

Our customers use our solutions to access their business systems and store data related to their employees, contractors, partners and customers. Our systems' integrity is essential to their use of our platform, which stores, transmits and processes customers' proprietary information and users' personal data. If the confidentiality, integrity or availability of our customers' data or systems is disrupted, we could incur significant liability to our customers and to individuals or businesses whose information was being stored by our customers, and our platform may be perceived as a technology company, less desirable, which could negatively affect our business and damage our reputation. We, face various security threats, including cybersecurity threats our third-party service providers, and our customers may be unable to gain unauthorized access anticipate these techniques or to sensitive implement adequate preventive measures. Further, because we do not control our third-party service providers, or the processing of data by our third-party service providers, we cannot ensure the integrity or security of measures they take to protect customer information and prevent data loss beyond evaluating and relying on their representations as to their security methods and posture. Although we utilize various procedures and controls to monitor these threats and mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing. If any of these events were to materialize, they could lead to losses of sensitive information, critical infrastructure, personnel or capabilities, essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations, or cash flows. As a technology company, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information. on an ongoing basis.

In addition to threats from traditional computer "hackers," malicious code (such as malware, viruses, worms and ransomware), employee or contractor theft or misuse, password spraying, phishing and denial-of-service attacks, we and our third-party service providers now also face threats from sophisticated nation-state and nation-state-supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risks to our systems (including those hosted on AWS' systems), internal networks, our customers' systems and the information that they store and process. Cybersecurity attacks in particular are evolving, we expect that they will continue, and we expect the scope and sophistication of these efforts may increase in future periods. As a result, we and our third-party service providers may be unable to anticipate these techniques or implement adequate preventative measures quickly enough to prevent either an electronic intrusion into our systems or services or a compromise of customer data, employee data or other protected information.

Cybersecurity attacks in particular are evolving and include but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. Although we have implemented systems and procedures that are designed to protect customer, employee, vendor and Company information, prevent data loss and other security breaches, and otherwise identify, assess, and analyze cybersecurity risks, these measures may not function as expected or may not be effective. sufficient to protect our internal networks and platform against certain attacks. Development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures increase and become more sophisticated. We face an evolving threat landscape in which cybercriminals, among others, employ a complex array of techniques designed to access personal data and other information, including, for example, the use of fraudulent or stolen access credentials, malware, ransomware, phishing, denial of service and other types of attacks. While, to the best of our knowledge, we have not experienced any material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a security breach or cyber attack cyberattack that could materially increase financial risk to the Company or our customers, such a security breach or cyber attack cyberattack could adversely affect our business and operations, including by damaging our reputation and our relationships with our customers, employees and investors, exposing us to litigation, fines, penalties or remediation costs.

We maintain cybersecurity insurance, but our insurance may be insufficient to cover all liabilities incurred in any such incident, and any incident may result in loss of, or increased costs of, that cybersecurity insurance. Any breach, or any perceived breach, of our systems, our customers' systems, or other systems or networks secured by our products, without regard to whether any breach is due to a vulnerability in our platform, may also undermine confidence in our platform or the identity as a service industry and could result in damage to our reputation and brand, negative publicity, loss of partners, customers and sales, increased costs to correct any problem, costly litigation and other liabilities. In addition, a breach of the security measures of one of our partners could result in the disclosure of confidential information or other data that may provide additional avenues of attack, and if a high profile security breach occurs with respect to a comparable cloud technology provider, our customers and potential customers may lose trust in the security of the cloud business model generally, which could adversely impact our ability to retain existing customers or attract new ones. Any of these negative outcomes could adversely impact market acceptance of our products and could harm our business, results of operations, and financial condition.

Our failure to comply with applicable privacy, data protection and information security laws or related contractual obligations could subject us to significant liability and negatively impact our financial position and results of operation.

There are numerous laws and regulations in various jurisdictions regarding privacy, data protection, information security, and the storing, sharing, use, processing, transfer, disclosure and protection of personal data. In light of the increasing pace of new technology development, including with respect to biometric data, the scope of these data protection and privacy-related laws and regulations are expanding, subject to differing interpretations, and may be inconsistent among jurisdictions, or conflict with other rules that we are subject to. These evolving laws and regulations may result in increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. We are also subject to the terms of our privacy policies and contractual obligations to third parties related to privacy, data protection and information security.

Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to customers or other third parties, or applicable laws or regulations relating to privacy, data protection, or information security may result in governmental investigations or enforcement actions, litigation, claims or public statements against us by consumer advocacy groups or others, and could result in significant liability or cause our customers to lose trust in us, which could cause them to cease or reduce use of our products and services and otherwise have an adverse effect on our reputation and business. Any similar failure or perceived failure by users of our products or services may also have an adverse effect on our reputation and business. In addition, legal, regulatory, contractual and other obligations as well as public concerns relating to privacy, data protection or information security could restrict our ability to store and process data as part of our solutions or otherwise impact our ability to provide our solutions in certain jurisdictions and may result in the loss of business opportunities from customers operating in, or seeking to expand into, those jurisdictions. Additionally, in 2022, the SEC proposed new rules related to cybersecurity risk management, which may further increase our regulatory burden and the cost of compliance in such events.

Our failure to maintain appropriate environmental, social, and governance ( " ESG " ) practices and disclosures could result in reputational harm, a loss of customer and investor confidence, and adverse business and financial results.

There is an increasing focus from certain investors, employees, customers and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance matters ("ESG"). Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to corporate responsibility are inadequate. The growing investor demand for measurement of non-financial performance is addressed by third-party providers of sustainability assessment and ratings on companies. The criteria by which our corporate responsibility practices are assessed may change due to the constant evolution of the sustainability landscape, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. If we elect not to or are unable to satisfy such new criteria, investors may conclude that our policies and/or actions with respect to corporate social responsibility are inadequate. We may face reputational damage in the event that we do not meet the ESG standards set by various constituencies.

Furthermore, if our competitors' corporate social responsibility performance is perceived to be better than ours, potential or current investors may elect to invest with our competitors instead. In addition, in the event that we communicate certain initiatives and goals regarding environmental, social and governance matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the expectations of investors, employees and other stakeholders or our initiatives are not executed as planned, our reputation and business, operating results and financial condition could be adversely impacted.

New climate disclosure rules, if adopted by the SEC, may increase our costs and litigation risks, which could materially and adversely affect our future results of operations and financial condition.

During 2022, the SEC proposed new climate disclosure rules, which, if adopted, would require new climate-related disclosure in SEC filings, including certain climate-related metrics and greenhouse gas emissions data, information about climate-related targets and goals, transition plans, if any, and extensive attestation requirements. In addition to requiring public companies to quantify and disclose direct emissions data, the new rules also would require disclosure of climate impact arising from the operations and uses by the company's business partners and contractors and end-users of the company's products and/or services. We are currently assessing the impact of the new rules, if adopted as proposed, but at this time, we cannot predict the costs of implementation or any potential adverse impacts resulting from the new rules if adopted. However, we may incur increased costs relating to the assessment and disclosure of climate-related risks and increased litigation risks related to disclosures made pursuant to the new rules, either of which could materially and adversely affect our future results of operations and financial condition.

The war in Ukraine and the international community ' s response have created substantial political and economic disruption, uncertainty, and risk.

Russia's military intervention in Ukraine in late February 2022, Ukraine's widespread resistance, and the NATO led and United States coordinated economic, financial, communications, and other sanctions imposed by other countries have created significant political and economic world uncertainty. There is significant risk of expanded military confrontation between Russia and other countries. It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof, as well as any counter measures or retaliatory actions by Russia in response. At a minimum, the continuing conflict is likely to cause regional instability, geopolitical shifts and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy, which could materially adversely affect our financial condition or results of operations. Current and likely additional international sanctions against Russia may contribute to higher costs, particularly for petroleum-based products. These and related actions, responses, and consequences that cannot now be predicted or controlled may contribute to world-wide economic reversals.

There is a scarcity of and competition for acquisition opportunities.

There are a limited number of operating companies available for acquisition that we deem to be desirable targets. In addition, there is a very high level of competition among companies seeking to acquire these operating companies. Many established and well-financed entities are active in acquiring interests in companies that we may find to be desirable acquisition candidates. Many of these entities have significantly greater financial resources, technical expertise and managerial capabilities than us. Consequently, we will be at a competitive disadvantage in negotiating and executing possible acquisitions of these businesses. Even if we are able to successfully compete with these entities, this competition may affect the terms of completed transactions and, as a result, we may pay more or receive less favorable terms than we expected for potential acquisitions. We may not be able to identify operating companies that complement our strategy, and even if we identify a company that complements our strategy, we may be unable to complete an acquisition of such a company for many reasons, including:

failure to agree on the terms necessary for a transaction, such as the purchase price;

incompatibility between our operational strategies or management philosophies with those of the potential acquiree;

competition from other acquirers of operating companies;

lack of sufficient capital to acquire a profitable distribution company; and unwillingness of a potential acquiree to work with our management.

Risks related to acquisition financing.

We have a limited amount of financial resources and our ability to make additional acquisitions without securing additional financing from outside sources is limited. In order to continue to pursue our acquisition strategy, we may be required to obtain additional financing. We may obtain such financing through a combination of traditional debt financing or the placement of debt and equity securities. We may finance some portion of our future acquisitions by either issuing equity or by using shares of our common stock for all or a portion of the purchase price for such businesses. In the event that our common stock does not attain or maintain a sufficient market value, or potential acquisition candidates are otherwise unwilling to accept our common stock as part of the purchase price for the sale of their businesses, we may be required to use more of our cash resources, if available, in order to maintain our acquisition program. If we do not have sufficient cash resources, we will not be able to complete acquisitions and our growth could be limited unless we are able to obtain additional capital through debt or equity financings.

We may experience difficulties in integrating the operations, personnel and assets of PistolStar which any business we acquired in June 2020 . acquire which may disrupt our business, dilute stockholder value, and adversely affect our operating results.

A component of our business plan is to acquire businesses and assets in the biometric and identity access management industry. There can be no assurance that we will be able to identify, acquire or profitably manage businesses or successfully integrate acquired businesses into the Company without substantial costs, delays or other operational or financial problems. Such acquisitions also involve numerous operational risks, including:

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difficulties in retaining the existing customers;

the potential loss of existing customers or acquired strategic operating partners following an acquisition;

the potential loss of key employees following an acquisition and the associated risk of competitive efforts from such departed personnel; and the inability to generate sufficient revenue to offset acquisition or investment costs. departures;

assumed or unforeseen liabilities that arise in connection with the acquired business;

possible legal disputes with the acquired company following an acquisition; and the inability to generate sufficient revenue to offset acquisition or investment costs.

1 unchanged paragraph

To the extent we make any material acquisitions, our earnings may adversely affected by non-cash charges relating to the amortization of intangible assets.

Under applicable accounting standards, purchasers are required to allocate the total consideration paid in a business combination to the identified acquired assets and liabilities based on their fair values at the time of acquisition. The excess of the consideration paid to acquire a business over the fair value of the identifiable tangible assets acquired must be allocated among identifiable intangible assets including goodwill. The amount allocated to goodwill is not subject to amortization. However, it is tested at least annually for impairment. The amount allocated to identifiable intangible assets, such as customer relationships and the like, is amortized over the life of these intangible assets. We expect that this will subject us to periodic charges against our earnings to the extent of the amortization incurred for that period. Because our business strategy focuses, in part, on growth through acquisitions, our future earnings may be subject to greater non-cash amortization charges than a company whose earnings are derived solely from organic growth. As a result, we may experience an increase in non-cash charges related to the amortization of intangible assets acquired in our acquisitions. Our financial statements will show that our intangible assets are diminishing in value, even if the acquired businesses are increasing (or not diminishing) in value.

1 unchanged paragraph

2 unchanged paragraphs

1 unchanged paragraph

4 unchanged paragraphs

and 31 more changes in the filing

Forward-looking statements 4 changes

This prospectus and the documents incorporated herein by reference contain forward-looking statements. The forward-looking statements are contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" in this prospectus. In some cases, you can identify these statements by terms such as "anticipate," "believe," "should," "estimate," "will," "may," "future," "plan," "intend" and "expect" or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes. These forward-looking statements reflect our management's beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties.

Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: our history of losses and limited revenue; our ability to raise additional capital; our ability to protect our intellectual property; changes in business conditions; changes in our sales strategy and product development plans; changes in the marketplace; continued services of our executive management team; security breaches; competition between us and other companies in the biometric technology industry; market acceptance of biometric products generally and our products under development; our ability to execute and deliver on contracts in Africa, our ability to expand into Asia, Africa and other foreign markets, our ability to integrate the operations and personnel of Pistol Star into our business; the duration and severity of the current coronavirus COVID-19 pandemic and its effect on our business operations, sales cycles, personnel, and the geographic markets in which we operate; delays in the development of products and statements of assumption underlying any of the foregoing as well as other factors set forth under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing.

These factors are not intended to represent a complete list of the general or specific factors that may affect us. It should be recognized that other factors, including general economic factors and business strategies, may be significant, presently or in the future.

All statements other than statements of historical facts contained in this prospectus, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words "anticipate," "believe," "should," "estimate," "will," "may," "future," "plan," "intend" and "expect" and similar expressions generally identify forward-looking statements. These statements are not guarantees of future performance or events and are subject to risks and uncertainties that may cause actual results to differ materially from those included within or implied by such forward-looking statements. These risks and uncertainties include, without limitation, our history of losses and limited revenue; our ability to raise additional capital; our ability to repay our outstanding secured indebtedness; our ability to protect our intellectual property; changes in business conditions; changes in our sales strategy and product development plans; changes in the marketplace; continued services of our executive management team; security breaches; competition in the biometric technology and identity access management industries; market acceptance of biometric products generally and our products under development; our ability to execute and deliver on contracts in Africa; our ability to expand into Asia, Africa and other foreign markets; our ability to integrate the operations and personnel of Swivel Secure into our business; fluctuations in foreign currency exchange rates; the duration and extent of continued hostilities in Ukraine and its impact on our European customers; delays in the development of products, statements of assumption underlying any of the foregoing, and numerous other matters of national, regional and global scale, including those set forth under the caption " Risk Factors " in this prospectus and other filings with the SEC. These factors are not intended to represent a complete list of the general or specific factors that may affect us. It should be recognized that other factors, including general economic factors and business strategies, may be significant, presently or in the future. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

3 unchanged paragraphs

Use of proceeds 4 changes

We estimate that the net proceeds of this offering will be approximately $16,360,000, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, and excluding the proceeds, if any, from the exercise of the warrants. If the underwriters exercise their option to purchase additional shares and warrants in full, our net proceeds from this offering will be approximately $18,844,000, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, and excluding the proceeds, if any, from the exercise of the warrants. We currently intend to use $2,415,000 of the net proceeds of the offering to repay in full a secured convertible promissory note in the principal amount of $2,415,000, payable to Lind, due May 6, 2021, of which $2,100,000 was funded to us representing an original issue discount of 15%. The proceeds of this note were used for general working capital purposes. Principal payments on this note are due on a monthly basis commencing December 6, 2020. We intend to use $1,811,250 of the net proceeds from this offering to repay in full a secured convertible promissory note in the principal amount of $1,811,250, payable to Lind, due June 30, 2021, of which $1,575,000 was funded to us representing an original issue discount of 15%. The proceeds of this note were used to fund the acquisition of PistolStar. Principal payments on this note are due on a monthly basis commencing October 30, 2020. We intend to use the balance of the net proceeds of this offering for general corporate and working capital purposes and to fund ongoing operations and expansion of our business. We cannot currently allocate specific percentages of the net proceeds to us from this offering that we may use for these purposes and our management will have broad discretion in the allocation of such net proceeds.

The selling stockholder will receive all proceeds from the sale of the shares of common stock offered hereby. We will not receive any proceeds from the sale of common stock by the selling stockholder.

We will, however, receive cash proceeds equal to the exercise price of the Warrant. Accordingly, we may receive aggregate gross proceeds of up to $600,000 assuming that the Warrant is exercised in full at an exercise price of $3.00 per share. We expect to use any proceeds received by us from the exercise of the Warrant for working capital purposes.

We will bear all costs, expenses and fees in connection with the registration of the shares, including, without limitation, all registration and filing fees and fees and expenses of our counsel and our accountants.

Plan of distribution 50 changes

We have entered into an underwriting agreement with Maxim Group LLC ("Maxim"), as representative of the underwriters named below with respect to the shares of our common stock and accompanying warrants and Pre-Funded Warrants and accompanying warrants subject to this offering. Subject to certain conditions, we have agreed to sell to the underwriters, and the underwriters have agreed to purchase, the number of shares of our common stock, Pre-Funded Warrants and corresponding warrants provided below opposite each underwriter's name.

The underwriters are offering the shares of our common stock and accompanying warrants and Pre-Funded Warrants and accompanying warrants subject to their acceptance of our common stock, the Pre-Funded Warrants and the warrants from us and subject to prior sale. The underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares of our common stock and accompanying warrants and Pre-Funded Warrants and accompanying warrants offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of our common stock and accompanying warrants and Pre-Funded Warrants and accompanying warrants if any such shares of our common stock and accompanying warrants or Pre-Funded Warrants and accompanying warrants are taken.

We have granted the underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional 2,250,000 shares of common stock and/or warrants to purchase 2,250,000 shares of common stock (equal to 15% of the number of shares and warrants underlying the securities sold in the offering) at the public offering price, less the underwriting discount.

Underwriter Compensation

We have agreed to pay the underwriters an aggregate fee equal to 8% of the gross proceeds of this offering and expect the net proceeds from this offering to be approximately $16,360,000 after deducting approximately $1,440,000 in underwriting commissions and other offering expenses. We have agreed to pay the underwriters an accountable expense allowance for certain of the underwriters' expenses relating to the offering up to a maximum aggregate amount of $80,000, including the underwriters' legal fees incurred in this offering.

Discounts and Expenses

The underwriters have advised us that they propose to offer the shares of our common stock, Pre-Funded Warrants and accompanying warrants to the public at the respective public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $[•] per share of our common stock and accompanying warrant or $[•] per Pre-Funded Warrant and accompanying warrant. After this offering, the public offering price and concession to dealers may be changed by the representative. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The shares of our common stock, Pre-Funded Warrants and accompanying warrants are offered by the underwriters as stated herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. The underwriters have informed us that they do not intend to confirm sales to any accounts over which they exercise discretionary authority.

The following table shows the public offering price, underwriting discount payable to the underwriters by us and proceeds before expenses to us, assuming no exercise of the underwriters' option to purchase additional shares of common stock and/or warrants. The underwriting commissions are equal to the combined public offering price per share, Pre-Funded Warrants and accompanying warrants, less the amount per share the underwriters pay us for the shares of common stock, Pre-Funded Warrants and warrants:

Accompanying Warrant

Accompanying Warrant

(No Exercise of Over-

( Full Exercise of Over-

Public offering price

Underwriting discounts and commissions

Proceeds, before expenses, to us

In addition, we have agreed to reimburse the underwriters for reasonable out-of-pocket expenses not to exceed $80,000 in the aggregate. We estimate that total expenses payable by us in connection with this offering, other than the underwriting discount referred to above, will be approximately $100,000.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

We, as well as our officers and directors, and greater than five percent (5%) shareholders, have agreed, subject to limited exceptions, for a period of 90 days after the closing of this offering, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, directly or indirectly any shares of common stock or any securities convertible into or exchangeable for our common stock either owned as of the date of the underwriting agreement or thereafter acquired without the prior written consent of Maxim. Maxim may, in its sole discretion and at any time or from time to time before the termination of the lock-up period, without notice, release all or any portion of the securities subject to lock-up agreements.

Price Stabilization, Short Positions and Penalty Bids

In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. A naked short position occurs if the underwriters sell more shares than could be covered by the over-allotment option. This position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be discontinued at any time.

Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our shares of common stock. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these transactions or that any transaction, if commenced, will not be discontinued without notice.

Electronic Distribution

This prospectus in electronic format may be made available on websites or through other online services maintained by the underwriters, or by their affiliates. Other than this prospectus in electronic format, the information on the underwriters' websites and any information contained in any other websites maintained by the underwriters is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriters in their capacity as underwriters, and should not be relied upon by investors.

From time to time, the underwriters and/or their affiliates have provided, and may in the future provide, various investment banking and other financial services for us for which services it has received and, may in the future receive, customary fees.

Except for the services provided in connection with this offering and as described below, the underwriters have not provided any investment banking or other financial services during the 180-day period preceding the date of this prospectus.

Maxim acted as placement agent in connection with the issuance of a $2,415,000 senior secured convertible note as described in our Current Report on Form 8-K filed with the SEC on May 7, 2020, the issuance of a $1,811,250 senior secured convertible note as described in our Current Report on Form 8-K filed with the SEC on July 2, 2020 and as financial advisor in connection with the issuance and amended and restated senior secured convertible promissory note as described in our Current Report on Form 8-K filed with the SEC on March 12, 2020, for which Maxim was paid a placement fee equal to 7% of the aggregate gross proceeds raised in the transaction.

Offers Outside the United States

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

We are registering 900,000 shares of our common stock for possible sale by the selling stockholder. The selling stockholder will act independently of us in making decisions with respect to the timing, manner and size of each sale. The selling stockholder may, from time to time, sell any or all of its shares of common stock on the Nasdaq Capital Market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholder may use any one or more of the following methods when selling shares:

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

an exchange distribution in accordance with the rules of the Nasdaq Capital Market or any other applicable national securities exchange;

privately negotiated transactions;

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

broker-dealers may agree with the selling stockholder to sell a specified number of such shares at a stipulated price per share;

a combination of any such methods of sale; and

any other method permitted pursuant to applicable law.

The selling stockholder may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus supplement and accompanying prospectus.

Broker-dealers engaged by the selling stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholder does not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by the selling stockholder.

The selling stockholder may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act. If we are notified by the selling stockholder that any arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file an amendment to this prospectus. If the selling stockholder uses this prospectus for any sale of the shares of common stock, the selling stockholder will be subject to the prospectus delivery requirements of the Securities Act.

The selling stockholder and any broker-dealer or agents participating in the distribution of the shares of common stock may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act in connection with such sales. In such event, any commissions paid, or any discounts or concessions allowed to, any such broker-dealer or agent and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. If the selling stockholder is an "underwriter" within the meaning of Section 2(11) of the Securities Act, it will be subject to the applicable prospectus delivery requirements of the Securities Act and may be subject to certain statutory liabilities of, including but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.

The selling stockholder also may transfer the shares of common stock in other circumstances, in which case the transferees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act supplementing or amending the list of selling stockholders to include the transferees or other successors in interest as selling stockholders under this prospectus.

We will bear all costs, expenses and fees in connection with the registration of the shares.

We will indemnify the selling stockholder against certain liabilities, including liabilities under the Securities Act, or the selling stockholder will be entitled to contribution. We may be indemnified by the selling stockholder against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus or we may be entitled to contribution.

Market for registrant's common equity, related stockholder matters and issuer purchases of equity securities 2 changes

1 unchanged paragraph

As of July 15, 2020, June 9, 2023, the number of stockholders of record of our common stock was 58. 131.

We have not paid any cash dividends on our common stock to date, to-date and have no intention of paying any cash dividends on our common stock in the foreseeable future. The terms of our secured promissory note issued in December 2022 prohibits us from paying or declaring any dividends or without the consent of the lender. The declaration and payment of dividends on our common stock is also subject to the discretion of our Board of Directors and certain limitations imposed under the DGCL. Delaware General Corporation Law. The timing, amount, and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors.

MD&A 165 changes

We develop and market advanced fingerprint biometric identification and identity verification technologies, as well as related identity management and credentialing fingerprint biometric hardware and software solutions. We were pioneers in developing automated, finger identification technology that supplements or compliments other methods of identification and verification, such as personal inspection identification, passwords, tokens, smart cards, ID cards, PKI, credit card, passports, driver's licenses, OTP or other forms of possession or knowledge-based credentialing. Advanced BIO-key® technology has been and is used to improve both the accuracy and speed of competing finger-based biometrics. Our solutions are used by customers in every sector of our economy including government, financial services, education, manufacturing, retail, and call centers.

We provide the ability to positively identify and authenticate individuals before granting access to valuable corporate resources, web portals or applications in seconds. Powered by our patented Vector Segment Technology (VST), WEB-key and BSP development kits are fingerprint biometric solutions that provide interoperability with dozens of reader manufacturers, enabling application developers and integrators to integrate fingerprint biometrics into their applications.

Our biometric identification technology improves both the accuracy and speed of screening individuals, for identification purposes or for personal identity verification, by extracting unique data from a fingerprint and comparing it to existing similar fingerprint data. The technology has been built to be scalable and to handle databases containing millions of fingerprints. We achieve the highest levels of discrimination without requiring any other identifying data (multi-factor) such as a user ID, smart cards, or tokens, although our technology can be used in conjunction with such additional factors. Users of our technology have the option of on device or cloud authentication. This flexible authentication option in conjunction with our interoperable capabilities, is another key differentiator of our biometric identification solutions.

Our WEB-key solution is a client server suite that can be integrated into virtually any application, whether web based or desktop application based on Windows. The WEB-key solution is a security solution that protects the biometric data in processing, transmission and storage. WEB-key provides a turn-key solution for biometric as well as multi-factor authentication across an enterprise, government system or any user population.

We also develop and distribute hardware components that are used in conjunction with our software, and sell third-party hardware components with our software in various configurations required by our customers. Our products are interoperable with major fingerprint reader and hardware manufacturers, supporting Windows, Linux, Mac OS X, and Android operating systems enabling application developers, value added resellers, and channel partners to integrate our fingerprint biometrics into their applications, while dramatically reducing maintenance, upgrade and life-cycle costs. This interoperability is unique in the industry, and a key differentiator for our products in the biometric market. In our opinion, these features make our technology more viable than competing technologies and expands the size of the overall market for our products.

In partnerships with OEMs, VARs, integrators, and solution providers, we market and sell biometric hardware and software solutions to SMBs, the Fortune 500 and government agencies.

We support industry standards, including PIV, FIPS, ANSI, ISO, SAML, and BioAPI among others. We have received National Institute of Standards and Technology (NIST) independent laboratory testing and certification of our ability to support Homeland Security Presidential Directive #12 (HSPD-12) and ANSI/INCITS-378 templates, as well as validation of our fingerprint match speed and accuracy in large database environments.

We have developed what we believe is the most discriminating and effective commercially available finger-based biometric technology. Our primary focus is in marketing and selling this technology to customers seeking to secure access to networks, applications and data on-premises or remotely. Our primary market focus includes, government, financial services, education, healthcare, manufacturing, retail, and call centers.

We also offer a full line of easy to use finger scanners for both enterprise and consumer markets. Our SideSwipe, SideTouch and EcoID scanners are plug and play compatible with Microsoft Windows and our Q-180 Touch reader is a Micro USB compatible fingerprint reader for Android devices. The readers are currently sold in the Microsoft stores, as well as through their on-line channel, on Amazon, and through our website. In 2018, we introduced OmniPass Consumer, a secure biometric-enabled application to manage multiple passwords for online apps, services, or accounts.

In 2015, Microsoft announced native support for biometrics in the Windows 8.1 and Windows 10 Operating platforms as well as Office 2016. With Microsoft Hello, any user can replace their PIN or password to access their device without any special software downloads by using our finger scanners, SideSwipe, SideTouch and EcoID, which are plug and play compatible with the Microsoft platforms. We have been the preferred partner, in particular at the Microsoft "Ignite your Business" Windows 10 and Office 2016 launch events.

Finally, our ID Director for Windows and ID Director for SAML offer biometric authentication to SAML enables apps such as Office 365, GoToMeeting, Zoom, SalesForce, Google G-Suite, and many others.

Historically, our largest market has been access control within highly regulated industries such as government, financial services, and healthcare. During 2019 we became the go-to biometric authentication provider for board of election offices as eight offices deployed our hardware and software to secure internal access to the voter registration database. We will seek to extend this footprint in 2020 and beyond.

Working with our partner TTI, we expect to begin deploying several large-scale identity and access projects in the second quarter of 2020. We are in the process of establishing an African subsidiary, to work closely with TTI who was awarded contracts of $45M and $30M. Under the first contract, we will provide biometric authentication to support the infrastructure of a new e-commerce project developed with the expectation to generate more than one million jobs in Nigeria. The second contract provides for BIO-key hardware and software to be used by a leading African telecommunications company to secure internal access to customer data. Based on information available today, Africa and the surrounding regions are receiving government funding to expand the use of biometric authentication solutions to help establish trustworthy government programs and reduce fraud. As described above, the COVID-19 pandemic has and may continue to delay the rollout of these programs.

As devices with onboard fingerprint sensors continue to deploy to consumers, we expect that third-party application developers will demand the ability to authenticate users of their respective applications (apps) with the onboard fingerprint biometric. We further believe that authentication will occur on the device itself for potentially low-value, and therefore low-risk, use-transactions and that user authentication for high-value transactions will migrate to the application provider's authentication server, typically located within their supporting technology infrastructure, or cloud. We have developed our technology to enable, on-device authentication as well as network or cloud-based authentication and believe we may be the only technology vendor capable of providing this flexibility and capability. Our core technology works on major commercially available fingerprint readers, across Windows and Linux, Mac OS X and Android operating systems. This interoperability, coupled with the ability to authenticate users via the device or cloud, is unique in the industry, provides a key differentiator for us, and in our opinion, makes our technology more viable than competing technologies and expands the size of the overall market for our products.

We believe there is potential for significant market growth in the following key areas:

Corporate network access control, corporate campuses, computer networks, and applications.

Large scale identification projects, especially in Africa and the surrounding regions.

Government funded initiatives, including with the state board of elections.

International law enforcement use case applications as prospects see us as a global leader in the biometric technology space as witnessed by our agreement with the Israeli Defense Force, and the Singapore and Dubai Police departments.

Consumer mobile credentialing, including mobile payments, credit and payment card programs, data and application access, and commercial loyalty programs.

Demand for BIO-key hardware products from Windows 10 users and Fortune 500 companies.

Government services and highly regulated industries including, Medicare, Medicaid, Social Security, Drivers Licenses, Campus and School ID, Passports/Visas.

Continued growth in the Asia Pacific region.

New remote authentication challenges – which our solutions are ideally suited to address.

New opportunity to market our remote security solutions, spurred on because of the COVID-19 outbreak.

Our two primary sales strategies call for expanded marketing efforts into the IAM market along with a dedicated pursuit of large-scale identification projects across the globe.

We also plan on expanding our new Channel Alliance Program which now has more than twenty participants and started to generate modest initial revenues.

As discussed under "Risk Factors" above, an outbreak of a novel strain of the coronavirus, COVID-19, has been recognized as a pandemic by the World Health Organization. This outbreak has severely restricted the level of economic activity around the world. In response to this coronavirus outbreak the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, including imposing restrictions on travel and business operations and requiring individuals to limit or forego their time outside of their homes. Given the uncertainty regarding the spread of this coronavirus, the related financial impact cannot be reasonably estimated at this time.

Acquisition of PistolStar

In June, 2020 we acquired PistolStar, a New Hampshire based provider of enterprise-ready identity access management solutions, including multi-factor authentication, identity-as-a-service, single sign-on and self-service password reset to commercial, government and education customers throughout the United States and internationally. PistolStar has over 200 active customer subscribers to their products, which include PortalGuard™ multi-factor authentication (MFA), Nebula™ identity-as-a-service (IDaaS), PortalGuard single sign-on (SSO) and PortalGuard self-service password reset (SSPR). Combining PistolStar's proprietary authentication software with our biometric solutions creates an integrated turn-key multi-factor solution which we believe is unparalleled in the industry, and will allow us to provide a unified MFA solution that is differentiated in the market by our biometric user experience and who-you-are strong authentication.

This Management's Management ' s Discussion and Analysis of Financial Condition and Results of Operations, and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this prospectus are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in the section captioned " Risk Factors " and elsewhere in this prospectus. The following should be read in conjunction with our audited financial statements included elsewhere herein.

The following Management's Management ' s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help you understand the our Company. The MD&A This discussion is provided as a supplement to and should be read in conjunction with our consolidated financial statements for the years ended December 31, 2022 and 2021 and the three months ended March 31, 2023 and 2022 and the accompanying notes included elsewhere in this prospectus.

We are a leading identity access management (IAM) platform provider enabling secure work-from-anywhere for enterprise, education, and government customers using secure multi-factor authentication (MFA). Our vision is to enable any organization to secure streamlined and passwordless workforce, customer, citizen and student access to any online service, workstation, or mobile application, without a requirement to use tokens or phones. Our products include PortalGuard® and PortalGuard Identity-as-a-Service (IDaaS) enterprise IAM, WEB-key® biometric civil and large-scale ID infrastructure, MobileAuth® mobile phone authentication application for iOS and Android, and high-quality, low-cost accessory fingerprint scanner and FIDO-compliant hardware to provide a full and complete solution for identity-innovating customers.

BIO-key PortalGuard and hosted PortalGuard IDaaS are platforms that enable our customers to securely and easily assure that only the right people can access the right systems. PortalGuard goes beyond traditional MFA solutions by addressing functional gaps, such as allowing roving users to biometrically authenticate at any workstation without using their phones or tokens, eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification.

Our customers use BIO-key every day to securely access a variety of cloud, mobile and web applications, on-premise and cloud-based servers from all of their devices. Employees, contractors, students and faculty sign in through PortalGuard to seamlessly and securely access the applications they need to do their important work, without relying on personal phone use or per-user tokens. Organizations use our platform to securely collaborate with their supply chain and partners, and to provide their customers with flexible, resilient user experiences online or in-person.

Large-scale customer and civil ID customers use our scalable biometric management platform and FBI-certified scanner hardware to manage enrollment, de-duplication and authentication for millions of users. One large bank has enrolled and identifies over 21.7 million of their customers using BIO-key fingerprint biometrics in branches on a daily basis.

PortalGuard and hosted PortalGuard IDaaS are platforms that enable our customers to securely and easily assure that only the right people can access the right systems by utilizing our world-class biometric core platform among 17 other authentication factors. PortalGuard goes beyond traditional multi-factor authentication, or MFA, solutions by addressing sizeable gaps, such as allowing roving users to biometrically authenticate at any workstation without using their phones or tokens, eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification.

PortalGuard and IBB deliver unique value to enterprises who find that mainstream MFA solutions do not adequately address their workforce use cases. PortalGuard operates as a single MFA user experience, providing a rich set of authentication choices to meet every use case. We sell our branded biometric and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution. We do not mandate the use of BIO-key hardware with our software and services. Our NIST-certified fingerprint biometric platform is unique in that it supports interoperable mixing and matching combinations of different manufactures' fingerprint scanners in a deployment, so that the right scanner can be selected for the right use case, without mandating the user of a particular scanner.

Security-conscious software developers leverage our platform APIs and federation interfaces to securely and efficiently embed biometric and MFA identity capabilities into their software. Our approach to IDaaS allows our customers to efficiently scale their security and identity infrastructures to protect both internal cloud workforce- and external customer-facing applications.

In 2022, we expanded our product offerings and customer base when we acquired Swivel Secure, a Madrid, Spain based provider of IAM solutions. Swivel Secure is the exclusive distributer of AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland. These solutions include a patented one-time-code extraction technology, helping enterprises manage the increasing data security risks posed by cloud services and bring your own device policies.

We operate a SaaS business model with customers subscribing to term use of our software for annual recurring revenue. We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners including resellers, system integrators, master agents and other distribution partners. Our subscription fees include a term license of hosted or on-premise product and technical support and maintenance of our platform. We base subscription fees primarily on the products used and the number of users enrolled in our platform. We generate subscription fees pursuant to noncancelable contracts with a weighted average duration of approximately one year.

We plan to have a more significant role in the Identity and Access Management IAM market which continues to expand. We plan to offer customers a suite of authentication options that complement our biometric solutions. The more well-rounded offerings of authentication options will allow customers to customize their approach to authentication all under one umbrella.

In the near-term, We expect to grow our business within government services and highly-regulated industries in which we have historically had a strong presence including financial services, higher education, and healthcare. We believe that continued heightened security and privacy requirements in these industries, and as colleges and universities continue operating in remote environments, we will generate increased demand for security solutions, including biometrics. In addition, we expect that the integration of compatible, yet superior portable biometric user experience offered by our technology into for Windows 10 users will accelerate the demand for our computer network log-on solutions and fingerprint readers. Through value add-offerings via direct sales, resellers, and strategic partnerships with leading higher education platform providers, we will continue to grow our installed base.

Our primary sales strategies are focused on (i) increased marketing efforts into the IAM market, (ii) dedicated pursuit of large-scale identification projects across the globe and (iii) growing our channel alliance program which we have grown to more than one hundred and fifty participants and continues to generate incremental revenues.

A second component of our growth strategy is to pursue strategic acquisitions of select businesses and assets in the IAM space. In furtherance of this strategy, we are active in the industry and regularly evaluate businesses that we believe will either provide an entry into new market verticals or be synergistic with our existing operations and in either case, be accretive to earnings. We cannot provide any assurance as to whether we will be able to complete any acquisition and if completed, successfully integrate any business we acquire into our operations.

As discussed under " Risk Factors " given the uncertainty of the duration and severity of a possible economic recession and the conflict between Ukraine and Russia and their effects on our business operations, sales cycles, personnel, and the geographic markets in which we operate, and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature, the related financial impact cannot be reasonably estimated at this time.

The complications caused by COVID-19 has forced organizations to quickly adapt to a work from home current trend of continued remote business model. This work environments increases the risk of unauthorized users, phishing attacks, and hackers whom who are eager to take advantage of the challenges of securing remote workers. We believe that biometrics should continue to play a key role in remote user authentication.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2020 2023 AS COMPARED TO MARCH 31, 2019 2022

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Three Months Ended March 31,

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For the three months ended March 31, 2020, service revenues were $207,523 as compared to $241,610 during the three months ended March 31, 2019, a decrease of $34,087, or 14%. The decrease was due to a decline in recurring service revenue due to the timing of payments received for year-end renewals.

For the three months ended March 31, 2020, license revenue increased to $235,345 or 183% from $83,208 during the three months ended March 31, 2019. The increase was due to an increase in new customers, and for continued expansion of biometric ID deployments with several commercial partners, and several healthcare facilities, voter registration offices, and banks.

Hardware sales decreased during the three months ended March 31, 2020 by approximately $147,188, or 65%, to $79,617 from $226,805 during the three months ended March 31, 2019. The decrease resulted from an approximate $34,000 reduction in the shipment of locks and an approximate $113,000 reduction in shipments of fingerprint readers due to smaller orders in 2020 as compared to 2019.

For the three months ended March 31, 2020, cost of service decreased approximately $20,000 or 22% to $70,445 as a result of reduced support required for ongoing maintenance, compared to the three months ended March 31, 2019 where costs are reclassed from research and development resources to cost of goods sold as needed. For the three months ended March 31, 2020, license fees decreased to $10,456 from $377,216 during the three months ended March 31, 2019, largely due to decrease of approximately $281,000 in amortization of the software rights which is included in cost of license fees on the statement of operations. For the three months ended March 31, 2020, hardware costs decreased to $43,362 from $136,005 during the three months ended March 31, 2019, related to lower costs associated with less hardware revenue.

Total Cost of goods sold

For the three months ended March 31, 2023 and 2022, service revenues included approximately $292,000 and $317,000 respectively, of recurring maintenance and support revenue, and approximately $240,000 and $79,000, respectively, of non-recurring custom services revenue. Recurring service revenue decreased 13% in the first quarter of 2023 as compared to the first quarter of 2022 due largely to the recognition of annual SaaS revenue versus maintenance renewal contracts. Non-recurring custom services increased due to services provided by Swivel Secure. As our customer base continues to grow, we expect the service revenue to increase in future periods.

For the three months ended March 31, 2023, license revenue increased 70% to $2,478,556 from $1,460,183 during the three months ended March 31, 2022. We increased both the variation and number of customers, including additional revenue from Swivel Secure which generated 63% of its license revenue from a customer in Central America, one large SaaS renewal, and cloud migrations.

Hardware sales decreased $12,495 during the three months ended March 31, 2023 to $72,689 from $85,184 during the three months ended March 31, 2022. The decrease was attributable to the mix of installations and other projects completed in the periods.

For the three months ended March 31, 2023, cost of service decreased approximately $56,000 or 27% to $154,801 from $210,913 for the three months ended March 31, 2022 due to reduced personnel costs associated with the direct support for BIO-key support and maintenance. For the three months ended March 31, 2022, license fees increased to $620,881 from $73,230 during the three months ended March 31, 2022, due largely to the costs related to the license for the Swivel Secure product line. For the three months ended March 31, 2023, hardware costs decreased to $44,592 from $53,298 during the three months ended March 31, 2022, corresponding to the decrease in hardware revenue.

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Selling, general and administrative expenses for the three months ended March 31, 2020 increased less than 1% to $1,381,399 as compared to $1,377,033 for the corresponding period in 2019. The increase was due to travel costs associated with securing contracts in Africa, marketing and shareholder relations. These amounts were offset by a decreases in Hong Kong business costs, factoring fees, show attendance, and booth costs.

Selling, general and administrative expenses for the three months ended March 31, 2023 increased 7% to $1,931,732 as compared to $1,797,998 for the corresponding period in 2022. This increase was attributable largely to a full quarter of Swivel Secure sales expenses and a reserve for doubtful accounts of $50,000. These increases were offset, in part, by decreases in marketing personnel and expenses, and non-cash compensation.

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For the three months ended March 31, 2020, 2023, research, development and engineering expenses decreased 10% 14% to $336,889 $690,159 as compared to $374,118 $805,266 for the corresponding period in 2019. 2022. Included in the decrease were reductions in personnel expense costs, and reduced outside services related to the completed development expenses by of our Hong Kong subsidiary. MobileAuth application.

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Other income (expenses)

Loss on foreign currency transactions

Change in fair value of convertible note

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Other income (expense) for the 2020 period related to the interest expense, which included the amortization of a beneficial conversion feature and amortization of debt discounts and debt issuance costs in approximate amount of $1,551,000 and a loss on the extinguishment of a convertible debt financing in an approximate amount of $500,000.

YEAR ENDED DECEMBER 31, 2019 AS COMPARED TO YEAR ENDED DECEMBER 31, 2018 Consolidated Results of Operations Two Year % trend Years ended December 31, 2019 2018 Revenues Services % % License fees % % Hardware % % % % Costs and other expenses Cost of services % % Cost of license fees % % Cost of hardware % % % % Gross Profit (Loss) -9 % -3 % Operating expenses Selling, general and administrative % % Research, development and engineering % % Total operating expenses before impairment % % Impairment of resalable software license rights % - Operating loss -596 % -170 % Other income (expense) Total other income (expense) -47 % % Net loss -643 % -170 % Revenues and Costs and other expenses 2019 - 2018 2019 2018 $ Chg % Chg Revenues Services $ 925,245 $ 1,012,576 $ (87,331 ) -9 % License fees 442,649 1,739,897 (1,297,248 ) -75 % Hardware 899,634 1,292,069 (392,435 ) -30 % Total Revenue $ 2,267,528 $ 4,044,542 $ (1,777,014 ) -44 % Costs and other expenses Services $ 272,318 $ 443,210 $ (170,892 ) -39 % License fees 916,112 3,072,356 (2,156,244 ) -70 % Hardware 1,272,815 648,624 624,191 % Total Costs and other expenses $ 2,461,245 $ 4,164,190 $ (1,702,945 ) -41 % Revenues Revenue decreased $1,777,014 or 44% to $2,267,528 in 2019 as compared to $4,044,542 in 2018 due to the factors stated below.

For the years ended December 31, 2019 and 2018, service revenues included approximately $904,000 and $895,000, respectively, of recurring maintenance and support revenue, and approximately $21,000 and $118,000, respectively, of non-recurring custom services revenue. Recurring service revenue increased 1% from 2018 to 2019 as we moved from a perpetual license to subscription based licensing. As our customer base continues to grow, we expect the recurring revenue to increase in future periods. Non-recurring custom services decreased 82% in 2019 as a result of a completed special software requirement from an existing customer in the first quarter of 2018.

For the years ended December 31, 2019 and 2018, license revenue decreased 75% to $442,649. The decrease was primarily due to one large international order received in the fourth quarter of 2018 in amount of approximately $1,111,000 without a comparable transaction in the fourth quarter of 2019.

Hardware sales decreased by approximately $392,000, or 30%, to $899,634 in 2019 as a result of fewer large customer deployments, and primarily reduced lock sales. Fingerprint reader sales decreased approximately $158,000, or 16%, while the biometric locks decreased approximately $235,000, or 84% from 2018.

For the year ended December 31, 2019, cost of service decreased approximately 39% to $272,318, due to a completed special software requirement from an existing customer in the first quarter of 2018.

License costs for the year ended December 31, 2019 decreased approximately 70% to $916,112. The decrease was attributable primarily to the amortization and actual deployments of the software rights in the approximate amount of $884,000 in 2019 compared to $2,658,000 in 2018.

Hardware costs for the year ended December 31, 2019 increased approximately 96% to $1,272,815. The increase was attributable primarily to the write down of lock inventory and parts as a result of the discontinuance of lock sales in the US, offset by a decrease in factory costs due to reduced lock sales.

Other income (expense) for the three month period ended March 31, 2023 consisted of interest expense of $54,999 on the secured note payable and the government loan through the BBVA bank net of interest income, change in fair value of $141,991 on the convertible note payable, and loss on foreign currency transactions. Other income (expense) for the three month period ending March 31, 2022 consisted of interest income.

YEAR ENDED DECEMBER 31, 2022 AS COMPARED TO YEAR ENDED DECEMBER 31, 2021 Consolidated Results of Operations Two Year % trend Years ended December 31, 2022 2021 Revenues Services % % License fees % % Hardware % % % % Costs and other expenses Cost of services % % Cost of license fees % % Cost of hardware % % % % Gross Profit % % Operating expenses Selling, general and administrative % % Research, development and engineering % % Reversal of earnout payable-Swivel acquisition -7 % - Impairment of goodwill % - Total operating expenses % % Operating loss -141 % -97 % Other income (expense) Total other income (expense) -29 % -2 % Loss before provision for income tax benefit -170 % -99 % Provision for income tax benefit - - Net loss -170 % -99 % Revenues and Costs and other expenses 2022-2021 2022 2021 $ Chg % Chg Revenues Services $ 1,789,720 $ 1,273,354 $ 516,366 % License fees 4,584,052 2,555,809 2,028,243 % Hardware 646,486 1,285,326 (638,840 ) -50 % Total Revenue $ 7,020,258 $ 5,114,489 $ 1,905,769 % Costs and other expenses Services $ 722,152 $ 686,175 $ 35,977 % License fees 906,417 183,199 723,218 % Hardware 811,001 803,555 7,446 % Total Costs and other expenses $ 2,439,570 $ 1,672,929 $ 766,641 % Revenues Revenue increased $1,905,769 or 37% to $7,020,258 in 2022 as compared to $5,114,489 in 2021 due to the factors stated below.

For the years ended December 31, 2022, and 2021, service revenues included approximately $1,243,000 and $1,100,000, respectively, of recurring maintenance and support revenue, and approximately $546,000 and $173,000, respectively, of non-recurring custom services revenue. Recurring service revenue increased 13% from 2021 to 2022 due largely to the increased maintenance related to increased license revenue. Non-recurring custom services increased 216% due to increased new customer installations, Swivel service fees, and conversion to the cloud platform. Although inflation has negatively impacted many industries, we have continued to see our pipeline increase for the cybersecurity protection software and services that we offer. As our customer base continues to grow, we expect the service revenue to increase in future periods.

For the years ended December 31, 2022 and 2021, license revenue increased $2,028,243 or 79% to $4,584,052, due primarily to new customer orders, revenues from Swivel Secure for approximately $1.9 million, and existing recurring revenue contracts. We expect the recurring revenue to continue to grow in 2023.

Hardware sales decreased by $638,840, or 50%, to $646,486 in 2022 from $1,285,326 in 2021. The decrease was attributable largely to Q1 2021 sales in Nigeria to an international government agency, which did not recur in 2022 due to delayed roll out of the government project.

For the year ended December 31, 2022, cost of services increased approximately 5% to $722,152, due to the increased costs to support for the PortalGuard deployments.

License fees for the year ended December 31, 2022 increased $732,218, or approximately 395%, to $906,417 related to increased license revenue and license fees payable for third-party software distributed by Swivel Secure.

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Business 150 changes

We continue to develop advancements in our capabilities, as well as explore potential strategic relationships, including business combinations and acquisitions, which could help us leverage our capability to deliver our solutions. To drive revenue we rely upon our inside and outside sales teams, and continue to develop relationships with distributors, resellers, integrators, value added resellers ("VAR's"), and technology partners. We're building a growing network of partners with substantial experience in selling technology solutions to government and corporate customers in their respective markets.

In 2020, we announced that we had secured two of the largest contracts in the Company's history, with our partner TTI. The contracts, valued at a combined $75M, are for large-scale identification projects in Africa and Nigeria. These historic opportunities are expected to showcase the Company's ability to support large scale projects utilizing our core biometric authentication software engine, WEB-key®.

In June 2020, we expanded our business though the acquisition of PistolStar. PistolStar has over 200 active customer subscribers to their products, which include PortalGuard multi-factor authentication (MFA), Nebula identity-as-a-service (IDaaS), PortalGuard single sign-on (SSO) and PortalGuard self-service password reset (SSPR).

PistolStar's PortalGuard MFA offers customers flexible policy-driven choices among 15 different methods of authentication, including BIO-key biometrics, FIDO U2F/2FA tokens, WebAuthn, Windows Hello, Google Authenticator, Microsoft Authenticator, RSA SecureID, Phone Push, OTP, SMS, phone-call, and bar-code, so every user can always be securely authenticated with whichever factor is most appropriate. For enterprises with existing IAM platforms, PortalGuard can be seamlessly integrated to add its complete MFA by supporting SAML, OpenID Connect, OAuth, WS-Federation, CAS, and Shibboleth, among other standards.

Combining PistolStar's proprietary authentication software with our biometric solutions creates an integrated turn-key multi-factor solution which we believe is unparalleled in the industry, and will allow BIO-key to provide a unified MFA solution that is differentiated in the market by our biometric user experience and who-you-are strong authentication.

Since April 10, 2020, we have licensed PortalGuard®, PistolStar's authentication software, which we combine with our biometric authentication solutions offered to existing and prospective customers. We acquired PistolStar for an aggregate purchase price of $2.5 million, subject to adjustment based on PistolStar's closing date working capital, consisting of a $250,000 deposit, cash payment of $1.75 million, and $500,000 by issuance of a 4% promissory note payable in four installments over the 12-month period following the closing, the first installment due on or before September 28, 2020 and the remaining installments due on or before the first day of each quarter thereafter (January 1, April 1, July 1) with the final installment to be paid on or before July 1, 2021. Additionally, if the Company faces an event of default because it fails to make a full, punctual payment of any amount due, which is not cured on or before the 5th day after the founder of PistolStar's written notice to the Company, the Company will deliver to the founder, all gross cash proceeds received by the Company from the sales of the Company's PortalGuard®, Password PowerTM and ScoochTM products until the amount of such cash proceeds delivered to the founder equals 100% of any missed and unsatisfied payment(s). For any other event of default, the founder may accelerate the indebtedness, which shall be immediately due and payable. At closing, we entered into a consulting agreement with the founder of PistolStar to provide technology development, product development, customer relations and other services to the Company for a period of one year.

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, and, in the following weeks, many U.S. states and localities issued lockdown orders impacting our operations. Since then, the COVID-19 situation within the U.S. has rapidly escalated. The recent COVID-19 outbreak has caused us to migrate to a remote business model for our sales, marketing, administrative and executive teams. Research and development and production are adjusting to the new landscape to maintain production as best as possible considering the conditions and regulations. We continue to monitor the situation closely and it is possible that we will implement further measures. Since we qualify as an essential business in New Jersey because we serve the healthcare industry, we have been able to access inventory to fulfill orders and ship products as required. The pandemic has extended sales cycles and delayed deployments in most markets in which we operate, particularly in Africa which remains subject to shut-down and shelter at home orders. We continue to conduct business daily and are actively closing transactions throughout the current climate, with no changes to personnel.

BIO-key is a leader in finger-based biometric identification and personal identity verification, as well as authentication-transaction security. Stand-alone, or in partnerships with OEMs, integrators, and solution providers, we provide biometric security solutions to private and public sector customers. We help customers reduce risk by providing the ability to control access to online assets. Our solutions positively identify individuals before granting access to corporate resources, subscribed services, cloud services and other applications.

We also develop and distribute hardware components that are used in conjunction with our software and sell third-party hardware components with our software in various configurations required by our customers. Our products are interoperable with all major fingerprint reader and hardware manufacturers, enabling application developers, VAR's, and channel partners to integrate our fingerprint biometrics into their applications, while dramatically reducing maintenance, upgrade and life-cycle costs. Our core technology supports interoperability on over 40 different commercially available fingerprint readers and is interoperable across Windows, Linux, and the Android mobile operating systems. This interoperability is unique in the industry, is a key differentiator for our products in the biometric market and, in our opinion, makes our technology more viable than competing technologies and expands the size of the overall market for our products.

2018 saw the emergence of a few trends as customers in financial services and manufacturing began reaching out to us to add a layer of biometric sign-in to their security infrastructure. Use cases included securing the online activity of roving users and shared workstations. Manufacturers turned to us to incorporate workflow efficiencies such as replacing eSignature processes with biometric tracking and reducing the use of long sophisticated passwords with biometric sign-in.

Late 2018, Lockheed Martin, a global government contractor, purchased SidePass and EcoID to secure employee access to the device and to leverage the biometric authentication capabilities of Windows Hello – Windows Hello for Business.

Along with organizations that sought out our solutions to address compliance requirements for multifactor authentication, emerged a new area of opportunity as state board of election organizations were funded to address key security concerns and biometric sign-in became a preferred solution.

In the second half of 2019, we modified our software licensing program to a software as a service (SaaS) model. By migrating to a SaaS billing model, we open the door for more organizations to use our technology by lowering the cost of entry. Although we expect to sacrifice some short-term revenue, the SaaS model is expected to generate more revenue than our former "perpetual billing method" which provided for an upfront payment for all licenses.

We approached CES 2019 as a critical proving ground for our TouchLock line of products. After expanding the product line and marketing the products on Shopify and Amazon, we targeted CES 2019 as a crossroad to either continue to market TouchLock, or to discontinue the products to focus on the core business. Upon returning from the event, we decided to exit the US consumer lock business.

In 2019, we entered into a sales incentive agreement with TTI to pursue market opportunities in the continent of Africa and compete for large-scale ID products in Africa and the surrounding region. The World Bank announced that it has dedicated $443M in funds to support government ID, voter ID, SIM Card registration programs throughout Africa and the surrounding countries. TTI has already secured $75M in contracts as of April, 2020. The COVID-19 pandemic has delayed the timing of the rollout of the programs. We are continuing to monitor the effects of the pandemic and expect that we may experience further delays.

In 2019, we won two significant international government law enforcement projects, one in Dubai and one in Singapore. Both organizations are using ID Director for Windows along with BIO-key fingerprint scanners to secure internal access to files and applications.

With the upcoming election, and security being a concern, during 2019 we emerged as the preferred biometric authentication solution for certain election offices in the Southeastern United states. Within the past twelve (12) months, we have completed projects with eight (8) county election offices to secure internal access to the voter registration databases and additional state and county offices are evaluating our solutions. We anticipate the trend may continue to grow both in number of offices supported and in geographic coverage.

Banking remains a primary focus as we added several banks and credit unions to our financial services footprint. During the first quarter of 2019, we published and distributed a case study highlighting First National Bank of Long Island. Banks are finding ID Director for Windows and BIO-key scanners offer secure cost-effective multifactor authentication, protecting internal access to customer data.

The U.S. Senate became a BIO-key customer when they ordered our fingerprint scanners to secure access to laptops, computers, and tablets. Several offices within the White House have deployed our scanners as a way to secure the device and protect critical files and applications.

Finger-based Biometric Identification and Personal Identity Verification Our biometric identification technology improves both the accuracy and speed of authenticating or identifying individuals, by extracting unique landmarks and other characteristics from a fingerprint and comparing it to the landmarks from previously enrolled fingerprints to determine a match. The technology is built to be scalable and to handle databases containing millions of fingerprints. We achieve the highest levels of discrimination without requiring any other identifying data (multi-factor) such as a user ID, smart ID cards, or tokens, although our technology can be used in conjunction with such additional factors. Users of our technology have the option of on device or cloud authentication. This flexible authentication option in conjunction with our interoperable capabilities, is another key differentiator of our biometric identification solutions.

We support industry standards, such as SAML, FIDO, BioAPI, and have received National Institute of Standards and Technology independent laboratory certification of our ability to support Homeland Security Presidential Directive #12 (HSPD-12) and ANSI/INCITS-378 templates, as well as validation of our fingerprint match speed and accuracy in large database environments.

Our fingerprint identification algorithm, Vector Segment Technology (VST™), and WEB-key biometric service manager are the core intellectual property behind our full suite of biometric products that include:

ID Director™ —is a suite of solutions for integration with CA Technologies / Broadcom's Single Sign-on solution, Oracle's Fusion Middleware SSO, IBM Tivoli Access Manager as well as ISAM and other solutions, utilizing the power and security of WEB-key. This solution provides a simple to implement, custom authentication scheme for companies looking to enhance authentication. ID Director is designed to add a level of security and convenience to the transaction level of any application. Versions of ID Director include:

ID Director for Windows provides enterprise customers the ability to implement and operate a biometric-centric multi-factor authentication (MFA) solutions with their Microsoft Active Directory and Azure Cloud platforms.

ID Director for SAML allows for simplified integration with many applications and identity and access management (IAM) platforms, without coding, including CA Technologies / Broadcom's Single Sign-on, Oracle's IDCS, IBM Tivoli Access Manager ESSO as well as Salesforce, SAP, and other SAML-enabled solutions, leveraging the power and security of WEB-key into a growing set of end user authentication scenarios. This solution provides a simple-to-implement, secure biometric authentication solution for companies looking to enhance authentication across many applications.

ID Director for EPIC adds BIO-key authentication to EPIC EHR environments, simplifying strong authentication for access, as well as meeting electronic prescribing regulations for authentication.

Vector Segment Technology SDK (VST )—Our biometric software development kit ("SDK") provides developers with the ability to incorporate our biometric capabilities into their respective product offerings or infrastructure. VST is available as a low level SDK for incorporation into any application architecture to increase security while not sacrificing convenience. VST runs on Windows and Linux as well as within WEB-key on iOS and Android systems.

Intelligent Image Indexing® —Our biometric identification solution offers both large-scale one-to-many and one-to-one user identification. This solution enables customers to perform false alias and fast entry checks, including preventing fraudulent access to systems and privileges. Intelligent image indexing scales identification capabilities from thousands to millions of users. The solution runs on commercially available hardware making it scalable for any size system.

Biometric Service Provider —We provide support for the BioAPI (a standards-based solution meeting worldwide needs) for a compliant interface to applications using biometrics for verification and identification. We enhance the traditional use of BioAPI by adding 64-bit support and other advanced features, supporting identification calls and also providing a single user interface for multiple fingerprint readers.

We also offer a full line of easy to use finger scanners for both enterprise and consumer markets. Our SideSwipe, SideTouch and EcoID scanners are plug and play compatible with Microsoft Windows and our Q-180 Touch reader is a Micro USB compatible fingerprint reader for Android devices. The readers are currently sold in the Microsoft stores, as well as through their on-line channel, on Amazon, and through our website.

In 2015, Microsoft announced native support for biometrics in the Windows 8.1 and Windows 10 Operating platforms as well as Office 2016. With Microsoft Hello, any user can replace their PIN or password to access their device without any special software downloads by using our finger scanners, SideSwipe, SideTouch and EcoID, which are plug and play (PnP) compatible with the Microsoft platforms. We have been the preferred partner, in particular at the Microsoft "Ignite your Business" Windows 10 and Office 2016 launch events.

In 2018, we continued to invest and grow our relationship with Microsoft. The 2018 Ignite your Business event included Microsoft hosting an exclusive BIO-key demonstration kiosk within their event showcase.

In 2018, we also introduced OmniPass Consumer, a secure biometric-enabled application to manage multiple passwords for online apps, services or accounts.

Authentication Transaction Security

Our authentication-transaction security technology, WEB-key, provides the ability to conduct identification and identity verification transactions in potentially unsecure environments, including the World Wide Web or in off-site cloud environments.

WEB-key makes cloud-based biometric user-authentication viable and eliminates technology constraints on online service providers, who are otherwise dependent on handset provider hardware and software platform decisions. It extends all features and functionalities of the VST algorithm to customers looking to add an enhanced level of security to their thin client and client/server applications. Both Windows and Linux operating systems currently support WEB-key. Clients are available on Windows and Android operating systems.

Solely for convenience, trademarks and tradenames referred to in this prospectus appear (after the first usage) without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks and tradenames.

BIO-key International, Inc. is a leading identity and access management (IAM) platform provider enabling secure work-from-anywhere for enterprise, education, and government customers using secure multi-factor authentication (MFA). Our vision is to enable any organization to secure streamlined and passwordless workforce, customer, citizen and student access to any online service, workstation, or mobile application, without a requirement to use tokens or phones. Our products include PortalGuard® and PortalGuard Identity-as-a-Service (IDaaS) enterprise IAM, WEB-key® biometric civil and large-scale ID infrastructure, MobileAuth® mobile phone authentication application for iOS and Android, and high-quality, low-cost accessory fingerprint scanner and FIDO-compliant hardware to provide a full and complete solution for identity-innovating customers.

BIO-key PortalGuard and hosted PortalGuard IDaaS are platforms that enable our customers to securely and easily assure that only the right people can access the right systems. PortalGuard goes beyond traditional MFA solutions by addressing functional gaps, such as allowing roving users to biometrically authenticate at any workstation without using their phones or tokens, eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification.

Our customers use BIO-key every day to securely access a variety of cloud, mobile and web applications, on-premise and cloud-based servers from all of their devices. Employees, contractors, students and faculty sign in through PortalGuard to seamlessly and securely access the applications they need to do their important work, without relying on personal phone use or per-user tokens. Organizations use our platform to securely collaborate with their supply chain and partners, and to provide their customers with flexible, resilient user experiences online or in-person.

Large-scale customer and civil ID customers use our scalable biometric management platform and FBI-certified scanner hardware to manage enrollment, de-duplication and authentication for millions of users. One large bank has enrolled and identifies over 21.7 million of their customers using BIO-key fingerprint biometrics in branches on a daily basis.

PortalGuard and hosted PortalGuard IDaaS are platforms that enable our customers to securely and easily assure that only the right people can access the right systems by utilizing our world-class biometric core platform among 17 other authentication factors. PortalGuard goes beyond traditional multi-factor authentication, or MFA, solutions by addressing sizeable gaps, such as allowing roving users to biometrically authenticate at any workstation without using their phones or tokens, eliminating unauthorized account delegation, detecting duplicate users, and accommodating in-person identification.

PortalGuard and IBB deliver unique value to enterprises who find that mainstream MFA solutions do not adequately address their workforce use cases. PortalGuard operates as a single MFA user experience, providing a rich set of authentication choices to meet every use case. We sell our branded biometric and FIDO authentication hardware as accessories to our IAM platforms, so that customers can have a single vendor providing all components of their IAM solution. We do not mandate the use of BIO-key hardware with our software and services. Our NIST-certified fingerprint biometric platform is unique in that it supports interoperable mixing and matching combinations of different manufactures' fingerprint scanners in a deployment, so that the right scanner can be selected for the right use case, without mandating the user of a particular scanner.

Security-conscious software developers leverage our platform APIs and federation interfaces to securely and efficiently embed biometric and MFA identity capabilities into their software. Our approach to IDaaS allows our customers to efficiently scale their security and identity infrastructures to protect both internal cloud workforce- and external customer-facing applications.

In 2022, we expanded our product offerings and customer base when we acquired Swivel Secure, a Madrid, Spain based provider of IAM solutions. Swivel Secure is the exclusive distributer of AuthControl Sentry, AuthControl Enterprise, and AuthControl MSP product line in Europe, Africa and the Middle East, or EMEA, excluding the United Kingdom and Ireland. These solutions include a patented one-time-code extraction technology, helping enterprises manage the increasing data security risks posed by cloud services and bring your own device policies.

We operate a SaaS business model with customers subscribing to term use of our software for annual recurring revenue. We sell our products directly through our field and inside sales teams, as well as indirectly through our network of channel partners including resellers, system integrators, master agents and other distribution partners. Our subscription fees include a term license of hosted or on-premise product and technical support and maintenance of our platform. We base subscription fees primarily on the products used and the number of users enrolled in our platform. We generate subscription fees pursuant to noncancelable contracts with a weighted average duration of approximately one year.

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