BIO-key International (NASDAQ:BKYI) reported higher second-quarter revenue and a narrower net loss, while management said a delayed hardware shipment prevented results from meeting its expectations for the period. The company said it expects to ship that order during the second half of 2026 and is targeting profitability for the back half of the year.
Revenue for the second quarter ended June 30 rose 13% to $1.92 million from $1.7 million a year earlier. Net loss narrowed 51% to $577,000, or $0.56 per share, compared with a loss of $1.17 million, or $2.01 per share, in the prior-year quarter. For the first half, revenue increased 23% and net loss improved 59% to $782,000.
License Revenue and Margins Improve
Gross profit increased 36% to $1.7 million, while gross margin expanded to 87% from 73% a year earlier. Welch said the improvement reflected a greater share of higher-margin license revenue as well as sales of hardware inventory that had previously been fully reserved. Since that inventory was fully reserved, those sales contributed 100% gross profit, she said.
Operating expenses fell 5% to $2.2 million as lower selling, general and administrative costs from cost-containment efforts were partly offset by expenses related to the company’s reverse stock split, audit work and tax matters.
Chairman and CEO Mike DePasquale said the delayed hardware shipment was not due to weaker demand. While he said the company would prefer to ship the entire order in the third quarter, he could not specify whether the shipment would be recognized in the third or fourth quarter. He added that BIO-key is working on other larger projects and contracts that management believes could support second-half growth and profitability.
International Pipeline and Customer Deployments
Management highlighted activity in Europe, the Middle East and Africa, where BIO-key is pursuing government, defense, financial-services and education opportunities through its channel network. DePasquale said virtually all international business is developed through partners, while roughly half of new U.S. business also comes through partners.
The company recently partnered with Maktabi Tech to offer PortalGuard passwordless authentication and Identity-Bound Biometrics to education institutions in Saudi Arabia, Jordan and the United Arab Emirates. BIO-key also said the Central Bank of Jordan is working with the company on an initiative to modernize authentication across Jordan’s financial sector using PortalGuard and WEB-key technologies.
During the question-and-answer session, DePasquale said BIO-key had been selected for the Jordan initiative and is beyond a pilot stage. He said the company is currently in deployment planning and expects revenue from the initiative to become more significant during the second half of 2026 and into early 2027. The project could involve both hardware and software, though management said software remains the company’s primary focus because of its higher margins.
In Portugal, BIO-key said a national security agency selected the company and local partner Visualforma to deploy PortalGuard, WEB-key and EcoID III fingerprint scanners. DePasquale said channel partners generally receive a 20% to 30% discount on software, but the company retains software gross margins of about 85% on the resulting revenue. He said Visualforma and other partners provide services and support to end customers.
In the U.S., Alabama’s AOD Federal Credit Union deployed BIO-key’s biometric authentication platform through partner BlueAlly. DePasquale said the credit union selected the platform for its flexibility and potential to reduce help-desk activity tied to password resets.
Capital Position and Product Strategy
BIO-key completed a 1-for-10 reverse stock split during the second quarter and regained compliance with Nasdaq listing requirements in July, resuming trading on the Nasdaq Capital Market.
As of June 30, the company had $1.4 million in cash, $3.8 million in current assets and stockholders’ equity of $4.3 million. After the quarter ended, BIO-key reduced the balance on an outstanding note by $350,000 to $325,000 in exchange for 81,100 shares.
The company also completed a warrant inducement transaction that generated gross proceeds of $2.5 million through the exercise of warrants for 681,334 shares at $4.06 per share and the issuance of new warrants for 1.2 million shares at the same exercise price. Welch said the company’s cash position subsequently exceeded $4.5 million, aided by both the financing and collections of receivables after quarter-end.
DePasquale said the company does not anticipate additional dilution and believes its cash resources can support operations and investments in growth initiatives. Those initiatives include the rollout of PortalGuard 7.0 and development around the use of biometric authentication for oversight of artificial-intelligence agents.
Management said it sees biometric authentication as a way to link sensitive AI-agent actions to accountable individuals. DePasquale said BIO-key is evaluating strategies around its Passkey:YOU offering and potential partnerships related to AI governance, though he said the company is still developing those opportunities.
About BIO-key International (NASDAQ:BKYI)
BIO-key International, Inc is a developer and provider of fingerprint biometric identity and access management solutions, serving enterprise and government customers. The company’s core offerings include a range of fingerprint readers and authentication software designed to verify user identity across physical and digital environments. By leveraging proprietary template-on-card and template-on-device technologies, BIO-key seeks to enhance security and streamline user access without reliance on traditional passwords.
In addition to hardware sensors, BIO-key delivers software platforms that integrate with existing IT infrastructures such as Microsoft Active Directory and major workforce management systems.
