1019034--3/11/2009--BIO_KEY_INTERNATIONAL

related topics

{stock, price, share}

{product, market, service}

{regulation, government, change}

{control, financial, internal}

{system, service, information}

{customer, product, revenue}

{interest, director, officer}

{property, intellectual, protect}

{acquisition, growth, future}

{personnel, key, retain}

Based on our lack of significant revenue since inception and recurring losses from operations, our auditors have included an explanatory paragraph in their opinion as to the substantial doubt about our ability to continue as a going concern. Since our formation, we have historically generated minimal revenue and have sustained substantial operating losses. biometric technology has yet to gain widespread market acceptance and we do not know how large of a market will develop for our technology. Biometric technology is a new approach to Internet security which must be accepted in order for our WEB-key solution to generate significant revenue. Our software products may contain defects which will make it more difficult for us to establish and maintain customers. In order to generate revenue from our biometric products, we are dependent upon independent original equipment manufacturers, system integrators and application developers, which we do not control. As a result, it may be more difficult to generate sales. We derive the majority of our revenue from government contracts, which are often non-standard, involve competitive bidding, may be subject to cancellation with or without penalty and may produce volatility in earnings and revenue. We face intense competition and may not have the financial and human resources necessary to keep up with rapid technological changes, which may result in our technology becoming obsolete. We depend on key employees and members of our management team, including our Chairman of the Board and Chief Executive Officer, in order to achieve our goals. We cannot assure you that we will be able to retain or attract such persons. We can not assure you that the intellectual property protection for our core technology provides a sustainable competitive advantage or barrier to entry against our competitors. We may need to obtain additional financing to execute our business plan, 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 may not achieve sustainable profitability with respect to the law enforcement and biometric components of our business if we are unable to maintain, improve and develop the wireless data services we offer. Our law enforcement and biometric division depends upon wireless networks owned and controlled by others. New laws and regulations that impact our law enforcement and biometric division could increase our costs or reduce our opportunities to earn revenue. If we fail to adequately manage our resources, it could have a severe negative impact on our financial results or stock price. Our obligations to the holders of our outstanding preferred stock may adversely affect our ability to enter into potential significant transactions with other parties. Risks Related To Our Common Stock We have issued a substantial number of securities that are convertible into shares of our common stock which will result in substantial dilution to the ownership interests of our existing shareholders. A substantial number of our convertible securities are convertible into shares of common stock at a conversion price of $.30 per share. Most of these shares are eligible for public resale. The trading price of our common stock and our ability to raise additional financing may be adversely affected by the influx into the market of such a substantial number of shares. Applicable SEC Rules governing the trading of penny stocks limits the trading and liquidity of our common stock, which may affect the trading price of our common stock. We do not intend to pay dividends in the foreseeable future. The trading price of our common stock may be volatile.

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1019034--3/11/2009--BIO_KEY_INTERNATIONAL_INC