Exhibit 99.1

AMENDMENT AND WAIVER

This Amendment and Waiver (the “Amendment and Waiver”) is entered into by and between BIO-KEY INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), and Laurus Master Fund, Ltd. (“Laurus”), and is effective as of the 10th day of August, 2006.

WHEREAS, the Borrower issued a Secured Convertible Note to Laurus on September 29, 2004 in the aggregate original principal amount of $5,000,000 (as amended, modified and/or supplemented from time to time, the “September 2004 Note”), payable in full on January 1, 2008 (the “September Note Maturity Date”);

WHEREAS, the Borrower issued a Secured Convertible Note to Laurus on June 8, 2005 in the aggregate original principal amount of $2,000,000 (as amended, modified and/or supplemented from time to time, the “June 2005 Note”), payable in full on December 1, 2008 (the “June Note Maturity Date”) (the September 2004 Note and the June 2005 Note are collectively referred to as the “Notes”; capitalized terms not otherwise defined herein shall have the meanings given to them in the Notes);

WHEREAS, the parties wish to amend the Notes to provide that the Principal Amounts due and payable under the September 2004 Note and the June 2005 Note for the months of August and September 2006, respectively, shall be paid in shares of Common Stock priced at $0.50 per share (subject to adjustment as provided in the Notes);

WHEREAS, the parties wish to further amend the Notes to defer the payment of (i) the Principal Amount due and payable under the September 2004 Note for the months of October, November and December 2006 until the September Note Maturity Date, and (ii) the Principal Amount due and payable under the June 2005 Note for the months of October, November and December 2006 until the June Note Maturity Date;

WHEREAS, the Borrower has agreed to issue 150,000 newly issued restricted shares of Common Stock (the “Shares”) to Laurus, with registration rights to be granted to Laurus with respect to the Shares as provided herein; and

WHEREAS, Laurus has agreed to (i) unconditionally and irrevocably waive the provisions of Section 3.4(b)(C) of each Note regarding the adjustment of the Fixed Conversion Price (as defined in each such Note), in each case solely with respect to the issuance of the Shares, and (ii) waive all penalties arising out of certain obligations of the Borrower with respect to the registration of certain securities of the Borrower with the Securities and Exchange Commission (the “SEC”).

NOW, THEREFORE, in consideration of the mutual promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. September 2004 Note. With respect to the September 2004 Note, the parties hereby agree that (i) the Principal Amount due and payable for the months of August and

September 2006 shall be paid in shares of Common Stock priced at $0.50 per share (subject to adjustment as provided in the Notes) and (ii) the Principal Amount due and payable for the months of October, November and December 2006 (collectively, the “September Note Deferred Amount”) is hereby deferred until the September Note Maturity Date, at which time the September Note Deferred Amount shall be paid in full along with the final payment due on such date pursuant to the September 2004 Note. Notwithstanding the foregoing, (x) the Borrower shall remain obligated to pay all interest when due under the September 2004 Note and (y) the limitations set forth in Section 3.2 of the September 2004 Note shall continue to apply.

2. June 2005 Note. With respect to the June 2005 Note, the parties hereby agree that (i) the Principal Amount due and payable for the months of August and September 2006 shall be paid in shares of Common Stock priced at $0.50 per share (subject to adjustment as provided in the Notes) and (ii) the Principal Amount due and payable for the months of October, November and December 2006 (collectively, the “June Note Deferred Amount”) is hereby deferred until the June Note Maturity Date, at which time the June Note Deferred Amount shall be paid in full along with the final payment due on such date pursuant to the June 2005 Note. Notwithstanding the foregoing, (x) the Borrower shall remain obligated to pay all interest when due under the June 2005 Note and (y) the limitations set forth in Section 3.2 of the June 2005 Note shall continue to apply.

3. Issuance of Shares; Rule 144.

(a) As consideration for the foregoing, the Borrower hereby agrees to issue the Shares to Laurus as of the date hereof. The Borrower shall deliver to Laurus an original, newly issued stock certificate evidencing the Shares within five (5) business days after the date hereof.

(b) This Amendment and Waiver, including but not limited to the issuance of securities contemplated hereunder (the “Securities”), is made with Laurus in reliance upon Laurus’ representation to the Borrower, which by Laurus’ execution of this Amendment and Waiver, Laurus hereby confirms, that the Securities to be acquired by Laurus will be acquired for investment for Laurus’ own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Laurus has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Amendment and Waiver, Laurus further represents that Laurus does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. Laurus has not been formed for the specific purpose of acquiring the Securities. Laurus agrees and acknowledges that it has had an opportunity to discuss the Borrower’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Borrower’s management. Laurus understands that the Securities have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Laurus’ representations as expressed herein. Laurus understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws

and that, pursuant to these laws, Laurus must hold the Securities indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available. Laurus hereby represents and warrants to the Borrower that Laurus is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act and has knowledge and experience in financial and business matters such that it is capable of evaluating the merits and risks of the investment to be made hereunder. Laurus acknowledges that the Borrower has no obligation to register or qualify the Securities for resale except as is otherwise set forth in this Amendment and Waiver and the Registration Rights Agreement (as defined herein below). Laurus further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Borrower which are outside of Laurus’ control, and which the Borrower is under no obligation and may not be able to satisfy.

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.”

Certificates evidencing the Shares shall not be required to contain the legend set forth above or any other legend (i) while a Registration Statement (as defined in the Registration Rights Agreement) covering the resale of such Shares is effective under the Securities Act; provided that the holder thereof covenants that in connection with each sale of such securities, a copy of the final prospectus that forms a part of such Registration Statement will be delivered in accordance with the provisions of Section 5(b)(2) of the Securities Act, and the rules and regulations promulgated thereunder, or (ii) following any sale of such Shares pursuant to Rule 144 under the Securities Act, or (iii) if such Shares are eligible for sale under Rule 144(k) under the Securities Act, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the SEC). The Borrower shall cause its counsel to issue the legal opinion to permit the removal of the legend as permitted in the immediately preceding sentence to the Borrower’s transfer agent on the effective date of the Registration Statement covering the resale of the Shares. Following the effective date of such Registration Statement or at such earlier time as a legend is no longer required for the Shares, the Borrower will no later than three trading days following the delivery by Laurus to the Borrower or the Borrower’s transfer agent of a legended certificate representing such Shares, deliver or cause to be delivered to Laurus a certificate representing such Shares that is free from all restrictive and other legends.

(d) The Borrower acknowledges that all of the Common Stock issuable upon the conversion of the Notes shall be deemed to have been acquired at the same time as the Notes for purposes of Rule 144 under the Securities Act of 1933, as amended.

4. Registration Rights. The Borrower hereby grants registration rights to Laurus with respect to the Shares pursuant to a Registration Rights Agreement dated as of even date herewith, in the form attached as Exhibit A hereto, between Laurus and the Borrower (the “Registration Rights Agreement”).

5. Conversion Price. Laurus hereby unconditionally and irrevocably waives the provisions of Section 3.4(b)(C) of each Note regarding any adjustment of the Fixed Conversion Price (as defined in each such Note) that would otherwise be triggered as a result of the issuance of the Shares. The waiver contained in this Section 6 relates exclusively to the securities described herein, and shall not apply to any other subsequent issuances of any Common Stock or other securities by the Borrower.

6. Waiver of Penalties. Laurus hereby agrees to waive all penalties as of the date hereof under Section 2(b)(ii) of the Registration Rights Agreements between the Borrower and Laurus dated as of June 8, 2005 and September 29, 2004, respectively.

7. Securities Purchase Agreement. Laurus hereby acknowledges and consents to the Borrower entering into (a) Securities Purchase Agreements dated on or about the date hereof (the “Securities Purchase Agreement”) by and among the Borrower, Trellus Partners, L.P. and The Shaar Fund, Ltd. (the “Common Stock Purchasers”), pursuant to which the Borrower will agree to issue shares of Common Stock to the Common Stock Purchasers for an aggregate purchase price of $2,000,000 and (b) the Securities Exchange Agreement dated on or about the date hereof (the “Securities Exchange Agreement”) by and among the Borrower, The Shaar Fund, Ltd., Longview Fund, L.P. and the other parties thereto (collectively, the “Subordinated Purchasers”), pursuant to which the Subordinated Purchasers will agree to exchange all Subordinated Convertible Promissory Notes held by them for shares of the Borrower’s Series C Convertible Preferred Stock, $.0001 par value per share (the “Series C Preferred Stock”).

8. No Other Amendments. Except as expressly set forth in this Amendment and Waiver, no other term or provision of any of the Notes is hereby amended or affected in any way, and the Notes shall remain in full force and effect after the date hereof.

9. Governing Law. This Amendment and Waiver shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of laws.

10. Facsimile Signatures; Counterparts. This Amendment and Waiver may be executed by facsimile signatures and in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

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	BIO-KEY INTERNATIONAL, INC.

	By:	/s/ Thomas J. Colatosti
	Name: Thomas J. Colatosti
	Title: Chairman


	LAURUS MASTER FUND, LTD.

	By:	/s/ David Grin
	Name: David Grin
	Title: Director