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EXHIBIT 10.26





                       SECURED CONVERTIBLE PROMISSORY NOTE

THIS NOTE HAS NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.  THE NOTE  MAY NOT BE OFFERED, RESOLD, PLEDGED OR
TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION
THEREUNDER OR THE AVAILABILITY OF AN EXEMPTION THEREFROM.

No.     N-                                        Up to US $ 2,350,000
        ----                                            --------------

                           BIO-KEY INTERNATIONAL, INC.

                                       NOTE


     FOR VALUE RECEIVED,     BIO-KEY INTERNATIONAL, INC.,  a Minnesota
corporation (the "Company"), promises to pay to THE SHAAR FUND LTD., the
registered holder hereof (the "Holder"), the principal sum of Two Million Three
Hundred Fifty Thousand and 00/100  ($2,350,000) Dollars, or such lesser amount
as may have been advanced from time to time under that certain Note Purchase
Agreement dated as of even date herewith by and between the Company and Investor
(the "Agreement"), and to pay interest in arrears at the rate of 7% per annum on
the outstanding principal balance due hereunder.  Accrual of interest shall
commence on the first such business day to occur after the date hereof and shall
continue until payment in full of the principal sum has been made or duly
provided for on a 360 day basis.  The principal of, and interest on, this Note
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at the
address last appearing on the Note Register of the Company as designated in
writing by the Holder from time to time.  The Company will pay the principal of
and interest upon this Note, less any amounts required by law to be deducted, to
the registered holder of this Note to such date and addressed to such holder at
the last address appearing on the Note Register.  The forwarding of such check
shall constitute a payment of principal and interest hereunder and shall satisfy
and discharge the liability for principal and interest on this Note to the
extent of the sum represented by such check plus any amounts so deducted.

     Principal and interest hereunder shall be payable in a single payment on
June 30, 2004.
This Note is subject to the following additional provisions:

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     1.  (a)    The Company acknowledges that there has been received on the
date hereof, the sum of $600,000.

         (b)     This Note is being issued pursuant to the Terms of the
Agreement.  Terms not otherwise defined herein shall have the meanings ascribed
to them in the Agreement.

         (c)     The obligation of the Company for payment of principal,
interest and all other sums hereunder is secured by Security Interest Provisions
between the Company and the Holder as set forth in the Annex to that certain
Secured Note of the Company dated November 26, 2001 issued to Holder in the
principal amount of $4,092,920 with the same force and effect as if annexed
hereto.

     2.     The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Note any amounts required to be withheld
under the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.

     3.     This Note has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws.  In the event of any proposed
transfer of this Note, the Company may require, prior to issuance of a new Note
in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Note in such
other name does not and will not cause a violation of the Act or any applicable
state or foreign securities laws. Prior to due presentment for transfer of this
Note, the Company and any agent of the Company may treat the person in whose
name this Note is duly registered on the Company's Note Register as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Note be overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.

     4.     No provision of this Note shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Note at the time, place, and rate, and in the coin or
currency, herein prescribed.  This Note is a direct obligation of the Company.

     5.     A.     In the event that, on or before June 30, 2004 (the "Financing
Date"), the Company completes a private placement of equity securities of the
Company  (the "Current Financing Securities") for an aggregate sale price of at
least $5,000,000 (the "Transaction"), upon the closing of the Transaction, some
or all of the principal of, or the interest due on, the Note, or both, shall, at
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the option of the Holder, either (i) be converted into shares of Current
Financing Securities at a conversion price equal to the price per share at which
the Current Financing Securities are issued (such price subject to adjustment
for stock splits, stock dividends and the like), and on the additional terms and
conditions applicable generally to the Transaction, or (ii) immediately be paid
in cash.

          B.     In lieu thereof, the Investor may, at its option and
discretion, at any time and from time to time, elect to convert some or all of
the then outstanding principal and interest of the Note into either (a) Common
Stock of the Company at a conversion price of $.75 per share (subject to
adjustment set forth below) (the "Common Conversion Price") or (b) shares of the
Company's Series B 9% Convertible Preferred Stock, $.01 par value per share (the
"Series B Preferred Stock"), at a conversion price (the "Preferred Conversion
Price" and together with the Common Conversion Price, the "Conversion Prices ")
of $100.00 per share (subject to adjustment set forth below) by telecopying to
the Company an executed and completed Notice of Conversion in the form attached
hereto as Exhibit A.  Conversion shall be deemed to have been effected at on the
date the Notice of Conversion is telecopied and received by the Company and at
such time the rights of the Holder under this Note shall cease to the extent of
such conversion.

          C.     (i)     Notwithstanding any other provision hereof to the
contrary, the Company shall have the right to prepay, in whole or in part, the
then outstanding principal amount of the Note then held by the Holder for an
amount (the "Redemption Amount") equal to the sum of (a) the principal due under
the Note and (b) all accrued but unpaid interest thereon  through the date the
Redemption Amount is paid to the Holder (the "Redemption Payment Date"), The
Company shall give at least fifteen (15) business days, but not more than twenty
(20) business days, written notice of such redemption to the Holder (the "Notice
of Redemption").

               (ii)     With respect to any principal amount and interest for
which a Notice of Conversion is submitted to the Company prior to the Redemption
Payment Date, the Notice of Conversion shall take precedence and such principal
amount and interest shall be converted in accordance with the terms hereof.
Furthermore, in the event such Redemption Payment is not timely made, the Notice
of Redemption shall be null and void, and any rights of the Company to
thereafter redeem this Note shall be subject to the deposit of the Redemption
Amount, in escrow, with an attorney designated by the Holder , within 2 business
days of delivery of any Notice or Redemption .

          D.     In case of any reclassification of the Series B Preferred Stock
and/or Common Stock, recapitalization, or like capital adjustment affecting the
Series B Preferred Stock and/or Common Stock (each, an "Adjustment"), the Common
Conversion Price and/or the Series B Conversion Price, as applicable, in effect
at the time of the effective date for such Adjustment shall be proportionally
adjusted so that the Holder of this Note converted after such date shall be
entitled to receive the aggregate number and kind of shares which, if this Note
had been converted by such Holder immediately prior to such date, the Holder
would have owned upon such conversion and been entitled to received upon such
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Adjustment (and for such purposes the Holder shall, to the extent relevant, be
deemed to have converted this Note immediately prior to the record date or the
effective date, as the case may, for the Adjustment).

          E.     Conversion of this Note pursuant to Section 5B hereof may be
exercised, in whole or in part, by the Holder by telecopying an executed and
completed notice of conversion.  Interest accrued or accruing from the Issue
Date to the date of conversion shall, at the option of the Company, be paid in
cash or shares of Common Stock or Series B Preferred Stock, as applicable, upon
conversion at the Common Conversion Price or Preferred Conversion Price, as
applicable.  No fractional shares of Series B Preferred Stock or Common Stock or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share.  The date
on which notice of conversion is given (the "Conversion Date") shall be deemed
to be the date on which the Holder faxes the conversion notice ("Notice of
Conversion"), substantially in the form annexed hereto as Exhibit A, duly
executed, to the Company.  Facsimile delivery of the Notice of Conversion shall
be accepted by the Company at facsimile number (651) 687-0515; ATTN: Chief
Financial Officer. Certificates representing Series B Preferred Stock or Common
Stock, as applicable, upon conversion will be delivered within five (5) business
days (the "Delivery Date") from the date the Notice of Conversion is delivered
to the Company's transfer agent or the Company.

          F.     From and after the date hereof, the Company shall have at all
times authorized and reserved for issuance, free from preemptive rights, shares
of Series B Preferred Stock and Common Stock sufficient to yield the number of
such shares issuable at conversion as may be required to satisfy the conversion
rights based on the Conversion Prices as in effect from time to time, pursuant
to the terms and conditions of the maximum principal mount of the Notes and
accrued interest to maturity.

          G.     The  Company  understands  that  a delay in the issuance of the
shares  of  Common  Stock  or  Series B Preferred Stock beyond the Delivery Date
could  result  in  economic loss to the Buyer.  As compensation to the Buyer for
such  loss,  the  Company  agrees  to  pay  late  payments to the Buyer for late
issuance  of  shares of Common Stock or Series B Preferred Stock upon Conversion
in  accordance  with  the  following schedule (where "No. Business Days Late" is
defined  as  the  number  of  business  days beyond seven (7) business days from
Delivery  Date:

                                             Late Payment For Each
                                             $10,000 Principal Amount
          No. of Business Days Late          Amount Being Converted

                    1                         $100
                    2                         $200
                    3                         $300
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                    4                         $400
                    5                         $500
                    6                         $600
                    7                         $700
                    8                         $800
                    9                         $900
                    10                        $1,000
                    >10                       $1,000+$200 for each
Business            Day Late beyond 10 days

The  Company  shall  pay any payments incurred under this Section in immediately
available  funds  upon  demand.  Furthermore,  in addition to any other remedies
which  may  be  available to the Holder, in the event that the Company fails for
any  reason  to  effect  delivery of such shares of Series B Preferred or Common
Stock  within five (5) business days after the Delivery Date, the Holder will be
entitled  to  revoke the relevant Notice of Conversion by delivering a notice to
such  effect  to  the Company whereupon the Company and the Holder shall each be
restored  to  their  respective  positions immediately prior to delivery of such
Notice  of  Conversion.

          H.     The  Holder  shall not have the right to convert any portion of
this  Note  to  the extent that the issuance to the Holder of Common Shares upon
such  conversion  would result in the Holder being deemed the "beneficial owner"
of  4.99%  or  more  of the then outstanding Common Shares within the meaning of
Rule  13d-3  of  the  Securities  Exchange  Act of 1934, as amended.(but without
giving  effect  to  the  unconverted  portion  of  this  Note.

     6.     The Holder of the Note, by acceptance hereof, agrees that this Note
is being acquired for investment and that such Holder will not offer, sell or
otherwise dispose of this Note except under circumstances which will not result
in a violation of the Act or any applicable state Blue Sky or foreign laws or
similar laws relating to the sale of securities.  The exercise by Holder of or
failure to so exercise any authority granted herein shall in no manner affect
Company's liability to Holder, and provided, further, that Holder shall be under
no obligation or duty to exercise any of the powers hereby conferred upon them
and they shall be without liability for any act or failure to act in connection
with the collection of, or the preservation of, any rights hereunder.

     7.     This Note shall be governed by and construed in accordance with the
laws of the State of New York.  Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York  sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions.

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     8.     The following shall constitute an "Event of Default":

     a.   The Company shall default in the payment of principal or interest on
          this Note and same shall continue for a period of five (5) business
          days; or

     b.   Any of the representations or warranties made by the Company herein,
          or in any certificate or financial or other written statements
          heretofore or hereafter furnished by the Company in connection with
          the execution and delivery of the Agreement or this Note shall be
          false or misleading in any material respect at the time made; or

     c.   The Company shall fail to perform or observe, in any material respect,
          any other covenant, term, provision, condition, agreement or
          obligation of the Agreement or this Note, and such failure shall
          continue uncured for a period of ten (10) business days after written
          notice from the Holder of such failure; or

     d.   The Company shall fail to perform or observe, in any material respect,
          any covenant, term, provision, condition, agreement or obligation of
          the Company hereunder, and such failure shall continue uncured for a
          period of thirty (30) days after written notice from the Holder of
          such failure; or

     e.   The Company shall (1) admit in writing its inability to pay its debts
          generally as they mature; (2) make an assignment for the benefit of
          creditors or commence proceedings for its dissolution; or (3) apply
          for or consent to the appointment of a trustee, liquidator or receiver
          for its or for a substantial part of its property or business; or

     f.   A trustee, liquidator or receiver shall be appointed for the Company
          or for a substantial part of its property or business without its
          consent and shall not be discharged within ninety (90) days after such
          appointment; or

     g.   Any governmental agency or any court of competent jurisdiction at the
          instance of any governmental agency shall assume custody or control of
          the whole or any substantial portion of the properties or assets of
          the Company and shall not be dismissed within ninety (90) days
          thereafter; or

     h.   Any money judgment, writ or warrant of attachment, or similar process
          in excess of Two Hundred Thousand ($200,000) Dollars in the aggregate
          shall be entered or filed against the Company or any of its properties
          or other assets and shall remain unpaid, unvacated, unbonded or
          unstayed for a period of ninety (90) days or in any event later than
          five (5) business days prior to the date of any proposed sale
          thereunder; or

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     i.   Bankruptcy, reorganization, insolvency or liquidation proceedings or
          other proceedings for relief under any bankruptcy law or any law for
          the relief of debtors shall be instituted by or against the Company
          and, if instituted against the Company, shall not be dismissed within
          ninety (90) days after such institution or the Company shall by any
          action or answer approve of, consent to, or acquiesce in any such
          proceedings or admit the material allegations of, or default in
          answering a petition filed in any such proceeding; or

     j.   The Company shall have its Common Stock suspended or delisted from an
          exchange or other trading market from trading for in excess of ten
          (10) trading days.

     k.   The Company fails to issue shares of Common Stock or Series B
          Preferred Stock, as applicable, to the Holder upon exercise by the
          Holder of the conversion rights of the Holder in accordance with the
          terms of this Note, fails to transfer any certificate for shares of
          Common Stock or Series B Preferred Stock, as applicable, issued to the
          Holder upon conversion of this Note and when required by this Note,
          and such transfer is otherwise lawful, or fails to remove any
          restrictive legend or to transfer on any certificate or any shares of
          Common Stock Series B or Preferred Stock issued to the Holder upon
          conversion of this Note as and when required by this Note or the
          Agreement and such legend removal is otherwise lawful, and any such
          failure shall continue uncured for five (5) business days.

Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Note immediately due and payable within five (5) business days of written notice
by Holder to the Company, without presentment, demand, protest or notice of any
kinds, all of which are hereby expressly waived, anything herein or in any note
or other instruments contained to the contrary notwithstanding, and the Holder
may immediately enforce any and all of the Holder's rights and remedies provided
herein or any other rights or remedies afforded by law.

     9.      Upon failure to make any payment of any installment of principal or
interest when due hereunder, Company further promises to pay, automatically on
all installments of principal and interest which are not timely paid when due,
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and until such payment default is cured and on the then outstanding principal
balance, additional interest in addition to the rate set forth hereinabove, so
that interest will then accrue at a rate equal to fifteen (15%) percent per
annum.

     10.     Any interest rate provided for hereunder which exceeds the maximum
rate provided by applicable law shall instead be deemed to be such maximum rate
and any interest in excess of such maximum rate paid to Holder shall be applied
to reduce the principal balance of this Note so that in no event shall Holder
receive or be entitled to receive interest in excess of the maximum amount
permitted by applicable law.

     11.     Nothing contained in this Note shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.

     12.     The Company and the Holder  hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other in respect of any matter arising out of or in connection with
the Note.

     13.     The Holder's books and records as to the amounts advanced hereunder
and the date of such advances shall be conclusive evidence thereof.

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     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.

Dated: January 27, 2003

                              BIO-KEY  INTERNATIONAL,  INC.


                              By:  /s/  Gary  Wendt
                              ------------------------------

                              Gary  Wendt
                              ------------------------------
                              (Print  Name)

                              Chief  Financial  Officer
                              ------------------------------
                              (Title)


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                           [FORM OF CONVERSION NOTICE]


TO:
    ---------------------------------

    ---------------------------------

    ---------------------------------


     The  undersigned hereby instructs the Company to convert the portion of the
Note  specified  above  into  __ shares of Series B Preferred Stock/__ shares of
Common  Stock  [complete,  as  applicable]  issued  at  a  Conversion  Price  in
accordance  with  the  provisions  of the Note. The undersigned directs that the
Series  B  Preferred  Stock  or  Common  Stock,  as  applicable,  issuable  and
certificates  therefor  deliverable  upon conversion, the Note recertificated in
the  principal  amount,  if  any,  not  being surrendered for conversion hereby,
together  with  any check in payment for fractional shares of Series B Preferred
Stock  or Common Stock, as applicable, be issued in the name of and delivered to
the  undersigned  unless  a  different  name  has  been  indicated  below.  All
capitalized  terms  used  and  not  defined  herein have the respective meanings
assigned  to  them  in  the  Note.

     By  delivering this conversion notice, the undersigned owner represents and
warrants that it does not now, nor after giving effect to this conversion notice
will it, beneficially own in excess of 4.99% of the outstanding shares of Common
Stock  of  the  Corporation  within  the meaning of Rule 13d-3 of the Securities
Exchange  Act  of  1934,  as  amended.


Date  ___________________________________________________________________




Signature
____________________________________________________________________________
                    [Name]

Address:
____________________________________________________________________________

_____________________________________________________________________________


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