Exhibit 10.29

                           BIO-KEY INTERNATIONAL, INC.
                           1285 Corporate Center Drive
                                    Suite 175
                                 Eagan, MN 55121
                              Phone: (651) 687-0414
                               Fax: (651) 687-0515

                                October 31, 2003

The Shaar Fund, Ltd.
9 Kaya Flamboyan
Curacao, Netherland Antilles


Gentlemen:

         Reference  is  hereby  made  to the  following  securities  of  BIO-key
International, Inc. (the "Borrower") all of which were issued to The Shaar Fund,
Ltd.  (the  "Lender")  between  November  26,  2001 and  August  28,  2002:  (a)
Convertible  Debenture in the principal  amount of $1,000,000  due September 30,
2003 (the  "Debenture");  (b) Secured Note in the principal amount of $4,092,920
due September 30, 2003 (the "Note"); (c) Secured Notes issued between March 2002
and August 2002 in the aggregate  principal  amount of $1,080,000  (the "Advance
Notes");  and (d) Secured  Convertible  Note in the principal amount of $750,000
dated August 28, 2002 (the "August Note", and together with the Debenture,  Note
and Advance Note, collectively,  the "Notes"). Capitalized terms used herein and
not otherwise  defined herein,  shall have the meanings  ascribed thereto in the
Debenture, Note, Advance Note or August Note, as applicable.

         Pursuant  to the terms of the Notes or of waiver  letters  executed  by
Lender applicable to certain of the Notes, all principal and accrued interest on
each of the Notes was due and payable on September 30, 2003. By executing below,
Lender hereby  WAIVES the Event of Default  under each of the Notes  relating to
Borrower's  failure to timely make such principal and interest  payments and all
consequences  thereof  contemplated  by each of the  Notes,  including,  but not
limited to, the application of any section of any of the Notes providing for the
acceleration  of the payment of  principal  or  interest,  the  imposition  of a
default  rate of interest or the taking of any remedial  action,  until June 30,
2003,  and hereby  amends each of the Notes to provide  that all  principal  and
interest  due  under  each of the  Notes  shall be due and  payable  in a single
payment on June 30, 2004.

         Further,  effective upon the mutual execution hereof, the Borrower, for
itself and on behalf of all affiliates, representatives, and all predecessors in
interest, successors and assigns (collectively, the "Releasing Parties"), hereby
releases and forever discharges each of Lender,


<PAGE>

and  Lender's  direct and indirect  partners,  officers,  directors,  employees,
affiliates,  representatives,  agents, trustees, beneficiaries,  predecessors in
interest,  successors  in interest  and nominees of and from any and all claims,
demands,  actions and causes of action arising prior to the date of execution of
this Agreement, whether known or unknown, fixed or contingent, that the Borrower
may have had,  or may now have with  respect to any  matters  whatsoever  under,
relating to or arising  from any  securities  purchase  agreement,  Registration
Statement,  and any  agreements  entered  into by the  Borrower  and  Lender  in
connection  therewith (the "Prior  Agreements"),  or relating to or arising from
any other  matter.  The Borrower  also fully waives any offsets it may have with
respect  to the  amounts  owed  under the Prior  Agreements.  Additionally,  the
Borrower  represents,  warrants and  covenants  that it has not, and at the time
this release becomes effective will not have, sold,  assigned,  transferred,  or
otherwise  conveyed  to any other  person or entity  all or any  portion  of its
rights, claims, demands, actions, or causes of action herein released.

         By executing  below,  each of the  undersigned  represents and warrants
that its  signatory  hereto has the full  power and  authority  to execute  this
letter in the name of and on behalf of the Borrower or Lender, as applicable.

         This letter may be delivered via facsimile and executed in counterpart,
each of which  shall be deemed  to be an  original,  and both of which  together
shall constitute one and the same instrument

                                               Very truly yours,

                                               BIO-KEY INTERNATIONAL, INC.

                                               By: /s/ Michael W. DePasquale
                                                  -----------------------------
                                                  Name: Michael W. DePasquale
                                                  Title:  CEO
Agreed and Accepted

THE SHAAR FUND, LTD.

By: Levinson Capital Management

By: /s/ Sam Levinson
    -------------------------
    Sam Levinson
    Manager

By: Cita Investments Ltd.

By: /s/  Uri Wolfson
    ------------------------
    Uri Wolfson
    Sub-Advisor