authID Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

In the opinion of Management, the accompanying unaudited condensed consolidated financial statements are prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which we considered as necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for future periods or the full year.

The consolidated financial statements include the accounts of authID Inc. and its wholly-owned subsidiaries MultiPay S.A.S. (dissolved as of August 2, 2024), ID Solutions, Inc., FIN Holdings Inc., Ipsidy Enterprises Limited, and authID Gaming Inc. (collectively the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

Going Concern

As of March 31, 2025, the Company had an accumulated deficit of approximately $178.1 million. For the three months ended March 31, 2025, the Company earned revenue of approximately $0.3 million, used approximately $5.4 million to fund its operations, and incurred a net loss of approximately $4.3 million.

The continuation of the Company as a going concern is dependent upon financial support from the Company’s stockholders, the ability of the Company to obtain additional debt or equity financing to continue operations, the Company’s ability to generate sufficient cash flows from operations, successfully locating and negotiating with other business entities for potential acquisition and acquiring new clients to generate revenues and cash flows. Going forward, the Company plans to raise additional funds to support its operations and investments as it seeks to create a sustainable organization. Our growth-oriented business plan to offer products to our customers will require continued capital investment and there is no guarantee that such financing will be available, or available on acceptable terms.

There is no assurance that the Company will ever be profitable. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. As there can be no assurance that the Company will be able to achieve positive cash flows (become cash flow positive) and raise sufficient capital to maintain operations, there is substantial doubt about the Company’s ability to continue as a going concern.

Net Loss per Common Share

The Company computes net loss per share in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible notes and stock warrants, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion of convertible notes. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. The following potentially dilutive securities were excluded from the calculation of diluted loss per share for the three months ended March 31, 2025 and 2024 because their effect was antidilutive:

Revenue Recognition

Software License– The Company recognizes revenue based on the identified performance obligations over the performance period for fixed consideration and / or variable fees generated. Variable fees are typically earned over time based on monthly users, transaction volumes or a monthly flat fee rate. We allocate the selling price in a contract which has multiple performance obligations based on the contract selling price that we believe represents a fair market price for the service rendered based on estimated standalone selling price. Transaction fees are billed monthly and are constrained to transactions incurred within the month.

For contracts with minimum annual fees, the Company generally recognizes the amount of revenue ratably over the contract year and records contract assets for the amount in excess of monthly contract billings relating to variable contract consideration. For certain contracts, the Company enters into an agreement which stipulates a minimum annual fee which is generally due at the end of the contract year, in excess of the amount of monthly billings. The Company may also require milestone payments of the minimum annual fee. The amount of any billed fees in excess of revenue recognized is recorded as deferred revenue. The company accounts for any price concessions granted to a customer as reductions to consideration under each respective contract and subsequently recognizes revenue up to the amount of the revised consideration after the concession is provided.

Any usage-based fees in excess of the minimum contract amount are charged to the customer and allocated to the annual period in which they are earned under the contract. At the beginning of each annual period in the contract, the Company estimates the variable amounts for the annual period subject to the constrained variable consideration (usage-based fees) and recognizes that amount on a time-elapsed basis over the annual period. At each reporting date within an annual period, the Company reassesses its estimate of the excess variable amounts for the annual period and updates the amount recognized on a time-elapsed basis over the remainder of the annual period.

The Company had deferred revenue contract liabilities of approximately $1,011,000 and $215,000 as of March 31, 2025 and December 31, 2024, respectively, for certain revenue that will be earned in future periods.

Remaining Performance Obligations

As of March 31, 2025, the Company’s Remaining Performance Obligation (RPO) was $13.85 million, of which $1.01 million is recorded as deferred revenue and $12.84 million is related to other non-cancellable contracted amounts. The Company expects approximately 34% of the RPO to be recognized as revenue over the twelve months ending March 31, 2026, based on contractual commitments and expected usage patterns. However, the amount and timing of revenue recognition are generally dependent upon customers’ future consumption, which is inherently variable at customers’ discretion. Furthermore, the Company does not have sufficient historical information to estimate the recognition of revenue due to its current operations and has approximated such amount based on discussions with the contracted parties.

Accounts Receivable

All customers are granted credit on a short-term basis. The Company routinely reviews its trade receivables and makes provisions for probable doubtful accounts; however, those provisions are estimates and actual results could differ from those estimates and those differences may be material. Trade receivables are deemed uncollectible and removed from accounts receivable and the allowance for doubtful accounts when collection efforts have been exhausted.

As of December 31, 2024 the Company’s balance in its allowance for doubtful accounts was $149,720. In the three months ended March 31, 2025 the Company re-evaluated the likelihood of recovery of the balance of $149,720 and decided to remove the $149,720 from accounts receivable and allowance for doubtful accounts.

Concentration of Risks

For the Three Months ended March 31, 2025, three customers represented 68% of revenue. For the Three Months ended March 31, 2024, three customers represented 61% of revenue.

As of March 31, 2025, one customer accounting for 81% of the Company’s accounts receivable. As of December 31, 2024, two customers accounted for 39% of the Company’s accounts receivable.

As of March 31, 2025, one customer accounted for 72% of the Company’s Remaining Performance Obligation. As of December 31, 2024, one customer accounted for 70% of the Company’s Remaining Performance Obligation.

Deferred Contract Costs

We defer the portion of sales commission that is considered a cost of obtaining a new contract with a customer and amortize these deferred costs over the period of benefit. We expense the remaining sales commissions as incurred. Reversals recorded in the three months ended March 31, 2025 reflect commission clawbacks for certain bookings that were adjusted in the quarter, per our corporate policy. The following table summarizes deferred contract cost activity for the three months ended March 31, 2025:

NOTE 2 – OTHER CURRENT ASSETS

Other current assets consisted of the following as of March 31, 2025 (unaudited) and December 31, 2024:

Deferred offering costs are deferred costs directly related to the Company’s registered direct offering as described in Note 10. These costs include fees paid to bankers, attorneys, as well as other third parties.

NOTE 3 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)

The Company’s intangible assets primarily consist of acquired and developed software that is being amortized over their estimated useful lives as indicated below. The following is a summary of activity related to intangible assets for the three months ended March 31, 2025 (unaudited):

The following is a summary of intangible assets as of March 31, 2025 (unaudited):

Amortization expense totaled approximately $30,000 and $43,000 for the three months ended March 31, 2025, and 2024, respectively.

Future expected amortization of intangible assets is as follows:

There were no impairment indicators noted with respect to the Company’s long-lived assets, including intangible assets, as of March 31, 2025.

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of March 31, 2025 (unaudited) and December 31, 2024:

NOTE 5 – CONVERTIBLE NOTES PAYABLE

On March 21, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with certain accredited investors, which included certain Company directors or their affiliates (the “Note Investors”). Under the SPA, the Company issued Senior Secured Convertible Notes (the “Convertible Notes”) to the Note Investors, with a total initial principal amount of approximately $9.2 million and a conversion price of $3.70 per share.

The Convertible Notes carried an aggregate cash origination fee of approximately $200,000, and the Company also issued approximately 3,562 shares of common stock to the Note Investors as an additional origination fee. These Convertible Notes matured on March 31, 2025 and accrued interest at an annual rate of 9.75%, was payable on a quarterly basis.

The following is a summary of convertible notes outstanding as of March 31, 2025 (unaudited) and December 31, 2024:

The Company paid the outstanding Convertible Notes and accrued interest in full on March 31, 2025.

NOTE 6 – RELATED PARTY TRANSACTIONS

Commercial Agreements

On June 6, 2023, the Company entered into a services agreement with The Pipeline Group, Inc. (“TPG”). Ken Jisser, a director of the Company, is the founder and CEO of TPG, a technology-enabled services company that aims to deliver business results for companies looking to build a predictable and profitable pipeline. The agreement provides that TPG will assist in providing outsourced sales including business development resources for outbound calling, provide support for automated dialing technology, classify customer data and other sales related services for an initial term of one year. On October 25, 2023, on December 19, 2023 and on August 26, 2024, the Company entered into amendments to the above services agreement, pursuant to which TPG will provide certain additional services to the Company. In consideration of the services, the Company will pay TPG $70,000 per month during the current term ending in June 2025. During the three months ended March 31, 2025 the Company paid TPG a total of $210,000. As of March 31, 2025 the Company had a balance of $70,000 in Accounts Payable related to amounts owed to TPG under the payment terms of this agreement. The foregoing is only a summary of the material terms of the agreements entered with TPG and does not purport to be a complete description of the rights and obligations of the parties thereunder. The summary of the agreement entered with TPG is qualified in its entirety by reference to the forms of such agreements, which were filed as exhibits to the Company’s Current Report and are incorporated by reference herein (See “Exhibits”).

NOTE 7 –STOCKHOLDERS’ EQUITY

Common Stock

There was no common stock issued during the three months ended March 31, 2025 and 2024.

Warrants

There was no warrant activity during the three months ended March 31, 2025 and 2024. As of March 31, 2025, there are warrants to acquire 697,446 shares for a weighted average exercise price of $11.20 per share with weighted average remaining life of 2.9 years.

The following is a summary of the Company’s warrant activity for the three months ended March 31, 2025 (unaudited):

Stock Options

During the three months ended March 31, 2025, the Company granted 30,000 options to a new employee at an exercise price of $5.89 per share.

During the three months ended March 31, 2024 the Company agreed to accelerate the vesting of 6,511 options for Mr. Joe Trelin under the terms of his resignation with an exercise price of $5.48 per share. These accelerated options would not otherwise have vested prior to termination of service according to their Service conditions. Therefore, the Company recalculated the fair value of these options as of his termination date of February 20, 2024 using the Black Scholes method.

The Company determined the grant date fair value of options granted for the three months ended March 31, 2025, using the Black Scholes Method, as applicable, with the following assumptions:

Activity related to stock options for the three months ended March 31, 2025 (unaudited), is summarized as follows:

The following table summarizes stock option information as of March 31, 2025 (unaudited):

During the three months ended March 31, 2025, the Company recognized approximately $0.45 million of stock option-based compensation expense. As of March 31, 2025, there was approximately $2.5 million of unrecognized compensation costs related to stock options outstanding that will be expensed through 2027.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time the Company is a party to various legal or administrative proceedings arising in the ordinary course of our business. While any litigation contains an element of uncertainty, we have no reason to believe that the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company.

NOTE 9 – SEGMENT INFORMATION

Operating segments are defined as components of an enterprise for which separate financial information is available and which is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker ("CODM") is the Chief Executive Officer. The CODM is the highest level of management responsible for assessing the Company’s overall performance, and making operational decisions such as resource allocations related to operations, product prioritization and delegations of authority. The CODM has determined that the Company operates in a single operating and reportable segment and manages segment profit (loss) based upon consolidated net income (loss). The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets.

NOTE 10 – SUBSEQUENT EVENT

On April 1, 2025, pursuant to Securities Purchase Agreements, the Company issued 1,811,120 shares of common stock to existing and new stockholders in a registered direct offering, for cash gross proceeds of approximately $8.2 million and approximately $7.0 million, net of offering costs. Approximately $215,000 of offering costs related to the common stock offering in April 2025 were incurred during the three months ended March 31, 2025. Those costs are deferred and presented as other current assets in the Company’s Condensed Consolidated Balance Sheet as described in Note 2.

On May 7, 2025, pursuant to Securities Purchase Agreements, the Company issued 373,060 shares of common stock to existing and new stockholders in a registered direct offering, for cash gross proceeds of approximately $2.1 million and approximately $1.6 million, net of offering costs.

Except as noted above, the Company has concluded that no events or transactions have occurred that may require disclosure in the accompanying financial statements.