authID Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

In the opinion of Management, the accompanying 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 six months ended June 30, 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 June 30, 2025, the Company had an accumulated deficit of approximately $182.5 million. For the six months ended June 30, 2025, the Company earned revenue of approximately $1.7 million, used approximately $8.4 million to fund its operations, and incurred a net loss of approximately $8.7 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. In April and May 2025, the Company raised a total of approximately $8.5 million after expenses from existing and new stockholders through the sale of Common Stock pursuant to registered direct offerings. 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 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 potential dilutive 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 and six months ended June 30, 2025 and 2024 because their effect was antidilutive:

Revenue Recognition

Revenues, net is defined as gross revenues, less discounts and sales concessions.

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 $1.15 million and $0.22 million as of June 30, 2025 and December 31, 2024, respectively, for certain revenue that will be earned in future periods. All deferred revenue contract liabilities as of June 30, 2025 are expected to be earned over the next twelve months.

Remaining Performance Obligations

As of June 30, 2025, the Company’s Remaining Performance Obligation (RPO) was $13.77 million, of which $1.15 million is held as deferred revenue and $12.62 million is related to other non-cancellable contracted amounts. The Company expects approximately 39% of the RPO to be recognized as revenue over the next twelve months ending June 30, 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 and Contract Assets

All customers are granted credit on a short-term basis. Accounts receivable, net is stated net of the allowance for credit losses.

The Company maintains an allowance for its doubtful accounts receivable for estimated credit losses. This allowance is based upon historical loss patterns, the number of days that billings are past due, and evaluation of the potential risk of loss associated with delinquent accounts, current market conditions and reasonable and supportable forecasts of future billable product usage compared with contracted minimums. The Company records the allowance against bad debt expense through the condensed consolidated statement of operations, included in general and administrative expense, up to the amount of revenue recognized to date. Any incremental allowance is recorded as an offset to unearned revenue on the condensed consolidated balance sheet. Receivables are written off and charged against recorded allowance when the Company has exhausted collection efforts without success.

The Company evaluates its accounts receivable and contract assets balances using the Current Expected Credit Loss (“CECL”) model in accordance with ASC 326. The Company routinely reviews its accounts receivables and uses a risk-based probability-weighted approach to record provisions. However, those provisions are estimates and actual results could differ from those estimates, and those differences may be material.

Changes in the allowance for credit losses are as follows:

Concentration of Risks

The Company’s financial instruments that are exposed to concentration of credit risks consist primarily of cash and accounts receivable. The Company’s cash at times may exceed the Federal Depository Insurance coverage of $250,000.

As of June 30, 2025, one customer accounted for 92% of the Company’s gross accounts receivable. As of December 31, 2024, two customers accounted for 39% of the Company’s accounts receivable.

For the six months ended June 30, 2025, two customers represented 73% of revenue

For the three months ended June 30, 2025, one customer represented 76% of revenue.

For the six months ended June 30, 2024, two customers represented 59% of revenue

For the three months ended June 30, 2024, three customers represented 76% of revenue.

As of June 30, 2025, two customers accounted for 78% of the Company’s Remaining Performance Obligation.

As of December 31, 2024, one customer accounted for 67% 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 six months ended June 30, 2025 reflect commission claw-backs for certain bookings that were adjusted in the quarter, per our corporate policy. The following table summarizes deferred contract cost activity for the six months ended June 30, 2025:

NOTE 2 – OTHER CURRENT ASSETS

Other current assets consisted of the following at June 30, 2025 and December 31, 2024:

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 six months ended June 30, 2025:

The following is a summary of intangible assets as of June 30, 2025:

Amortization expense totaled approximately $60,000 and $87,000 for the six months ended June 30, 2025, and 2024, respectively.

Future expected amortization of intangible assets is as follows:

There wereno impairment indicators noted with respect to Company’s long-lived assets, including intangible assets, as of June 30, 2025.

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of June 30, 2025 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 June 30, 2025 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 2026. As of June 30, 2025, the Company held a balance of approximately $70,000 in prepaid expenses related to this service agreement. In June 2024, the agreement with TPG was renewed for an additional year at a reduced fee rate of $70,000 per month. Total expense incurred under this contract during the three and six months ended June 30, 2025 was approximately $210,000 and $420,000, respectively. Total expense incurred under this contract during the three and six months ended June 30, 2024 was approximately $285,000 and $542,000, respectively.

Employment Agreement

Since June 2023, the Company has employed Dale Daguro, the brother of our CEO, Rhon Daguro as a VP Sales. Dale Daguro’s employment is at will and may be terminated at any time, with or without cause. Dale’s compensation is commensurate with other executives employed by the Company at a similar level of seniority and experience. During the three and six months ended June 30, 2025, Dale Daguro earned approximately $97,000 and $151,000 in base salary and sales commission.

NOTE 7 –STOCKHOLDERS’ EQUITY

Common Stock

During the six months ended June 30, 2025, shares of common stock were issued to recipients at par value as a result of the following transactions:

During the six months ended June 30, 2024, shares of common stock were issued as a result of the following transactions:

Warrants

During the six months ended June 30, 2025, warrants were issued as a result of the following transactions:

On April 22, 2025, Madison III, LLC exercised 187,500 warrants in a cashless exercise. The warrants were previously expensed at their fair value of $438,000.

On June 27, 2024, in connection with their placement agent services, the Company issued 102,547 common stock warrants to Madison Global Partners, LLC, with a term of 5 years and an exercise price of $7.50 per share.

The following is a summary of the Company’s warrant activity for the six months ended June 30, 2025:

Restricted Stock Awards

On April 16, 2025, the Company granted 200,000 restricted stock awards (RSAs) at par value to non-employee advisors under advisory agreements. The awards were issued on the grant date and vest in four equal tranches of 50,000 shares each: (i) immediately upon execution, (ii) six months later, (iii) twelve months later, and (iv) eighteen months later. The Company has the option to repurchase all or a portion of unvested shares in the event that the advisors voluntarily cease to serve as an advisor of the Company. The fair value per share on the grant date was $7.97, resulting in a total grant-date fair value of $1,594,000. As of June 30, 2025, $531,333 of fair value was recognized as expense, with $1,062,667 remaining in deferred compensation to be recognized through October 2026.

The following is a summary of the Company’s RSA activity for the six months ended June 30, 2025:

Stock Options

During the six months ended June 30, 2025, the Company granted a total of 416,600 options to certain new and existing employees at exercise prices ranging from $5.35 to $5.89 per share.

During the six months ended June 30, 2025, the Company granted a former employee 5,205 options at an exercise price of $7.40 in lieu of cash severance payment.

The Company determined the grant date fair value of options granted for the six months ended June 30, 2025, using the Black Scholes Method, as applicable, with the following assumptions:

Activity related to stock options for the six months ended June 30, 2025, is summarized as follows:

The following table summarizes stock option information as of June 30, 2025:

As of June 30, 2025, there was approximately $3.3 million of unrecognized compensation costs related to stock options outstanding that will be expensed through 2027.

On May 24, 2024, the Board of Directors adopted the 2024 Equity Incentive Plan (the “2024 Plan”). On June 26, 2024, the stockholders approved and ratified the 2024 Plan and the allocation of 395,000 shares of Common Stock to the 2024 Plan, in addition to the remaining shares not allocated to awards under the 2021 Equity Incentive Plan and any shares, which become available as a result of the forfeiture, or cancellation of any previous awards. On June 26, 2025, the stockholders approved and ratified an increase of 295,000 shares allocated to the 2024 Incentive Plan. As of June 30, 2025, there were 322,872 shares allocated to and available for issuance of awards under the 2024 Plan.

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 EVENTS

None.