authID Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

authID Inc. (together with its consolidated subsidiaries, the “Company”) operates within the biometric identity verification and authentication market, delivering Software as a Service that leverages advanced biometric technologies in digital ecosystems. The Company’s technology quickly and accurately verifies a user’s identity, through its easy-to-integrate, patented, biometric identity platform, eliminating any assumption of ‘who’ is behind a device and preventing cybercriminals from taking over accounts. authID combines digital onboarding, biometric passwordless authentication and account recovery, with a fast, accurate, user-friendly experience. Establishing a biometric root of trust for each user that is bound to their accounts or provisioned devices, authID stops fraud at onboarding, eliminates password risks and costs, and provides the faster, frictionless, and more accurate user identity experience demanded by operators of today’s digital ecosystems. The Company was incorporated in the State of Delaware on September 21, 2011.

Going Concern

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) assuming the Company will continue on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next year following the issuance date of these consolidated financial statements.

As of December 31, 2025, the Company had an accumulated deficit of approximately $191.7 million. For the year ended December 31, 2025, the Company earned net revenue of approximately $2.0 million, used $15.0 million to fund its operations, and incurred a net loss from operations of approximately $17.9 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, May and November 2025, the Company raised a total of approximately $11.4 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 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 for a period of twelve months from the date these consolidated financial statements were issued.

Subsequent Events

Management of the Company has performed a review of all events and transactions occurring after the condensed consolidated balance sheet date and determined there were no events or transactions requiring adjustment to or disclosure in the accompanying condensed consolidated financial statements.

Basis of Consolidation

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., Innovation in Motion Inc., FIN Holdings Inc., authID Enterprises Limited (formerly Ipsidy Enterprises Limited), and authID Gaming Inc. (collectively the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

In preparing these consolidated financial statements in conformity with US GAAP, management is required to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

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 price concessions as reductions to the transaction price under ASC 606. Price concessions represent implied or estimated future reductions in consideration that the Company expects to grant, based on known facts and circumstances, including customer usage patterns and strategic considerations. These concessions are treated as variable consideration and are included in the transaction price only to the extent that it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty is resolved. For the years-ended December 31 2025 and 2024 the Company granted approximately $0.9 million and $0.0 million in concessions respectively.

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 $0.5 million and $0.2 million as of December 31, 2025 and December 31, 2024 respectively for certain revenue that will be earned in future periods. All deferred revenue contract liabilities as of December 31, 2025 are expected to be earned over the next twelve months.

Contract Balances

The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers as of:

Remaining Performance Obligations

As of December 31, 2025, the Company’s Remaining Performance Obligation (RPO) was $2.23 million, of which $0.48 million is recorded as deferred revenue and $1.75 million is related to other non-cancellable contracted amounts. The Company expects approximately 65% of the RPO to be recognized as revenue over the twelve months ending December 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 timing of recognition of revenue due to its current operations and has approximated such amount based on discussions with the contracted parties.

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. The following table summarizes deferred contract cost activity for the years ended December 31, 2025 and 2024:

Accounts Receivable

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 contract assets 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.

The following table summarizes changes in the allowance for credit losses for the years ended December 31, 2025 and 2024:

New Accounting Pronouncement

Improvements to Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in the ASU enhance income tax disclosures, primarily through standardization, disaggregation of rate reconciliation categories, and income taxes paid by jurisdiction. The adoption of this new standard did not have a material impact on our consolidated financial statements. For additional information, see Note 8 — Income Taxes.

Recently Issued Accounting Pronouncements Not Yet Adopted

Internal-Use Software

In September 2025, the FASB issued ASU 2025-06, which provides targeted improvements to the accounting for internal-use software, including clarifications around capitalization and implementation cost assessments. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2027, including interim periods within those years, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”. The amendments in the ASU require disclosures about specific types of expenses included in the expense captions presented on the Consolidated Statements of Income, as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption allowed. We are currently evaluating the impact of adoption on our financial disclosures.

Concentration of Risks

The Company’s financial instruments that potentially expose the Company to a concentration of credit risk consist of cash and accounts receivable.

The Company’s cash is deposited at financial institutions and cash balances held in United States (“US”) bank accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. Cash balances are generally in excess of the amounts insured by FDIC. At December 31, 2025, the Company had approximately $4.6 million in funds in the United States which are approximately $4.3 million in excess of the insured amounts by the FDIC. For the Company’s foreign subsidiaries, no amounts are insured.

The Company’s revenue is also exposed to concentration risk:

For the year ended December 31, 2025, three customers represented 64% of gross revenue.

For the year ended December 31, 2024, two customers represented 64% of gross revenue.

As of December 31, 2025, two customers accounted for 72% of the Company’s gross accounts receivable.

As of December 31, 2024, three customers accounted for 49% of the Company’s gross accounts receivable.

As of December 31, 2025, two customers accounted for 84% of the Company’s Remaining Performance Obligation.

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

Income Taxes

The Company accounts for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Taxes.” Under the asset and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

We record uncertain tax positions on the basis of a two-step process whereby we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position, and for those tax positions that meet the more likely than not criteria, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. We record interest and penalties on uncertain tax positions in income tax expense. There were no unrecognized tax benefits as of December 31, 2025 and 2024.

On July 4, 2025, the United States enacted budget reconciliation bill H.R. 1, referred to as the One Big Beautiful Bill Act ("OBBBA"). The Act includes a broad range of tax reform provisions, including extending and modifying various provisions of the Tax Cuts and Jobs Act and expanding certain incentives in the Inflation Reduction Act while accelerating the phase-out of other incentives. The legislation has multiple effective dates, with certain provisions effective in 2025 and other provisions effective in 2026 and subsequent years. OBBBA provisions include the restoration of the current deductibility for domestic research expenditures beginning in 2025, with transition options for previously capitalized amounts. OBBBA’s changes did not have a material impact on our consolidated financial statements. For additional information, see Note 8 — Income Taxes.

Leases

The Company has no outstanding lease agreements for the years ended December 31, 2025 and 2024, respectively.

Property and Equipment, net

The Company’s property and equipment as of December 31, 2025 consists primarily of computer equipment. Given the low cost and short useful life of these assets, as well as the immateriality of the related balances, the Company expenses purchases of computer equipment as incurred. As a result, no amounts related to property and equipment were recorded on the consolidated balance sheets for any of the periods presented.

Intangible Assets

Intangible assets include when applicable, costs associated with software development of new product offerings and significant enhancements to existing applications. Research & development costs are expensed as incurred. Costs incurred for the development of software that will be sold, leased or otherwise marketed are capitalized when technological feasibility has been established. Amortization expense of capitalized development costs would be included in research and development in the consolidated statements of operations. When management concludes that a software project is not expected to provide future economic benefits, or when such benefits are no longer considered probable, all related costs are expensed as incurred.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

For the years ended December 31, 2025 and 2024, the Company determined that all intangible assets would be recovered and therefore didnot record impairment expense.

Goodwill

Goodwill is recorded when the purchase price paid for an acquisition exceeds the fair market value of net identified tangible and intangible assets acquired. The Company performs an annual impairment test of goodwill and further periodic tests to the extent indicators of impairment develop between annual impairment tests. The Company’s impairment review process compares the fair market value of the reporting unit to it carrying value, including the goodwill related to the reporting unit utilizing qualitative considerations. To determine the fair market value of the reporting unit, the Company may use various approaches including an asset or cost approach, market approach or income approach or any combination thereof. These approaches may require the Company to make certain estimates and assumptions including future cash flows, revenue and expenses. These estimates and assumptions are reviewed each time the Company tests goodwill for impairment and are typically developed as part of the Company’s routine business planning and forecasting process. While the Company believes its estimates and assumptions are reasonable, variations from those estimates could produce materially different results.

During the years ended December 31, 2025 and 2024, the Company’s assessment did not indicate that an impairment charge was required as its fair market value (as determined primarily by the Company’s market capitalization) was in excess of carrying value.

Stock-based Compensation

The Company has accounted for stock-based compensation under the provisions of FASB ASC 718 – “Stock Compensation” which requires the use of the fair- value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (stock options and common stock purchase warrants). For all awards, the fair market value of each stock option award is estimated on the date of grant using the Black- Scholes or Monte-Carlo valuation models as appropriate that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of the Company’s stock and other factors estimated over the expected term of the stock options. For employee awards, the expected term of options granted is derived based on exercise history. We continually monitor exercise activity from the date of grant and consider our short history and certain stock price growth during various periods. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The Company accounts for forfeitures of employee awards as they occur.

General and Administrative Expense

General and administrative expenses consist primarily of payroll, bonuses and awards, stock-based compensation and other employee-related costs for executive management, sales, and finance and legal as well as external professional services and incremental costs related to servicing the customer contracts, such as payroll, consulting, hosting and software related expenses. General and administrative expenses also include bad debt expense recorded under CECL.

Research and Development and Software Development Costs

Research and development costs consist of expenditures for the research and development of new products and technology. These costs are primarily expenses incurred to perform research projects and develop technology for the Company’s products. Research and development costs are expensed as incurred. Costs incurred for the development of software that will be sold, leased or otherwise marketed are capitalized when technological feasibility has been established.

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 years ended December 31, 2025 and 2024 because their effect was antidilutive:

Foreign Currency Translation

The assets, liabilities and results of operations of certain of authID’s subsidiaries are measured using their functional currency which is the currency of the primary foreign economic environment in which they operate. Upon consolidating these subsidiaries, the applicable assets and liabilities are translated to US dollars at currency exchange rates as of the applicable dates and their revenues and expenses are translated at the weighted average currency exchange rates during the applicable reporting periods. Translation adjustments resulting from the process of translating these subsidiaries’ financial statements are reported in other comprehensive loss in the accompanying consolidated statements of comprehensive loss.

NOTE 2 – OTHER CURRENT ASSETS

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

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

The Company’s intangible assets consist of intellectual property acquired from FIN Holdings Inc. in addition to internally developed software that have been placed into service. They are amortized over their estimated useful lives as indicated below. The following is a summary of activity related to intangible assets for the years ended December 31, 2025, and 2024:

The following is a summary of intangible assets as of December 31, 2025:

The following is a summary of intangible assets as of December 31, 2024:

The following is the future amortization of intangible assets for the years ended December 31:

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of December 31, 2025 and 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 company paid all outstanding Convertible Notes and accrued interest in full on March 31, 2025.

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

NOTE 6 – RELATED PARTY TRANSACTIONS

Executive Officers

Mr. Rhoniel A. Daguro, a director of the Company, was hired as Chief Executive Officer of the Company in consideration of an initial annual salary of $400,000. Mr. Daguro will be eligible for an annual target bonus of up to $375,000 based on performance milestones. For the period beginning April 1, 2023, a bonus amount of $75,000 shall be payable upon the Company achieving increments of $1,000,000 in total contract value of all customer agreements less claw backs (“Bookings”) up to an aggregate of $5,000,000 in Bookings. Above $5,000,000 a bonus amount of $75,000 shall be payable upon the Company achieving increments of $4,000,000 in total contract bookings up to an aggregate of $17,000,000. Mr. Daguro has earned a bonus of $75,000 in 2025 for non-equity incentive compensation based on Bookings in 2025. He also earned $300,000 in 2024 for non-equity incentive compensation based on Bookings in 2024, of which a $225,000 adjustment was assessed in September 2025 based on revised performance metrics. The adjustment of $225,000, net of $75,000 in 2025 earnings, or a total of $150,000, was repaid in December 2025 by way of a surrender of 71,977 stock options having a Black Scholes value equal to the amount of the adjustment. For subsequent years, Mr. Daguro and the Compensation Committee of the Board will mutually agree as to the performance targets to earn for the annual bonus. Additionally, the Company provided Mr. Daguro with an initial grant of options (“Initial Grant”) to purchase 306,875 shares of common stock for a period often years vesting subject to achievement of performance and service conditions, at an exercise price of $3.176 per share. Pursuant to his offer letter the Company granted Mr. Daguro additional options to acquire 183,125 shares of common stock for a period often years vesting subject to achievement of performance and service conditions (the “Additional Grant”) at an exercise price of $5.48 per share. The aggregate grant date fair market value of the option grants was $1,185,100. Additionally, on June 4, 2025, the Company granted Mr. Daguro options to acquire 10,000 shares of common stock at an exercise price of $5.35 forten years, vesting over twelve months. The grant date fair market value of the option grant was $42,230.

The employment of Mr. Daguro is at will and may be terminated at any time, with or without formal cause. The Company also entered an Executive Retention Agreement with Mr. Daguro, pursuant to which the Company agreed to provide specified severance and bonus amounts and to accelerate the vesting on his equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the agreement. In the event of a termination upon a change of control or an involuntary termination, Mr. Daguro is entitled to receive an amount equal to 100% of his base salary, the actual bonus earned but unpaid for the previous year and any bonus that was earned but unpaid prior to the termination date. Further, upon termination upon a change of control or an involuntary termination, the Company will reimburse Mr. Daguro for the cost of continuation of health coverage for Mr. Daguro and his eligible dependents pursuant to COBRA until the earlier of 12 months following the termination date, the date Mr. Daguro and his dependents are eligible for health coverage from a new employer or the date Mr. Daguro and his eligible dependents are no longer eligible for COBRA.

On April 12, 2023, the Company entered an Offer Letter with Thomas R. Szoke, a director of the Company, pursuant to which Mr. Szoke agreed to serve as Chief Technology Officer in consideration of an initial annual salary of $250,000. Mr. Szoke received an initial signing bonus of $20,833 and will be eligible for an annual target bonus of up to $200,000 based on performance milestones. For the period beginning April 1, 2023, a bonus amount of $40,000 shall be payable upon the Company achieving increments of $1,000,000 in total contract value of all customer agreements less claw backs (“Bookings”) up to an aggregate of $5,000,000 in Bookings. Above $5,000,000 a bonus amount of $40,000 shall be payable upon the Company achieving increments of $4,000,000 in total contract bookings up to an aggregate of $17,000,000. Mr. Szoke has earned a bonus of $40,000 in 2025 for non-equity incentive compensation based on Bookings in 2025. He also earned $160,000 in 2024 for non-equity incentive compensation based on Bookings in 2024, of which a $120,000 adjustment was assessed in September 2025 based on revised performance metrics. The adjustment of $160,000, net of $40,000 in 2025 earnings, or a total of $80,000, was repaid in December 2025 with a surrender of 42,154 stock options having a Black Scholes value equal to the amount of the adjustment. For subsequent years, Mr. Szoke and the Compensation Committee of the Board will mutually agree as to the performance targets to be achieved, to earn the annual bonus. The vesting criteria of Mr. Szoke’s Stock Options to acquire 12,500 shares of common stock previously granted to Mr. Szoke on March 14, 2023 (the “Original Grant”) were amended pursuant to an Amended and Restated Stock Non-Statutory Option Agreement providing for vesting subject to achievement of performance and service conditions. All other terms of the Original Grant were not changed. On June 28, 2023, the Company made an additional grant of options to Mr. Szoke to acquire 50,000 shares of common stock at the exercise price of $5.48 per share for a period often years vesting subject to achievement of performance and service conditions. On December 21, 2023, the Company granted Mr. Szoke additional options to acquire 5,000 shares of common stock at an exercise price of $9.25 forten years, vesting over twelve months. On June 4, 2025, the Company made an additional grant of options to Mr. Szoke to acquire 33,000 shares of common stock at the exercise price of $5.35 per share for a period often years, vesting over twelve months.

The employment of Mr. Szoke is at will and may be terminated at any time, with or without formal cause. The Company also entered an Executive Retention Agreement with Mr. Szoke, pursuant to which the Company agreed to provide specified severance and bonus amounts and to accelerate the vesting on his equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the agreement. In the event of a termination upon a change of control or an involuntary termination, Mr. Szoke is entitled to receive an amount equal to 100% of his base salary, the actual bonus earned but unpaid for the previous year and any bonus that was earned but unpaid prior to the termination date. Further, upon termination upon a change of control or an involuntary termination, the Company will reimburse Mr. Szoke for the cost of continuation of health coverage for Mr. Szoke and his eligible dependents pursuant to COBRA until the earlier of 12 months following the termination date, the date Mr. Szoke and his dependents are eligible for health coverage from a new employer or the date Mr. Szoke and his eligible dependents are no longer eligible for COBRA.

On July 31, 2023, the Company and Edward Sellitto entered an Offer Letter pursuant to which Mr. Sellitto agreed to serve as Chief Financial Officer of the Company commencing August 15, 2023 in consideration of an annual salary of $250,000. As of January 1, 2024, Mr. Sellitto’s annual salary was increased to $275,000. Mr. Sellitto will be eligible for an annual target bonus of up to 60% of base salary based on achievement of performance milestones, as Mr. Sellitto and the Compensation Committee of the Board, will mutually agree for each year. The bonus was pro-rated for the year 2023. At the outset of employment, Mr. Sellitto was provided with a grant of options to purchase 50,000 shares of common stock vesting subject to achievement of performance and service conditions at an exercise price of $8.87, with an exercise period of 10 years. Additionally, on December 21, 2023, the Company granted Mr. Sellitto options to acquire 7,000 shares of common stock at an exercise price of $9.25 forten years, vesting over twelve months. On June 4, 2025, the Company also granted Mr. Sellitto options to acquire 45,000 shares of common stock at an exercise price of $5.35 forten years, vesting over twelve months. The employment of Mr. Sellitto is at will and may be terminated at any time, with or without formal cause.

On September 23, 2024, Mr. Erick Soto was hired as Chief Product Officer, in consideration of an annual salary of $325,000. Mr. Soto will be eligible for an annual target bonus of up to 20% of base salary based on achievement of performance milestones. The target bonus for the 2024 year was pro-rated and is $17,760. At the outset of employment, Mr. Soto was provided with a grant of options to purchase 100,000 shares of common stock vesting subject to achievement of performance and service conditions at an exercise price of $6.94, with an exercise period of 10 years. On June 4, 2025, the Company also granted Mr. Soto options to acquire 1,000 shares of common stock at an exercise price of $5.35 forten years, vesting over twelve months.

The employment of Mr. Soto is at will and may be terminated at any time, with or without formal cause. The Company also entered an Executive Retention Agreement with Mr. Soto, pursuant to which the Company agreed to provide specified severance and bonus amounts and to accelerate the vesting on his equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the agreement. In the event of a termination upon a change of control or an involuntary termination, Mr. Soto is entitled to receive an amount equal to 100% of his base salary.

On March 23, 2023, the Company and Thomas Thimot entered into a Confidential Separation Agreement and General Release for the purposes of separation of Mr. Thimot from the Company as Chief Executive Officer and an employee by mutual consent and settling, compromising and resolving all claims between them. Mr. Thimot’s resignation was effective March 23, 2023. In addition to the Company paying all accrued but unpaid salary and providing reimbursement for all outstanding expenses, the Company has agreed to pay Mr. Thimot $325,000 which was deferred until the earlier of April 1, 2025 and a change of control of the Company. In April 2025, the Company and Mr. Thimot mutually agreed to a settlement payment comprised of $95,000 in cash, $206,000 in common stock and $24,000 in stock options. All such payments to Mr. Thimot were made in April 2025. Mr. Thimot was also eligible for certain health benefits. The exercise period with respect to Mr. Thimot’s stock option to acquire 32,812 shares of common stock at an exercise price of $62.40 per share was extended through March 23, 2027. All unvested grants or other equity awards lapsed and are no longer exercisable as of the separation date.

Board of Directors

On February 15, 2024, Mr. Joe Trelin tendered his resignation as Chairman and a Director of the Company, effective immediately. On February 20, 2024, the board of directors of the Company (the “Board”) accepted his resignation and agreed to vest the unvested portion of an option granted to Mr. Trelin on June 28, 2023, amounting to 6,511 shares.

On March 25, 2024, Mr. Kunal Mehta was appointed as a Director of the Company, upon the standard terms for non-employee Directors. On May 20, 2024, Mr. Mehta was granted an option to purchase 13,282 shares of common stock at an exercise price of $7.78 per share.12,500 of the shares vest annually in equal amounts over a three-year period commencing in 2025 and 782 shares vested monthly in equal amounts over a three-month period commencing March 2024.

On August 13, 2024, the Company granted 15,627 options each at the exercise price of $8.67 per share to Messrs. Michael Koehneman, Michael Thompson, Ken Jisser, Kunal Mehta and Ms. Jacqueline White, in accordance with the Company’s compensation policy for non-employee directors. Each such option vests over a period of twelve months.

On September 4, 2025, the Company made a grant of options to Mr. Thompson to acquire 3,169 shares of common stock at the exercise price of $3.90 per share, exercisable for a period ofthree years from his date of resignation, vesting immediately to reflect his service as a member of the Board through the date of his resignation.

On September 16, 2025, the board of directors of the Company (the “Board”) agreed to vest the unvested portion of an option granted to Mr. Thompson on March 14, 2023, amounting to 4,167 shares. The Board also agreed to extend the expiration Mr. Thompson’s vested options to a period of three years after the date of his resignation.

On September 4, 2025, the Company made a grant of options to each of Messrs. Mehta, Jisser, Koehneman, Garchik, Venkataraman, Shevelyov, Menghani and to Ms. White to acquire 38,024 shares each of common stock at the exercise price of $3.90 per share, in accordance with the Company’s compensation policy for non-employee directors. Each such option vests over a period of twelve months.

On September 4, 2025, the Company made a grant of options to each of Messrs. Garchik, Venkataraman, Shevelyov, Menghani to acquire 12,500 shares of common stock at the exercise price of $3.90. The shares vest annually in equal amounts over a three-year period commencing in 2026.

On November 24, 2025, Mr. Garchik, purchased 126,609 shares of the Company’s common stock at a price of $216,500. The purchase price of the shares issued in this transaction was the same as the Nasdaq Official Closing Price in effect on the date of the transaction.

Employment Agreement

Since June 2023, the Company has employed Daguro, the brother of our CEO, Rhoniel 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 years ended December 31, 2025 and 2024, Dale Daguro earned approximately $283,000 and $255,000 in base salary and sales commission respectively.

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 paid TPG $70,000 per month. On September 26, 2025, the Company signed another amendment with TPG to reduce the monthly fees to $42,000. The amendment is effective October 1, 2025. On September 30, 2025, the Company entered into a services agreement with TPG. The agreement provides that the Company will provide biometric authentication services to TPG for an initial term of two years, with an annual license fee of $2,500 and monthly minimum fees ramping to $1,000 per month.

Total expense incurred under this contract during the years ended December 31, 2025 and 2024 was approximately $761,000 and $974,000, respectively.** **

NOTE 7 – STOCKHOLDERS’ EQUITY

The Company is authorized to issue 150,000,000 shares of common stock. The Company had 16,132,487 and 10,920,909 shares of common stock issued and outstanding as of December 31, 2025 and 2024, respectively. In addition, the Company is authorized to issue 20,000,000 shares of preferred stock butno shares of preferred stock have been issued.

Common Stock

Warrants

The following is a summary of the Company’s warrant activity for the years ended December 31, 2025 and 2024:

Stock Options

The Company has adopted the authID 2017 Incentive Stock Plan, the 2021 Equity Incentive Plan, and the 2024 Equity Incentive Plan. The Company has no other stockholder approved stock incentive plans in effect as of December 31, 2024.

On September 28, 2017, the shareholders of the Company approved the 2017 Incentive Stock Plan (“2017 Incentive Plan”). On December 29, 2021 the shareholders of the Company approved the 2021 Equity Incentive Plan (“2021 Plan”). On June 26, 2024, the shareholders of the Company approved the 2024 Equity Incentive Plan (“2024 Plan”). The following is a summary of principal features of the 2017 Incentive Plan, the 2021 Plan, and the 2024 Plan. The summaries, however, do not purport to be a complete description of all the provisions of each plan.

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. At the Annual Meeting of Stockholders held on June 26, 2025, the stockholders approved and ratified an increase of 295,000 shares to the 2024 Plan. As of December 31, 2025, there were 193,147 shares allocated to and available for issuance of awards under the 2024 Plan.

The terms of Awards granted under the plans shall be contained in an agreement between the participant and the Company and such terms shall be determined by the Compensation Committee consistent with the provisions of the applicable plan. The terms of Awards may or not require performance conditions in order to vest the equity comprised in the relevant Award. The terms of each Option granted shall be contained in a stock option agreement between the optionee and the Company and such terms shall be determined by the Compensation Committee consistent with the provisions of the applicable plan.

In addition, the Compensation Committee has from time to time approved the grant of options to purchase shares of common stock by way of Inducement Grants to new employees, which are outside the approved Plans, pursuant to Nasdaq Listing Rule 5635(c)(4). During 2025 and 2024, the Company granted 30,000 and 300,000 such options, respectively. The options granted are Non-ISO’s and the terms of the Inducement Grants are contained in agreements between the participant and the Company which are consistent with the Awards issued under the 2021 and 2024 Plans.

2025 Stock Option Activity

2024 Stock Option Activity

The Company determined the grant date fair market value of the options granted during the years-ended December 31, 2025 and 2024 using the Black Scholes and Monte-Carlo Method as appropriate and the following assumptions:

Activity related to stock options for the years ended December 31, 2025, and 2024 is summarized as follows:

The following table summarizes stock option information as of December 31, 2025:

As of December 31, 2025, there was approximately $2.9 million of unrecognized compensation costs related to employee stock options outstanding which will be recognized in 2026 through 2028. The company will recognize forfeitures as they occur. Stock compensation expense for the years ended December 31, 2025 and 2024 was approximately $3.6 million, and $2.6 million, respectively.

NOTE 8–INCOME TAXES

The Company accounts for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Taxes.” Under the asset and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. We record Global Intangible Low Tax Income (GILTI) as a current period expense when incurred. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

We record uncertain tax positions on the basis of a two-step process whereby we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position, and for those tax positions that meet the more likely than not criteria, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. We record interest and penalties on uncertain tax positions in Income tax expense. There were no unrecognized tax benefits as of December 31, 2025 and 2024

The Company’s loss before income taxes from US and Foreign sources for the years ended December 31, 2025 and 2024, are as follows:

The income tax provision consisted of the following for the years ended December 31, 2025 and December 31, 2024

A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate for the year ended December 31, 2024 is as follows:

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:

Deferred Tax Assets at December 31, 2025 and December 31, 2024 are related to the following:

We establish valuation allowances for deferred tax assets based on a more likely than not standard. Deferred income tax assets are evaluated quarterly to determine if valuation allowances are required or should be adjusted. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The assessment regarding whether a valuation allowance is required or should be adjusted also considers all available positive and negative evidence factors. It is difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. We utilize a rolling three years of actual and current year results as the primary measure of cumulative losses in recent years. The valuation allowance increased by approximately $0.5 million in the year ended December 31, 2025.

At December 31, 2025, the Company had federal research and development credit carryforwards of approximately $1.6 million. As of December 31, 2025, the Company has available federal net operating loss carry forward of $101.2 million and state net operating loss carry forwards of $45.5 million. Federal net operating loss carryforwards of approximately $14.4 million will expire through 2037 and the balance of $86.8 million have an indefinite life. Additionally, the Company has income tax net operating loss carryforwards related to our international operations which have an indefinite life. The federal credit carryforwards begin to expire in 2038. Section 382 of the Internal Revenue Code subject the future utilization of net operating losses and certain other tax attributes, such as research and experimental tax credits, to an annual limitation in the event of certain ownership changes, as defined. The Company may be subject to the net operating loss limitation provision of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual limitation of the use of NOL carryforwards and tax credits attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period prior to the change, and the federal published interest rate. Although the Company has not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be limited.

Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2025 there were no uncertain positions. The Company’s U.S. federal and state net operating losses have occurred since its inception in 2009 and as such, tax years subject to potential tax examination could apply from that date. This is because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties for the 12 months ended December 31, 2025 and 2024.

NOTE 9 – 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. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. No such provision has been recorded as of December 31, 2025 and 2024.

On January 29, 2026, the Company was served with a Summons and Complaint in the matter of Perez v. Intellicheck, Inc. and authID Inc., filed in the U.S. District Court for the Northern District of Illinois. The Complaint alleges that one of the Company’s partners (Intellicheck, Inc., a reseller of the Company’s services) and the Company collected, stored and used biometric information from the Plaintiff and similarly situated individuals in Illinois in violation of the Illinois Biometric Information Privacy Act, 740 ILCS 14/1 et seq. (“BIPA”). BIPA provides for statutory damages of $1,000 per negligent violation or $5,000 per intentional or reckless violation, and the Plaintiff seeks class action certification, damages, attorneys’ fees, and other relief. The Company is not able to fully assess the probability and outcome of the matter at this time due to the need to conduct further investigation. However, the Company believes the case is without merit and it does not currently believe that a material loss is probable or reasonably estimable. As such, the Company has not recognized a liability related to this matter and intends to vigorously defend the matter.

As of December 31, 2025, the Company had employment agreements with members of the management team providing base salary amounts and provisions for stock compensation, cash bonuses and other benefits to be granted at the discretion of the Board of Directors. Additionally, certain employment agreements include provisions for base salary, bonus amounts upon meeting certain performance milestones, severance benefits for involuntary termination from a change in control or other events as defined in their respective agreements. Additionally, the vesting of certain awards could be accelerated upon a change in control (as defined) or by action of the Board of Directors.

Starting in fiscal year 2022 the Company adopted a 401(k) plan where employer matches 100% of the employees contribution up to 3% of their salaries and 50% of the employee’s contribution (including both executives and other employees) between 3% and 5% of their salaries. Total employer contributions for named executives for the years ended December 31, 2025 and 2024 were approximately $37,000 and $25,000, respectively.

NOTE 10 – 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 asingle 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.