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 and, 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 (“US GAAP”) 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, 2025. The results of operations for the three months ended March 31, 2026 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 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.

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 March 31, 2026, the Company had an accumulated deficit of approximately $196.2 million. For the three months ended March 31, 2026, the Company earned revenue of approximately $0.5 million, used $3.4 million to fund its operations, and incurred a net loss from operations of approximately $4.5 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 2026, the Company raised a total of approximately $3.6 million after expenses from accredited investors through the sale of approximately $4.2 million Senior Secured Debentures pursuant to a private placement. Going forward, the Company plans to raise additional funds as needed 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.

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 months ended March 31, 2026 and 2025 because their effect was antidilutive:

Revenue Recognition

Revenues are 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. The Company did not grant any concessions during the three months ended March 31, 2026 and 2025, 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 $385,000 and $477,000 as of March 31, 2026 and December 31, 2025 respectively for certain revenue that will be earned in future periods.

Remaining Performance Obligations

As of March 31, 2026, the Company’s Remaining Performance Obligation (RPO) was $2.0 million, of which $0.38 million is recorded as deferred revenue and $1.62 million is related to other non-cancellable contracted amounts. The Company expects approximately 71% of the RPO to be recognized as revenue over the twelve months ending March 31, 2027, 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.

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 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 Company hadno allowance for credit losses as of March 31, 2026 and 2025 respectively. Credit loss write-offs during the three months ended March 31, 2026 and 2025 were $0 and $149,720 respectively.

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 March 31, 2026, the Company had approximately $1.2 million in funds in the United States which are approximately $0.9 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 three months ended March 31, 2026, three customers represented 81% of gross revenue.

For the three months ended March 31, 2025, three customers represented 68% of gross revenue.

As of March 31, 2026, three customers accounted for 76% of the Company’s gross accounts receivable.

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

As of March 31, 2026, two customers accounted for 77% of the Company’s Remaining Performance Obligation.

As of December 31, 2025, two customers accounted for 84% 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. The following table summarizes deferred contract cost activity for the period ended March 31, 2026:

NOTE 2 – OTHER CURRENT ASSETS

Other current assets consisted of the following at March 31, 2026 and December 31, 2025:

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, 2026:

The following is a summary of intangible assets as of March 31, 2026:

Amortization expense totaled approximately $12,000 and $30,000 for the three months ended March 31, 2026, and 2025, respectively.

Future expected amortization of intangible assets is as follows:

There were no impairment indicators noted with respect to Company’s long-lived assets, including intangible assets, as of March 31, 2026.

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of March 31, 2026 and December 31, 2025:

NOTE 5 – 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 paid TPG $70,000 per month. On September 26, 2025 and April 13, 2026, the Company signed another amendment with TPG to reduce the monthly fees to $42,000 and $13,500, respectively. The September amendment is effective October 1, 2025 and the April amendment is effective June 7, 2026.

Total expense incurred under contract during the three months ended March 31, 2026 was approximately $126,000. Total expense incurred under contract during the three months ended March 31, 2025 was approximately $210,000.

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.

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 months ended March 31, 2026, Dale Daguro earned approximately $55,000 in base salary and sales commission.

NOTE 6 – STOCKHOLDERS’ EQUITY

Common Stock

There was no common stock issued during the three months ended March 31, 2026 and 2025.

Warrants

The following is a summary of the Company’s warrant activity for the three months ended March 31, 2026:

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 of the advisory agreements on March 30, 2025, (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 September 30, 2025, $797,000 of fair value was recognized as expense, with $797,000 of unrecognized compensation expense to be recognized through October 2026.

The following is a summary of the Company’s RSA activity for the three months ended March 31, 2026:

Stock Options

Activity related to stock options for the three months ended March 31, 2026 is summarized as follows:

The following table summarizes stock option information as of March 31, 2026:

During the three months ended March 31, 2026, the Company recognized approximately $0.8 million of stock option-based compensation expense. As of March 31, 2026, there was approximately $2.0 million of unrecognized compensation costs related to employee stock options outstanding which will be recognized in 2026 through 2028

NOTE 7 – 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 March 31, 2026 and 2025.

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.

Executive Compensation

As of March 31, 2026, 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.

NOTE 8 – 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.

NOTE 9 – SUBSEQUENT EVENTS

On April 13, 2026, the Company signed an amendment with TPG to reduce the monthly fees from $42,000 to $13,500. The amendment is effective June 7, 2026.

Commencing April 29, 2026, the Company entered into Securities Purchase Agreements with accredited investors (“Investors”) in a private placement, pursuant to which the Company sold approximately $4.2 million of Senior Secured Debentures (“Debentures”) as well as 4,165,000 warrants to existing and new Investors, for net proceeds of approximately $3.6 million, after placement agent fees and offering expenses. The Debentures are secured by the assets of the Company and mature October 29, 2026. The Company issued 587,782 shares of common stock to the Investors in lieu of fees and interest under the Debentures.