IDN

Forward Looking Statements This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements anticipating future growth in revenues, income (loss) from operations and cash flow. Words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and the Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise. References made in this Quarterly Report on Form 10-Q to “we,” “our,” “us,” “Intellicheck,” or the “Company,” refer to Intellicheck, Inc. The following discussion and analysis of our financial condition and results of operations constitutes management’s review of the factors that affected our financial and operating performance for the three and six months ended June 30, 2026. This discussion should be read in conjunction with the financial statements and notes thereto contained elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2025. Overview We are a prominent technology company engaged in developing, integrating and marketing identity verification solutions to address challenges that include commercial retail and banking fraud prevention. Our products include solutions for preventing identity fraud across any industry delivered via smartphone, tablet, POS integration or other electronic devices. Recent Developments — Customer’s Multi-Vendor Transition. Our customer, representing 29% of total revenue for the first six months of 2026, has recently informed us that, as part of a vendor-resilience initiative, it is adopting a primary/secondary vendor architecture under which an alternative vendor is expected to become the primary provider for certain identity verification use cases. We will remain the primary provider for certain other use cases and will retain secondary or failover roles for certain of the transitioned use cases. In communicating its plans, the customer cited objectives that included improving vendor resilience, supplier rationalization in connection with its previously announced merger, cost considerations and, for a separate portion of the transition, workflow automation. This customer accounted for approximately 30% of our total revenue for the three months ended June 30, 2026 and approximately 31% for the year ended December 31, 2025. The customer’s communicated plans contemplate a reduction of approximately 70–75% in its transaction volumes with us during the second half of 2026 relative to the baseline reflected in those plans, with implementation scheduled to proceed on a phased basis through the third quarter of 2026. As of August 13, 2026, the implementation was underway and our transaction volumes with this customer had declined from prior-year levels; however, the reductions observed through that date were less than the pace and magnitude contemplated by the customer’s current plan. The timing and extent of future reductions remain uncertain, and we believe may be affected by a number of factors, including the performance of the alternative vendor, the customer’s evolving operational requirements and any adjustments the customer may make to its current plans. Accordingly, actual transaction volumes may be higher or lower than the levels indicated by the customer’s current plans. Assuming the customer implements its current plan substantially as communicated and no volumes are added above the levels reflected in that plan, we currently expect total revenue for the year ending December 31, 2026 to decline compared to 2025. These expectations are based on the customer’s current communicated plan and its indicated implementation schedule and are subject to change based on actual transaction volumes and other developments. The volume reductions observed to date have been smaller than the customer’s plan contemplates and we remain engaged with the customer in ongoing discussions regarding current services and potential future business opportunities. We expect to continue to be an important vendor to the customer. Notwithstanding the anticipated decline, we currently expect to remain profitable on a net income basis, and to generate positive Adjusted EBITDA, for the year ending December 31, 2026. These expectations are forward-looking statements subject to the risks described in Part II, Item 1A, including the risks that the customer’s transition proceeds faster, extends further or results in greater volume reductions than its current plans indicate; that use cases for which we remain the primary provider are subsequently transitioned; that any retained or 22 Index restored volumes are at lower levels or pricing than anticipated; that certain transitioned use cases do not retain us in a secondary or failover role or generate little or no transaction volume. Critical Accounting Policies and the Use of Estimates The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Significant estimates and assumptions that affect amounts reported in the financial statements include impairment consideration and valuation of goodwill and intangible assets including software development costs, revenue recognition (including breakage revenue), the fair value of stock options under our stock-based compensation plans and the valuation allowance of our deferred tax assets. Due to the inherent uncertainties involved in making estimates, actual results reported in future periods may be different from those estimates. Recent Accounting Pronouncements In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This standard allows entities to apply a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606, Revenue from Contracts with Customers. The standard is effective for all the entities for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted, and the standard is to be applied prospectively. We adopted ASU 2025-05 in the first quarter of 2026. The adoption did not have a material impact on our condensed financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendment requires new financial statement disclosures to provide disaggregated information for certain types of expenses, including employee compensation, depreciation, and amortization in commonly presented expense captions such as cost of revenue, sales and marketing, and general and administrative expenses. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is in the process of evaluating the effect that the adoption of these standards will have on its financial statements. In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software by replacing the previous stage-based model and aligning the capitalization process with current development practices, especially agile and iterative methods. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and may be applied prospectively, retrospectively, or using a modified transition approach. The Company is in process of evaluating the impact of the adoption of this ASU on its financial statements. Revenue Recognition and Deferred Revenue SaaS fees and service revenue are generated from a combination of fixed-price and per-scan contracts. Under the per-scan revenue model, customers are charged a fee each time the customer scans an identity document, such as a driver’s license, with the Company’s software. Under the fixed-price revenue model customers are charged a fixed monthly fee either per device or physical business location to access the Company’s software. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company measures revenue based on the consideration specified in a customer arrangement, and revenue is recognized when the performance obligations in an arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the customer receives the benefit of the performance obligation. Customers typically receive the benefit of the Company’s services as they are performed. The Company's performance obligations are satisfied over time, and as a result, the Company may follow the right to invoice practical expedient meaning we recognize revenue monthly as invoiced based on our contract terms. Reference Note 2, “Significant Accounting Policies,” in the Notes to Unaudited Condensed Financial Statements for additional details on the Company’s recognized and deferred revenue. 23 Index Stock-Based Compensation We account for the issuance of stock-based compensation awards to employees in accordance with ASC 718, Compensation – Stock Compensation, which requires that the cost resulting from all stock-based compensation payment transactions be recognized in the financial statements. This pronouncement establishes fair value as the measurement objective in accounting for stock-based compensation payment arrangements and requires all companies to apply a fair value-based measurement method in accounting for all stock-based compensation payment transactions with employees. Reference Note 9, “Stockholders' Equity,” in the Notes to Unaudited Condensed Financial Statements for details on the Company’s stock-based compensation plans. Valuation of long-lived assets Our long-lived assets include property and equipment, goodwill, and intangible assets. As of June 30, 2026, the balances of property and equipment, goodwill and intangible assets, all net of accumulated depreciation and amortization, were $351, $8,102 and $1,798, respectively. As of December 31, 2025, the balances of property and equipment, goodwill and intangible assets, all net of accumulated depreciation and amortization, were $394, $8,102 and 2,077, respectively. Reference Note 2, “Significant Accounting Policies”; Note 4, “Property and Equipment, Net”; and Note 5, “Intangible Assets, net” in the Notes to Financial Statements of the December 31, 2025 audited financial statements for details on the Company’s valuations of our long-lived assets. Internal Use Capitalized Software We capitalize certain costs related to the development of our platform and other software applications for internal use. In accordance with authoritative guidance, we begin to capitalize our costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software will be used as intended. We stop capitalizing these costs when the software is substantially complete and ready for its intended use, including the completion of all significant testing. These costs are amortized on a straight-line basis over the estimated useful life of the related asset. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditure will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within research and development expenses in the statements of operations. We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. The above listing is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. Results of Operations (All dollar amounts are rounded to thousands, except share and per share data) COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2026 TO THE THREE MONTHS ENDED JUNE 30, 2025 Revenues for the three months ended June 30, 2026 increased $818, or 16%, to approximately $5,941 compared to $5,123 for the same period of 2025. The increase in revenues is primarily the result of higher SaaS revenue for the current period. SaaS revenue, which consists of software licensed as a service on a subscription basis, increased $841 or 17% to $5,921 for the three months ended June 30, 2026 compared to $5,080 for the same period of 2025. Gross profit increased $824, or 18%, to $5,424 for three months ended June 30, 2026 from $4,600 for the same period of 2025. Our gross profit, as a percentage of revenues, was 91% and 90% for the three months ended June 30, 2026 and 2025, respectively. Operating expenses, which consist of selling, general and administrative and research and development expenses, decreased $47, or 1%, to $4,851 for the three months ended June 30, 2026 compared to $4,898 for the same period of 2025. The decrease in operating expenses is primarily the result of a lower headcount in the three-month period ended June 30, 2026. 24 Index As a result of the factors noted above, the Company had a net income of $663 for the three months ended June 30, 2026 as compared to a net loss of $(251) for the three months ended June 30, 2025. COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2026 TO THE SIX MONTHS ENDED JUNE 30, 2025 Revenues for the six months ended June 30, 2026 increased $1,448, or 14%, to approximately $11,465 compared to $10,017 for the same period of 2025. The increase in revenues is primarily the result of higher transaction volumes for SaaS for the current period. SaaS revenue, which consists of software licensed as a service on a subscription basis, increased $1,487 or 15% to $11,435 for the six months ended June 30, 2026 compared to $9,948 for the same period of 2025. Gross profit increased $1,457, or 16%, to $10,449 for six months ended June 30, 2026 from $8,992 for the same period of 2025. Our gross profit, as a percentage of revenues, was 91% and 90% for the six months ended June 30, 2026 and 2025, respectively. Operating expenses, which consist of selling, general and administrative and research and development expenses, decreased $304, or 3%, to $9,334 for the six months ended June 30, 2026 compared to $9,638 for the same period of 2025. The decrease in operating expenses is primarily the result of a lower headcount in the six-month period ended June 30, 2026. As a result of the factors noted above, the Company had a net income of $1,299 for the six months ended June 30, 2026 as compared to a net loss of $(569) for the six months ended June 30, 2025. Liquidity and Capital Resources As of June 30, 2026, we had cash and cash equivalents of $11,837, working capital (defined as current assets minus current liabilities) of $12,237, total assets of $25,565 and stockholders’ equity of $22,489. During the six months ended June 30, 2026, we generated cash of $2,242 in operating activities as compared to net cash of $3,884 generated from operating activities in the six months ended June 30, 2025. Cash used in investing activities was $(59) for the six months ended June 30, 2026 compared to cash used in investing activities of $(232) for the six months ended June 30, 2025. Cash provided by financing activities was $4 for the six months ended June 30, 2026 compared to net cash of $255 provided by financing activities for the six months ended June 30, 2025. We currently anticipate that our available cash and expected cash from operations will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months from the date of this report. We keep the option open to raise additional funds to respond to business contingencies which may include the need to fund more rapid expansion, fund additional marketing expenditures, develop new markets for our technology, enhance our operating infrastructure, respond to competitive pressures, or acquire complementary businesses or necessary technologies. There can be no assurance that we will be able to secure the additional funds when needed or obtain such on terms satisfactory to us, if at all. The specific terms of any future offering, including the prices and use of proceeds, will be determined at the time of any such offering and will be described in detail in a prospectus supplement which will be filed with the SEC at the time of the offering. We are not currently involved in any legal or regulatory proceeding, or arbitration, the outcome of which is expected to have a material effect on our business. Net Operating Loss Carry Forwards Our available net operating loss (“NOL”) as of December 31, 2025 was approximately $30,520, of which $10,892 expires between 2035 and 2037. The remaining $19,628 was generated after 2017 and may be carried forward indefinitely, subject to an annual limitation of 80% of taxable income under the Tax Cuts and Jobs Act of 2017. 25 Index Use of Non-GAAP Measures Adjusted Gross Profit We use Adjusted Gross Profit as a non-GAAP financial performance measurement. Adjusted Gross Profit is calculated by adjusting gross profit for the reduction of amortization expense. Adjusted Gross Profit is provided to investors to supplement the results of operations reported in accordance with GAAP. We believe Adjusted Gross Profit is important because it focuses on the current operating performance, as amortization expense does not accurately reflect the current costs required to maintain the operational usage of our service. Rather, amortization expense reflects the allocation of historical software development costs over their estimated useful lives. As an indicator of our operating performance, Adjusted Gross Profit should not be considered an alternative to, or more meaningful than, gross profit as determined in accordance with GAAP. Our Adjusted Gross Profit may not be comparable to a similarly titled measure of another company because other entities may not calculate Adjusted Gross Profit in the same manner. The reconciliation of GAAP gross profit to Non-GAAP Adjusted Gross Profit is as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenues $ 5,941 $ 5,123 $ 11,465 $ 10,017 Cost of revenues, exclusive of amortization 380 402 742 800 Amortization allocable to cost of revenues 137 121 274 225 Gross profit 5,424 4,600 10,449 8,992 Add: Amortization allocable to cost of revenues 137 121 274 225 Adjusted gross profit 5,561 4,721 10,723 9,217 Gross profit as a percentage of revenues 91.3 % 89.8 % 91.1 % 89.8 % Adjusted gross profit as a percentage of revenues 93.6 % 92.2 % 93.5 % 92.0 % Adjusted EBITDA We use Adjusted EBITDA as a non-GAAP financial performance measurement. Adjusted EBITDA is calculated by adjusting net income (loss) for certain reductions such as restructuring severance expenses, interest and other income, provisions for income taxes, depreciation, amortization and stock-based compensation expense. Adjusted EBITDA is provided to investors to supplement the results of operations reported in accordance with GAAP. Management believes that Adjusted EBITDA provides an additional tool for investors to use in comparing our financial results with other companies that also use Adjusted EBITDA in their communications to investors. By excluding non-cash charges such as amortization, depreciation and stock-based compensation, as well as non-operating charges for interest and provisions for income taxes, investors can evaluate our operations and can compare the results on a more consistent basis to the results of other companies. In addition, Adjusted EBITDA is one of the primary measures management uses to monitor and evaluate financial and operating results. We consider Adjusted EBITDA to be an important indicator of our operational strength and performance of our business and a useful measure of our historical operating trends. However, there are significant limitations to the use of Adjusted EBITDA since it excludes restructuring severance expenses, interest and other income, provisions for income taxes, stock-based compensation expense, all of which impact our profitability, as well as depreciation and amortization related to the use of long-term assets which benefit multiple periods. We believe that these limitations are compensated by providing Adjusted EBITDA only with GAAP net income (loss) and clearly identifying the difference between the two measures. Consequently, Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss) presented in accordance with GAAP. Adjusted EBITDA as defined by us may not be comparable with similarly named measures provided by other companies. 26 Index The reconciliation of GAAP net income (loss) to Non-GAAP Adjusted EBITDA is as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net income (loss) $ 663 $ (251) $ 1,299 $ (569) Reconciling items: Other income, net (90) (47) (184) (77) Depreciation and amortization 188 171 381 325 Stock-based compensation 289 202 489 379 Adjusted EBITDA $ 1,050 $ 75 $ 1,985 $ 58 Off-Balance Sheet Arrangements We have not entered into any off-balance sheet financing arrangements and have not established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.