T Stamp Inc 10-Q/A for FY2024 Q3
T Stamp Inc (IDAI)
10-Q/A
2024-11-21
For: 2024-09-30
View Original
Added on
April 11, 2026
About this 10-Q/A
T Stamp Inc filed this 10-Q/A on November 21, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $511.08K
- down 83.3% from $3.07M a year earlier
- Net loss
- $1.26M
- compared with a net loss of $35.16K a year earlier
- Diluted EPS
- -$0.07
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
OF 1934
For the quarterly period ended September 30, 2024
ACT OF 1934
For the transition period from ______________ to _____________
Commission file number: 001-41252
(Exact name of registrant as specified in its charter)
| 7372 | ||||||||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Number) | (IRS Employer Identification Number) | ||||||||||||
(Address of registrant’s principal executive offices) (Zip code)
(404 ) 806-9906
Registrant's telephone number, including area code
Securities registered under Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the issuer (1) has filed reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o | |||||||||||
| x | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 20, 2024, there were 23,145,179 shares of Class A Common Stock, par value $0.01 per share, of the registrant outstanding.
EXPLANATORY NOTE
T Stamp Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to its Quarterly Report on Form 10-Q for the fiscal period ended September 30, 2024 (the “Original Filing”) which was filed with the Securities and Exchange Commission (the “SEC”) on November 15, 2024, to amend and restate Part I, Item 1, “Notes to Condensed Consolidated Financial Statements”, with respect to certain GAAP financial disclosures in Note 2 "Borrowings". Specifically, this Amendment corrects an inadvertent misstatement under in Note 2 "Borrowings" in the Original Filing that indicated that the "Promissory Notes Payable" were repaid in full on November 15, 2024, when in fact, the "Subordinated Business Loans" were repaid in full on November 15, 2024, and the "Promissory Notes Payable" are still outstanding.
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment also amends Part II, Item 6. "Exhibits" of the Original Filing to include updated certifications from the Company’s principal executive officer and principal financial officer pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002 (“SOX”) as Exhibits 31.1, 31.2 and 32.1.
Other than as described above, this Amendment does not amend, update or change any other items or disclosures contained in the Original Filing, and accordingly, all other information contained in this Amendment is as of the date of the original filing and does not reflect subsequent information or events beyond the original filing date, November 7, 2024. Accordingly, this Amendment should be read in conjunction with other filings made with the SEC subsequent to the filing of the Original Filing, including any amendments to those filings. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Original Filing.
In this Amendment, T Stamp Inc. (together with its subsidiaries) is referred to as the “Company,” “Trust Stamp,” “we,” “us,” or “our.”
T STAMP INC.
TABLE OF CONTENTS
| Page | ||||||||
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
T STAMP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2024 | December 31, 2023 | ||||||||||
(unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net (includes unbilled receivables of $ | |||||||||||
| Related party receivables | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total Current Assets | |||||||||||
| Capitalized internal-use software, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Investment | |||||||||||
| Other assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Related party payables | |||||||||||
| Accrued expenses | |||||||||||
| Deferred revenue | |||||||||||
| Income tax payable | |||||||||||
| Loans payable | |||||||||||
| Short-term operating lease liabilities | |||||||||||
| Short-term financial liabilities | |||||||||||
| Total Current Liabilities | |||||||||||
| Warrant liabilities | |||||||||||
Notes payable, including accrued interest of $ | |||||||||||
| Long-term operating lease liabilities | |||||||||||
| Total Liabilities | |||||||||||
| Commitments, Note 11 | |||||||||||
| Stockholders’ Equity: | |||||||||||
Common stock $ | |||||||||||
Treasury stock, at cost: | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive income | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total T Stamp Inc. Stockholders’ Equity | |||||||||||
| Non-controlling interest | |||||||||||
| Total Stockholders’ Equity | |||||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | |||||||||
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.
3
T STAMP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||
| Net revenue | $ | $ | $ | $ | |||||||||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||||||||
| Cost of services (exclusive of depreciation and amortization shown separately below) | |||||||||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||||||||
| Selling, general, and administrative | |||||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||
| Total Operating Expenses | |||||||||||||||||||||||||||||
| Operating Loss | ( | ( | ( | ( | |||||||||||||||||||||||||
| Non-Operating Income (Expense): | |||||||||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||||||||
| Change in fair value of warrant liability | ( | ||||||||||||||||||||||||||||
| Other income | |||||||||||||||||||||||||||||
| Other expense | ( | ( | ( | ( | |||||||||||||||||||||||||
| Total Other Income (Expense), Net | ( | ||||||||||||||||||||||||||||
| Net Income (Loss) | ( | ( | ( | ||||||||||||||||||||||||||
| Deemed dividend | ( | ( | |||||||||||||||||||||||||||
| Net loss before non-controlling interest | ( | ( | ( | ( | |||||||||||||||||||||||||
| Net loss attributable to non-controlling interest | |||||||||||||||||||||||||||||
| Net loss attributable to T Stamp Inc. | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
| Basic and diluted net loss per share attributable to T Stamp Inc. | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||||
| Weighted-average shares used to compute basic and diluted net loss per share | |||||||||||||||||||||||||||||
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.
4
T STAMP INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Net loss including non-controlling interest | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other Comprehensive Income (Loss): | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | |||||||||||||||||||||||
| Total Other Comprehensive Income (Loss) | ( | ( | ( | |||||||||||||||||||||||
| Comprehensive loss | ( | ( | ( | ( | ||||||||||||||||||||||
| Comprehensive loss attributable to non-controlling interest | ||||||||||||||||||||||||||
| Comprehensive loss attributable to T Stamp Inc. | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.
5
T STAMP INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income | Accumulated Deficit | Non-controlling Interest | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants to common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in relation to vested restricted stock units, to wholly owned subsidiary | ( | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss attributable to T Stamp Inc. | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income | Accumulated Deficit | Non-controlling Interest | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Exercise of prefunded warrants to common stock | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants to common stock, including inducement | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Termination of common stock warrant agreement | — | — | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend related to inducement transactions | — | — | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, prefunded warrants, and common stock warrants, net of fees | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to T Stamp Inc. | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.
6
T STAMP INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
| Common Stock | Additional Paid-In Capital | Treasury Stock | Stockholders’ Notes Receivable | Accumulated Other Comprehensive Income | Accumulated Deficit | Non-controlling Interest | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants to common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of options to common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, prefunded warrants, and common stock warrants, net of fees | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in relation to vested restricted stock units, to wholly owned subsidiary | ( | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Reverse stock split rounding | ( | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repayment of shareholders loan through in-kind services | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss attributable to T Stamp Inc. | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income | Accumulated Deficit | Non-controlling Interest | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Exercise of prefunded warrants to common stock | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants to common stock, including inducement | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Termination of common stock warrant agreement | — | — | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in relation to vested restricted stock units and grants | ( | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend related to inducement transactions | — | — | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, prefunded warrants, and common stock warrants, net of fees | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss attributable to T Stamp Inc. | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.
7
T STAMP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the nine months ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss attributable to T Stamp Inc. | $ | ( | $ | ( | |||||||
| Net loss attributable to non-controlling interest | |||||||||||
| Adjustments to reconcile net loss to cash flows used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation | |||||||||||
| Change in fair value of warrant liability | ( | ( | |||||||||
| Repayment of shareholder loan through in-kind services | |||||||||||
| Impairment of capitalized internal-use software | |||||||||||
| Gain on sale of property and equipment | ( | ||||||||||
| Non-cash interest | |||||||||||
| Non-cash lease expense | |||||||||||
| Non-cash write off of mobile hardware | ( | ( | |||||||||
| Loss on retirement of equipment | |||||||||||
| Loss on inducement agreements | |||||||||||
| Loss on termination of warrant agreement | |||||||||||
| Non-cash investment gain | ( | ||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Related party receivables | |||||||||||
| Prepaid expenses and other current assets | ( | ||||||||||
| Other assets | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued expense | ( | ||||||||||
| Related party payables | ( | ( | |||||||||
| Deferred revenue | ( | ||||||||||
| Income tax payable | ( | ( | |||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Net cash flows from operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Proceeds from sale of property, plant and equipment | |||||||||||
| Investment | ( | ||||||||||
| Capitalized internally developed software costs | ( | ( | |||||||||
| Patent application costs | ( | ( | |||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Net cash flows from investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from common stock, prefunded warrants, and common stock warrants, net of fees | |||||||||||
| Payment to terminate common stock warrant agreement | ( | ||||||||||
| Forfeited common stock shares to satisfy taxes | ( | ( | |||||||||
| Proceeds from exercise of warrants to common stock | |||||||||||
| Proceeds from exercise of options to common stock | |||||||||||
| Proceeds from loans | |||||||||||
| Principal payments on loans | ( | ||||||||||
| Principal payments on financial liabilities | ( | ||||||||||
| Net cash flows from financing activities | $ | $ | |||||||||
| Effect of foreign currency translation on cash | ( | ( | |||||||||
| Net change in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
8
T STAMP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid during the period for interest | $ | $ | |||||||||
| Supplemental disclosure of non-cash activities: | |||||||||||
| Adjustment to investing activities for warrants issued to the Company in lieu of cash | $ | $ | |||||||||
| Adjustment to operating lease right-of-use assets related to renewed leases | $ | $ | |||||||||
| Adjustment to operating lease operating lease liabilities related to renewed leases | $ | $ | |||||||||
| Adjustment to operating lease right-of-use assets related to terminated leases | $ | $ | |||||||||
| Adjustment to operating lease liabilities related to terminated leases | $ | $ | |||||||||
| Prepaid rent expense reclassified upon termination of leases | $ | $ | |||||||||
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.
9
T STAMP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of Business, Summary of Significant Accounting Policies, and Going Concern
Description of Business — T Stamp Inc. was incorporated in the State of Delaware on April 11, 2016. T Stamp Inc. and its subsidiaries (“Trust Stamp,” “we,” “us,” “our,” or the “Company”) develop and market artificial intelligence-powered or enabled software solutions for enterprise and government partners and peer-to-peer markets.
Trust Stamp primarily develops proprietary artificial intelligence-powered solutions, researching and leveraging machine learning artificial intelligence, including computer vision, cryptography, and data mining, to process and protect data and deliver insightful outputs that identify and defend against fraud, protect sensitive user information, facilitate automated processes, and extend the reach of digital services through global accessibility. We utilize the power and agility of technologies such as GPU processing, edge computing, neural networks, and large language models to process and protect data faster and more effectively than historically possible to deliver results at a disruptively low cost for usage across multiple industries.
Reverse Split — On February 15, 2023 our Board of Directors approved and, as of February 20, 2023, the holders of a majority of our voting capital stock approved an amendment (the “Certificate of Amendment”) to the Company’s Amended and Restated Certificate of Incorporation and approved to effect a reverse split of our issued and outstanding shares of Class A Common Stock at a ratio of one share for every five shares currently held, rounded up to the nearest whole share – whereby every five (5) outstanding shares of Class A Common Stock was combined and became one (1) share of Class A Common Stock, rounding up to the nearest whole number of shares (the “Reverse Split”). All share and per share amounts have been updated to reflect the Reverse Split in these unaudited condensed consolidated financial statements. The Reverse Split was effective for trading on the market opening of Nasdaq on March 23, 2023. The Reverse Stock Split effective March 23, 2023, was ratified by the Company’s stockholders by written consent pursuant to a definitive proxy statement filed with the Securities and Exchange Commission on April 13, 2023. Written consent from the majority of stockholders was received as of May 13, 2023.
Amended and Restated Certificate of Incorporation — On July 6, 2023, the Company received confirmation of the acceptance of its Third Amended and Restated Certificate of Incorporation (the "Third Restated Certificate") from the Secretary of State of Delaware. The Third Restated Certificate was approved by the Company’s stockholders by written consent pursuant to a definitive proxy statement filed with the Securities and Exchange Commission on April 13, 2023. Written consent from the majority of stockholders was received as of May 13, 2023. The Third Restated Certificate maintained the 50,000,000
Going Concern — The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is a business that has not yet generated profits, with a net loss during the nine months ended September 30, 2024 of $4.59 million, net operating cash outflows of $6.18 million for the same period, working capital of negative $1.45 million and an accumulated deficit of $55.45 million as of September 30, 2024.
The Company’s ability to continue as a going concern in the next twelve months following the date the unaudited condensed consolidated financial statements were available to be issued is dependent upon its ability to produce revenues and/or obtain financing sufficient to meet current and future obligations and deploy such to produce profitable operating results. Management has evaluated these conditions and plans to generate revenue and raise capital as needed to satisfy the Company’s capital needs. While the negotiation of significant additional revenue is well advanced, it has not reached a stage that allows it to be factored into a going concern evaluation. In addition, although the Company has previously been successful in raising capital as needed and has already made plans to do so as well as restructuring expenses to meet the Company’s cash needs, no assurance can be given that the Company will be successful in its capital raising efforts. These
10
factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period.
Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with US Generally Accepted Accounting Principles (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The accompanying unaudited condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Basis of Consolidation — The accompanying unaudited condensed consolidated financial statements reflect the activity of the Company and its subsidiaries, Trusted Mail Inc. (“Trusted Mail”), Finnovation LLC (“Finnovation”), Trust Stamp Malta Limited (“Trust Stamp Malta”), AIID Payments Limited, Biometric Innovations Limited (“Biometrics”), Trust Stamp Rwanda Limited, Trust Stamp Denmark ApS, Quantum Foundation, TSI GovTech Corporation, Global Server Management Inc., Cheltenham AI LTD, and Trust Stamp Nigeria Limited. All significant intercompany transactions and accounts have been eliminated.
The Company has completed the process of administratively dissolving AIID Payments Limited and the dissolution was effective October 29, 2024.
Further, we continue to consolidate Tstamp Incentive Holdings (“TSIH”) which we consider to be a variable interest entity.
In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments necessary (which adjustments are of a normal and recurring nature) for the fair presentation of the Company's financial position as of September 30, 2024 and December 31, 2023, and the results of operations for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of results expected for the full year. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. The accounting policies employed are substantially the same as those shown in note 1 of the notes to consolidated financial statements included therein.
Variable Interest Entity — On April 9, 2019, management created a new entity, TSIH. Furthermore, on April 25, 2019, the Company issued 320,513 shares of Class A Common Stock to TSIH, for the purpose of providing a pool of shares of Class A Common Stock of the Company that the Company’s Board of Directors (the “Board”) could use for employee stock awards and were recorded initially as Treasury stock. Since establishing TSIH, 264,000 shares were transferred to various employees as a stock award that were earned and outstanding. On February 15, 2023, Trust Stamp issued 206,033 shares of Class A Common Stock to TSIH to be used to satisfy vested employee stock awards. As of September 30, 2024, no shares of Class A Common Stock are held by TSIH as all shares have been issued pursuant to employee Restricted Stock Units.
The Company considers this entity to be a variable interest entity (“VIE”) because it is thinly capitalized and holds no cash. Because the Company does not own shares in TSIH, management believes that this gives the Company a variable interest. Further, management of the Company also acts as management of TSIH and is the decision-maker as management grants shares held by TSIH to employees of the Company. As this VIE's primary purpose is to hold shares in the Company from time to time and holds no other liabilities or assets, the Company is the primary beneficiary of TSIH and will consolidate the VIE.
Major Customers and Concentration of Risks — Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of Cash and cash equivalents, and Accounts receivable. We maintain our Cash and cash equivalents with high-quality financial institutions, mainly in the United States; the composition of which are regularly monitored by us. The Federal Deposit Insurance Corporation covers $250,000 for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits. As of September 30, 2024 the Company had $30,342 of deposits in excess of insured limits, meanwhile as at December 31, 2023, the Company had $2,620,765 in U.S. bank accounts which exceeded insured limits. Management believes minimal credit risk exists with respect to these financial institutions and the Company has not experienced any losses on such amounts.
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For Accounts receivable, we are exposed to credit risk in the event of nonpayment by customers to the extent the amounts are recorded in the consolidated balance sheets. We extend different levels of credit and maintain reserves for potential credit losses based upon the expected collectability of Accounts receivable. We manage credit risk related to our customers by performing periodic evaluations of credit worthiness and applying other credit risk monitoring procedures.
Three customers represented 86.87 % or 65.12 %, 17.12 %, and 4.63 % of the balance of total Accounts receivable as of September 30, 2024 and three customers represented 91.11 % or 53.55 %, 30.43 %, and 7.13 % of the balance of total Accounts receivable as of December 31, 2023. The Company seeks to mitigate its credit risk with respect to Accounts receivable by contracting with large commercial customers and government agencies, and regularly monitoring the aging of Accounts receivable balances. As of September 30, 2024 and December 31, 2023, the Company had not experienced any significant losses on its Accounts receivable.
During the three months ended September 30, 2024, the Company sold to primarily three customers which made up approximately 93.24 % of total Net revenue, and consisted of 66.34 %, 17.60 %, and 9.30 % from an S&P 500 Bank, Mastercard, and Triton, respectively.
Additionally, during the three months ended September 30, 2023, the Company sold to primarily three customers which made up approximately 95.85 % of total Net revenue, and consisted of 81.87 %, 7.91 %, and 6.07 % from IGS, Mastercard, and an S&P 500 Bank, respectively.
During the nine months ended September 30, 2024, the Company sold to primarily three customers which made up approximately 94.68 % of total Net revenue, and consisted of 63.66 %, 21.07 %, and 9.95 % from an S&P 500 Bank, Mastercard, and Triton, respectively.
Additionally, during the nine months ended September 30, 2023, the Company sold to primarily three customers which made up approximately 90.53 % of total Net revenue, and consisted of 62.98 %, 14.95 %, and 12.60 % from IGS, an S&P 500 Bank, and Mastercard, respectively.
Property and Equipment, Net — Property and equipment, net is stated at cost less accumulated depreciation. Depreciation is recognized using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs that do not improve or extend the useful lives of the assets are expensed when incurred, whereas additions and major improvements are capitalized. Upon sale or retirement of assets, the cost and related accumulated depreciation are derecognized from the consolidated balance sheet and any resulting gain or loss is recorded in the consolidated statements of operations in the period realized.
Accounting for Impairment of Long-Lived Assets — Long-lived assets with finite lives include Property and equipment, net, Capitalized internal-use software, Operating lease right-of-use assets, and Intangible assets, net subject to amortization. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset exceeds these estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
As of September 30, 2024, the Company determined that $24 thousand of Capitalized internal-use software were impaired. The impaired Capitalized internal-use software was expensed to during the nine months ended September 30, 2024. As of December 31, 2023, the Company determined that $19 thousand of Capitalized internal-use software and $12 thousand of Intangible assets was impaired. The impaired Capitalized internal-use software was expensed to during the year ended December 31, 2023.
Goodwill — Goodwill is accounted for in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other. The Company allocates the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase consideration transferred over the fair value of the net assets acquired, including other Intangible assets, net, is recorded as Goodwill. Goodwill is tested for impairment at the reporting unit level at least quarterly or more frequently when events or circumstances occur that indicate that it is more likely than not that an impairment has occurred. In assessing Goodwill for impairment, the Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In the qualitative assessment, the Company considers factors including
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economic conditions, industry and market conditions and developments, overall financial performance and other relevant entity-specific events in determining whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. Should the Company conclude that it is more likely than not that the recorded Goodwill amounts have been impaired, the Company would perform the impairment test. Goodwill impairment exists when a reporting unit’s carrying value exceeds its fair value. Significant judgment is applied when Goodwill is assessed for impairment. There were no impairment charges to Goodwill as of September 30, 2024 and December 31, 2023.
Remaining Performance Obligations — The Company’s arrangements with its customers often have terms that span over multiple years. However, the Company generally allows its customers to terminate contracts for convenience prior to the end of the stated term with less than twelve months’ notice. Revenue allocated to remaining performance obligations represents non-cancelable contracted revenue that has not yet been recognized, which includes deferred revenue and, in certain instances, amounts that will be invoiced. The Company has elected the practical expedient allowing the Company to not disclose remaining performance obligations for contracts with original terms of twelve months or less. Cancellable contracted revenue, which includes customer deposit liabilities, is not considered a remaining performance obligation. As of September 30, 2024 and December 31, 2023, the Company did not have any related performance obligations for contracts with terms exceeding twelve months.
Disaggregation of Revenue
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Professional services (over time) | $ | $ | $ | $ | ||||||||||||||||||||||
| License fees (over time) | ||||||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Recent Accounting Pronouncements Not Yet Adopted — In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures. ASU 2023-09 requires enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. The Company is currently evaluating the impacts of the new standard but does not expect a material impact to its unaudited condensed consolidated financial statements or related disclosures.
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU clarify that an entity should measure the fair value of an equity security subject to contractual sale restriction the same way it measures an identical equity security that is not subject to such a restriction. The FASB said the contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, should not affect its fair value. The ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect this guidance to have a material impact to its unaudited condensed consolidated financial statements or related disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption of the amendments is permitted. The Company is currently evaluating the impacts of the new standard but does not expect a material impact to its unaudited condensed consolidated financial statements or related disclosures.
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2. Borrowings
Promissory Notes Payable
| September 30, 2024 | December 31, 2023 | ||||||||||
| Malta loan receipt 3 – June 3, 2022 | $ | $ | |||||||||
| Malta loan receipt 2 – August 10, 2021 | |||||||||||
| Malta loan receipt 1 – February 9, 2021 | |||||||||||
| Interest added to principal | |||||||||||
| Total principal outstanding | |||||||||||
| Plus: accrued interest | |||||||||||
| Total promissory notes payable | $ | $ | |||||||||
In May 2020, the Company formed a subsidiary in the Republic of Malta, Trust Stamp Malta, with the intent to establish a research and development center with the assistance of potential grants and loans from the Maltese government. As part of the creation of this entity, we entered into an agreement with the government of Malta for a potentially repayable advance of up to €800 thousand or $858 thousand to assist in covering the costs of 75 % of the first 24 months of payroll costs for any employee who begins 36 months from the execution of the agreement on July 8, 2020. On February 9, 2021 the Company began receiving funds and as of September 30, 2024, the balance received was $892 thousand which includes changes in foreign currency rates.
The Company will pay an annual interest rate of 2 % over the European Central Banks (ECB) base rate as set on the beginning of the year in review. If the ECB rate is below negative 1 %, the interest rate shall be fixed at 1 %. The Company will repay a minimum of 10 % of Trust Stamp Malta’s pre-tax profits per annum capped at 15 % of the amount due to the Corporation until the disbursed funds are repaid. At this time, Trust Stamp Malta does not have any revenue-generating contracts and therefore, we do not believe any amounts shall be classified as current. The Malta loan interest rate increased from 4.5 % for the nine months ended September 30, 2023 to 6.5 % for the nine months ended September 30, 2024 due to the increased interest rate noted by the ECB.
Subordinated Business Loans
| September 30, 2024 | December 31, 2023 | ||||||||||
| Agile loan agreement 1 - July 9, 2024 | $ | $ | |||||||||
| Agile loan agreement 2 - August 29,2024 | |||||||||||
| Interest added to loan agreement 1 - July 9, 2024 | |||||||||||
| Interest added to loan agreement 2 - August 29, 2024 | |||||||||||
| Total principal and interest outstanding | |||||||||||
| Less: loan repayments | |||||||||||
| Total promissory notes payable | $ | $ | |||||||||
On July 9, 2024, the Company entered into a subordinated secured promissory note with Agile Lending, LLC as lead lender (“Agile”) and Agile Capital Funding, LLC as collateral agent, which provides for a term loan to the Company of $454 thousand with the principal amount of $315 thousand and interest of $139 thousand. Commencing July 18, 2024, the Company is required to make weekly payments of $16 thousand until the due date, January 23, 2025. The loan may be prepaid subject to a prepayment fee. An administrative agent fee of $15 thousand was paid on the loan. In connection with the loan, Agile was issued a subordinated secured promissory note, dated July 9, 2024, in the principal amount of $315 thousand which note is secured by all of the Borrower’s assets, including receivables. The liability was paid in full on November 15, 2024.
On August 29, 2024, the Company entered into another subordinated secured promissory note with Agile Lending, LLC as lead lender (“Agile”) and Agile Capital Funding, LLC as collateral agent, which provides for a term loan to the Company of $763 thousand with the principal amount of $530 thousand and interest of $233 thousand. Commencing September 6, 2024, the Company is required to make weekly payments of $27 thousand until the due date, March 14, 2025. The loan may be prepaid subject to a prepayment fee. An administrative agent fee of $27 thousand was paid on the loan. In
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3. Warrants
Liability Classified Warrants
The following table presents the change in the liability balance associated with the liability classified warrants, which are classified in Level 3 of the fair value hierarchy from January 1, 2023 to September 30, 2024:
| Warrants ($) | |||||
| Balance as of January 1, 2023 | $ | ||||
| Additional warrants issued | |||||
| Change in fair value | ( | ||||
| Balance as of December 31, 2023 | $ | ||||
| Additional warrants issued | |||||
| Change in fair value | ( | ||||
| Balance as of September 30, 2024 | $ | ||||
As of September 30, 2024, the Company has issued a customer a warrant to purchase up to $1.00 million of capital stock in a future round of financing at a 20 % discount of the lowest price paid by another investor. The warrant was issued on November 9, 2016. There is no vesting period, and the warrant expires on November 30, 2026. The Company evaluated the provisions of ASC 480, Distinguishing Liabilities from Equity, noting the warrant should be classified as a liability due to its settlement being for a variable number of shares and potentially for a class of shares not yet authorized. The warrant was determined to have a fair value of $250 thousand which was recorded as a Deferred contract acquisition asset and to a Warrant liability during the year ended December 31, 2016 and was amortized as a revenue discount prior to the current periods presented. The fair value of the warrant was estimated on the date of grant by estimating the warrant’s intrinsic value on issuance using the estimated fair value of the Company as a whole and has a balance of $250 thousand as of September 30, 2024.
On December 16, 2016, the Company issued an investor warrant to purchase $50 thousand worth of shares of our Class A Common Stock. The warrants have no vesting period and expires on December 16, 2026. The warrant agreement states that the investor is entitled to the “number of shares of Common Stock with a Fair Market Value as of the Determination Date of $50,000 ”. The determination date is defined as the “date that is the earlier of (A) the conversion of the investor’s Note into the equity interests of the Company or (B) the maturity date of the Note.” The investor converted the referenced Note on June 30, 2020, therefore, defining the determination date. The number of shares to be purchased is settled as 6,418 shares as of June 30, 2020. The exercise price of the warrants is variable until the exercise date.
The Company used a Black-Scholes-Merton pricing model to determine the fair value of the warrants and uses this model to assess the fair value of the warrant liability. As of September 30, 2024, the warrant liability is recorded at $1 thousand which is a $6 thousand decrease, recorded to Change in fair value of warrant liability, from the balance of $7 thousand as of December 31, 2023.
The following assumptions were used to calculate the fair value of the warrant liability during the nine months ended September 30, 2024:
| Fair Value of Warrants | $ | ||||
| Exercise price | $ | ||||
| Risk free interest rate | |||||
| Expected dividend yield | % | ||||
| Expected volatility | |||||
| Expected term | |||||
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Equity Classified Warrants
| Warrant Issuance Date | Strike Price | September 30, 2024 | December 31, 2023 | |||||||||||||||||
| November 9, 2016 | $ | |||||||||||||||||||
| January 23, 2020 | $ | |||||||||||||||||||
| January 23, 2020 | $ | |||||||||||||||||||
| April 18, 2023 | $ | |||||||||||||||||||
| June 5, 2023 | $ | |||||||||||||||||||
| December 21, 2023 | $ | |||||||||||||||||||
| April 3, 2024 | $ | |||||||||||||||||||
| April 3, 2024 | $ | |||||||||||||||||||
| September 3, 2024 | $ | |||||||||||||||||||
| September 3, 2024 | $ | |||||||||||||||||||
| September 3, 2024 | $ | |||||||||||||||||||
| September 10, 2024 | $ | |||||||||||||||||||
| Total warrants outstanding | ||||||||||||||||||||
November 9, 2016
The Company has issued a customer a warrant to purchase 80,128 shares of Class A Common Stock with an exercise price of $3.12 per share. The warrant was issued on November 9, 2016. There is no vesting period, and the warrant expires on November 30, 2026.
January 23, 2020
In January 2020, the Company issued REach®, a related party, a warrant to purchase 186,442 shares of the Company’s Class A Common Stock at a strike price of $8.00 per share in exchange for the cancellation of a $100 thousand SAFE issued on August 18, 2017 by the Company’s affiliate Trusted Mail Inc. with a value of $125 thousand. The warrants were issued on January 23, 2020. There is no vesting period, and the warrants expire on December 20, 2024.
January 23, 2020
In January 2020, the Company issued SCV, a related party, a warrant to purchase 932,111 shares of the Company’s Class A Common Stock at a strike price of $8.00 per share in exchange for $300 thousand in cash and “Premium” sponsorship status with a credited value of $100 thousand per year for 3 years totaling $300 thousand. This “premium” sponsorship status provides the Company with certain benefits in marketing and networking, such as the Company being listed on the investor’s website, as well as providing the Company certain other promotional opportunities organized by the investor. The warrants were issued on January 23, 2020. There is no vesting period, and the warrants expire on December 20, 2024.
On December 21, 2021, SCV executed a Notice of Exercise for certain of its warrants to purchase 407,512 shares of Class A Common Stock at an exercise price of $8.00 per share for a total purchase price of $3.26 million. The closing occurred on January 10, 2022 and resulted in total cash proceeds of $3,260,000 to the Company for the warrant exercise.
The warrants to purchase the remaining 524,599 shares of the Company’s Class A Common Stock remain outstanding as of September 30, 2024.
April 18, 2023
On April 14, 2023, the Company entered into a securities purchase agreement (“SPA”) with Armistice Capital Master Fund Ltd. Pursuant to which the Company agreed to issue and sell to the investor (i) in a registered direct offering, 563,380 shares of Class A Common Stock, par value $0.01 per share of the Company at a price of $3.30 per share, and pre-funded warrants to purchase up to 1,009,950 shares of Class A Common Stock, at a price of $3.299 per prefunded warrant, at an exercise price of $0.001 per share of Class A Common Stock, and (ii) in a concurrent private placement, common stock purchase warrants, exercisable for an aggregate of up to 1,573,330 shares of Class A Common Stock, at an exercise price of $3.30 per share. On April 18, 2023, the Company sold 563,380 shares of Class A Common Stock to the institutional
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investor at a price of $3.30 per share for total proceeds $1,859,154 . Additionally, on same date, the institutional investor purchased and exercised the 1,009,950 pre-funded warrants, for total proceeds to the Company of $3,332,835 , resulting in an aggregate issuance by the Company of 1,573,330 shares of Class A Common Stock for net proceeds of $4,778,550 from the registered direct offering after deducting placement fee and legal expense of $363,439 and $50,000 , respectively.
On December 21, 2023, the Company entered into an Inducement Agreement with Armistice Capital Master Fund Ltd. Pursuant to the terms of the Inducement Agreement, the exercise price for the warrants to purchase the remaining 1,573,330 shares of Class A Common Stock of the Company was reduced to $1.34 for a total purchase price of $2,108,262 .
On December 21, 2023, the remaining 1,573,330 common stock purchase warrants to purchase shares of Class A Common Stock of the Company at a price of $1.34 per warrant were exercised for total proceeds of $2,108,262 .
As of December 31, 2023, the Company had received Notice to Exercise for 798,000 common stock purchase warrants resulting in an issuance by the Company of 798,000 shares of Class A Common Stock. Due to the beneficial ownership limitation provisions in the Inducement Agreement, as of December 31, 2023 the remaining 775,330 common stock purchase warrants exercised on December 21, 2023 were unissued and held in abeyance for benefit of the institutional investor until notice from the institutional investor that the shares may be issued in compliance with the beneficial ownership limitation. On February 7, 2024 and February 27, 2024, the Company issued 320,000 and 455,330 shares, respectively.
All warrants related to this investment have been exercised and are no longer outstanding as of September 30, 2024.
June 5, 2023
On June 1, 2023, the Company entered into a securities purchase agreement (“SPA”) with an Armistice Capital Master Fund Ltd. Pursuant to which the Company agreed to issue and sell to the investor (i) in a registered direct offering, 736,400 shares of Class A Common Stock, par value $0.01 per share of the Company at a price of $2.30 per share, and pre-funded warrants to purchase up to 543,300 shares of Class A Common Stock, at a price of $2.299 per prefunded warrant, at an exercise price of $0.001 per share of Class A Common Stock, and (ii) in a concurrent private placement, common stock purchase warrants, exercisable for an aggregate of up to 1,279,700 shares of Class A Common Stock, at an exercise price of $2.30 per share. On June 5, 2023, the Company sold 736,400 shares of Class A Common Stock to the institutional investor at a price of $2.30 per share for total proceeds of $1,693,720 . Additionally, on same date, the institutional investor purchased the 543,300 pre-funded warrants at a price of $2.299 per prefunded warrant, for total proceeds to the Company of $1,249,047 , resulting in an issuance by the Company of 736,400 shares of Class A Common Stock for net proceeds of $2,686,773 from the registered direct offering after deducting placement fee and legal expense of $205,994 and $50,000 , respectively.
On June 12, 2023, the institutional investor exercised 322,300 pre-funded warrants at a price of $0.001 per prefunded warrant, resulting in an issuance by the Company of 322,300 shares of Class A Common Stock for total proceeds of $322 . Additionally, on June 23, 2023, the institutional investor exercised 221,000 pre-funded warrants at a price of $0.001 per prefunded warrant, resulting in an issuance by the Company of 221,000 shares of Class A Common Stock for total proceeds of $221 .
On December 21, 2023, the Company entered into an Inducement Agreement with Armistice Capital Master Fund Ltd. Pursuant to the terms of the Inducement Agreement, the exercise price for the common stock purchase warrants to purchase the remaining 1,279,700 shares of Class A Common Stock of the Company was reduced to $1.34 for a total purchase price of $1,714,798 .
On December 21, 2023, the institutional investor exercised 106,670 warrants to purchase shares of Class A Common Stock of the Company at a price of $1.34 per warrant for total proceeds of $142,938 .
As of December 31, 2023, due to the beneficial ownership limitation provisions in the Inducement Agreement, the 106,670 warrants were unissued and held in abeyance for benefit of the institutional investor until notice from the institutional investor that the shares may be issued in compliance with the beneficial ownership limitation. These shares were subsequently issued on February 27, 2024.
On September 3, 2024, the Company entered into an Inducement Agreement with Armistice Capital Master Fund Ltd. Pursuant to the terms of the Inducement Agreement, the exercise price for the common stock purchase warrants to purchase
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the remaining 1,173,030 shares of Class A Common Stock of the Company was reduced to $0.3223 . All of the 1,173,030 shares were exercised and issued on September 4, 2024.
All warrants related to this investment have been exercised and are no longer outstanding as of September 30, 2024.
December 21, 2023
On December 21, 2023, the Company entered into a warrant exercise agreement (the “WEA”) with a certain existing institutional investor, pursuant to which the institutional investor agreed to exercise (the “Exercise”) (i) a portion (106,670 ) of the warrants issued to the institutional investor on June 5, 2023, which, as of December 21, 2023, were exercisable for 1,279,700 shares of the Company’s Class A Common Stock, par value $0.01 per share (“Class A Common Stock”) with a current exercise price of $2.30 per share (the “June 2023 Warrants”), (ii) all of the warrants issued to the institutional investor on September 14, 2022, as amended on June 5, 2023, which are exercisable for 120,000 shares of Class A Common Stock, with a current exercise price of $2.30 per share (the “September 2022 Warrants”), and (iii) all of the warrants issued to the institutional investor on April 18, 2023, which are exercisable for 1,573,330 shares of Class A Common Stock, with a current exercise price of $3.30 per share (the “April 2023 Warrants” and collectively with all of the June 2023 Warrants and the September 2022 Warrants, the “Existing Warrants”). In consideration for the immediate exercise of 1,800,000 of the Existing Warrants for cash, the Company agreed to reduce the exercise price of all of the Existing Warrants, including any unexercised portion thereof, to $1.34 per share, which was equal to the most recent closing price of the Company’s Class A Common Stock on The Nasdaq Stock Market prior to the execution of the WEA. As of September 30, 2024, the institutional investor had submitted an Exercise Notice for all 1,800,000 Existing Warrants, in two batches, 918,000 and 882,000 , respectively, and the shares of Class A Common Stock were issued to the warrant holders.
In addition, in consideration for such Exercise, the Selling Stockholder received new unregistered warrants to purchase up to an aggregate of 3,600,000 shares of Class A Common Stock, equal to 200 % of the shares of Class A Common Stock issued in connection with the Exercise, with an exercise price of $1.34 per share (the “New Warrants”) in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”).
On September 3, 2024, the Company entered into an Inducement Agreement with an institutional investor. Pursuant to the terms of the Inducement Agreement, the exercise price for the common stock purchase warrants to purchase the remaining 3,600,000 shares of Class A Common Stock of the Company was reduced to $0.3223 . The 3,600,000 warrants were subsequently exercised resulting in the Company receiving $1,160,280 in cash proceeds.
Due to the beneficial ownership limitation provisions in the Inducement Agreement, 706,970 shares were issued on September 4, 2024.
The warrants to purchase the remaining 2,893,030
April 3, 2024
On April 3, 2024, the Company closed a Securities Purchase Agreement with a certain institutional investor. Pursuant to the terms of the Securities Purchase Agreement, the investor agreed to purchase from the Company 499,990 shares of Class A Common Stock, par value $0.01 of the Company and pre-funded warrants to purchase 1,500,010 shares of Class A Common Stock of the Company ("Warrant A") at a purchase price of $0.968 per share resulting in a total purchase price of $1,936,000 . The Company paid offering costs of $245,520 resulting in net proceeds of $1,690,480 .
Additionally, pursuant to the Securities Purchase Agreement, as additional consideration for the share and Warrant A purchase described above, the Company agreed to issue to the Selling Stockholder a stock purchase warrant for the purchase of 2,000,000 shares of the Company’s Class A Common Stock at an exercise price of $0.968 per share (“Warrant B”), and a stock purchase warrant for the purchase of 1,600,000 shares of the Company’s Class A Common Stock at an exercise price of $1.06 per share (“Warrant C”).
On May 24, 2024, the institutional investor exercised 542,100 pre-funded warrants from Warrant A to purchase shares of Class A Common Stock of the Company at an exercise price of $0.00 per warrant for total proceeds of $0 .
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On July 26, 2024 , the institutional investor exercised a further 799,091 pre-funded warrants from Warrant A to purchase shares of Class A Common Stock of the Company at an exercise price of $0.00 per warrant for total proceeds of $0 .
On August 20, 2024, the institutional investor exercised the remaining 158,819 pre-funded warrants from Warrant A to purchase shares of Class A Common Stock of the Company at an exercise price of $0.00 per warrant for total proceeds of $0 . Subsequent to the August 20, 2024 exercise, there were no remaining securities in Warrant A.
On September 3, 2024, the Company entered into a Termination and Release Agreement under which the transaction entered into between the Company and institutional investor that terminated the remaining 2,000,000 stock purchase warrants in Warrant B and 1,600,000 stock purchase warrants in Warrant C. In consideration of the termination of the Transaction Documents, the Company made a $1,650,000 payment to the institutional investor.
All warrants related to this investment have been exercised or terminated and are no longer outstanding as of September 30, 2024.
September 3, 2024
On September 3, 2024, the Company entered into a securities purchase agreement with a single institutional investor to purchase 1,432,399 shares of Class A Common Stock, par value $0.01 of the Company (or pre-funded warrants in lieu thereof) in a registered direct offering priced at-the-market under Nasdaq rules. The shares were purchased at $0.3213 resulting in proceeds of $460,230 .
In a concurrent private placement, the Company also agreed to issue and sell unregistered warrants to purchase up to an aggregate of 2,864,798 shares of Class A Common Stock, par value $0.01 of the Company. The exercise price for each share of common stock (or pre-funded warrant in lieu thereof) and accompanying warrant is $0.3223 . The private placement warrants will be exercisable upon receipt of shareholder approval and will expire five years from the initial exercise date and will have an exercise price of $0.3223 per share. As of the date of this Quarterly Report on Form 10-Q, the Company has not received shareholder approval but will hold a vote on November 18, 2024.
The warrants to purchase the remaining 1,432,399 shares of the Company’s Class A Common Stock are held in abeyance as of September 30, 2024 and 2,864,798 shares of the Company’s Class A Common Stock remain outstanding as of September 30, 2024. On November 6, 2024, the 1,432,399 shares were issued upon the exercise of the warrants for $0.0010 per share resulting in $1,432 in proceeds.
September 3, 2024
On September 3, 2024, the Company also entered into a warrant inducement agreement with a single institutional investor to exercise 1,173,030 outstanding warrants that the Company issued on June 5, 2023 (as amended on December 20, 2023) and 3,600,000 outstanding warrants that the Company issued on December 20, 2023. These warrant exercises are discussed under the June 5, 2023 and December 20, 2023 sections above. In consideration for the immediate exercise of the warrants, the Company also agreed to issue to the investor unregistered warrants to purchase an aggregate of 9,546,060 shares of the Company's common stock. These warrants will have an exercise price of $0.3223 per share, will be exercisable upon receipt of shareholder approval and will expire five years from the initial exercise date. As of the date of this Quarterly Report on Form 10-Q, the Company has not received shareholder approval but will hold a vote on November 18, 2024.
In accordance with the Inducement Agreement we recognized a deemed dividend of $1.94 million calculated as the fair value of the warrants and reduction in exercise price of the warrants as described above immediately following the Inducement Agreement. The fair values were determined using the Black Sholes Model. This deemed dividend is added to net loss to arrive at net loss attributable to common stockholders on the statements of operations.
The warrants to purchase the remaining 9,546,000 shares of the Company’s Class A Common Stock remain outstanding as of September 30, 2024.
September 10, 2024
On September 10, 2024, T Stamp Inc., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement the (“SPA”) with a certain institutional investor. The investor and the Company previously entered into that certain Securities Purchase Agreement dated July 13, 2024, in which the Company issued 4,597,701 shares of Class A
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Common Stock, par value $0.01 of the Company (the “Class A Common Stock”) in exchange for the issuance by the investor to the Company of (i) a $500,000 promissory note payable on July 31, 2024; (ii) a $500,000 promissory note payable on August 31, 2024; and (iii) a $1,000,000 promissory note payable within three (3) trading days of an effective resale registration statement. As of the date of this report, all promissory notes have been repaid.
Pursuant to the terms of the SPA, the Company agreed, at the closing of the SPA and upon the terms and subject to the conditions set forth in the SPA, to issue shares certain warrants to purchase 3,763,950 shares of Class A Common Stock, with an exercise price equal to $0.2273 , subject to adjustment in certain circumstances.
The warrants to purchase the remaining 3,763,950 shares of the Company’s Class A Common Stock remain outstanding as of September 30, 2024.
4. Investment
Boumarang License Agreement — On August 6, 2024, the Company entered into a License Agreement (the “Agreement”) with Boumarang Inc. (“Boumarang”), a developer, manufacturer, and seller of hydrogen-powered UAV and USV drones.
Pursuant to the Agreement, the Company agreed to grant a non-exclusive license to Boumarang to exploit certain of the Company’s patents for the purpose of producing, selling, marketing, and distributing drones. As consideration for the grant of the non-exclusive license, Boumarang agreed to pay the Company a non-refundable license fee of $5,000,000 in the form of a prepaid warrant issued by Boumarang to the Company for 5,000,000 shares of common stock of Boumarang at $1.00 per share (the “Prepaid Warrant”).
The Prepaid Warrant may be exercised in whole or in part at any time prior to the tenth annual anniversary of the issuance date of the Prepaid Warrant. No additional exercise price must be paid by the Company to exercise any portion of the Prepaid Warrant. The Prepaid Warrant also provides that the Company will receive any dividends declared by Boumarang that it would have been entitled to had the Prepaid Warrant been fully exercised, even if the Prepaid Warrant has not been exercised as of such time the distribution is made. Boumarang agreed to reserve a number a sufficient number of shares at all times to allow the Company to fully exercise the Prepaid Warrant. The Prepaid Warrant has certain anti-dilution protections, whereby the number of shares issuable upon the exercise of the Prepaid Warrant will proportionately adjust in the case of a stock-split or stock dividend of Boumarang’s common stock.
The investment in Boumarang was recorded in accordance with ASC 321, Investments – Equity Securities (“ASC 321”). Under this guidance, investments in equity securities in privately-held companies without readily determinable fair values are generally recorded at cost, plus or minus subsequent observable price changes in identical or similar investments, less impairments. The Company elected the practical expedient permitted by ASC 321 and recorded the above investment on a cost basis. As a part of the assessment for impairment indicators, the Company considers significant deterioration in the earnings performance and overall business prospects of the investee as well as significant adverse changes in the external environment the investment operate. If qualitative assessment indicates the investment is impaired, the fair value of the Prepaid Warrants would be estimated, which would involve a significant degree of judgement and subjectivity.
The Company qualitatively assessed the investment for impairment in accordance with ASC 321. As of September 30, 2024, the Company determined that there was no impairment for the investment.
Boumarang Subscription Agreement — On August 6, 2024, Trust Stamp executed a Subscription Agreement with Boumarang to participate in a Regulation D offering being conducted by Boumarang, subscribing for 100,000 shares of Boumarang's common stock at a price per share of $1.00 . The Company made the $100,000 subscription payment on August 6, 2024.
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5. Balance Sheet Components
Prepaid expenses and other current assets
Prepaid expenses and other current assets as of September 30, 2024 and December 31, 2023 consisted of the following:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Prepaid operating expenses | $ | $ | |||||||||
| Rent deposit | |||||||||||
| Value added tax receivable | |||||||||||
| Tax credit receivable (short-term) | |||||||||||
| Miscellaneous receivable | |||||||||||
| Prepaid expenses and other current assets | $ | $ | |||||||||
Capitalized internal-use software, net
Capitalized internal-use software, net as of as of September 30, 2024 and December 31, 2023 consisted of the following:
| Useful Lives | September 30, 2024 | December 31, 2023 | |||||||||||||||
| Internally developed software | $ | $ | |||||||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||||||||
| Capitalized internal-use software, net | $ | $ | |||||||||||||||
Amortization expense is recognized on a straight-line basis and during the three months ended September 30, 2024 and 2023 totaled $141 thousand and $140 thousand, respectively. Amortization expense during the nine months ended September 30, 2024 and 2023 totaled $419
As of September 30, 2024, the Company determined that $24 thousand of Capitalized internal-use software were impaired. The impaired Capitalized internal-use software was expensed to during the nine months ended September 30, 2024.
Property and equipment, net
Property and equipment, net as of as of September 30, 2024 and December 31, 2023 consisted of the following:
| Useful Lives | September 30, 2024 | December 31, 2023 | |||||||||||||||
| Computer equipment | $ | $ | |||||||||||||||
| Furniture and fixtures | |||||||||||||||||
| Property and equipment, gross | |||||||||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||||||||
| Property and equipment, net | $ | $ | |||||||||||||||
Depreciation expense is recognized on a straight-line basis and during the three months ended September 30, 2024 and 2023 totaled $8 thousand and $10 thousand, respectively. Depreciation expense during the nine months ended September 30, 2024 and 2023 totaled $27 thousand and $62 thousand, respectively.
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Accrued expenses
Accrued expenses as of September 30, 2024 and December 31, 2023 consisted of the following:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Compensation payable | $ | $ | |||||||||
| Commission liability | |||||||||||
| Accrued employee taxes | |||||||||||
| Other accrued liabilities | |||||||||||
| Accrued expenses | $ | $ | |||||||||
6. Goodwill and Intangible Assets, Net
There were no changes in the carrying amount of Goodwill for the nine months ended September 30, 2024.
Intangible assets, net as of September 30, 2024 and December 31, 2023 consisted of the following:
| Useful Lives | September 30, 2024 | December 31, 2023 | |||||||||||||||
| Patent application costs | $ | $ | |||||||||||||||
| Trade name and trademarks | |||||||||||||||||
| Intangible assets, gross | |||||||||||||||||
| Less: Accumulated amortization | ( | ( | |||||||||||||||
| Intangible assets, net | $ | $ | |||||||||||||||
The Company added 6 new issued patents during the nine months ended September 30, 2024. The patents issued during the nine months ended September 30, 2024 increased our total number of patents to 23 and include:
•On January 2, 2024, the Company received Notice of Issuance for a patent that is a continuation of “Systems and Processes for Lossy Biometric Representation.” This patent is a continuation addresses a long-felt but unresolved need for a system or process that can transform size-variant, personally-identifying biometric templates into fixed-size, privacy-secured representations, while maintaining sufficiently accurate biometric matching capabilities.
•On January 30, 2024, the Company received Notice of Issuance for a patent that is a continuation of “Systems and Processes for Lossy Biometric Representation.” This technology provides a system or process that can transform size-variant, personally-identifying biometric templates into fixed-size, privacy-secured representations, while maintaining sufficiently accurate biometric matching capabilities.
•On March 19, 2024, the Company received Notice of Issuance for a patent entitled “Systems and Methods for Enhanced Hash Transforms.” Conventional cryptographic hashing techniques generally include functions that generate unique signatures given a piece of data, accepting binary strings of characters as an input, and producing a string (e.g., a digital signature) as an output. Our new patent addresses the need for improved techniques for securely handling sensitive data.
•On April 23, 2024, the Company received Notice of Issuance for a patent entitled “Face Cover-compatible Biometrics and Processes for Generating and Using Same.” which allows for enrollment of biometric information from individuals wearing face coverings such that subsequent biometric identification and verification processes may not require the individuals to remove their face coverings.
•On April 30, 2024, the Company received Notice of Issuance for a patent entitled “Systems and Methods for Liveness-verified, Biometric-based Encryption.” This patent fulfills a long-felt but unresolved need for a system or method that permits encryption/decryption based on liveness-verified biometric data that cannot be stolen or spoofed.
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•On September 3, 2024 the Company received Notice of Issuance by the US Patent of Trademark Office of Patent No. 17/719,975 entitled, “Personal Identifiable Information Encoder." This technology provides the means to maintain the essential utility of PII without storing highly sensitive data. Anyone processing or storing PII should embrace this technology to fulfill their data protection obligations and mitigate damage and losses in the event of a data breach.”
Intangible asset amortization expense is recognized on a straight-line basis and during the three months ended September 30, 2024 and 2023 totaled $32 thousand and $40 thousand, respectively. Intangible asset amortization expense during the nine months ended September 30, 2024 and 2023 totaled $102 thousand and $115 thousand, respectively.
Estimated future amortization expense of Intangible assets, net is as follows:
| Years Ending December 31, | Amount | |||||||
| 2024 | $ | |||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
Total future amortization | $ | |||||||
7. Net Loss per Share Attributable to Common Stockholders
The following table presents the calculation of basic and diluted net loss per share:
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
| Weighted average shares used in computing net loss per share attributable to common stockholders | ||||||||||||||||||||||||||
| Net loss per share attributable to common stockholders | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||
The following potentially dilutive securities were excluded from the computation of diluted net loss per share calculations for the periods presented because the impact of including them would have been anti-dilutive:
| As of September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Options, RSUs, and grants | |||||||||||
| Warrants | |||||||||||
| Total | |||||||||||
8. Stock Awards and Stock-Based Compensation
From time to time, the Company may issue stock awards in the form of Class A Common Stock grants, Restricted Stock Units (RSUs), or Class A Common Stock options with vesting/service terms. Stock awards are valued on the grant date using the Company’s common stock share price quoted on an active market. Stock options are valued using the Black-Scholes-Merton pricing model to determine the fair value of the options. We generally issue our awards in terms of a fixed monthly value, resulting in a variable number of shares being issued, or in terms of a fixed monthly share number.
Stock Options
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The following table summarizes stock option activity for the three and nine months ended September 30, 2024:
| Options Outstanding | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | |||||||||||||||||||||
| Options granted | |||||||||||||||||||||||
| Options exercised | ( | ||||||||||||||||||||||
| Options canceled and forfeited | ( | ||||||||||||||||||||||
| Balance as of December 31, 2023 | |||||||||||||||||||||||
| Options granted | |||||||||||||||||||||||
| Options exercised | |||||||||||||||||||||||
| Options canceled and forfeited | ( | ||||||||||||||||||||||
| Balance as of March 31, 2024 | |||||||||||||||||||||||
| Options granted | |||||||||||||||||||||||
| Options exercised | |||||||||||||||||||||||
| Options canceled and forfeited | ( | ||||||||||||||||||||||
| Balance as of June 30, 2024 | |||||||||||||||||||||||
| Options granted | |||||||||||||||||||||||
| Options exercised | |||||||||||||||||||||||
| Options canceled and forfeited | ( | ||||||||||||||||||||||
| Options vested and exercisable as of September 30, 2024 | $ | ||||||||||||||||||||||
| Options Outstanding | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Balance as of January 1, 2024 | $ | $ | |||||||||||||||||||||
| Options granted | |||||||||||||||||||||||
| Options exercised | |||||||||||||||||||||||
| Options canceled and forfeited | ( | ||||||||||||||||||||||
| Balance as of September 30, 2024 | |||||||||||||||||||||||
| Options vested and exercisable as of September 30, 2024 | $ | $ | |||||||||||||||||||||
The aggregate intrinsic value of options outstanding, exercisable, and vested is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock. The aggregate intrinsic value of options exercised during the nine months ended September 30, 2024 and 2023 was $0
The weighted average grant-date fair value of options granted during the nine months ended September 30, 2024 and 2023 was $0.29 and $1.25 per share, respectively. The total grant-date fair value of options that vested during the nine months ended September 30, 2024 and 2023 was $4 thousand and $10 thousand, respectively.
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The following assumptions were used to calculate the fair value of options granted during the nine months ended September 30, 2024:
| Fair value of Class A Common Stock | $ | ||||
| Exercise price | $ | ||||
| Risk free interest rate | |||||
| Expected dividend yield | % | ||||
| Expected volatility | |||||
| Expected term | |||||
As of September 30, 2024, the Company had 404,868 stock options outstanding of which all are fully vested options.
Stock Grants
As of September 30, 2024, the Company has 100,188 common stock grants outstanding of which 82,111 were vested but not issued and 18,077 were not yet vested. All granted and outstanding common stock grants will fully vest by September 30, 2025. The Company had unrecognized stock-based compensation related to common stock grants of $6 thousand as of September 30, 2024.
RSU
As of September 30, 2024, the Company had 1,091,423 RSUs outstanding of which 51,412 were vested but not issued and 1,040,011 were not yet vested. All granted and outstanding RSUs will fully vest by January 2, 2025. The Company had unrecognized stock-based compensation related to RSUs of $343 thousand as of September 30, 2024.
During the nine months ended September 30, 2024 the Company issued 54,734 of Class A Common Stock to employees that were designated for employee stock awards and were previously recorded as treasury stock.
A summary of outstanding RSU activity as of September 30, 2024 is as follows:
| RSU Outstanding Number of Shares | |||||
| Balance as of January 1, 2023 | |||||
| Granted | |||||
| Vested (issued) | ( | ||||
| Forfeited | ( | ||||
| Balance as of December 31, 2023 | |||||
| Granted | |||||
| Vested (issued) | ( | ||||
| Forfeited | ( | ||||
| Balance as of September 30, 2024 | |||||
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Stock-based compensation expense
Our consolidated statements of operations include stock-based compensation expense as follows:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Cost of services | $ | $ | $ | $ | ||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| Selling, general, and administrative | ||||||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||||||||||||
9. Related Party Transactions
Related party payables of $48 thousand and $82 thousand as of September 30, 2024 and December 31, 2023, respectively, primarily relate to amounts owed to 10Clouds, the Company’s contractor for software development and investor in the Company, and smaller amounts payable to members of management as expense reimbursements. Total costs incurred in relation to 10Clouds for the three months ended September 30, 2024 and 2023, totaled approximately $1 thousand and $164 thousand, respectively. Total costs incurred in relation to 10Clouds for the nine months ended September 30, 2024 and 2023, totaled approximately $112 thousand and $699 thousand, respectively.
Mutual Channel Agreement
On November 15, 2020, the Company entered into a Mutual Channel Agreement with Vital4Data, Inc., a company at which one of our Directors serves as Chief Executive Officer. Pursuant to the agreement, the Company engaged Vita4Data, Inc. as a non-exclusive sales representative for the Company’s products and services. Vital4Data, Inc. is entitled to compensation in the form of commissions, receiving a 20 % of commission-eligible on net revenue from sales generated by Vital4Data, Inc. in the first year of the contract term, which is reduced to 10 % in the second year, and 5 % in the third year. The Company has not earned or expensed any commissions pursuant to the Vital4Data, Inc. agreement to date. As of September 30, 2024 and December 31, 2023, the Vital4Data, Inc. commission due was $0
10. Malta Grant
During July 2020 the Company entered into an agreement with the Republic of Malta that would provide for a grant of up to €200 thousand or $251 thousand as reimbursement for operating expenses over the first twelve months following Trust Stamp Malta’s incorporation in the Republic of Malta. The Company must provide an initial capital amount of €50 thousand or $62 thousand, which is matched with a €50 thousand or $62 thousand grant. The remaining €150 thousand or $190 thousand are provided as reimbursement of operating expenses twelve months following incorporation.
U.S. GAAP does not provide authoritative guidance regarding the receipt of economic benefits from government entities in return for compliance with certain conditions. Therefore, based on ASC 105-10-05-2, non-authoritative accounting guidance from other sources was considered by analogy in determining the appropriate accounting treatment, the Company elected to apply International Accounting Standards 20 – Accounting for Government Grants and Disclosure of Government Assistance and recognizes the expected reimbursements from the Republic of Malta as deferred income. As reimbursable operating expenses are incurred, a receivable is recognized (reflected within “Prepaid expenses and other current assets” in the consolidated balance sheets) and income is recognized in a similar systematic basis over the same periods in the consolidated statements of operations. During the nine months ended September 30, 2023, the Company incurred $0 in expenses that are reimbursable under the grant. As of September 30, 2024, all amounts provided for under this grant were received.
On January 25, 2022, the Company entered into an additional agreement with the government of Malta for a grant of up to €100 thousand or $107 thousand, in terms of the ‘Investment Aid to produce the COVID-19 Relevant Product’ program, to support the proposed investment. The estimated value of the grant is €137 thousand or $146 thousand, at an aid intensity of 75 % to cover eligible wage costs incurred after February 1, 2022 in relation to new employees engaged specifically for the implementation of the project. On September 22, 2022, the Company entered into an amendment agreement that enables the Company to submit eligible employee expenses for reimbursement by October 31, 2022. The grant was approved in January 2022, however, the request for payment was not approved and management abandoned the agreement. Hence,
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11. Leases and Commitments
Operating Leases — The Company leases office space in Atlanta, Georgia, which serves as its corporate headquarters, office space in Malta, which serves as its research and development facility, and vehicles in Malta that are considered operating lease arrangements under ASC 842 guidance. In addition, the Company contracts for month-to-month coworking arrangements in other office spaces in North Carolina, Denmark, Poland, Rwanda, and Japan to support its dispersed workforce. As of September 30, 2024, there were no minimum lease commitments related to month-to-month lease arrangements.
Initial lease terms are determined at commencement date, the date the Company takes possession of the property, and the commencement date is used to calculate straight-line expense for operating leases. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s Operating lease right-of-use assets and Operating lease liabilities. The Company’s leases have remaining terms of 1 to 4 years. As the Company’s leases do not provide an implicit rate, the present value of future lease payments is determined using the Company’s incremental borrowing rate based on information available at the commencement date.
| Lease term and discount rate | September 30, 2024 | |||||||
| Weighted average remaining lease term | ||||||||
| Weighted average discount rate | % | |||||||
During the nine months ended September 30, 2024, the Company did terminate one operating lease for office space located in the United States. The lease was terminated upon the conclusion of the agreed upon lease term, therefore, there were no termination fees, Right-of-use assets derecognized, Lease liabilities derecognized, or losses recognized.
Balance sheet information related to leases as of as of September 30, 2024 and December 31, 2023 was as follows:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Operating lease right-of-use assets | |||||||||||
| Operating lease right-of-use assets | $ | $ | |||||||||
| Operating lease liabilities | |||||||||||
| Short-term operating lease liabilities | $ | $ | |||||||||
| Long-term operating lease liabilities | |||||||||||
| Total operating lease liabilities | $ | $ | |||||||||
Future maturities of ASC 842 lease liabilities as of September 30, 2024 are as follows:
| Years Ending December 31, | Principal Payments | Imputed Interest Payments | Total Payments | |||||||||||||||||
| 2024 | $ | $ | $ | |||||||||||||||||
| 2025 | ||||||||||||||||||||
| 2026 | ||||||||||||||||||||
| 2027 | ||||||||||||||||||||
| 2028 | ||||||||||||||||||||
| Total future maturities | $ | $ | $ | |||||||||||||||||
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Total lease expense, under ASC 842, was included in Selling, general, and administrative expenses in our unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2024 and 2023 as follows:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Operating lease expense – fixed payments | $ | $ | $ | $ | ||||||||||||||||||||||
| Short term lease expense | ||||||||||||||||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||||||||||||||
Supplemental cash flows information related to leases was as follow:
| For the nine months ended September 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
| Operating cash flows from operating leases | $ | ( | $ | ( | ||||||||||
During the nine months ended September 30, 2024, the Company did not incur variable lease expense.
Financial Liability Obligation — The Company’s financial liability totaled $0 and $162 thousand as of September 30, 2024 and December 31, 2023, respectively, for an executed agreement with a telecommunications company for acquiring mobile hardware. On March 3, 2023, the Company provided a 30 -day termination notice to the telecommunications company which terminates the mobile hardware data service. Under the contract terms with the telecommunications company, upon termination of the data service the Company must pay the remaining financial liability during the final data service billing period. The remaining financial liability was resolved with a settlement and no further payment is due as of September 30, 2024.
Litigation — The Company is not currently involved with and does not know of any pending or threatening litigation against the Company or any of its officers or directors in connection with its business.
12. Subsequent Events
Securities Purchase Agreement — On October 27, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with DQI Holdings, Inc. (“DQI”). Pursuant to the terms of the SPA, the Company agreed to sell, and DQI agreed to purchase from, at the closing of the SPA (the “Closing”) and upon the terms and subject to the conditions set forth in the SPA, 1,363,636.36 shares of Class A Common Stock, par value $0.01 of the Company (the “Class A Common Stock”) at $0.22 per share, subject to adjustment in certain circumstances.
On October 28, 2024 (the “Closing Date”), the Closing of the SPA occurred, and the Company received a cash payment of $300,000 . The 1,363,636.36 shares of Class A Common Stock are held abeyance as of the date of this Quarterly Report on Form 10-Q. The Closing of the SPA was subject to a number of customary closing conditions, including, but not limited to, the Company’s entry into a Registration Rights Agreement, the execution of which were conditions to the Closing of the SPA.
Secured Promissory Note — On November 13, 2024, the Company received a loan pursuant a secured promissory note in the principal amount of $3.00 million. The note accrues interest at a rate of 14 % per annum, computed as simple interest on the basis of a year of 365 days. Principal and any accrued but unpaid interest under this note shall be due and payable by the Company upon demand of the noteholder at any time after January 12, 2025. The note is secured by all of the Company's assets, including its receivables.
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PART II - OTHER INFORMATION
Item 6. Exhibits.
| Exhibit No. | Exhibit Description | ||||||||||
| 3.1 | |||||||||||
| 3.2 | |||||||||||
4.1 | |||||||||||
4.2 | |||||||||||
4.3 | |||||||||||
4.4 | |||||||||||
4.5 | |||||||||||
4.6 | |||||||||||
4.7 | |||||||||||
4.8 | |||||||||||
4.9 | |||||||||||
4.10 | |||||||||||
4.11 | |||||||||||
4.12 | |||||||||||
4.13 | |||||||||||
| 10.1 | |||||||||||
| 10.2 | |||||||||||
| 10.3 | |||||||||||
| 10.4 | |||||||||||
| 10.5 | |||||||||||
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| 10.6 | |||||||||||
| 10.7 | |||||||||||
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_________________________
* Filed herewith.
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| T STAMP INC. | |||||
| /s/ Gareth Genner | |||||
| Gareth Genner, Chief Executive Officer | |||||
| Trust Stamp | |||||
The following persons in the capacities and on the dates indicated have signed this report.
| /s/ Gareth Genner | |||||
| Gareth Genner, Principal Executive Officer, Chief Executive Officer, Director | |||||
Date: November 21, 2024 | |||||
| /s/ Alex Valdes | |||||
| Alex Valdes, Principal Financial Officer, Principal Accounting Officer | |||||
Date: November 21, 2024 | |||||
| /s/ Andrew Gowasack | |||||
| Andrew Gowasack, President, Director | |||||
Date: November 21, 2024 | |||||
| /s/ William McClintock | |||||
| William McClintock, Director | |||||
Date: November 21, 2024 | |||||
/s/ Charles Potts | |||||
Charles Potts, Director | |||||
Date: November 21, 2024 | |||||
| /s/ Kristin Stafford | |||||
| Kristin Stafford, Director | |||||
Date: November 21, 2024 | |||||
| /s/ Berta Pappenheim | |||||
| Berta Pappenheim, Director | |||||
Date: November 21, 2024 | |||||
/s/ Andrew Scott Francis | |||||
Andrew Scott Francis, Director | |||||
Date: November 21, 2024 | |||||
32
Exhibit 31.1
CERTIFICATIONS
I, Gareth Genner, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2024 of T Stamp Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 21, 2024
| /s/ Gareth Genner | |||||
| Gareth Genner | |||||
| Chief Executive Officer (Principal Executive Officer) | |||||
Exhibit 31.2
CERTIFICATIONS
I, Alex Valdes, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2024 of T Stamp Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 21, 2024
| /s/ Alex Valdes | |||||
| Alex Valdes | |||||
| Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of T Stamp Inc. (the “Company”) on Form 10-Q/A for the quarter ended September 30, 2024 as filed with the Securities and Exchange Commission (the “Report”), I, Gareth Genner, Chief Executive Officer of the Company, and I, Alex Valdes, Chief Financial Officer of the Company, certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: November 21, 2024
| /s/ Gareth Genner | |||||
| Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
| /s/ Alex Valdes | |||||
| Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||