UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from ______________ to _____________

Commission file number: 001-41252

T Stamp Inc. (D/B/A Trust Stamp)

(Exact name of registrant as specified in its charter)


3017 Bolling Way NE, Floors 1 and 2, Atlanta, Georgia,		30305

N/A

(Former name, former address and former fiscal year, if changed since last report)


Class A Common Stock, $0.01 par value per share		IDAI		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (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 ☒ No ☐

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 ☒ No ☐

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	☐	Accelerated filer	☐
Non-accelerated filer	☒	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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 10, 2022, there were 24,264,150 shares of Class A Common Stock, par value $0.01 per share, of the registrant issued and outstanding.

Table of Contents

T STAMP INC.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and September 30, 2021 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2022 and September 30, 2021 (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2022 and September 30, 2021 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and September 30, 2021 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49


PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
	Signatures	56

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

T STAMP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	2,930,591	$	3,475,695
Accounts receivable		1,325,023		1,278,286
Related party receivables		31,831		13,648
Prepaid expenses and other current assets		479,386		996,602
Total Current Assets		4,766,831		5,764,231
Capitalized internal-use software, net		1,370,584		1,160,044
Goodwill		1,248,664		1,248,664
Digital assets		4,856		—
Intangible assets, net		210,371		201,807
Property and equipment, net		330,187		111,768
Other assets		150,601		178,140
Total Assets	$	8,082,094	$	8,664,654
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable	$	280,831	$	304,140
Related party payables		159,083		252,773
Accrued expenses		941,850		1,059,532
Deferred revenue		1,614,843		503,433
Customer deposit liabilities		—		280,108
Short-term financial liability		118,860		—
Total Current Liabilities		3,115,467		2,399,986

Warrant liabilities		286,327		374,694
Non-convertible notes payable, non-current, plus accrued interest of $21,873 and $12,252, respectively		804,613		856,258
Long-term financial liability		118,475		—
Total Liabilities		4,324,882		3,630,938

Commitments and Contingencies, Note 13

Stockholders' Equity:
Series A Preferred Stock $0.01 par value, 2,000,000 shares authorized, no shares issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock $0.01 par value, 37,500,000 shares authorized, and 24,264,150 and 20,475,143 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		242,641		204,751
Treasury stock, at cost: 282,565 shares held as of September 30, 2022 and December 31, 2021, respectively		—		—
Additional paid-in capital		38,503,926		31,822,079
Noncontrolling interest		161,439		161,439
Stockholders' notes receivable		(46,477)		(130,267)
Accumulated other comprehensive income		158,109		183,900
Accumulated deficit		(35,262,426)		(27,208,186)
Total Stockholders' Equity		3,757,212		5,033,716
Total Liabilities and Stockholders' Equity	$	8,082,094	$	8,664,654

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

Table of Contents

T STAMP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


		For the three months ended				For the nine months ended
		September 30,				September 30,
	2022		2021		2022		2021
Net revenue	$	1,348,478	$	330,104	$	4,877,809	$	1,581,796
Operating Expenses:
Cost of services (exclusive of depreciation and amortization shown separately below)		529,023		249,357		1,571,166		853,370
Research and development		777,800		578,763		1,766,164		1,126,914
Selling, general, and administrative		3,281,661		2,292,182		9,014,894		6,102,937
Depreciation and amortization		203,106		149,103		547,737		422,727
Total Operating Expenses		4,791,590		3,269,405		12,899,961		8,505,948
Operating Loss		(3,443,112)		(2,939,301)		(8,022,152)		(6,924,152)
Non-Operating Income (Expense):
Interest income (expense)		(2,889)		(3,801)		(9,202)		(43,850)
Change in fair value of warrant liability		11,307		(54,372)		88,367		(54,372)
Grant income		—		10,308		—		61,601
Impairment of digital assets		(1,260)		—		(25,144)		—
Other income		3,546		—		16,160		10,865
Other expense		(7,484)		(49,178)		(102,269)		(85,217)
Total Other Income (Expense), Net		3,220		(97,043)		(32,088)		(110,973)
Net Loss before Taxes		(3,439,892)		(3,036,344)		(8,054,240)		(7,035,125)
Income tax expense		—		—		—		—
Net loss including noncontrolling interest		(3,439,892)		(3,036,344)		(8,054,240)		(7,035,125)
Net loss attributable to noncontrolling interest		—		(440)		—		(1,304)
Net loss attributable to T Stamp Inc.	$	(3,439,892)	$	(3,035,904)	$	(8,054,240)	$	(7,033,821)
Basic and diluted net loss per share attributable to T Stamp Inc.	$	(0.15)	$	(0.16)	$	(0.35)	$	(0.37)
Weighted-average shares used to compute basic and diluted net loss per share		23,467,324		19,358,016		23,163,414		18,847,797

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

Table of Contents

T STAMP INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)


	For the three months ended					For the nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Net loss including noncontrolling interest	$	(3,439,892)	$	(3,036,344)	$	(8,054,240)	$	(7,035,125)
Other Comprehensive Income (Loss):
Foreign currency translation adjustments		(53,715)		32,032		(25,791)		76,760
Total Other Comprehensive Income (Loss)		(53,715)		32,032		(25,791)		76,760
Comprehensive loss		(3,493,607)		(3,004,312)		(8,080,031)		(6,958,365)
Comprehensive loss attributable to noncontrolling interest		—		(440)		—		(1,304)
Comprehensive loss attributable to T Stamp Inc.	$	(3,493,607)	$	(3,003,872)	$	(8,080,031)	$	(6,957,061)

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

Table of Contents

T STAMP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021


													Accumulated
				Additional							Stockholders'		Other
	Common Stock			Paid-In		Treasury Stock			Noncontrolling		Notes		Comprehensive		Accumulated
	Shares	Amount		Capital		Shares	Amount		Interest		Receivable		Income		Deficit		Total
Balance, June 30, 2021	19,100,710	$	191,007	$	25,095,832	282,565	$	—	$	162,318	$	(411,127)	$	89,828	$	(22,148,940)	$	2,978,918
Issuance of common stock	40,190		402		22,730	—		—		—		—		—		—		23,132
Issuance of common stock warrants	—		—		19,509	—		—		—		—		—		—		19,509
Repayment of shareholders loan through in-kind services	—		—		—	—		—		—		27,930		—		—		27,930
Stock-based compensation	—		—		892,898	—		—		—		—		—		—		892,898
Currency translation adjustment	—		—		—	—		—		—		—		32,032		—		32,032
Net loss attributable to non-controlling interest	—		—		—	—		—		(440)		—		—		—		(440)
Net loss attributable to T Stamp Inc.	—		—		—	—		—		—		—		—		(3,035,904)		(3,035,904)
Balance, September 30, 2021	19,140,900	$	191,409	$	26,030,969	282,565	$	—	$	161,878	$	(383,197)	$	121,860	$	(25,184,844)	$	938,075


													Accumulated
				Additional							Stockholders’		Other
	Common Stock			Paid-In		Treasury Stock			Noncontrolling		Notes		Comprehensive		Accumulated
	Shares	Amount		Capital		Shares	Amount		Interest		Receivable		Income		Deficit		Total
Balance, June 30, 2022	23,285,733	$	232,857	$	36,240,605	282,565	$	—	$	161,439	$	(74,407)	$	211,824	$	(31,822,534)	$	4,949,784
Exercise of options to common stock	4,667		47		6,453	—		—		—		—		—		—		6,500
Issuance of common stock	973,750		9,737		794,615	—		—		—		—		—		—		804,352
Issuance of common stock warrants	—		—		611,452	—		—		—		—		—		—		611,452
Repayment of shareholders loan through in-kind services	—		—		—	—		—		—		27,930		—		—		27,930
Stock-based compensation	—		—		850,801	—		—		—		—		—		—		850,801
Currency translation adjustment	—		—		—	—		—		—		—		(53,715)		—		(53,715)
Net loss attributable to T Stamp Inc.	—		—		—	—		—		—		—		—		(3,439,892)		(3,439,892)
Balance, September 30, 2022	24,264,150	$	242,641	$	38,503,926	282,565	$	—	$	161,439	$	(46,477)	$	158,109	$	(35,262,426)	$	3,757,212

Table of Contents

T STAMP INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021


													Accumulated
				Additional							Stockholders’		Other
	Common Stock			Paid-In		Treasury Stock			Noncontrolling		Notes		Comprehensive		Accumulated
	Shares	Amount		Capital		Shares	Amount		Interest		Receivable		Income		Deficit		Total
Balance, January 1, 2021	17,695,985	$	176,965	$	20,306,495	282,565	$	—	$	163,182	$	(467,061)	$	45,100	$	(18,151,023)	$	2,073,658
Exercise of warrants to common stock	75,000		750		—	—		—		—		—		—		—		750
Issuance of common stock	1,369,915		13,694		3,982,029	—		—		—		—		—		—		3,995,723
Issuance of common stock warrants	—		—		19,509	—		—		—		—		—		—		19,509
Repayment of shareholders loan through in-kind services	—		—		—	—		—		—		83,864		—		—		83,864
Stock-based compensation	—		—		1,722,936	—		—		—		—		—		—		1,722,936
Currency translation adjustment	—		—		—	—		—		—		—		76,760		—		76,760
Net loss attributable to non-controlling interest	—		—		—	—		—		(1,304)		—		—		—		(1,304)
Net loss attributable to T Stamp Inc.	—		—		—	—		—		—		—		—		(7,033,821)		(7,033,821)
Balance, September 30, 2021	19,140,900	$	191,409	$	26,030,969	282,565	$	—	$	161,878	$	(383,197)	$	121,860	$	(25,184,844)	$	938,075


														Accumulated
				Additional							Stockholders'			Other
	Common Stock			Paid-In		Treasury Stock			Noncontrolling		Notes			Comprehensive	Accumulated
	Shares	Amount		Capital		Shares	Amount		Interest		Receivable			Income	Deficit		Total
Balance, January 1, 2022	20,475,143	$	204,751	$	31,822,079	282,565	$	—	$	161,439	$	(130,267)	$	183,900	$	(27,208,186)	$	5,033,716
Exercise of warrants to common stock	2,452,451		24,525		3,359,237	—		—		—		—		—		—		3,383,762
Exercise of options to common stock	65,022		650		77,442	—		—		—		—		—		—		78,092
Issuance of common stock	1,054,180		10,542		997,248	—		—		—		—		—		—		1,007,790
Issuance of common stock warrants	—		—		667,290	—		—		—		—		—		—		667,290
Issuance of common stock in relation to vested restricted stock units, net of shares forfeited to satisfy taxes	217,354		2,173		(17,603)	—		—		—		—		—		—		(15,430)
Repayment of shareholders loan through in-kind services	—		—		—	—		—		—		83,790		—		—		83,790
Stock-based compensation	—		—		1,598,233	—		—		—		—		—		—		1,598,233
Currency translation adjustment	—		—		—	—		—		—		—		(25,791)		—		(25,791)
Net loss attributable to T Stamp, Inc.	—		—		—	—		—		—		—		—		(8,054,240)		(8,054,240)
Balance, September 30, 2022	24,264,150	$	242,641	$	38,503,926	282,565	$	—	$	161,439	$	(46,477)	$	158,109	$	(35,262,426)	$	3,757,212

Table of Contents

T STAMP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	For the nine months ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss attributable to T Stamp Inc.	$	(8,054,240)	$	(7,033,821)
Net loss attributable to noncontrolling interest		—		(1,304)
Adjustments to reconcile net loss to cash flows used in operating activities:
Depreciation and amortization		547,737		422,727
Stock-based compensation		1,598,233		1,722,936
Change in fair value of warrant liability		(88,367)		54,372
Repayment of shareholder loan through in-kind services		83,790		83,864
Impairment of digital assets		25,144		—
Changes in assets and liabilities:
Accounts receivable		(46,737)		(43,169)
Related party receivables		(18,183)		(11,854)
Prepaid expenses and other current assets		517,216		(89,122)
Other assets		27,539		(105,289)
Accounts payable and accrued expenses		(170,911)		(108,263)
Related party payables		(93,690)		121,315
Deferred revenue		1,111,410		(282,850)
Customer deposit liabilities		(280,108)		—
Net cash flows from operating activities		(4,841,167)		(5,270,458)

Cash flows from investing activities:
Purchases of property and equipment		(25,745)		(33,901)
Capitalized internally developed software costs		(589,282)		(368,643)
Acquisition of Pixelpin intangible asset		13,362		(90,621)
Purchase of digital assets		(30,000)		—
Patent application costs		(103,419)		(138,780)
Net cash flows from investing activities		(735,084)		(631,945)
Cash flows from financing activities:
Proceeds from exercise of warrants to common stock		3,385,935		—
Proceeds from exercise of options to common stock		78,092		—
Proceeds from issuance of common stock		1,007,790		3,996,472
Proceeds from issuance of common stock warrants		667,290		19,509
Principal payment on financial liability		(59,815)		—
Proceeds from debt, net of issuance costs		—		(345,000)
Proceeds from loan from Maltese government		—		858,589
Net cash flows from financing activities		5,079,292		4,529,570
Effect of foreign currency translation on cash		(48,145)		76,760
Net change in cash and cash equivalents		(545,104)		(1,296,073)
Cash and cash equivalents, beginning of period		3,475,695		1,469,952
Cash and cash equivalents, end of period	$	2,930,591	$	173,879

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	8	$	29,053

Supplemental disclosure of non-cash activity:
Property and equipment acquired under financial liability	$	(297,150)	$

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

Table of Contents

T STAMP INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Description of Business and Summary of Significant Accounting Policies

Description of Business - T Stamp Inc. was incorporated on April 11, 2016 in the State of Delaware. T Stamp Inc. and its subsidiaries (“Trust Stamp”, “we”, “us”, “our” or the “Company”) develops and markets identity authentication software solutions for enterprise and government partners and peer-to-peer markets.

Trust Stamp develops proprietary artificial intelligence-powered solutions, researching and leveraging biometric science, cryptography, and data mining, to deliver insightful identity and trust predictions that identify and defend against fraudulent identity attacks, protect sensitive user information, and extend the reach of digital services through global accessibility. We utilize the cutting-edge power and agility of technologies such as GPU processing, edge-computing, and neural networks to process and protect data faster and more effectively than has ever previously been possible, to deliver results at a disruptively low cost for usage across multiple industries, including:

●

Banking/FinTech

●

KYC/AML Compliance

●

Humanitarian and Development Services

●

Government and Law Enforcement, including Alternative to Detention programs

●

Cryptocurrency and Digital Assets

●

Biometrically Secured Email and Digital Communications

●

P2P Transactions, Social Media, and Sharing Economy

●

Real Estate, Travel and Healthcare

Stock Split - On August 18, 2021, by written consent of the stockholders, the Company effected a 5-for-1 forward stock split. All share and per share amount in these condensed consolidated financial statements have been retroactively restated to reflect the stock split.

Regulation D Common Stock Offering - On March 12, 2021, the Company launched a Regulation D offering of its Class A Common Stock to accredited investors for $5.00 million or 1,633,986 shares. The raise was marketed to the Company’s existing investor email list as well as new investors with an initial minimum investment of $25 thousand and a share price of $3.06 per share. The initial tranche of the round closed on April 5, 2021, with $3.92 million of reserved investment with the contracted sale of 1,279,825 shares of Class A Common Stock. After the initial phase, on April 6, 2021, the Company then offered up to $700 thousand or 182,291 additional shares, again only to accredited investors, with a $5 thousand minimum investment and a share price of $3.84 per share. The second tranche of the round closed on June 4, 2021, with $82 thousand of reserved investment with the contracted sale of 21,400 shares of Class A Common Stock. The Company incurred offering costs of $61,582 from this offering that were recorded as a reduction of the gross proceeds.

Regulation CF, D, and S Common Stock and Warrant Offering - On August 25, 2021, the Company launched concurrent offerings under Regulation Crowdfunding (“Regulation CF”), Regulation D and Regulation S. The Company initially sought to raise up to $5.00 million in the aggregate between the three offerings through the sale of units but had the discretion to accept up to $5.00 million in each offering. Each unit consists of 1 share of the Company’s Class A Common Stock, par value $0.01 per share, and 1 warrant to purchase 1 share of Class A Common Stock of the Company in a future registered or exempt offering of the Company (i.e. a Regulation CF, Regulation D, or Regulation S Warrant, as applicable). The minimum target amount under the Regulation CF offering was $100 thousand, which the Company achieved.

On November 19, 2021, we closed the Regulation CF offering, having received binding commitments for 1,250,000 units at $4.00 per unit for a total of $5,000,000 in gross proceeds. We continued to hold closings on investments from investors who subscribed prior to November 19, 2021. As of December 31, 2021, the Company received $4,353,480 in gross proceeds from the issuance of 1,088,370 Regulation CF Units to investors. The Company received an additional $198,420 in gross proceeds from the issuance of 49,605 Regulation CF Units to investors during the nine months ended September 30, 2022. On August 25, 2022, we refunded $5,000 in

Table of Contents

Regulation CF Units to two investors. We raised a final total of $4,546,900 in gross proceeds from the issuance of 1,136,725 Regulation CF units to investors in this offering as of September 30, 2022.

On January 7, 2022, we closed the public portion of the Regulation D offering and conducted an additional close on February 2, 2022. As of December 31, 2021, the Company received $858,956 in gross proceeds from the issuance of 214,739 Regulation D Units to investors. The Company received an additional $105,000 in gross proceeds from the issuance of 26,250 Regulation D Units to investors during the nine months ended September 30, 2022. We raised a final total of $963,956 in gross proceeds from the issuance of 240,989 Regulation D units to investors in this offering as of September 30, 2022.

On January 7, 2022, we closed the Regulation S offering. We raised a final total of $224,416 in gross proceeds from the issuance of 56,104 Regulation S units to investors in this offering. As of December 31, 2021, the Company received $219,416 in gross proceeds from the issuance of 54,854 Regulation S Units to investors. The Company received an additional $5,000 in gross proceeds from the issuance of 1,250 Regulation D Units to investors during the nine months ended September 30, 2022.

Going Concern - The accompanying 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 loss in the nine months ended September 30, 2022 of $8.05 million, operating cash outflows of $4.84 million for the same period, and an accumulated deficit of $35.26 million as of September 30, 2022.

The Company’s ability to continue as a going concern in the next twelve months following the date the 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. Refer to Revenue Recognition in Note 1 for an expanded discussion of the 90-day cessation, subsequent 60-day cessation, and eventual termination of the ICE renewal. Management has evaluated these conditions and plans to generate revenue and raise capital as needed to satisfy its 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 factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period.

Basis of Consolidation and Presentation - The accompanying consolidated financial statements reflect the activity of the Company and its subsidiaries, Trusted Mail Inc. (“Trusted Mail”), Sunflower Artificial Intelligence Technologies (“SAIT”), Finnovation LLC (“Finnovation”), Trust Stamp Malta Limited (“Trust Stamp Malta”), AIID Payments Limited, Biometric Innovations Limited (“Biometrics”), Trust Stamp Rwanda Limited, Metapresence Limited, and Trust Stamp Denmark ApS. All significant intercompany transactions and accounts have been eliminated.

The Company has entered joint ventures with Biometric Innovations Limited (formerly “Trust Stamp Fintech Limited”) and Trust Stamp Cayman. Due to common ownership of the Company and these two entities, the Company has funded all operating expenses since inception and as a result, the operations of these entities are included in the condensed consolidated financial statements.

Biometric Innovations Limited is a company incorporated in the United Kingdom by the Company’s management. The purpose of this entity was to establish beachhead operations in the country to service a contract entered by the Company with the National Association of Realtors and Property Mark. This entity remains separate from the Company’s operations and serves as a sales and marketing function for the product “NAEA” which was developed for the contract between the listed parties. On June 11, 2020, the Company entered a stock exchange with Biometric Innovations Limited, becoming a 100% owner. As of September 30, 2022, Biometric Innovations Limited is included as a consolidated entity within the September 30, 2022 financial statements.

Trust Stamp Cayman was established with the intention of taking advantage of enterprise grants which were offered by the Cayman National Government’s Enterprise Zone. No operations were established. The Company has completed the process of administratively dissolving Trust Stamp Cayman and the dissolution will be effective December 30, 2022. See Note 14 to the financial statements provided under Item 1 of this report for more details.

Further, we continue to consolidate TStamp Incentive Holdings “TSIH” which we consider to be a variable interest entity.

Table of Contents

Variable Interest Entity - On April 9, 2019, management created a new entity, TSIH. Furthermore, on April 25, 2019, the Company issued 1,602,565 shares of Class A Shares of Common Stock to TSIH that the Board can use for employee stock awards in the future and was recorded initially as treasury stock. On January 8, 2021, 1,033,335 shares were transferred to various employees as a stock award that was earned and outstanding on December 8, 2020, upon the Company being listed on a public market. The remaining 282,565 shares are earmarked for future employee RSU bonuses and recorded to treasury stock as of September 30, 2022.

The Company does not own any of the stock in TSIH; however, it is held by members of the Company’s management. 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 owns only shares in the Company and no other liabilities or assets, the Company is the primary beneficiary of TSIH and will consolidate the VIE.

Use of Estimates — The preparation of the consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates that include, but are not limited to, percentage of completion related to revenue contracts that are not fully complete at the end of a fiscal quarter, capitalization and estimated useful life of internal-use software, the allowance for doubtful accounts, the fair value of financial assets and liabilities, the useful lives of property and equipment and intangible assets, the recoverability of goodwill, stock-based compensation including the determination of the fair value of our common stock, impairment of long-lived assets, the valuation of deferred tax assets and uncertain tax positions, and warrant liabilities. We base our estimates on assumptions, both historical and forward-looking trends, and various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Impacts of COVID-19 — The World Health Organization declared in March 2020 that the outbreak of the novel coronavirus disease (“COVID-19”) constituted a pandemic. The COVID-19 pandemic has caused general business disruption worldwide, beginning in January 2020. The Company assessed the impacts of the coronavirus pandemic on its various accounting estimates and significant judgments, including those that require consideration of forecasted financial information in the context of the unknown future impacts of COVID-19, using information that is reasonably available at this time. The accounting estimates and other matters assessed included but were not limited to, capitalized internal-use software, the recoverability of goodwill, long-lived assets and investments recorded at cost, useful lives associated with intangible assets and capitalized internal-use software, and the valuation and assumptions underlying stock-based compensation and warrant liabilities. Based on the Company’s current assessment of these estimates, there was not a material impact to the condensed consolidated financial statements as of and for the nine months ended September 30, 2022. As additional information becomes available, the Company’s future assessment of these estimates, including updated expectations at the time regarding the duration, scope and severity of the pandemic, could materially and adversely impact its consolidated financial statements in future reporting periods.

Segment Information — The Company has a single operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a condensed consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources.

Risks and Uncertainties — The Company is dependent upon additional capital resources for its planned full-scale operations and is subject to significant risks and uncertainties, including failing to secure funding to continue to operationalize the Company’s plans or failing to profitably operate the business.

Major Customers and Concentration of Risks — Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, 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, 2022, and December 31, 2021, the Company had $2.16 million and $2.25 million in U.S. bank accounts, respectively, which exceeded these insured amounts. Management believes minimal credit risk exists with respect to these financial institutions and the Company has not experienced any losses on such amounts.

Table of Contents

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 95% and 92% of the balance of total accounts receivable as of September 30, 2022 and December 31, 2021, respectively. 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, 2022 and December 31, 2021, the Company had not experienced any significant losses on its accounts receivable.

During the three and nine months ended September 30, 2022, the Company sold to primarily three customers which made up approximately 95% of total net revenue. The remaining revenue recognized during the three and nine months ended September 30, 2022, which made up approximately 5% of total net revenue, was from various other customers.

During the three and nine months ended September 30, 2021, two and three customers, respectively, made up approximately 95% and 82%, respectively, of total net revenue. The remaining revenue recognized during the three and nine months ended September 30, 2021, which made up approximately 5% and 18%, respectively, of total net revenue, was from various other customers.

The loss of, or substantial reduction, in statements of work from the Company’s major customers, could have a material effect on the consolidated financial statements. On August 17, 2022, Trust Stamp received notification from ICE that it was terminating the ICE Contract for convenience effective immediately. During the three and nine months ended September 30, 2022, ICE Contract revenue made up 63% and 67% of total revenue, respectively. During the three and nine months ended September 30, 2021, ICE Contract revenue made up 0% of total revenue. See Revenue Recognition in Note 1 for additional information.

Foreign Currencies — The functional currencies of the Company’s foreign subsidiaries are the local currencies. For those subsidiaries, the assets and liabilities are translated into U.S. dollars at the exchange rate method at the condensed consolidated balance sheet date. The Company’s other comprehensive income (loss) is comprised of foreign currency translation adjustments related to the Company’s foreign subsidiaries. Income and expenses are translated at the average exchange rates for the period. Foreign currency transaction gains and losses are included in other income or other expense in the condensed consolidated statements of operations.

Cash and Cash Equivalents — Cash and cash equivalents consist of cash in banks and bank deposits. The Company considers all highly liquid instruments purchased with an original maturity of three months or less when purchased as cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts — Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts, if any. Allowance for doubtful accounts is based on the Company’s best estimate of probable losses inherent in its accounts receivable portfolio and is determined based on expectations of the customer’s ability to pay by considering factors such as historical experience, financial position of the customer, age of the accounts receivable, current economic conditions, including the ongoing COVID-19 pandemic, and as well as reasonable and supportable forward-looking factors about its portfolio and future economic conditions. Accounts receivables are written-off and charged against an allowance for doubtful accounts when the Company has exhausted collection efforts without success. No allowance for bad debts has been established. Bad debts are recognized when they are deemed uncollectible, and management considers all present receivables fully collectible.

As of September 30, 2022, and December 31, 2021, accounts receivable includes unbilled receivables of $188 thousand and $109 thousand, 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.

Capitalized Internal-Use Software, Net — Costs related to software acquired, developed, or modified solely to meet our internal requirements, with no substantive plans to market such software at the time of development are capitalized. The Company capitalizes eligible costs to develop internal-use software that are incurred subsequent to the preliminary project stage through the development

Table of Contents

stage. These costs consist of personnel costs (including related benefits and stock-based compensation) that are incurred during the application development stage. Costs incurred during the preliminary project stage and during the post-implementation operational stage are expensed as incurred. Maintenance costs are expensed as incurred. The estimated useful life of costs capitalized is evaluated for each specific project that is generally five years. Actual economic lives may differ from estimated useful lives. Periodic reviews could result in a change in estimated useful lives and therefore changes in amortization expense in future periods.

Business and Asset Acquisitions — When the Company acquires a business, the purchase price is allocated to the tangible and identifiable intangible assets, net of liabilities assumed. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed may be recorded, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations.

The Company accounts for a transaction as an asset acquisition pursuant to the provisions of ASU No. 2017-01, Clarifying the Definition of a Business, when substantially all of the fair value of the gross assets acquired is concentrated into a single identifiable asset or group of similar identifiable assets, or otherwise does not meet the definition of a business. Asset acquisition-related costs are capitalized as part of the asset or assets acquired.

Accounting for Impairment of Long-Lived Assets — Long-lived assets with finite lives include property and equipment, capitalized internal-use software, and intangible assets. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset 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. The Company determined that as of September 30, 2022, and December 31, 2021, no long-lived assets with finite lives were impaired.

Goodwill — Goodwill is accounted for in accordance with FASB 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, 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 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 during the nine months ended September 30, 2022, and September 30, 2021.

Digital Asset — Digital assets are currently accounted for intangible assets with indefinite useful lives in accordance with ASC 350, Intangibles—Goodwill and Other. Initially, the Company accounts for digital assets by recording them at cost. Digits assets are not amortized but subsequently remeasured for any impairment losses that may have occurred since acquisition. On a quarterly basis, the Company determines the fair value of the digital asset in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange where the Company purchased the digital asset (Level 1 inputs). The Company performs an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that the digital asset is impaired. Should the Company conclude that it is more likely than not that the recorded digital asset value is impaired, the Company will perform the impairment test. Digital asset impairment exists when the carrying value exceeds the digital asset’s fair value. Significant judgment is applied in assessing the digital asset for impairment, and subsequent

Table of Contents

reversal of impairment losses is not permitted. During the nine months ended September 30, 2022, we recorded $25 thousand of impairment losses on such digital assets.

Fair Value of Assets and Liabilities — The Company follows the relevant U.S. GAAP guidance regarding the determination and measurement of the fair value of assets/liabilities; in which fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction valuation hierarchy which requires an entity to maximize the use of observable inputs when measuring fair value. The guidance describes the following three levels of inputs that may be used in the methodology to measure fair value:

Level 1 – Quoted prices available in active markets for identical investments as of the reporting date;

Level 2 – Inputs other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date; and

Level 3 – Unobservable inputs, which are to be used in situations where there is little or no market activity for the asset or liability and wherein the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The estimated fair values of cash, accounts receivable, related party receivables, prepaid expenses and other current assets, other assets, accounts payable, related party payables, accrued expenses, deferred revenue, customer deposit liabilities, and nonconvertible notes payable approximate their carrying values. The fair values of warrant liabilities issued in connection with equity or debt issuance are determined using the Black-Scholes valuation model, a “Level 3” fair value measurement, based on the estimated fair value of the underlying common stock, volatility based on the historical volatility data of similar companies, considering the industry, products and market capitalization of such other entities, the expected life based on the remaining contractual term of the conversion option and warrant liabilities and the risk free interest rate based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the warrant liability’s contractual life. The Company accounts for its financial assets and liabilities at fair value regularly. The Company evaluates the fair value of its non-financial assets and liabilities on a nonrecurring basis.

Revenue Recognition — The Company derives its revenue primarily from professional services. Revenue is recognized upon transfer of control of promised products and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. If the consideration promised in a contract includes a variable amount, the Company includes an estimate of the amount it expects to receive or the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur. The Company determines the amount of revenue to be recognized through the application of the following steps:

●

Identification of the contract, or contracts with a customer;

●

Identification of the performance obligations in the contract;

●

Determination of the transaction price;

●

Allocation of the transaction price to the performance obligations in the contract; and

●

Recognition of revenue when or as the Company satisfies the performance obligations.

At contract inception, the Company will assess the services agreed upon within each contract and assess whether each service is distinct and determine those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. In general, each contract with a customer consists of a single performance obligation to perform services in which revenue is recognized when the service has been delivered.

During the year ended December 31, 2021, the Company entered a significant contract with U.S. Immigration and Customs Enforcement (“ICE”) that contained multiple performance obligations, including software application development, mobile hardware, and services to assist ICE (the “ICE Contract”). The Company allocates the transaction price for this contract based on the stand-alone selling price of each performance obligation. The Company uses the expected cost-plus margin approach for determining the stand-alone selling prices of the mobile hardware and services to assist ICE, as this is believed to be the most accurate method of allocating the transaction price to these performance obligations, maximizing the use of observable inputs. As the Company does not have a similar software

Table of Contents

application that has been sold to another customer, the Company uses the residual approach for determining the stand-alone selling price of the software application development by subtracting the sum of the stand-alone selling prices for the mobile hardware and services to assist ICE from the total transaction price.

Executed on April 5, 2022, and made effective March 27, 2022, Trust Stamp agreed to a modification of this contract with ICE, increasing the total contract award value to $7,176,364 from the original $3,920,764 and extending the delivery period until September 26, 2022 (subject to a right of early termination by ICE). However, due to a recent change in legislation (enacted through H.R. 2471: Consolidated Appropriations Act, 2022) which requires a Congressional notification in order for ICE to award a contract or subcontract to a particular entity for any pilot or demonstration program that uses more than 5 full-time equivalents or costs in excess of $1,000,000, effective April 15, 2022, the Company entered into an amendment to the ICE Contract, implementing an up to 90-day cessation of performance of the Company’s and ICE’s obligations under the contract (the “Amendment”). This change in legislation was retroactively applied to the March 27, 2022, modification to the ICE Contract. The up to 90-day cessation of the ICE Contract provided by the Amendment was intended to allow ICE ample time to obtain a Congressional notification for the modification of the ICE Contract, so that the Company could continue to provide services to ICE under the ICE Contract. During the cessation period, Trust Stamp continued to incur maintenance costs specific to the April 5, 2022 modification contract, without recognizing or receiving the revenue, in order that we are positioned to restart immediately once the cessation is lifted.

On July 15, 2022, the Company entered into a second amendment agreement with ICE to amend the terms of the ICE Contract. The second amendment had the effect of implementing an additional up to 60-day cessation of performance of the Company’s and ICE’s obligations under the ICE Contract previously agreed to be performed between March 27, 2022 and September 26, 2022. The second amendment was required to provide ICE additional time to complete the Congressional notification process, so that the Company could continue to provide services to ICE under the ICE Contract. During the cessation period, Trust Stamp continued to incur maintenance costs specific to the April 5, 2022 modification contract, without recognizing or receiving the revenue, in order that we could be positioned to restart immediately if and when the cessation was lifted.

On September 15, 2022, the Company entered into a Master Services Agreement (“the MSA”) with Innovative Government Solutions, LLC ("IGS") under which the Company and IGS will jointly offer services and IGS is granted a 12-year (renewable) license (“the license”) to resell the Company’s technology subject to payment by IGS of agreed revenue advances and end user license fees. On execution of the MSA, IGS agrees to pay $1,500,000 to the Company as a non-refundable revenue advance, an additional $1,500,000 non-refundable revenue advance on the first anniversary of the MSA, and $1,000,000 on each of the next two anniversaries of the MSA as additional non-refundable revenue advances. IGS has the right to terminate the MSA for convenience before the additional non-refundable revenue advances become due in which case the unpaid additional non-refundable revenue advances will not be payable and the license will terminate. During the nine months ended September 30, 2022, Trust Stamp received the initial $1.5 million payment, recorded the non-refundable revenue advance to deferred revenue, and recognized no IGS revenue.

Contract Balances — The timing of customer billing and payment relative to the start of the service period varies from contract to contract; however, the Company bills many of its customers in advance of the provision of services under its contracts, resulting in liabilities consisting of either deferred revenue (a “contract liability”) or customer deposit liabilities. Deferred revenue represents billings under noncancelable contracts before the related product or service is transferred to the customer. Such amounts are recognized by the Company over the life of the contract upon meeting the revenue recognition criteria, but generally within one year. Customer deposit liabilities consist of billings or payments received in advance of the start of the contractual term or for anticipated revenue-generating activities for the portion of a contract term that is subject to cancellation for convenience. Certain of the Company’s arrangements generally include terms that allow the customer to terminate the contract for convenience and receive a refund of the amount of the customer deposit for the percentage of the work not performed prior to the notice of termination. In these arrangements, the Company concluded there are no enforceable rights and obligations after such notice period and therefore, the consideration received or due from the customer that is subject to termination for convenience is recorded as customer deposit liabilities.

Table of Contents

The payment terms and conditions vary by contract; however, the Company’s terms generally require payment within 30 to 60 days from the invoice date. In instances where the timing of revenue recognition differs from the timing of payment, the Company elected to apply the practical expedient in accordance with ASC 606 to not adjust contract consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when promised goods and services are transferred to the customer and when the customer pays for those goods and services will be one year or less. As such, the Company determined its contracts do not generally contain a significant financing component.

Costs to Obtain and Fulfill Contracts — Incremental costs of obtaining a contract include only those costs that are directly related to the acquisition of contracts, including sales commissions, and that would not have been incurred if the contract had not been obtained. The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it is expected that the economic benefit and amortization period will be longer than one year. Costs to obtain contracts were not material in the periods presented. The Company recognizes an asset for the costs to fulfill a contract with a customer if the costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. Costs to fulfill contracts were not material in the periods presented. The Company elected to apply the practical expedient in accordance with ASC 340 which allows the Company to expense commissions as incurred when the contract term is twelve months or less in total.

Warrants — The Company accounts for stock warrants as either equity instruments, derivative liabilities, or liabilities in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”), depending on the specific terms of the warrant agreement.

Cost of Services — Cost of services generally consists of the cost of hosting fees, materials, and cost of labor associated with professional services rendered. Depreciation and amortization expense is not included in cost of services.

Research and Development — Research and development costs are expensed as incurred and consist primarily of personnel costs such as salaries and benefits and relate primarily to time spent during the preliminary project stage and post implementation maintenance and bug fixes associated with capitalized internal-use software activities, and front-end application development in which technological feasibility has not been established. Depreciation and amortization expense is not included in research and development.

Advertising — Advertising costs are expensed as incurred. Advertising and marketing expenses totaled $50 thousand and $31 thousand for the three months ended September 30, 2022 and 2021, respectively, and $173 thousand and $91 thousand for the nine months ended September 30, 2022 and 2021, respectively.

Stock- Based Compensation — The Company accounts for its stock-based compensation arrangements at fair value. Fair value of each stock-based award is estimated on the date of grant using either the Black-Scholes-Merton Model for stock options granted or using the fair value of a common stock for stock grants and restricted stock units. The Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common shares, the expected term of the share option, the expected volatility of the price of our common shares, risk-free interest rates, and the expected dividend yield of common shares. The assumptions used to determine the fair value of the option awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. The calculated fair value is recognized as expense over the requisite service period using the straight-line method. Forfeitures are accounted for in the period in which they occur. Trust Stamp offers the indirect repurchase of shares through a net-settlement feature upon the vesting of RSU awards to satisfy minimum statutory tax-withholding requirements for the recipient.

Income Taxes — The Company records income tax provisions for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax bases of assets and liabilities, as well as for loss and tax credit carryforwards. The deferred assets and liabilities are measured using the statutorily enacted tax rates anticipated to be in effect when those tax assets and liabilities are expected to be realized or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

A valuation allowance is established if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income in assessing the need for a valuation allowance.

Table of Contents

The Company’s tax positions are subject to income tax audits by multiple tax jurisdictions. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not the position will be sustainable upon examination by the taxing authority, including resolution of any related appeals or litigation processes. This evaluation is based on all available evidence and assumes that the tax authorities have full knowledge of all relevant information concerning the tax position. The tax benefit recognized is measured as the largest amount of benefit which is more likely than not (greater than 50% likely) to be realized upon ultimate settlement with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense. The Company adjusts these reserves in accordance with the income tax guidance when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences may affect the provision for income taxes in the period in which such determination is made and could have a material impact on the Company’s financial condition and operating results.

We continue to record a full valuation allowance on all deferred tax assets given our continued history of operating losses and have an effective tax rate of 0% during the three and nine months ended September 30, 2022, and 2021. Management has evaluated all other tax positions that could have a significant effect on the consolidated financial statements and determined the Company had no uncertain income tax positions as of September 30, 2022 and December 31, 2021, respectively.

Leases — Leases are reviewed and classified as either capital or operating leases at their inception. In certain lease agreements, we may receive renewal or expansion options, rent holidays, and other incentives. For operating leases, we recognize lease costs on a straight-line basis once we take control of the space, without regard to deferred payment terms such as rent holidays that defer the commencement date of required payments. Additionally, incentives received are treated as a reduction of costs over the term of the agreement.

Commitments and Contingencies — Liabilities for loss contingencies arising from claims, disputes, legal proceedings, fines and penalties, and other sources are recorded when it is probable that a liability has been or will be incurred and the amount of the liability can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Recoveries of such legal costs from insurance policies are recorded as an offset to legal expenses in the period they are received.

Treasury Stock — Repurchased treasury stock is recorded at cost. When treasury stock is resold at a price different than its historical acquisition cost, the difference is recorded as a component of additional paid-in capital in the consolidated balance sheets.

Net Loss per Share Attributable to Common Stockholders — Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by giving effect to all potentially dilutive Class A Shares of Common Stock equivalents for the period. For purposes of this calculation, stock-based awards, warrants, and the conversion option of convertible notes are considered to be potential common shares outstanding. Since the Company incurred net losses for each of the periods presented, diluted net loss per share is the same as basic net loss per share. The Company’s potential common shares outstanding were not included in the calculation of diluted net loss per share as the effect would be anti-dilutive.

Recent Accounting Pronouncements Not Yet Adopted — In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases. The standard requires all leases with lease terms over twelve months to be capitalized as a right-of-use asset and lease liability on the balance sheet at the date of lease commencement. Leases will be classified as either financial or operating. This distinction will be relevant for the pattern of expense recognition in the income statement. The guidance is effective for reporting periods beginning after December 15, 2021, and interim periods beginning after December 15, 2022. The Company is adopting the new guidance during the current annual period and will reflect the effects of such adoption, including the additional required disclosures, in our Annual Report on Form 10-K for the year ended December 31, 2022.

Recently Adopted Accounting Pronouncement — In March 2021, the FASB issued ASU No. 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events, an amendment of the FASB Accounting Standards Codification. The amendments in this ASU allow companies to elect not to monitor for goodwill impairment triggering events during the reporting period and instead, to evaluate the facts and circumstances as of the end of the reporting period to determine whether it is more likely than not that goodwill is impaired. This aligns the triggering event evaluation date with the reporting date, whether that date is an interim or annual reporting date. The amendments in this update are effective for fiscal years beginning after December 15, 2019, with early adoption permitted for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. The Company adopted this standard as of January 1, 2022, and the guidance did not have a material impact on its condensed consolidated financial statements or related disclosures.

Table of Contents

Unaudited Interim Results — These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP, pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. In management’s opinion, these unaudited condensed consolidated financial statements and accompanying notes have been prepared on the same basis as the annual financial statements and reflect all the adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of September 30, 2022, the results of operations for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021. Certain information and note disclosures have been condensed or omitted pursuant to such rules and regulations. The accompanying condensed consolidated balance sheet as of December 31, 2021, was derived from the audited financial statements as of that date but does not include all of the disclosures required by U.S. GAAP. The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes for the year ended December 31, 2021 included in the Company’s Annual Report. The Company’s significant accounting policies are described in Note 1 to those audited financial statements.

2. Pixelpin Acquisition and Patent Approvals

On February 23, 2021, Trust Stamp Malta completed an agreement to acquire Pixelpin, an image-based “Pin-on-Glass” account access solution that alleviates pain-points of traditional login methods while ensuring the security of authentication. The Company paid $92 thousand in cash as consideration for the asset purchase of software intellectual property including VAT taxes. The asset acquisition was recorded at 100% of the fair value of the net assets acquired. The allocation of the consideration to the fair value of 100% of the net assets acquired at the date of acquisition is as follows:


	Fair Value
Trade name and trademarks	$	90,621
Foreign currency translation		1,133
Total acquisition	$	91,754

On June 1, 2022, Trust Stamp Malta received a $13 thousand refund for the VAT taxes paid in the Pixelpin acquisition transaction and the Company applied the refund to reduce the asset’s carrying value to $78 thousand.

In addition to the acquisition, the Company experienced continued growth in its robust intellectual property portfolio adding a total of $103 thousand in patent investments with eight new patent issuances and twelve new patent filings during the nine months ended September 30, 2022.

3. Borrowings

Non-Convertible Promissory Notes Payable


	As of September 30,		As of December 31,
	2022		2021
Malta loan receipt 3 – June 3, 2022	$	56,885	$	—
Malta loan receipt 2 – August 10, 2021		277,087		322,190
Malta loan receipt 1 – February 9, 2021		448,768		521,816
Total principal outstanding		782,740		844,006
Plus accrued interest		21,873		12,252
Total promissory notes payable	$	804,613	$	856,258

In May 2020, the Company formed a subsidiary in the Republic of Malta, Trust Stamp Malta Limited, 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 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 December 31, 2021 the Company

Table of Contents

had received $844 thousand recorded to non-convertible notes payable. As of September 30, 2022, the balance received was $783 thousand which includes changes in foreign currency rates and one additional loan receipt of $57 thousand received during the nine months ended September 30, 2022.

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 one percent, the interest rate shall be fixed at one percent. The Company will repay a minimum of 10% percent of Trust Stamp Malta Limited'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 Limited does not have any revenue-generating contracts and therefore, we do not believe any amounts shall be classified as current.

Financial Liability

Trust Stamp executed an agreement with a telecommunications company for the right to purchase mobile hardware with a monthly service agreement. The mobile hardware is to be purchased at a predetermined price over a thirty-month period beginning after thirty days from the receipt and activation of the mobile hardware. Trust Stamp determined that the debt met the qualification of financial liability as it requires the payment of cash for the mobile hardware over the contractual period. The short-term financial liability is $119 thousand, and the long-term financial liability is $118 thousand as of September 30, 2022.

4. 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, 2021, to September 30, 2022:


	Warrants ($)
Balance as of January 1, 2021	$	287,750
Additional warrants issued		—
Change in fair value		86,944
Balance as of December 31, 2021	$	374,694
Additional warrants issued		—
Change in fair value		(88,367)
Balance as of September 30, 2022	$	286,327

As of September 30, 2022, 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, 2022.

The Company has issued an investor warrant to purchase $50 thousand worth of shares of our Class A Shares of Common Stock. The warrants were issued on December 16, 2016. There is no vesting period, and the warrants expire in 10 years from the issuance date. 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 September 30, 2020, therefore, the determination date. The number of shares to be purchased is settled as 32,092 shares as of June 30, 2020. The exercise price of the warrants is variable until the exercise date.

Table of Contents

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, 2022, the warrant liability is recorded at $36 thousand which is an $89 thousand decrease from the balance of $125 thousand as of December 31, 2021.

Equity Classified Warrants


			As of September 30,	As of December 31,
Warrant Issuance Date	Strike Price		2022	2021
September 30, 2016	$	0.1664	—	400,641
November 9, 2016	$	0.6240	400,640	400,640
January 23, 2020	$	1.6000	932,210	932,210
January 23, 2020	$	1.6000	2,622,995	4,660,555
August – December 2021	$	4.0000	1,343,713	1,357,963
January – February 2022	$	4.0000	75,855	—
September 14, 2022	$	1.7700	1,950,000	—
Total warrants outstanding			7,325,413	7,752,009

On September 30, 2016, the Company issued REach® a warrant to purchase 400,641 shares of Class A Shares of Common Stock with an exercise price of $0.1664 per share. There is no vesting period, and the warrant expires on September 30, 2026. The fair value of the warrant was estimated on the date of grant using the Black-Scholes-Merton model.

On December 21, 2021, REach® executed a Notice of Exercise for its warrants to purchase 400,641 shares of Class A Common Stock at an exercise price of $0.1664 per share. The closing occurred on January 10, 2022 and resulted in total cash proceeds of $67 thousand to the Company for the warrant exercise.

The Company has issued a customer a warrant to purchase 400,640 shares of Class A Shares of Common Stock with an exercise price of $0.6240 per share. The warrant was issued on November 9, 2016. There is no vesting period, and the warrant expires on November 30, 2026. The Company used a Black-Scholes-Merton pricing model to determine the fair value of the warrant. The fair value of the warrant issued in connection with the customer contract was determined to be $0.46 per share and had a fair value of $183 thousand which was recorded as a deferred contract acquisition asset and to additional paid-in capital during the year ended December 31, 2016 and which was amortized as a revenue discount in the periods prior to those presented. The fair value of the warrant issued is recorded as a revenue discount as it is considered a sales incentive.

These warrants remain outstanding as of September 30, 2022.

In January 2020, the Company issued REach® a warrant to purchase 932,210 shares of the Company’s Class A Shares of Common Stock at an exercise of $1.6000 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 an agreed 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.

These warrants remain outstanding as of September 30, 2022.

In January 2020, the Company issued SCV a warrant to purchase 4,660,555 shares of the Company’s Class A Shares of Common Stock at a strike price of $1.6000 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 2,037,560 shares of Class A Common Stock at an exercise price of $1.6000 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 $3.26 million to the Company for the warrant exercise.

Table of Contents

The warrants to purchase the remaining 2,622,995 shares of the Company’s Class A Shares of Common Stock remain outstanding as of September 30, 2022.

The Company issued 1,357,963 warrants from August 2021 to December 2021 and 77,105 warrants from January 2022 to February 2022 related to the Regulation CF, D, and S common stock and warrant offering discussed in Note 1 to the consolidated financial statements included under Item 1. These warrants became exercisable on January 26, 2022 when the Company received SEC qualification of its offering statement on Form 1-A. These warrants expire as of the earlier of: (a) January 26, 2023, (b) the acquisition of the Company by another entity, or (c) immediately prior to the closing of a firm commitment underwritten public offering. On August 25, 2022, we refunded $5,000 in Regulation CF Units to two investors resulting in the cancellation of 1,250 warrants.

During the nine months ended September 30, 2022, investors exercised 14,250 warrants at an exercise price of $4.0000 per share, resulting in total cash proceeds of $57 thousand to the Company for the warrant exercises. The warrants to purchase the remaining 1,419,568 shares of the Company’s Class A Shares of Common Stock remain outstanding as of September 30, 2022.

On September 11, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with Armistice Capital Master Fund Ltd.. Pursuant to the terms of the SPA, the Company agreed, at the closing of the SPA, to sell and issue to the Armistice Capital Master Fund Ltd. in a private placement 975,000 shares of Class A Common Stock of the Company and warrants to purchase 1,950,000 shares of Class A Common Stock of the Company for a total purchase price of $1,511,250.

The warrants also allow for a “cashless exercise” if, at any time after the six (6) month anniversary of the issue date of the warrants there is no effective registration statement registering the resale of the Class A Common Stock issuable pursuant to the warrants. In such a case, then warrants may also be exercised, in whole or in part, by means of a cashless exercise in which the Selling Stockholder will be entitled to receive a number of shares of Class A Common Stock as described in the warrants. Trust Stamp filed the registration statement on September 30, 2022.

The 1,950,000 warrants have an exercise price of $1.77 and may be exercised at any time by the Selling Stockholder starting on the issuance date, September 14, 2022, until the five year and six-month anniversary thereafter.

These warrants remain outstanding as of September 30, 2022.

5. Balance Sheet Components

Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following:


	September 30,		December 31,
	2022		2021
Prepaid operating expenses	$	227,235	$	319,996
Rent deposit		87,734		100,425
VAT receivable associated with SAIT		62,259		68,798
Prepaid sponsorship		25,000		100,000
Tax credit receivable		75,109		75,106
Miscellaneous receivable		2,049		332,277
Prepaid expenses and other current assets	$	479,386	$	996,602

Table of Contents

Capitalized internal-use software, net

Capitalized internal-use software, net consisted of the following:


			September 30,	December 31,
	Useful Lives	2022		2021
Internally developed software	5 Years	$	3,127,677	$	2,538,395
Less accumulated depreciation			(1,757,093)		(1,378,351)
Capitalized internal-use software, net		$	1,370,584	$	1,160,044

Amortization expense is recognized on a straight-line basis and capitalized internal-use software amortization expense for the three months ended September 30, 2022, and 2021 totaled $132 thousand and $119 thousand, respectively. Amortization expense related to capitalized internal-use software for nine months ended September 30, 2022, and 2021 totaled $379 thousand and $337 thousand, respectively.

Property and equipment, net

Property and equipment, net consisted of the following:


			September 30,	December 31,
	Useful Lives	2022		2021
Computer equipment	3-4 Years	$	134,835	$	125,139
Furniture and fixtures	10 Years		24,828		28,870
Mobile hardware	2.5 Years		297,150		—
Property and equipment, gross			456,813		154,009
Less accumulated depreciation			(126,626)		(42,241)
Property and equipment, net		$	330,187	$	111,768

Depreciation expense is recognized on a straight-line basis and property and equipment depreciation expense for the three months ended September 30, 2022, and 2021 totaled $42 thousand and $10 thousand, respectively. Depreciation expense related to property and equipment for nine months ended September 30, 2022 and 2021 totaled $94 thousand and $39 thousand, respectively.

Other assets

Other assets consisted of the following:


	September 30,		December 31,
	2022		2021
Tax credit receivable	$	150,601	$	178,140
Other assets	$	150,601	$	178,140

Accrued expenses

Accrued expenses consisted of the following:


	September 30,		December 31,
	2022		2021
Compensation payable	$	60,534	$	597,849
Commission liability		31,026		—
Accrued employee taxes		425,096		349,256
Accrued mobile expenses		328,402		—
Other accrued liabilities		96,792		112,427
Accrued expenses	$	941,850	$	1,059,532

Table of Contents

6. Goodwill, Digital Asset, and Intangible Assets

There were no changes in the carrying amount of goodwill for the periods ended September 30, 2022 and December 31, 2021.

On February 16, 2022, Metapresence Limited acquired digital assets including a plot of virtual land for $23 thousand and cryptocurrency for $7 thousand. In accordance with ASC 350, Trust Stamp accounts for both purchases as identifiable intangible assets with indefinite useful lives. The virtual land acquisition is recorded at the fair value of the purchase cost and the Company recorded the cryptocurrency at the purchase cost fair value. During the nine months ended September 30, 2022, we recorded $25 thousand of impairment losses on such digital assets.

Intangible assets consisted of the following:


		September 30,		December 31,
	Useful Lives	2022		2021
Patent application costs	3 Years	$	311,049	$	207,630
Trade name and trademarks	3 Years		62,350		86,999
Intangible assets, gross			373,399		294,629
Less: Accumulated amortization			(163,028)		(92,822)
Intangible assets, net		$	210,371	$	201,807

Intangible asset amortization expense is recognized on a straight-line basis and intangible asset amortization expense for the three months ended September 30, 2022, and 2021 totaled $29 thousand and $20 thousand, respectively. Intangible asset amortization expense for nine months ended September 30, 2022, and 2021 totaled $75 thousand and $46 thousand, respectively.

Estimated future amortization expense of intangible assets is as follows:


Future Intangible Asset Amortization Expense	Amount
Remainder of 2022	$	29,098
2023		114,686
2024		57,028
2025		9,559
	$	210,371

7. Revenue Recognition

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 noncancelable 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. Cancelable contracted revenue, which includes customer deposit liabilities, is not considered a remaining performance obligation. As of September 30, 2022, and December 31, 2021 the Company does not have any related performance obligations for contracts with terms exceeding twelve months.

Table of Contents

Disaggregation of Revenue


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Professional services (over time)	$	566,413	$	280,104	$	3,970,744	$	1,431,796
Termination expense reimbursement (one time)		719,565		—		719,565		—
License fees (over time)		62,500		50,000		187,500		150,000
Total net revenue	$	1,348,478	$	330,104	$	4,877,809	$	1,581,796

8. Income Taxes

The Company computes its tax provision for interim periods by applying the estimated annual effective tax rate to year-to-date pre-tax income from recurring operations and adjusting for discrete tax items arising in that quarter.

The Company had an effective tax rate of 0% for the three and nine months ended September 30, 2022, and 2021, respectively. There were no discrete items that impacted the effective tax rate for the three and nine months ended September 30, 2022, and 2021, respectively. The Company has incurred U.S. operating losses and has minimal profits in foreign jurisdictions.

Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, management considers all available positive and negative evidence affecting specific deferred tax assets, including the Company’s past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry-back and carry-forward periods, and the implementation of tax planning strategies.

The Company had no unrecognized tax benefits as of September 30, 2022, and December 31, 2021.

It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax expense. The Company has not accrued any penalties related to uncertain tax positions due to offsetting tax attributes as of September 30, 2022, and December 31, 2021.

The Company files U.S. federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitation. The only material jurisdiction where the Company is subject to potential examination by tax authorities is the U.S. (federal and state) for tax years 2016 through 2021.

9. Net Loss per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net loss per share:


	Three months ended					Nine months ended
	September 30,					September 30,
	2022		2021		2022		2021
Numerator:
Net loss attributable to common stockholders	$	(3,439,892)	$	(3,035,904)	$	(8,054,240)	$	(7,033,821)

Denominator:
Weighted average shares used in computing net loss per share attributable to common stockholders		23,467,324		19,358,016		23,163,414		18,847,797

Net loss per share attributable to common stockholders	$	(0.15)	$	(0.16)	$	(0.35)	$	(0.37)

Table of Contents

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:


	September 30,	September 30,
	2022	2021
Options, RSUs, and grants	3,663,719	2,701,098
Warrants	8,380,286	7,274,108
Total dilutive securities	12,044,005	9,975,206

10. Stock Awards and Stock-Based Compensation

From time to time, the Company may issue stock awards in the form of Class A Shares of Common Stock grants, Restricted Stock Units (RSUs), or Class A Shares of 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.

During the three and nine months ended September 30, 2022 and 2021, the Company entered into agreements with advisory board members and other external advisors to issue cash payments and stock awards in exchange for services rendered to the Company on a monthly basis. The total granted stock-based awards to advisory board members and other external advisors during the three months ended September 30, 2022, and 2021 included grants totaling, $45 thousand and $20 thousand, respectively, options totaling $0, and RSUs totaling $55 thousand and $66 thousand, respectively.

The total granted stock-based awards to advisory board members and other external advisors during the nine months ended September 30, 2022 and 2021 included grants totaling, $49 thousand and $20 thousand, respectively, options totaling $0, and RSUs totaling $109 thousand and $107 thousand, respectively.

In addition to issuing stock awards to advisory board members and other external advisors, during the three and nine months ended September 30, 2022, and 2021, the Company granted stock-based awards to multiple employees. The total granted stock-based awards to employees during the three months ended September 30, 2022, and 2021 included grants totaling, $50 thousand and $109 thousand, respectively, options totaling $9 thousand and $102 thousand, respectively, and RSUs totaling $691 thousand and $596 thousand, respectively.

The total granted stock-based awards to employees during the nine months ended September 30, 2022, and 2021 included grants totaling, $272 thousand and $310 thousand, respectively, options totaling $52 thousand and $330 thousand, respectively, and RSUs totaling $1.12 million and $957 thousand, respectively.

The following table summarizes stock option activity for the three and nine months ended September 30, 2022:


				Weighted
		Weighted		Average
		Average		Remaining
	Options	Exercise Price		Contractual	Aggregate
	Outstanding	Per Share		Life (years)	Intrinsic Value
Balance as of June 30, 2022	1,932,773	$	1.28	1.90	$	787,384
Options granted	9,389		0.64
Options exercised	(4,666)		0.96
Options canceled and forfeited	—		—
Balance as of September 30, 2022	1,937,496		1.28	0.93		12,136
Options vested and exercisable as of September 30, 2022	1,937,496	$	1.28	0.93	$	12,136

Table of Contents


				Weighted
		Weighted		Average
		Average		Remaining
	Options	Exercise Price		Contractual	Aggregate
	Outstanding	Per Share		Life (years)	Intrinsic Value
Balance as of January 1, 2022	1,975,010	$	1.28	2.42	$	5,365,737
Options granted	27,507		0.65
Options exercised	(65,021)		1.34
Options canceled and forfeited	—		—
Balance as of September 30, 2022	1,937,496		1.28	0.93		12,136
Options vested and exercisable as of September 30, 2022	1,937,496	$	1.28	0.93	$	12,136

The aggregate intrinsic value of options outstanding, exercisable, and vested and exercisable 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, 2022 and 2021 is $3 thousand and $0, respectively.

The weighted average grant-date fair value of options granted during the nine months ended September 30, 2022, and 2021 was $1.90 and $1.57 per share, respectively. The total grant-date fair value of options that vested during the nine months ended September 30, 2022 and 2021 was $52 thousand and $332 thousand, respectively.

As of September 30, 2022, the Company had 1,937,496 stock options outstanding of which all are fully vested options. As of September 30, 2022, the Company had 296,380 common stock grants outstanding of which 260,752 were vested but not issued and 35,628 were not yet vested. All granted and outstanding common stock grants will fully vest by August 31, 2023. The Company had unrecognized stock-based compensation related to common stock grants of $36 thousand as of September 30, 2022. As of September 30, 2022, the Company had 1,429,843 RSUs outstanding of which 206,510 were vested but not issued and 1,223,333 were not yet vested. All granted and outstanding RSUs will fully vest by January 2, 2024. The Company had unrecognized stock-based compensation related to RSUs of $920 thousand as of September 30, 2022.

The following assumptions were used to calculate the fair value of options granted during the three and nine months ended September 30, 2022:


	Three months ended			Nine months ended
	September 30, 2022			September 30, 2022
Fair value of Class A Shares of Common Stock	$	1.28—1.51		$	1.28—4.58
Exercise price	$	0.63—0.64		$	0.63—0.75
Risk free interest rate		3.03—3.88	%		1.25—3.88	%
Expected dividend yield		0.00	%		0.00	%
Expected volatility		53.16—88.71	%		52.80—88.71	%
Expected term		3 Years			3 Years

Stock-based compensation expense

Our consolidated statements of operations include stock-based compensation expense as follows:


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Cost of services	$	10,122	$	40,126	$	13,516	$	120,378
Research and development		96,113		123,334		206,413		370,002
Selling, general, and administrative		744,566		729,438		1,378,304		1,232,556
Total stock-based compensation expense	$	850,801	$	892,898	$	1,598,233	$	1,722,936

Table of Contents

11. Related Party Transactions

Related party payables of $159 thousand and $253 thousand as of September 30, 2022 and December 31, 2021, respectively, primarily relate to amounts owed to 10Clouds, the Company’s third-party 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, 2022 and 2021, totaled approximately $254 thousand and $313 thousand, respectively. Total costs incurred in relation to 10Clouds for the nine months ended September 30, 2022 and 2021, totaled approximately $688 thousand and $815 thousand, respectively, of which certain amounts were recorded as capitalized internal-use software, research and development, or cost of services.

A member of management provides legal services to the Company from a law firm privately owned and separate from the Company. Certain services are provided to the Company through this law firm. Total expenses incurred by the Company in relation to these services totaled $32 thousand and $0 during the three months ended September 30, 2022 and 2021, respectively. Total expenses incurred by the Company in relation to these services totaled $95 thousand and $9 thousand during the nine months ended September 30, 2022, and 2021, respectively. Amounts payable as of September 30, 2022, and December 31, 2021 were $0.

The Company has agreed, with effect from November 13, 2020, to grant a three-year loan in the amount of $335 thousand with an abated interest rate of 0.25% per annum to an advisory contractor to purchase 1,408,240 options. The options provide for the right to acquire shares of Class A Common Stock at a strike price of $1.20 per share. The options have no vesting period and will expire in 24 months after the date of issuance. The loan will be repaid with in-kind services from the contractor at a rate of $9 thousand per month for 36 months with the first payment receipt in April 2020. As of September 30, 2022 and December 31, 2021, the shareholder loan balances were $46 thousand and $130 thousand, respectively.

On August 16, 2017, the Company entered into three shareholder loan agreements with three related parties for $75 thousand each at an interest rate abated to the Applicable Federal Rate at August 2017 of ninety-six basis points. The loans were issued in exchange for 176,282 shares each and are payable to Company on the earlier of three years from the date of the Agreement, or within ninety (90) days upon liquidation of the loan’s underlying security. On July 28, 2020 and August 16, 2021, the Company extended the shareholder loans maturity date of these loans by one year on each date for a total extension of two years from the original maturity date. On November 18, 2021, one shareholder repaid the loan in full, and the Company’s Board resolved to forgive the other two loans in full as a bonus to the remaining two shareholders. As of September 30, 2022 and December 31, 2021 the shareholder loan balances were $0.

12. 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 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, which is matched with a €50 thousand grant. The remaining €150 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 three months ended September 30, 2022 and 2021, the Company incurred $0 in expenses that are reimbursable under the grant. During the nine months ended September 30, 2022 and 2021, the Company incurred $0 in expenses that are reimbursable under the grant and therefore, recorded these amounts as grant income in the consolidated statements of operations. As of September 30, 2022, 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, 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 €136,568, 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

Table of Contents

agreement that enables the Company to submit eligible employee expenses for reimbursement by October 31, 2022. During the three and nine months ended September 30, 2022, the Company incurred $0 thousand, respectively, in expenses that are reimbursable under the grant. As of September 30, 2022, no amounts provided under this grant were received.

13. Commitments and Contingencies

Operating Leases – The Company leased office space in Georgia and certain other states in the U.S. under various operating lease arrangements, some of which are month-to-month lease arrangements, including several vehicles and corporate apartment leases requiring monthly payments. As of September 30, 2022, there were no minimum lease commitments related to month-to-month lease arrangements.

The following are the future minimum lease obligations on the Company’s lease agreements as of September 30, 2022:


Future Minimum Lease Obligations
Remainder of 2022	$	111,290
2023		274,210
2024		103,165
2025		48,029
2026		2,425
Total	$	539,119

Rental expense totaled $143 thousand and $140 thousand for the three months ended September 30, 2022 and 2021, respectively. Rental expense totaled $407 thousand and $441 thousand for the nine months ended September 30, 2022 and 2021, respectively.

Financial Liability Obligation - As of September 30, 2022, the Company’s financial liability totaled $237 thousand for an executed agreement with a telecommunications company for acquiring mobile hardware. The financial liability term is thirty months from the time each mobile hardware asset was acquired.


Future Financial Liability Obligations
Remainder of 2022	$	29,715
2023		118,860
2024		88,765
Total	$	237,340

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

14. Subsequent Events

Subsequent events have been evaluated through November 10, 2022, the date these condensed consolidated financial statements were available to be issued.

On October 5, 2022, the Company received the Certificate of Strike Off from the Cayman Registrar of Companies, which represents the completion of administratively dissolving Trust Stamp Cayman. As there were no operations established under the entity, there is a limited impact to Trust Stamp. The dissolution of Trust Stamp Cayman will be effective December 30, 2022.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current plans, expectations, and beliefs, involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

T Stamp Inc. was incorporated on April 11, 2016 in the State of Delaware. T Stamp Inc. and its subsidiaries (“Trust Stamp”, “we”, or the “Company”) develops and markets identity authentication software for enterprise and government partners and peer-to-peer markets.

Trust Stamp develops proprietary artificial intelligence-powered identity and trust solutions at the intersection of biometrics, privacy, and cybersecurity, that enable organizations to protect themselves and their users, while empowering individuals to retain ownership of their identity data and prevent fraudulent activity using their identity.

Trust Stamp tackles industry challenges including data protection, regulatory compliance, and financial accessibility, with cutting edge technology including biometric science, cryptography, and machine learning. Our core technology irreversibly transforms identity information to create tokenized identifiers that enable accurate authentication without the need to store or share sensitive data. By retaining the usefulness of biometric-derived data while minimizing the risk, we allow businesses to adopt biometrics and other anti-fraud initiatives while protecting personal information from hacks and leaks.

Trust Stamp’s key sub-markets are identity authentication for the purpose of account opening, access and fraud detection, the creation of tokenized digital identities to facilitate financial and societal inclusion, and in-community case management software for alternatives to detention and other governmental uses.

As biometric solutions proliferate, so does the need to protect biometric data. Stored biometric images and templates represent a growing and unquantified financial, security and PR liability and are the subject of governmental, media and public scrutiny, since biometric data cannot be “changed” once they are hacked, as they are directly linked to the user’s physical features and/or behaviors. Privacy concerns around biometric technology have led to close attention from regulators, with multiple jurisdictions placing biometrics in a special or sensitive category of personal data and demanding much stronger safeguards around collection and safekeeping.

To address this unprecedented danger and increased cross-industry need to establish trust quickly and securely in virtual environments, Trust Stamp has developed its Irreversibly Transformed Identity Token, or IT2, solutions, which replace biometric templates with a cryptographic hash that can never be rebuilt into the original data and cannot be used to identify the subject outside the environment for which it is designed.

Trust Stamp’s data transformation and comparison technology is vendor and modality agnostic, allowing organizations including other biometric services providers to benefit from the increased protection, efficiency, and utility of our proprietary tokenization process. With online and offline functionality, Trust Stamp technology is effective in even the most remote locations in the world.

Trust Stamp also offers end-to-end solutions for multi-factor biometric authentication for account access and recovery, KYC/AML compliance, customer onboarding, and more, which allow organizations to approve more genuine users, keep bad actors from accessing systems and services, and retain existing users with a superior user experience. Management has evaluated the market potential for its services in part by reviewing the following reports, articles, and data sources, none of which were commissioned by the Company, and none are to be incorporated by reference:

Table of Contents

Data security and fraud

●

In 2021, 4,145 publicly disclosed breaches exposed over 22 billion records according to the 2021 Year End Data Breach QuickView Report.

●

eCommerce, airline ticketing, money transfer and banking services are estimated to cumulatively lose over $200 billion to online payment fraud between 2020 and 2024, according to a 2020 Juniper Research report on Online Payment Fraud.

Biometric authentication

●

Juniper research estimates that biometrics will annually authenticate over $3 trillion in payment transactions by 2025.

●

The global biometric system market is projected to grow from $24.1 billion in 2020 to $82.8 billion by 2027 according to a 2021 Global Industry Analysts, Inc report.

Financial and societal inclusion

●

As of 2017, 1.7 billion people lacked basic financial services including a bank account, and 4 billion people were underbanked according to the World Bank Global Findex 2017 report. (NB. estimates for people lacking basic financial services are now closer to 1.4 billion people).

●

More than 200 million small and medium-sized enterprises in emerging markets lack access to finance, limiting their ability to grow and thrive (UNGSA Financial Inclusion)

●

The global market for Microfinance estimated at $156.7 Billion in the year 2020, is projected to reach $304.3 Billion by 2026 according to the Global Microfinance Market Report 2022.

Alternatives to detention (“ATD”)

●

Addressing the House Appropriations Subcommittee for Homeland Security on May 17, 2022, ICE Acting Director stated that the financial year 2023 Budget submitted by ICE for approval included an additional $75,000,000 for the ATD program over and above the present appropriation and that ICE is “focusing on ATD” instead of more expensive physical detention programs; both because of the threat of COVID and because ATD is less expensive and more humane.

●

On that same day, the Ranking Member of the Subcommittee shared that 230,000 participants are currently in the ATD program with a planned increase to 600,000 participants.

●

The bipartisan Appropriations Committee has recommended a funding increase of $42,186,000 above the request made by ICE, for a total of $569,319,000 for financial year 2023 to fund increases in enrollments into the Alternative to Detention and Secure Docket programs, and case management services and participation.

Our Customers and Business –

Trust Stamp’s key sub-markets are:

i) Identity authentication for the purpose of account opening, access and fraud detection;

ii) The creation of tokenized digital identities to facilitate financial and societal inclusion; and

iii) In-community case-management services for governmental agencies

Table of Contents

i) In parallel with our engagements with an S&P 500 bank and other financial and FinTech institutions, we continued to expand our work with Fidelity Information Services, LLC (“FIS”) with our proprietary tokenization technology being utilized in FIS’ new global identity authentication system. To date, two banks have committed to FIS pilots using Trust Stamp technology and it is anticipated that a number of additional banks will be onboarded into pilots by the end of 2022. The pilots utilize the Company’s next-generation identity package, offering rapid deployment across devices and platforms, with custom workflows that seamlessly orchestrate trust across the identity lifecycle for a consistent user experience in processes for onboarding and KYC/AML, multi-factor authentication, account recovery, fraud prevention, compliance, and more. The orchestration layer that has been developed facilitates no-code and low-code implementations of the Company’s technology making adoption faster and even more cost-effective for a broader range of potential customers.

ii) Under a ten-year technology services agreement (“the TSA”) with Mastercard International entered into in March 2019, the Company’s IT² technology is being implemented by Mastercard for Humanitarian & Development purposes as a core element of its Community Pass and Inclusive Identity offerings. Use cases include not only financial services for individuals and businesses but also empowering people and communities to meet basic needs, such as nutritious food, clean water, housing, education, and healthcare including Ethiopia’s implementation of Mastercard’s Wellness Pass within Ethiopia’s health information system to promote efficiency in healthcare tracking and offline portability of health records.

Under the TSA, the Company is paid to develop and host software solutions utilizing the IT² and to support Mastercard’s implementations. In addition, the Company is paid on a “per use” basis for all transactions utilizing its technology. To date the Company has received guaranteed minimum annual payments on account of usage but anticipates significant use-based revenue starting in 2023 and growing year-on-year thereafter.

iii) On September 23, 2021, the Company was awarded a contract with the US Department of Homeland Security, Immigration and Customs Enforcement Division (“ICE”). Effective March 27, 2022, Trust Stamp agreed to a bilateral modification (the “ICE Contract”) of that September 2021 contract. The modification covers software development and services related to rapid enrolment in the ICE Alternative to Detention Program increases the total contract award value to $7,176,364 from the original $3,920,764 and extends the delivery period until September 26, 2022. On August 17, 2022, Trust Stamp received notification from ICE that it was terminating the ICE Contract for convenience effective immediately. The Company anticipates significant ongoing growth opportunities for its software products in the Alternative to Detention Program and in the provision of other in-community case management services for federal and state agencies. Refer to the Liquidity and Capital Resources subsection below for an expanded discussion of the 90-day and 60-day cessation as well as termination of the ICE Contract.

In addition to its key sub-markets, the Company is developing products and working with partners and industry organizations in other sectors that offer significant market opportunities, in particular, the travel, healthcare, Metaverse platform and cryptographic key and account credential safekeeping sectors.

Key Business Measures

In addition to the measures presented in our consolidated financial statements, we use the following key non-GAAP business measure to help us evaluate our business, identify trends affecting our business, formulate business plans and financial projections, and make strategic decisions.

Adjusted EBITDA

This discussion includes information about Adjusted EBITDA that is not prepared in accordance with U.S. GAAP. Adjusted EBITDA is not based on any standardized methodology prescribed by U.S. GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP measure is included below.

Adjusted EBITDA is a non-GAAP financial measure that represents U.S. GAAP net income (loss) adjusted to exclude (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) changes in assets and liabilities, and (6) certain other items management believes affect the comparability of operating results.

Table of Contents

Management believes that Adjusted EBITDA, when viewed with our results under U.S. GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our Company and our management, and it will be a focus as we invest in and grow the business.

Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:

Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments.

Adjusted EBITDA does not reflect changes in, or cash requirements for our working capital needs.

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

Adjusted EBITDA does not include the impact of certain charges or gains resulting from matters we consider not to be indicative of our ongoing operations.

Due to these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only as a supplement to our U.S. GAAP results.

Reconciliation of Net Loss to Adjusted EBITDA


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net loss before taxes	$	(3,439,892)	$	(3,036,344)	$	(8,054,240)	$	(7,035,125)
Add: Other expense		7,484		49,178		102,269		85,217
Less: Other income		(3,546)		—		(16,160)		(10,865)
Add: Interest expense (income)		2,889		3,801		9,202		43,850
Add: Stock-based compensation		850,801		892,898		1,598,233		1,722,936
Add: Impairment loss of digital assets		1,260		—		25,144		-
Add: Non-cash expenses for in-kind services		27,930		27,930		83,790		83,864
Add: Depreciation and amortization		203,106		149,103		547,737		422,727
Adjusted EBITDA loss (non-GAAP)	$	(2,349,968)	$	(1,913,434)	$	(5,704,025)	$	(4,687,396)

Adjusted EBITDA loss (non-GAAP) for the three months ended September 30, 2022, increased by 22.81%, to $2.35 million from $1.91 million for the three months ended September 30, 2021. The overall increase in adjusted EBITDA loss (non-GAAP) was driven primarily by an increase in selling, general and administrative expenses of $989 thousand and research and development expenses of $199 thousand and cost of services of $280 thousand during the three months ended September 30, 2022. See “Results of Operations” below for further discussion on the drivers behind the increase in gross margin and selling, general and administrative expenses during the three months ended September 30, 2022.

Adjusted EBITDA loss (non-GAAP) for the nine months ended September 30, 2022, increased by 21.69%, to $5.70 million from $4.69 million for the nine months ended September 30, 2021. The overall increase in adjusted EBITDA loss (non-GAAP) was driven by a $2.91 million increase in selling, general and administrative expenses, research and development expenses of $639 thousand, and cost of services of $718 thousand during the nine months ended September 30, 2022, offset by an increase in net revenues of $3.30 million during the nine months ended September 30, 2022. See “Results of Operations” below for further discussion on the drivers behind the increase in gross margin and selling, general and administrative expenses during the nine months ended September 30, 2022.

Table of Contents

Gross revenue (non-GAAP)

This discussion includes information about gross revenue that is not prepared in accordance with U.S. GAAP. Gross revenue is not based on any standardized methodology prescribed by U.S. GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP measure is included below.


	(Unaudited)				(Unaudited)
	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net revenue	$	1,348,478	$	330,104	$	4,877,809	$	1,581,796
Add back:
Third party costs rebilled to clients		62,500		50,000		187,500		150,000
Gross revenue (non-GAAP)	$	1,410,978	$	380,104	$	5,065,309	$	1,731,796

Gross revenue for the three months ended September 30, 2022, increased 271.21% to $1.41 million compared to $380 thousand for the three months ended September 30, 2021. Gross revenues received in the three months ended September 30, 2022, included $63 thousand for the sale of outsourced web hosting services. See “Results of Operations” below for further discussion on the drivers behind the increase in net revenue during the three months ended September 30, 2022.

Gross revenue for the nine months ended September 30, 2022, increased 192.49% to $5.07 million compared to $1.73 million for the nine months ended September 30, 2021. Gross revenues received in the nine months ended September 30, 2022, included $188 thousand for the sale of outsourced web hosting services. Due to GAAP requirements, we did not include the third-party costs for web hosting in net revenue, but instead, reduced cost of services. See “Results of Operations” below for further discussion on the drivers behind the increase in net revenue during the nine months ended September 30, 2022.

Table of Contents

Comparison of the Three and Nine Months Ended September 30, 2022 and 2021

The following table summarizes our condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021:


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Net revenue	$	1,348,478	$	330,104	$	4,877,809	$	1,581,796
Operating Expenses:
Cost of services (exclusive of depreciation and amortization shown separately below)		529,023		249,357		1,571,166		853,370
Research and development		777,800		578,763		1,766,164		1,126,914
Selling, general, and administrative		3,281,661		2,292,182		9,014,894		6,102,937
Depreciation and amortization		203,106		149,103		547,737		422,727
Total Operating Expenses		4,791,590		3,269,405		12,899,961		8,505,948
Operating Loss		(3,443,112)		(2,939,301)		(8,022,152)		(6,924,152)
Non-Operating Income (Expense):
Interest income (expense)		(2,889)		(3,801)		(9,202)		(43,850)
Change in fair value of warrant liability		11,307		(54,372)		88,367		(54,372)
Grant income		—		10,308		—		61,601
Impairment of digital assets		(1,260)		—		(25,144)		—
Other income		3,546		—		16,160		10,865
Other expense		(7,484)		(49,178)		(102,269)		(85,217)
Total Other Income (Expense), Net		3,220		(97,043)		(32,088)		(110,973)
Net loss before Taxes		(3,439,892)		(3,036,344)		(8,054,240)		(7,035,125)
Income tax expense		—		—		—		—
Net loss including noncontrolling interest		(3,439,892)		(3,036,344)		(8,054,240)		(7,035,125)
Net loss attributable to noncontrolling interest		—		(440)		—		(1,304)
Net loss attributable to T Stamp Inc.	$	(3,439,892)	$	(3,035,904)	$	(8,054,240)	$	(7,033,821)
Basic and diluted net loss per share attributable to T Stamp Inc.	$	(0.15)	$	(0.16)	$	(0.35)	$	(0.37)
Weighted-average shares used to compute basic and diluted net loss per share		23,467,324		19,358,016		23,163,414		18,847,797

Comparison of the Three Months Ended September 30, 2022 and 2021

Net revenue


	Three months ended September 30,
	2022		2021		$ Change		% Change
Net revenue	$	1,348,478	$	330,104	$	1,018,374	308.50	%

Net revenue increased by $1.02 million, or 308.50% during the three months ended September 30, 2022, and consisted of $844 thousand from ICE, $198 thousand from Mastercard, $241 thousand from a S&P500 bank, and the remaining $66 thousand from various other customers.

During the three months ended September 30, 2022, the Company implemented its "Orchestration Layer" platform with two new customers through its partnership with FIS. This platform is designed to provide easy integration with and access to Trust Stamp's products, chargeable on a per use basis. Additionally, during the three months ended September 30, 2022, $133 thousand in revenue was generated from a new statement of work (“SOW”) with Mastercard with a total contract value of $390 thousand.

Table of Contents

The majority of revenue during the three months ended September 30, 2022 is a result of the ICE Contract including $124 thousand, derived from the remaining of the $325 thousand billed for the pro rata 18-day (March 27, 2022 – April 14, 2022) period from the contract modification which was valued at $3.25 million and executed on April 4, 2022. The Company recognized the other $201 thousand for the 18-day pro rata period during the three months ended June 30, 2022. Upon termination, the Company proposed to ICE for reimbursement of the reasonably unavoidable costs which the Company incurred during the pause period (April 15, 2022 – August 17, 2022) for a total of $720 thousand which included expenses such as payroll, mobile carrier costs, storage, and other costs related to the ICE contract. ICE agreed to the proposal and the Company subsequently invoiced the entire amount. Refer to the Liquidity and Capital Resources subsection below for an expanded discussion of the 90-day and 60-day cessation as well as termination of the ICE Contract.

Cost of services


	Three months ended September 30,
	2022		2021		$ Change		% Change
Cost of services	$	529,023	$	249,357	$	279,666	112.15	%

Cost of services (“COS”) increased by $280 thousand or 112.15% for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase was driven primarily by $264 thousand in mobile carrier costs related to servicing requirements from the ICE modification contract, which was not incurred during the three months ended September 30, 2021. Furthermore, we incurred $62 thousand more in web hosting charges during the three months ended September 30, 2022, both internally and with our customers, which was driven by additional customer implementations and usage. Web hosting costs totaled $220 thousand during the three months ended September 30, 2022, of which $105 thousand was invoiced to our customers, compared to the three months ended September 30, 2021, which had $133 thousand in web hosting charges and $80 thousand invoiced to customers.

The COS increases for the three months ended September 30, 2022 were offset by a $30 thousand decrease in stock-based compensation and a $21 thousand decrease in internal COS for the three months ended September 30, 2022 despite new customer implementations of the Orchestration Layer, a feature of the platform's easy integration design.

Gross profit during the comparative periods increased significantly by 914.84% or $739 thousand from $81 thousand for the three months ended September 30, 2021, to $819 thousand for the three months ended September 30, 2022. Gross margins improved by 36.31% from 24.46% for the three months ended September 30, 2021, to 60.77% for the three months ended September 30, 2022.

Research and development


	Three months ended September 30,
	2022		2021		$ Change		% Change
Research and development	$	777,800	$	578,763	$	199,037	34.39	%

Research and development (“R&D”) expense increased by $199 thousand, or 34.39% for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase in R&D expense during the three months ended September 30, 2022 was driven by an increase in R&D expenses related to additional employees hired which did not exist during the three months ending September 30, 2021. Comparing the three months ended September 30, 2021 to the three months ended September 30, 2022, the Company grew its R&D team from 51 to 64 full-time equivalents (“FTE”).

Selling, general, and administrative


	Three months ended September 30,
	2022		2021		$ Change		% Change
Selling, general, and administrative	$	3,281,661	$	2,292,182	$	989,479	43.17	%

Selling, general, and administrative expense (“SG&A”) increased by $989 thousand, or 43.17% for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The increase in SG&A expense during the three months ended September 30, 2022 was driven mostly by the $369 thousand increase from mobile carrier costs during the period after the termination of the ICE Contract.

Table of Contents

Additionally, during the three months ended September 30, 2022, there was a $129 thousand or 118.72% increase in legal, professional, and consulting services fees related to a variety of legal, financial, and human resource consulting services. Also related to human resources was a $108 thousand redundancy payment for employees in our U.K. office.

During the three months ended September 30, 2022, there was also a $92 thousand increase in SG&A from $25 thousand to $117 thousand from corporate and commercial travelling costs related to industry events, meetings with prospective customers, and investor conferences.

Finally, the remainder of the increase in SG&A expenses from the three months ended September 30, 2021 to the three months ended September 30, 2022 was driven mostly was driven mostly by the increase in SG&A FTE and associated overhead.

Depreciation and amortization


	Three months ended September 30,
	2022		2021		$ Change		% Change
Depreciation and amortization	$	203,106	$	149,103	$	54,003	36.22	%

Depreciation and amortization (“D&A”) increased by $54 thousand, or 36.22% for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The primary increase in D&A expense during the three months ended September 30, 2022 is $30 thousand for the depreciation of mobile hardware assets. There were no mobile hardware assets or related depreciation expense during the three months ended September 30, 2021.

Also driving the increase is the capitalized internal-use software depreciation expense due to a significant portion of lower allocations of capitalized internal-use software, specifically from the years ended December 31, 2016 and 2017, reaching the completion of their 5 year useful lives. The lower allocations are being replaced by larger allocations of capitalized internal-use software, specifically from years ended December 31, 2018 through 2022, resulting in increased depreciation. For instance, the average monthly capitalization of internal-use software added during the year ended December 31, 2017 was $23 thousand compared to $40 thousand for the capitalization of internal-use software added during the year ended December 31, 2021.

We continue to see a trend of increasing software capitalization. The development of new software has resulted in additional capitalized internal-use software amortization, or microservices, that once reaching technical feasibility, the Company begins to capitalize and subsequently amortize the related costs over a period of 5 years.

In addition, patent amortization increased during the three months ended September 30, 2022 as a result of new pending patent applications and issued patents with the United States Patent and Trademark Office. During the nine months ended September 30, 2022, the Company added twelve new pending patents and eight issued patents.

Operating loss


	Three months ended September 30,
	2022		2021		$ Change		% Change
Operating loss	$	(3,443,112)	$	(2,939,301)	$	(503,811)	17.14	%

Operating loss increased by $504 thousand, or 17.14% for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The primary reason for the increase in operating loss was the growth in SG&A, COS, D&A and R&D expenses during the three-months ended September 30, 2022, compared to the three months ended September 30, 2021.

While total operating costs, including COS, R&D, D&A, and SG&A, increased by 46.56% or $1.52 million, it took only $3.55 to produce $1.00 in net revenue in the three months ended September 30, 2022, versus $9.90 in total operating expense to produce $1.00 in net revenue in the three months ended September 30, 2021; an improvement of 64.12% and an indicator of better operating efficiencies during the comparative periods.

Table of Contents

Interest income (expense)


	Three months ended September 30,
	2022		2021		$ Change		% Change
Interest income (expense)	$	(2,889)	$	(3,801)	$	912	23.99	%

Interest income (expense) decreased by $912, or 23.99% for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. During the three months ending September 30, 2022, there was $1 thousand and $4 thousand of interest income and interest expense, respectively. During the three months September 30, 2021, there $4 thousand of interest expense. All interest earned and expensed during the comparative periods were a result of standard operating activities.

Change in fair value of warrant liability


	Three months ended September 30,
	2022		2021		$ Change		% Change
Change in fair value of warrant liability	$	11,307	$	(54,372)	$	65,679	120.80	%

The Company recognized a change in fair value of warrant liability during the three months ended September 30, 2022, of $11 thousand based on the fair value assessment and adjustment for one warrant liability as described in Note 4 to the financial statements provided under Item 1 of this report.

Grant income


	Three months ended September 30,
	2022		2021		$ Change		% Change
Grant income	$	—	$	10,308	$	(10,308)	—

Grant income during the three months ended September 30, 2021 relates to the Business Development and Continuity Scheme secured by the Company’s subsidiary, Trust Stamp Malta. This agreement with the Republic of Malta is described in more detail in Note 12 to the financial statements, provided under Item 1 of this report. During the three months ended September 30, 2022 there was no grant income recorded.

Impairment of digital assets


	Three months ended September 30,
	2022		2021		$ Change		% Change
Impairment of digital assets	$	(1,260)	$	—	$	(1,260)	—

The Company recognized an impairment on digital assets during the three months ended September 30, 2022 of $1 thousand. Digital assets are considered indefinite-lived intangible assets under applicable accounting rules. Accordingly, any decrease in their fair values below our carrying values for such assets at any time subsequent to their acquisition requires recognition of impairment.

Other income


	Three months ended September 30,
	2022		2021		$ Change		% Change
Other income	$	3,546	$	—	$	3,546	100	%

Other income increased by $4 thousand for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The other income increase was primarily due to miscellaneous income from GAAP entries.

Table of Contents

Other expense


	Three months ended September 30,
	2022		2021		$ Change		% Change
Other expense	$	(7,484)	$	(49,178)	$	41,694	-84.78	%

Other expense decreased by $42 thousand for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. The Company recorded $48 thousand in unrealized exchange losses during the three months ended September 30, 2021.

During the six months ended June 30, 2022, the Company determined that there is currently no intention to settle intercompany accounts in the foreseeable future; therefore, future fluctuations in foreign currencies between the Company and its subsidiaries will be booked to accumulated other comprehensive income on the balance sheet.

Comparison of the Nine Months Ended September 30, 2022 and 2021

Net revenue


	Nine months ended September 30,
	2022		2021		$Change		% Change
Net revenue	$	4,877,809	$	1,581,796	$	3,296,013	208.37	%

During the nine months ended September 30, 2022, net revenue increased by $3.30 million, or 208.37% compared to the nine months ended September 30, 2021, and consisted of $3.29 million from ICE, $536 thousand from Mastercard, $791 thousand from a S&P500 bank, and the remaining $266 thousand from various other customers.

During the period, the Company implemented its "Orchestration Layer" platform with two new customers through its partnership with FIS. This platform is designed to provide easy integration with and access to Trust Stamp's products, chargeable on a per use basis. Additionally, $337 thousand in revenue was generated from a new statement of work (“SOW”) with Mastercard with a total contract value of $390 thousand.

The majority of revenue during the period came from the ICE Contract for an alternative to detention program which was subsequently modified to $7.18 million, effective March 27, 2022. During the nine months ended September 30, 2022, the Company booked $3.29 million related to the ICE Contract. Refer to the Liquidity and Capital Resources subsection below for an expanded discussion of the 90-day and 60-day cessation as well as termination of the ICE Contract.

Cost of services


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Cost of services	$	1,571,166	$	853,370	$	717,796	84.11	%

Cost of services provided increased by $718 thousand, or 84.11% for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase during the nine months ended September 30, 2022 was primarily driven by the ICE Contract which the Company executed during the nine months ended September 30, 2021 and was subsequently modified effective March 27, 2022. During the nine months ended September 30, 2022, the Company booked $802 thousand in labor and third-party carrier costs related to servicing the requirements of the ICE Contract. During the nine months ended September 30, 2022, web services also increased by $149 thousand due to an increase in the level of services provided to customers and an increase in usage by customers. The increases were offset by a decrease of $107 thousand in stock-based compensation as well as $108 thousand in costs to service the FIS contract that did not recur in the nine months ended September 30, 2022.

Table of Contents

Additionally, gross profit during the comparative periods increased significantly by 353.94% or $2.58 million from $728 thousand for the nine months ended September 30, 2021, to $3.31 million for the nine months ended September 30, 2022. Gross margins improved by 21.74% from 46.05% for the nine months ended September 30, 2021, to 67.79% for the nine months ended September 30, 2022.

Research and development


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Research and development	$	1,766,164	$	1,126,914	$	639,250	56.73	%

Research and development (“R&D”) increased by $639 thousand, or 56.73% for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase in R&D expenses during the nine months ended September 30, 2022, was driven by an increase in R&D activities related to the ICE contract which did not exist until the end of the three months ending September 30, 2021, and was therefore immaterial. This increase was offset by a decrease of $164 thousand in stock-based compensation during the nine months ended September 30, 2022. Comparing the nine months ended September 30, 2021 to the nine months ended September 30, 2022, the Company grew its R&D team from 51 to 64 full-time equivalents (“FTE”) by adding $260 thousand in compensation costs which is a 32.68% increase between the comparison periods.

Selling, general, and administrative


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Selling, general, and administrative	$	9,014,894	$	6,102,937	$	2,911,957	47.71	%

Selling, general, and administrative expense (“SG&A”) increased by $2.91 million, or 47.71% for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase during the nine months ended September 30, 2022 was driven mostly by the $763 thousand increases in legal and professional services fees and other fees related to the listing of the Company’s Class A Common stock on the Nasdaq Capital Market.

Additionally, the Company incurred $433 thousand in sales commissions in the nine months ended September 30, 2022 compared to $48 thousand during the nine months ended September 30, 2021; an increase of $384 thousand or 792.39%. The increase in commissions paid during the nine months ended September 30, 2022 is directly related to the substantial increase in cash received on revenue contracts during the comparative periods, and include commissions paid on the customer contracts with ICE, FIS, and others.

Other notable variances during the nine months ended September 30, 2022 include a $369 thousand increase in mobile carrier costs during the nine months ended September 30, 2022 incurred after the termination of the ICE revenue contract. Additionally, there were $330 thousand in total compensation costs during the nine months ended September 30, 2022, from corporate and commercial travelling which is an 18.01% or $242 thousand increase from $88 thousand during the nine months ended September 30, 2021.

The remainder of the increase in SG&A expenses from the nine months ended September 30, 2021 to the nine months ended September 30, 2022 was driven mostly by the increase in SG&A FTE and associated overhead.

Depreciation and amortization


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Depreciation and amortization	$	547,737	$	422,727	$	125,010	29.57	%

Depreciation and amortization (“D&A”) increased by $125 thousand, or 29.57% for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The primary increase in D&A expense during the nine months ended September 30, 2022 is $60 thousand for the depreciation of mobile hardware assets. There were no mobile hardware assets or related depreciation expense during the nine months ended September 30, 2021.

Table of Contents

Also driving the increase is the capitalized internal-use software depreciation expense due to a significant portion of lower allocations of capitalized internal-use software, specifically from the years ended December 31, 2016 and 2017, reaching the completion of their 5 year useful lives. For instance, the average monthly capitalization of internal-use software added during the year ended December 31, 2017 was $23 thousand compared to $40 thousand for the capitalization of internal-use software added during the year ended December 31, 2021.

Operating loss


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Operating loss	$	(8,022,152)	$	(6,924,152)	$	(1,098,000)	15.86	%

Operating loss increased by $1.1 million, or 15.86% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase was primarily due to an increase in SG&A, COS, and R&D expenses.

Interest income (expense)


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Interest income (expense)	$	(9,202)	$	(43,850)	$	34,648	79.01	%

Interest income (expense) increased by $35 thousand, or 79.01% for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The decrease was driven due to the Company paying off its venture loan with Second Century Ventures (“SCV”) in April 2021. The remaining net interest expense relates to various immaterial interest-bearing and interest-earning accounts.

During the nine months ending September 30, 2022, there was $3 thousand and $12 thousand of interest income and expense, respectively. During the nine months ending September 30, 2021, there was $1 thousand and $45 thousand of interest income and expense, respectively. All interest, other than that related to the SCV venture loan, earned and expensed during the comparative periods were a result of standard operating activities.

Change in fair value of warrant liability


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Change in fair value of warrant liability	$	88,367	$	(54,372)	$	142,739	262.52	%

The Company recognized a change in fair value of warrant liability during the nine months ended September 30, 2022, of $88 thousand based on the fair value assessment and adjustment for one warrant liability as described in Note 4 to the financial statements provided under Item 1 of this report.

Grant income


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Grant income	$	—	$	61,601	$	(61,601)	(100)	%

Table of Contents

Grant income during the nine months ended September 30, 2021, relates to $62 thousand received in grant income that the Company’s subsidiary, Trust Stamp Malta, entered with the Republic of Malta that would provide for a grant of up to €200 thousand as reimbursement for operating expenses over the first 12 months following incorporation in the Republic of Malta with the Republic of Malta described in Note 12 to the financial statements provided under Item 1 of this report. During the nine months ended September 30, 2022, there was no grant income recorded.

Impairment of digital assets


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Impairment of digital assets	$	(25,144)	$	—	$	(25,144)	—

The Company recognized an impairment on digital assets during the nine months ended September 30, 2022, of $25 thousand. Digital assets are considered indefinite-lived intangible assets under applicable accounting rules. Accordingly, any decrease in their fair values below our carrying values for such assets at any time after their acquisition requires recognition of impairment.

Other income


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Other income	$	16,160	$	10,865	$	5,295	48.73	%

Other income increased by $5 thousand or 48.73% for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase consists primarily of miscellaneous income from GAAP entries.

Other expense


	Nine months ended September 30,
	2022		2021		$ Change		% Change
Other expense	$	(102,269)	$	(85,217)	$	(17,052)	(20.01)	%

Other expense increased by $17 thousand or 20.01%% for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase was primarily due to an unrealized loss on foreign currency translations for intercompany transactions between the parent company, T Stamp Inc., and its subsidiary, Trust Stamp Malta Limited with currencies denominated in United States Dollars and European Union Euros, respectively.

During the nine months ended September 30, 2021, there was an unrealized loss on foreign currency translations that is recorded to other income for foreign currencies held by the Company’s subsidiaries to meet expenses denominated in those currencies, the U.S. dollar cost of which expenses has fallen commensurately, therefore the unrealized loss will have no cash impact until the accounts are settled.

During the nine months ended September 30, 2022, the Company determined that there is currently no intention to settle intercompany accounts in the foreseeable future; therefore, future fluctuations in foreign currencies between the Company and its subsidiaries will be booked to accumulated other comprehensive income on the balance sheet.

Liquidity and Capital Resources

As of September 30, 2022 and December 31, 2021, we had approximately $2.93 million and $3.48 million cash in our banking accounts, respectively. The decrease of $545 thousand in cash from December 31, 2021 to September 30, 2022 was a result of the net negative cash inflow from the combination of financing and operating activities. During the nine months ended September 30, 2022, contributors to the cash outflows from operations include $499 thousand for AT&T carrier fees, $426 thousand in sales commissions, $200 thousand NASDAQ listing fee, $468 thousand in a cash bonus to meet the Company’s commitment to pay taxes on behalf of employees for their 2019 stock bonuses, $240 thousand to the Disney Institute for management consulting, and other normal operating activities.

Table of Contents

Total current assets for the comparative periods decreased by 17.30% or $997 thousand from $5.76 million as of December 31, 2021, to $4.77 million during the nine months ended September 30, 2022. The current assets decrease was primarily driven by the decrease in cash (discussed above) and $517 thousand decrease in prepaid expenses and other current assets. Additionally, there was an increase in total current liabilities of 29.81% or $715 thousand, from $2.40 million at December 31, 2021 to $3.12 million as of September 30, 2022. In effect, the Company’s current ratio, that is, the ratio of the Company’s total current assets as a multiple of total current liabilities or the Company’s ability to service its current liabilities with its current cash assets, changed from 2.40 as of December 31, 2021, to 1.53 as of September 30, 2022. The change in current ratio is mostly a result of the $1.1 million increase in deferred revenue primarily related to the addition of $1.50 million received for a new 12-year revenue contract that the Company executed towards the end of the nine months ended September 30, 2022. See note 1 to the financial statements provided under Item 1 of this report for more details.

The receipt of cash as prepayment on various revenue contracts and resulting deferred revenue entry was the main driver for the increase in current liabilities as of September 30, 2022 compared to December 31, 2021. Various SOWs that accrued deferred revenue as of September 30, 2022, including $1.50 million received for a new 12-year revenue contract, $63 thousand received in cash in relation to the Mastercard License fee, and $13 thousand for FIS. Customer deposit liabilities as of December 31, 2021, included deferred revenue related to the ICE Contract. Since there is a provision in government contracts which provides for termination on convenience, the Company reclassed this amount to customer deposit liabilities. During the nine months ended September 30, 2022, the Company converted this entire balance to recognized revenue.

Effective September 3, 2019, the Company entered into a software license agreement with a customer pursuant to which the Company received total fees of $150 thousand in 2020, $200 thousand in 2021, and will receive minimum total fees of $250 thousand in 2022, rising by 15% in each subsequent year beginning in 2023 with a cap of $1.00 million. The Company has recognized $188 thousand of the software license agreement fees during the nine months ended September 30, 2022.

On March 12, 2021, the Company launched a Regulation D raise limited to accredited investors for a maximum of $5.00 million or 1,633,986 shares. The raise was marketed only to the Company’s existing investor email list with an initial minimum investment of $25 thousand and a share price of $3.06 per share. The initial tranche of the round closed on April 5, 2021, with $3.9 million of reserved investment with the contracted sale of 1,279,825 shares of Class A Common Stock. After the initial tranche, on April 6, 2021, the Company then offered up to $700 thousand or 182,291 of additional shares, again only to accredited investors, with a $5 thousand minimum investment and at a share price of $3.84 per share. The second tranche of the round closed on June 4, 2021 with $82 thousand of reserved investment at $3.84 per share with the contracted sale of 21,400 shares of Class A Common Stock.

On August 25, 2021, the Company launched concurrent offerings under Regulation Crowdfunding (“Regulation CF”), Regulation D and Regulation S. The Company initially sought to raise up to $5.00 million in the aggregate between the three offerings through the sale of units but had the discretion to accept up to $5.00 million in each offering. Each unit consists of 1 share of the Company’s Class A Common Stock, par value $0.01 per share, and 1 warrant to purchase 1 share of Class A Common Stock of the Company in a future registered or exempt offering of the Company (i.e. a Regulation CF, Regulation D, or Regulation S Warrant, as applicable). The minimum target amount under the Regulation CF offering was $100 thousand, which the Company achieved.

On August 25, 2022, we refunded $5,000 in Regulation CF Units to two investors. We raised a final total of $4,546,900 in gross proceeds from the issuance of 1,136,725 Regulation CF units to investors in this offering.

On December 21, 2021, REach® executed a Notice of Exercise for its warrants to purchase 400,641 shares of Class A Common Stock at an exercise price of $0.1664 per share for a total purchase price of $67 thousand.

On December 21, 2021, a SCV executed a Notice of Exercise for certain of its warrants to purchase 2,037,560 shares of Class A Common Stock at an exercise price of $1.6000 per share for a total purchase price of $3.3 million.

Table of Contents

On January 7, 2022, we closed on an initial tranche of investments from the Regulation D offering. We raised a final total of $863,956 in gross proceeds from the issuance of 215,989 Regulation D units to investors in this offering. We conducted an additional close on February 2, 2022, receiving gross proceeds of $100,000 and issuing 25,000 Regulation D units to that investor.

On January 7, 2022, we closed the Regulation S offering. We raised a final total of $224,416 in gross proceeds from the issuance of 56,104 Regulation S units to investors in this offering.

On January 26, 2022, we initially qualified an offering with the Securities and Exchange Commission under Regulation A to allow for the exercise of warrants issued pursuant to the Regulation CF, Regulation D, and Regulation S unit offerings. As of September 30, 2022, warrants for 14,250 shares have been exercised for $57 thousand by investors.

On September 23, 2021, the Company was awarded a $3,920,764 contract with ICE (the “ICE Contract”).

Executed on April 5, 2022, and made effective March 27, 2022, Trust Stamp agreed to a modification of the ICE Contract, increasing the total contract award value to $7,176,364 from the original $3,920,764 and extending the delivery period until September 26, 2022 (subject to a right of early termination by ICE). However, due to a recent change in legislation (enacted through H.R. 2471: Consolidated Appropriations Act, 2022) which requires a Congressional notification in order for ICE to award a contract or subcontract to a particular entity for any pilot or demonstration program that uses more than 5 full-time equivalents or costs in excess of $1,000,000, effective April 15, 2022, the Company entered into an Amendment with ICE to amend the terms of the ICE Contract, implementing an up to 90-day cessation of performance of the Company’s and ICE’s obligations under the ICE Contract. This change in legislation was retroactively applied to the March 27, 2022, modification to the ICE Contract. The up to 90-day cessation of the ICE Contract provided by the Amendment was intended to allow ICE ample time to complete a Congressional notification for the modification of the ICE Contract, so that the Company could continue to provide services to ICE under the ICE Contract. However, as of July 15, 2022 (the end of the 90-day cessation period), ICE had not yet been able to complete such a Congressional notification.

On July 15, 2022, the Company entered into a second amendment agreement with ICE to amend the terms of the ICE Contract (as modified on March 27, 2022. The second amendment had the effect of implementing an additional up to 60-day cessation of performance of the Company’s and ICE’s obligations under the ICE Contract previously agreed to be performed between March 27, 2022, and September 26, 2022. Furthermore, this second amendment was intended to provide ICE additional time to complete such a Congressional notification, so that the Company could continue to provide services to ICE under the ICE Contract. During the cessation period, Trust Stamp continued to incur maintenance costs specific to the April 5, 2022 modification contract, without recognizing or receiving the revenue, in order that we could be positioned to restart immediately if and when the cessation was lifted.

On August 17, 2022, Trust Stamp received notification from ICE that it was terminating the ICE Contract for convenience effective immediately. ICE has paid Trust Stamp for the ICE Contract services performed prior to the amendment effective April 15, 2022. Additionally, Trust Stamp has received written notice that ICE will pay $720 thousand in cancellation expenses incurred during the period between April 15, 2022 and August 17, 2022 for mobile service expense, storage expense, and payroll expense. The Company expects that human resources costs – i.e., compensation for new and existing officers, directors, and employees – will be the largest material cash obligation for the Company within the next twelve months, with projected human resources costs totaling approximately $639 thousand per month, a reduction from $750 thousand per month as reported as of March 31, 2022. The Company believes, as described above, that revenues from its existing operations will be sufficient to cover these costs, and that any funds from new client contracts or offerings would provide additional operational capacity for the Company going forward.

On September 11, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with Armistice Capital Master Fund Ltd. Pursuant to the terms of the SPA, the Company agreed, at the closing of the SPA, to sell and issue to Armistice Capital Master Fund Ltd. in a private placement 975,000 shares of Class A Common Stock of the Company and warrants to purchase 1,950,000 shares of Class A Common Stock of the Company for a total purchase price of $1,511,250. Trust Stamp received the $1,511,250 payment during the nine months ended September 30, 2022 and issued the 975,000 shares of Class A Common Stock and 1,950,000 warrants to purchase shares of Class A Common Stock on September 14, 2022. A Form D related to this sale was filed on September 16, 2022.

Table of Contents

revenue advance on the first anniversary of the MSA, and $1,000,000 on each of the next two anniversaries of the MSA as additional non-refundable revenue advances. IGS has the right to terminate the MSA for convenience before the additional non-refundable revenue advances become due in which case the unpaid additional non-refundable revenue advances will not be payable and the license will terminate. During the nine months ended September 30, 2022, Trust Stamp received the initial $1.5 million payment, recorded the non-refundable revenue advance to deferred revenue, and recognized no IGS revenue.

Going Concern

The accompanying 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 loss in the nine months ended September 30, 2022 of $8.05 million, operating cash outflows of $4.84 million for the same period, and an accumulated deficit of $35.26 million as of September 30, 2022.

The Company’s ability to continue as a going concern in the next twelve months following the date the 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. Refer to Revenue Recognition in Note 1 to the consolidated financial statements included under Item 1 for an expanded discussion of the 90-day cessation, subsequent 60-day cessation, and eventual termination of the ICE renewal. Management has evaluated these conditions and plans to generate revenue and raise capital as needed to satisfy its 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 factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period.

Equity, Notes, and Warrants

Regulation D, Regulation S and Regulation CF Offerings. See more information on Regulation D, Regulation S, and Regulation CF fundraising efforts, as well as exercise of warrants by existing warrant holders of the Company, in the Liquidity and Capital Resources subsection above.

Armistice Capital Master Fund Ltd. Securities Purchase Agreement. See more information on the Securities Purchase Agreement with Armistice Capital Master Fund Ltd. in the Liquidity and Capital Resources subsection above.

Operating Activities

Net cash used in operating activities decreased by 8.15% from $5.27 million for the nine months ended September 30, 2021 to $4.84 million for the nine months ended September 30, 2022. Of the $8.05 million net loss for the nine months ended September 30, 2022, there was a non-cash expense of $1.60 million related to an accounting estimate used to calculate stock-based compensation, decrease in warrant liability of $88 thousand, repayment of shareholder loan through in-kind services of $84 thousand, digital asset impairment of $25 thousand, and $548 thousand for depreciation and amortization that was added back to net loss. Additionally, $1.05 million from the timing of accrual was subtracted from net loss to arrive at a $4.84 million cash outflow from operating activities.

Table of Contents

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2022 was $735 thousand, compared to net cash of $632 thousand used in the nine months ended September 30, 2021. Cash used in investing activities for the nine months ended September 30, 2022 and 2021 were related primarily to continued investments to develop future technologies that we intend to capitalize and monetize over time. During the nine months ended September 30, 2022, capitalized internal-use software increased by 59.85% compared the nine months ended September 30, 2021. This is also a result of the Company’s investments in R&D, which, during the nine months ended September 30, 2022, produced twelve new pending patent applications and eight issued patents with the United States Patent and Trademark Office.

During the nine months ended September 30, 2021, we completed an acquisition of Pixelpin Ltd (completed on March 18, 2021), in exchange for $91 thousand in cash. Pixelpin Ltd is an image-based “Pin-on-Glass” account access solution that alleviates pain-points of traditional login methods while ensuring the security of authentication. This acquisition further enhances Trust Stamp’s innovative portfolio of technology solutions that enable improved customer experiences and reputation while broadening the scope of internal risk-management strategies and providing additional options for multi-factor authentication.

Financing Activities

For the nine months ended September 30, 2022, net cash provided by financing activities was $5.08 million, compared to net cash of $4.53 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, cash received included the $3.38 million from a warrant exercise received in December 2021 from SCV and REach® Ventures, $78 thousand from the exercise of options, $1.42 million from the sale of Class A Common Stock and warrants exercisable into Class A Common Stock in a private investment in public equity agreement with Armistice Capital Master Fund Ltd. (“Armistice PIPE”), $254 thousand in units sold and warrants exercised in connection to the Company’s 2021 raises under Regulation CF, Regulation D, and Regulation S in preparation for our Nasdaq listing, an offset of $60 thousand for principal payments made for the financial liability, and.

During the nine months ended September 30, 2021, cash received primarily related to our private fundraise under SEC Regulations D and Regulation S, from which the Company closed $3.97 million in net proceeds. Additionally, the Company received $858 thousand in proceeds from a soft loan, a potentially repayable loan, from the government of Malta. On April 22, 2021, the Company paid off its remaining hard loan balance on the books which was a venture loan with Second Century Ventures, LLC for $379,053 including interest.

Contractual Obligations and Commitments

The following table summarizes our non-cancellable contractual obligations as of September 30, 2022:


Payments Due by Period
			Less Than
	Total		1 Year		1-3 Years		3-5 Years
Operating lease obligations	$	539,119	$	111,290	$	425,404	$	2,425
Financial liability obligations		237,340		29,715		207,625		—

Total contractual obligations	$	776,459	$	141,005	$	633,029	$	2,425

The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

Table of Contents

The critical accounting policies and estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Capitalized Internal-Use Software, Net

Costs related to software acquired, developed, or modified solely to meet our internal requirements, with no substantive plans to market such software at the time of development are capitalized. The Company capitalizes eligible costs to develop internal-use software that are incurred subsequent to the preliminary project stage through the development stage. These costs consist of personnel costs (including related benefits and stock-based compensation) that are incurred during the application development stage. Costs incurred during the preliminary project stage and during the post-implementation operational stage are expensed as incurred. Maintenance costs are expensed as incurred. The estimated useful life of costs capitalized is evaluated for each specific project. Actual economic lives may differ from estimated useful lives. Periodic reviews could result in a change in estimated useful lives and therefore changes in amortization expense in future periods.

Revenue Recognition

The Company derives its revenue primarily from professional services. Revenue is recognized upon transfer of control of promised products and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. If the consideration promised in a contract includes a variable amount, the Company includes an estimate of the amount it expects to receive or the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur.

The Company determines the amount of revenue to be recognized through the application of the following steps:

●

Identification of the contract, or contracts with a customer;

●

Identification of the performance obligations in the contract;

●

Determination of the transaction price;

●

Allocation of the transaction price to the performance obligations in the contract; and

●

Recognition of revenue when or as the Company satisfies the performance obligations.

During the year ended December 31, 2021, the Company entered into a significant contract with ICE that contained multiple performance obligations, including software application development, mobile hardware, and services to assist ICE. The Company allocates the transaction price for this contract based on the stand-alone selling price of each performance obligation. The Company uses the expected cost-plus margin approach for determining the stand-alone selling prices of the mobile hardware and services to assist ICE, as this is believed to be the most accurate method of allocating the transaction price to these performance obligations, maximizing the use of observable inputs. As the Company does not have a similar software application that has been sold to another customer, the Company uses the residual approach for determining the stand-alone selling price of the software application development by subtracting the sum of the stand-alone selling prices for the mobile hardware and services to assist ICE from the total transaction price.

Executed on April 5, 2022, and made effective March 27, 2022, Trust Stamp agreed to a modification of this contract with ICE, increasing the total contract award value to $7,176,364 from the original $3,920,764 and extending the delivery period until September 26, 2022 (subject to a right of early termination by ICE). However, due to a recent change in legislation (enacted through H.R. 2471: Consolidated Appropriations Act, 2022) which requires a Congressional notification in order for ICE to award a contract or subcontract to a particular entity for any pilot or demonstration program that uses more than 5 full-time equivalents or costs in excess of $1,000,000, effective April 15, 2022, the Company entered into an amendment with ICE to amend the terms of the ICE Contract, implementing an up to 90-day cessation of performance of the Company’s and ICE’s obligations (the “Amendment”). This change in legislation was retroactively applied to the March 27, 2022, modification to the ICE Contract. The up to 90-day cessation of the ICE Contract provided by the Amendment was intended to allow ICE ample time to obtain a Congressional notification for the modification of the ICE Contract,

Table of Contents

so that the Company could continue to provide services to ICE under the ICE Contract. During the cessation period, Trust Stamp continued to incur maintenance costs specific to the April 5, 2022 modification contract, without recognizing or receiving the revenue, in order that we could be positioned to restart immediately if and when the cessation is lifted.

On September 15, 2022, the Company entered into a Master Services Agreement (“the MSA”) with Innovative Government Solutions ("IGS") under which the Company and IGS will jointly offer services and IGS is granted a 12-year (renewable) license (“the license”) to resell the Company’s technology subject to payment by IGS of agreed revenue advances and end user license fees. On execution of the MSA, IGS agrees to pay $1,500,000 to the Company as a non-refundable revenue advance, an additional $1,500,000 non-refundable revenue advance on the first anniversary of the MSA, and $1,000,000 on each of the next two anniversaries of the MSA as additional non-refundable revenue advances. IGS has the right to terminate the MSA for convenience before the additional non-refundable revenue advances become due in which case the unpaid additional non-refundable revenue advances will not be payable and the license will terminate. During the nine months ended September 30, 2022, Trust Stamp received the initial $1.5 million payment, recorded the non-refundable revenue advance to deferred revenue, and recognized no IGS revenue.

Contract Balances

The timing of customer billing and payment relative to the start of the service period varies from contract to contract; however, the Company bills many of its customers in advance of the provision of services under its contracts, resulting in liabilities consisting of either deferred revenue (a “contract liability”) or customer deposit liabilities. Deferred revenue represents billings under noncancelable contracts before the related product or service is transferred to the customer. Such amounts are recognized by the Company over the life of the contract upon meeting the revenue recognition criteria, but generally within one year. Customer deposit liabilities consist of billings or payments received in advance of the start of the contractual term or for anticipated revenue generating activities for the portion of a contract term that is subject to cancellation for convenience. Certain of the Company’s arrangements generally include terms that allow the customer to terminate the contract for convenience and receive a refund of the amount of the customer deposit for the percentage of the work not performed prior to the notice of termination. In these arrangements, the Company concluded there are no enforceable rights and obligations after such notice period and therefore the consideration received or due from the customer that is subject to termination for convenience is recorded as customer deposit liabilities.

The payment terms and conditions vary by contract; however, the Company’s terms generally require payment within 30 to 60 days from the invoice date. In instances where the timing of revenue recognition differs from the timing of payment, the Company elected to apply the practical expedient in accordance with ASC 606 to not adjust contract consideration for the effects of a significant financing component, as the Company expects, at contract inception, that the period between when promised goods and services are transferred to the customer and when the customer pays for those goods and services will be one year or less. As such, the Company determined its contracts do not generally contain a significant financing component.

Costs to Obtain and Fulfill Contracts

Incremental costs of obtaining a contract include only those costs that are directly related to the acquisition of contracts, including sales commissions, and that would not have been incurred if the contract had not been obtained. The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it is expected that the economic benefit and amortization period will be

Table of Contents

longer than one year. Costs to obtain contracts were not material in the periods presented. The Company recognizes an asset for the costs to fulfill a contract with a customer if the costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. Costs to fulfill contracts were not material in the periods presented. The Company elected to apply the practical expedient in accordance with ASC 340, which allows the Company to expense commissions as incurred when the contract term is twelve months or less in total.

Warrants

The Company accounts for stock warrants as either equity instruments, derivative liabilities, or liabilities in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”), depending on the specific terms of the warrant agreement.

Stock- Based Compensation

The Company accounts for its stock-based compensation arrangements at fair value. Fair value of each option grant is estimated on the date of grant using either the Black-Scholes-Merton Model for stock options granted or using the fair value of a common stock for grants and restricted stock units. The calculated fair value is recognized as an expense over the requisite service period, net of estimated forfeitures, using the straight-line method.

Income Taxes

The Company records a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax bases of assets and liabilities, as well as for loss and tax credit carryforwards. The deferred assets and liabilities are measured using the statutorily enacted tax rates anticipated to be in effect when those tax assets and liabilities are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

The Company’s tax positions are subject to income tax audits by multiple tax jurisdictions. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not, that the position will be sustainable upon examination by the taxing authority, including resolution of any related appeals or litigation processes. This evaluation is based on all available evidence and assumes that the tax authorities have full knowledge of all relevant information concerning the tax position. The tax benefit recognized is measured as the largest amount of benefit which is more likely than not (greater than 50% likely) to be realized upon ultimate settlement with the taxing authority. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense. The Company makes adjustments to these reserves in accordance with the income tax guidance when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences may affect the provision for income taxes in the period in which such determination is made and could have a material impact on the Company’s financial condition and operating results.

Recent Accounting Pronouncements

For information on recently issued accounting pronouncements, refer to Note 1, Description of Business and Summary of Significant Accounting Policies in our condensed consolidated financial statements included elsewhere under Item 1 in this report.

As a Nasdaq listed public reporting company, we are required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company”, we may take advantage of certain exemptions from

Table of Contents

various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies”, including but not limited to:

●

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

●

taking advantage of extensions of time to comply with certain new or revised financial accounting standards;

●

being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

●

being exempt from the requirement to hold a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We may remain an “emerging growth company” for up to five years, beginning January 26, 2022, although if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of any June 30th before that time, we would cease to be an “emerging growth company” as of the following December 31st.

In summary, we are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies” and therefore, our shareholders could receive less information than they might expect to receive from more mature public companies.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company, and thus, this section is not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving their desired control objectives.

Based on the evaluation Company’s disclosure controls and procedures as of the end of the period covered by this report, its Chief Executive Officer and Chief Financial Officer concluded that, as of such date, its disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

In connection with the audit of our financial statements for the year ended December 31, 2021, our independent auditor identified material weaknesses in our internal control over financial reporting. The material weaknesses related to certain corporate finance and accounting oversight functions reside over the detection of errors that were present within the Company’s calculation of stock-based awards as well as the financial reporting close process.

During the nine months ended September 30, 2022, covered by this report, there have been no changes in Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

Table of Contents

Notwithstanding this material weakness, management has concluded that our financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in accordance with GAAP.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are involved in various claims and legal actions arising in the ordinary course of business. To the knowledge of our management, there are no legal proceedings currently pending against us which we believe would have a material effect on our business, financial position, or results of operations and, to the best of our knowledge, there are no such legal proceedings contemplated or threatened.

Item 1A. Risk Factors.

Not applicable.

Table of Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the nine months ended September 30, 2022, the Company sold the following securities in transactions not registered under the Securities Act:

Table of Contents

Number of

Date Closed

Offering

Date

shares

Class of

Proceeds

Use of

(if Open,

Type

Intermediary

Commenced

issued

Securities

Raised

Proceeds

N/A)

2021 Reg CF

Dalmore Group LLC

8/25/2021

1,137,975

Units comprised of Class A Common Stock and Warrants to acquire Class A Common Stock

4.6 million

Product development, marketing, and working capital

2/18/2022

2021 Reg D

n/a

8/25/2021

240,989

Units comprised of Class A Common Stock and Warrants to acquire Class A Common Stock

1.0 million

Product development, marketing, and working capital

2/1/2022

2021 Reg S

n/a

8/25/2021

56,104

Units comprised of Class A Common Stock and Warrants to acquire Class A Common Stock

0.2 million

Product development, marketing, and working capital

1/7/2022

2022 Reg A

n/a

01/26/2022

14,250

Shares of Class A Common Stock issuable upon exercise of Reg CF, Reg D, and Reg S Warrants

57,000

Product development, marketing, and working capital

N/A

Table of Contents

2022 Reg D

Maxim Group LLC

09/14/2022

1,975,000

Class A Common Stock Warrants to purchase Class A Common Stock

1.51 million

Working Capital

9/14/2022

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Table of Contents

Item 6. Exhibits.

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.


3.1		Amended and Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 2.1 to the Company’s Form DOS filed with the SEC on December 30, 2019).

3.2		Bylaws (incorporated by reference to Exhibit 2.2 to the Company’s Form DOS filed with the SEC on December 30, 2019).

3.3		Certificate of Amendment to Amended and Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 2.3 to the Company’s Form 1-A/A filed with the SEC on April 6, 2020).

3.4		Certificate of Amendment to Amended and Restated Certificate of Incorporation, as amended (Incorporated by reference to Exhibit 2.3 of the Company’s Form 1-U filed with the SEC on August 20, 2021)

10.7		Emergent Agreement dated June 11, 2020 (incorporated by reference to Exhibit 6.11 to the Company’s Form 1-SA for the six months ended fsi, 2020 filed with the SEC on September 28, 2020). (incorporated by reference to Exhibit 6.10 to the Company’s Form 1-A/A filed with the SEC on January 12, 2022).

10.9		Executive Employment Agreements of Gareth Genner and Andrew Gowasack, effective as of December 8, 2020 (incorporated by reference to Exhibit 6.13 to the Company’s Form 1-K for the year ended December 31, 2020 filed with the SEC on April 30, 2021).

10.11		Malta Enterprise Letter dated July 8, 2020 sent to the Company (Repayable Advance of €800,000) (incorporated by reference to Exhibit 6.14 to the Company’s Form 1-A/A filed with the SEC on January 12, 2022).

10.12		Purchase Order executed September 23, 2021 issued by U.S. Immigration and Customs Enforcement to the Company (as Contractor) (incorporated by reference to Exhibit 6.15 to the Company’s Form 1-A/A filed with the SEC on January 12, 2022).

10.13		Letter of Appointment effective December 1, 2021 sent by the Company to Berta Pappenheim (as non-executive director appointee) (incorporated by reference to Exhibit 6.16 to the Company’s Form 1-A/A filed with the SEC on January 12, 2022).

10.14		Letter of Appointment effective December 1, 2021 sent by the Company to Kristin Stafford (as non-executive director appointee) (incorporated by reference to Exhibit 6.17 to the Company’s Form 1-A/A filed with the SEC on January 12, 2022).

10.15		Warrant Agency Agreement between the Company and Colonial Stock Transfer Company, Inc. dated August 20, 2021. (incorporated by reference to Exhibit 6.18 to the Company’s Form 1-A/A filed with the SEC on January 12, 2022).

10.16		Mutual Channel Agreement dated November 15, 2020 between the Company and Vital4Data, Inc. (incorporated by reference to Exhibit 6.19 to the Company’s Form 1-A/A filed with the SEC on January 12, 2022).

10.18		Warrant to Purchase Common Stock between the Company and Second Century Ventures, LLC dated April 22, 2020 (incorporated by reference to Exhibit 6.9 to the Company’s Form 1-A/A filed with the SEC on April 30, 2020).

10.19		Settlement Agreement dated July 1, 2019 between Emergent Technology Holdings, LP and the Company (Included as Exhibit 6.1 to the Company’s Form 1-A filed with the SEC on March 12, 2020). (incorporated by reference to Exhibit 6.1 to the Company’s Form 1-A/A filed with the SEC on January 12, 2022).

10.20		Amendment dated April 15, 2022 to Purchase Order executed September 23, 2021 issued by U.S. Immigration and Customs Enforcement to the Company (as Contractor) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 21, 2022).

Table of Contents


10.21		Amendment dated July 15, 2022 to Purchase Order executed September 23, 2021 issued by U.S. Immigration and Customs Enforcement to the Company (as Contractor) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed within).

31.1*		Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase

104		Cover Page Interactive Data File—the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

* Filed herewith.

Table of Contents

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 10, 2022


/s/ Alex Valdes
Alex Valdes, Principal Financial Officer, Principal Accounting Officer
Date: November 10, 2022


/s/ Andrew Gowasack
Andrew Gowasack, President, Director
Date: November 10, 2022


/s/ David Story
David Story, Director
Date: November 10, 2022


/s/ William McClintock
William McClintock, Director
Date: November 10, 2022


/s/ Mark Birschbach
Mark Birschbach, Director
Date: November 10, 2022


/s/ Joshua Allen
Joshua Allen, Director
Date: November 10, 2022


/s/ Kristin Stafford
Kristin Stafford, Director
Date: November 10, 2022


/s/ Berta Pappenheim
Berta Pappenheim, Director
Date: November 10, 2022