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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

Or

  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.

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

2

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.

3

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.

4

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.

5

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

6

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

7

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