T Stamp (US:IDAI)2024-08-13 21:12PART I FINANCIAL INFORMATION Item 1. Financial Statements Presents T Stamp Inc.'s unaudited condensed consolidated financial statements as of June 30, 2024, reflecting a $5.28 million net loss and substantial going concern doubt Condensed Consolidated Balance Sheets As of June 30, 2024, total assets decreased to $5.19 million, liabilities increased, and equity declined to $0.91 million, reflecting ongoing losses Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2024 ($) | December 31, 2023 ($) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 659,533 | 3,140,747 | | Total Current Assets | 1,928,446 | 4,697,942 | | Total Assets | 5,193,358 | 7,893,314 | | Liabilities & Equity | | | | Total Current Liabilities | 3,002,534 | 2,714,250 | | Total Liabilities | 4,281,521 | 3,978,434 | | Total Stockholders' Equity | 911,837 | 3,914,880 | | Total Liabilities and Stockholders' Equity | 5,193,358 | 7,893,314 | Condensed Consolidated Statements of Operations Net revenue increased for the three and six months ended June 30, 2024, but rising operating expenses led to larger operating and net losses, totaling $5.28 million for the first half Statement of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2024 ($) | Three Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2024 ($) | Six Months Ended June 30, 2023 ($) | | :--- | :--- | :--- | :--- | :--- | | Net revenue | 500,395 | 460,804 | 1,074,071 | 919,438 | | Total Operating Expenses | 3,125,761 | 2,843,213 | 6,548,695 | 5,881,280 | | Operating Loss | (2,625,366) | (2,382,409) | (5,474,624) | (4,961,842) | | Net loss attributable to T Stamp Inc. | (2,598,361) | (2,170,368) | (5,276,930) | (4,717,818) | | Basic and diluted net loss per share | (0.21) | (0.32) | (0.47) | (0.80) | Condensed Consolidated Statements of Cash Flows Operating activities used $3.76 million cash, financing provided $1.63 million (down from $7.42 million), resulting in a $2.48 million net cash decrease, ending with $659,533 Cash Flow Summary for Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Net cash flows from operating activities | (3,756,928) | (3,581,369) | | Net cash flows from investing activities | (363,086) | (17,249) | | Net cash flows from financing activities | 1,633,487 | 7,415,347 | | Net change in cash and cash equivalents | (2,481,214) | 3,780,920 | | Cash and cash equivalents, end of period | 659,533 | 5,035,414 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies and financial items, highlighting a 'Going Concern' warning due to net losses, negative operating cash flows, and working capital deficit, alongside subsequent financing - The company's financial statements are prepared on a going concern basis, but management has identified conditions that raise substantial doubt about its ability to continue due to a net loss of $5.28 million, negative operating cash flow of $3.76 million, and a working capital deficit of $1.07 million for the six months ended June 30, 2024262728 - Subsequent to the quarter end, on July 13, 2024, the company entered into a Securities Purchase Agreement to sell 4,597,701 shares of Class A Common Stock for a total of $2.0 million, paid via three promissory notes, with the first $500,000 received on July 25, 20242930 - Revenue is highly concentrated, with three customers (an S&P 500 Bank, Mastercard, and Triton) accounting for 96.21% of total net revenue in Q2 2024 and 95.37% in the first half of 20243940 - In August 2024, the company entered into a license agreement with Boumarang Inc., granting a non-exclusive license to its patents for use in drones, receiving a non-refundable $5 million license fee in the form of a prepaid warrant for 5 million shares of Boumarang common stock113 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting a 16.8% net revenue increase, but rising operating expenses led to a $5.28 million net loss, reiterating liquidity challenges and 'going concern' risk, with subsequent $2 million financing Overview and Key Customers Trust Stamp develops AI identity solutions, pivoting to a scalable SaaS 'Orchestration Layer' model, expanding its customer base through FIS while maintaining key partnerships - The company is strategically pivoting from custom solutions to a modular and scalable SaaS model with its 'Orchestration Layer' platform, which is the primary focus of sales and development131 - As of June 30, 2024, 62 enterprise customers are on the Orchestration Layer platform, including 54 financial institutions onboarded via a partnership with FIS136149 - The company's relationship with Mastercard, utilizing its IT2 technology for the Community Pass program, was extended to April 2027, with Mastercard's program serving 3.5 million users and targeting 30 million by 2027, and user-based revenue for Trust Stamp anticipated to start in 2024132133134 Results of Operations Net revenue grew 16.8% to $1.07 million, but increased cost of services and SG&A expenses led to a 10.3% wider operating loss of $5.47 million for the six months ended June 30, 2024 Comparison of Results for the Six Months Ended June 30 | Metric | 2024 ($) | 2023 ($) | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | 1,074,071 | 919,438 | 16.82% | | Cost of Services | 542,033 | 420,887 | 28.78% | | Research & Development | 1,016,578 | 1,206,766 | (15.76)% | | Selling, General, & Administrative | 4,624,088 | 3,847,173 | 20.19% | | Operating Loss | (5,474,624) | (4,961,842) | 10.33% | - The increase in net revenue was primarily driven by an S&P 500 bank adopting the Orchestration Layer, which contributed an additional $405 thousand in gross revenue during the first half of 2024160 - The rise in SG&A expense was mainly due to a $1.07 million increase in salaries, stock-based compensation, and sales commissions as the company reinforced its sales resources and insourced technical positions167 Liquidity and Capital Resources As of June 30, 2024, the company had $660,000 cash, insufficient for 12 months due to net losses and operating cash outflows, acknowledging 'going concern' risk, with subsequent $2 million financing secured - The company had approximately $660,000 in cash as of June 30, 2024, which is insufficient to fund operations for the next 12 months176 - A Securities Purchase Agreement was executed on July 13, 2024, to raise $2.0 million through the sale of common stock, funded by three promissory notes, with the first $500,000 received on July 25, 2024177178 Cash Flow Summary for Six Months Ended June 30 | Cash Flow Activity | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Net cash flows from operating activities | (3,756,928) | (3,581,369) | | Net cash flows from investing activities | (363,086) | (17,249) | | Net cash flows from financing activities | 1,633,487 | 7,415,347 | Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of June 30, 2024, with no material changes during the quarter - Based on an evaluation as of June 30, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective193 - Management's assessment concluded that the company's internal control over financial reporting was effective as of June 30, 2024194 PART II OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any litigation, and management is unaware of any pending or threatened legal actions - The Company is not currently involved in any litigation and is not aware of any pending or threatened legal actions197 Item 2. Unregistered Sale of Equity Securities and Use of Proceeds The company disclosed an unregistered sale of 499,990 Class A Common Stock shares and warrants for $1,936,000 on April 3, 2024, with proceeds used for general working capital - On April 3, 2024, the Company sold 499,990 shares of Class A Common Stock and issued warrants to an institutional investor for a total of $1,936,000 in a transaction exempt from registration under Section 4(a)(2) of the Securities Act199 Item 5. Other Information The company entered a material definitive agreement on August 6, 2024, granting Boumarang Inc. a non-exclusive patent license for a $5,000,000 non-refundable fee paid as a prepaid warrant for 5,000,000 Boumarang common shares - On August 6, 2024, the Company entered into a License Agreement with Boumarang Inc., a drone manufacturer200 - As consideration, the Company received a $5,000,000 non-refundable license fee, paid in the form of a prepaid warrant for 5,000,000 shares of Boumarang common stock at $1.00 per share200 Item 6. Exhibits This section lists exhibits filed with the quarterly report, including corporate governance documents, warrant agreements, material contracts, and officer certifications