T Stamp (IDAI) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information for T Stamp Inc., including financial statements, management's discussion, and disclosures on controls and market risk Financial Statements This section presents the unaudited condensed consolidated financial statements for T Stamp Inc. as of March 31, 2023, and for the three months then ended Condensed Consolidated Balance Sheets The balance sheet reflects a significant decrease in total assets and a shift to a stockholders' deficit as of March 31, 2023, compared to year-end 2022 Condensed Consolidated Balance Sheet Highlights (Unaudited) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $773,114 | $1,254,494 | | Total Current Assets | $1,799,572 | $2,874,401 | | Total Assets | $5,160,818 | $6,411,918 | | Total Current Liabilities | $5,892,524 | $4,447,573 | | Total Liabilities | $7,119,788 | $5,786,774 | | Total Stockholders' Equity (Deficit) | $(1,958,970) | $625,144 | Condensed Consolidated Statements of Operations The statements of operations show a substantial decline in net revenue and a widened net loss for the three months ended March 31, 2023, compared to the prior year Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net revenue | $458,633 | $2,821,044 | | Total Operating Expenses | $3,038,383 | $4,462,164 | | Operating Loss | $(2,579,750) | $(1,641,120) | | Net loss attributable to T Stamp Inc. | $(2,547,450) | $(1,692,062) | | Basic and diluted net loss per share | $(0.50) | $(0.37) | Condensed Consolidated Statements of Cash Flows Cash and cash equivalents decreased significantly in Q1 2023 due to cash usage across all activities, contrasting with a substantial increase in the prior year period Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net cash flows from operating activities | $(154,578) | $(1,141,310) | | Net cash flows from investing activities | $(191,231) | $(244,755) | | Net cash flows from financing activities | $(103,058) | $3,696,352 | | Net change in cash and cash equivalents | $(481,380) | $2,360,456 | | Cash and cash equivalents, end of period | $773,114 | $5,836,151 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies and financial condition, including a 'going concern' warning, customer concentration, and a significant subsequent capital raise - The financial statements were prepared on a going concern basis, but the company's history of losses ($2.55 million in Q1 2023), negative working capital ($4.09 million), and accumulated deficit ($41.85 million) raise substantial doubt about its ability to continue as a going concern[24] - In April 2023, subsequent to the quarter end, the company raised net proceeds of $4.78 million through a registered direct offering of Class A Common Stock and pre-funded warrants, which is a critical event for its liquidity[27][137] - The company has a high concentration of customer revenue. In Q1 2023, three customers (an S&P 500 Bank, Mastercard, and FIS) accounted for 78.77% of total net revenue. In Q1 2022, a single customer (ICE) accounted for 79.42% of net revenue[41][43] - On February 15, 2023, the Board approved a 1-for-5 reverse stock split of the Class A Common Stock, which became effective for trading on March 23, 2023. All share and per-share amounts have been retroactively restated[23] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Q1 2023 financial performance, highlighting revenue decline due to contract termination, liquidity challenges, and the impact of a recent capital raise Results of Operations Net revenue significantly decreased in Q1 2023 primarily due to a contract termination, leading to an increased operating loss despite reduced operating expenses Comparison of Key Operating Metrics (Q1 2023 vs Q1 2022) | Metric | Q1 2023 | Q1 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $458,633 | $2,821,044 | $(2,362,411) | (83.74)% | | Cost of services | $216,958 | $693,978 | $(477,020) | (68.74)% | | Research and development | $632,369 | $493,686 | $138,683 | 28.09% | | Selling, general, and administrative | $1,969,875 | $3,120,572 | $(1,150,697) | (36.87)% | | Operating loss | $(2,579,750) | $(1,641,120) | $(938,630) | (57.19)% | - The decrease in revenue is primarily attributed to the termination of the U.S. Immigration and Customs Enforcement (ICE) contract, which produced $2.24 million in revenue during Q1 2022[178] - The decrease in Selling, general, and administrative (SG&A) expense was mainly driven by reductions in headcount (from 100 FTEs to 83 FTEs) and associated overhead, as well as lower bonuses and commissions[184] Liquidity and Capital Resources The company's liquidity significantly weakened in Q1 2023, exacerbating 'going concern' risks, though a subsequent capital raise substantially improved the pro forma cash position - Cash and cash equivalents decreased from $1.25 million at year-end 2022 to $773 thousand as of March 31, 2023[196] - The company's current ratio (current assets / current liabilities) deteriorated from 0.65 at Dec 31, 2022, to 0.31 at March 31, 2023, reflecting increased pressure on short-term liquidity[200] - A pro forma balance sheet, adjusted for the April 2023 financing, shows cash increasing to $4.11 million and Total Stockholders' Equity becoming positive at $2.77 million, demonstrating the critical impact of the subsequent capital raise[206] Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide the information for this item - As a smaller reporting company, T Stamp Inc. is exempt from providing quantitative and qualitative disclosures about market risk[227] Controls and Procedures Management evaluated the company's disclosure controls and procedures as of March 31, 2023, noting a persistent material weakness in internal control over financial reporting - Management identified a material weakness in internal control over financial reporting related to insufficient review of journal entries and inadequate controls over management information systems[231] - A remediation plan is in place to add controls for journal entry review and to improve IT general controls related to program changes, segregation of duties, and access[232] - No changes to internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[234] PART II. OTHER INFORMATION This section covers other required disclosures, including legal proceedings, risk factors, unregistered sales of equity securities, and recent corporate actions Legal Proceedings The company is not currently involved in any litigation, and management is not aware of any pending or threatened legal actions - The Company is not currently involved with and does not know of any pending or threatening litigation[235] Risk Factors This item is not applicable for this filing - Not applicable[236] Unregistered Sales of Equity Securities and Use of Proceeds The company did not sell any unregistered securities during the three months ended March 31, 2023 - During the three months ended March 31, 2023, the Company did not sell any securities in transactions not registered under the Securities Act[237] Other Information As of May 13, 2023, the company received majority stockholder approval for the Second Amended and Restated Certificate of Incorporation and to ratify the reverse stock split - On May 13, 2023, the company received majority stockholder approval to ratify the reverse stock split effected on March 23, 2023[240][241]