T Stamp Inc

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business, Summary of Significant Accounting Policies, and Going Concern

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

Trust Stamp primarily develops proprietary artificial intelligence-powered solutions, researching and leveraging machine learning artificial intelligence, including computer vision, cryptography, and data mining, to process and protect data and deliver insightful outputs that identify and defend against fraud, protect sensitive user information, facilitate automated processes, and extend the reach of digital services through global accessibility. We utilize the power and agility of technologies such as GPU processing, edge computing, neural networks, and large language models to process and protect data faster and more effectively than historically possible to deliver results at a disruptively low cost for usage across multiple industries.

Our team has substantial expertise in the creation and development of AI-enabled software products. We license our technology and expertise in numerous fields, with an increasing emphasis on addressing diverse markets through established partners who will integrate our technology into field-specific applications.

Reverse Split —On December 30, 2024, the Company filed a Certificate of Amendment to the Company’s Third Amended and Restated Certificate of Incorporation, which was previously approved by the Company’s stockholders at the special meeting of the Company's stockholders held on November 18, 2024, which was described in the Company’s definitive proxy statement filed with the SEC on September 30, 2024, to effectuate a reverse stock split at a ratio of one (1) share of Common Stock for every fifteen (15) shares of Common Stock (the “Reverse Stock Split”) which became effective as of the opening of business on January 6, 2025 (the “Effective Time”). Accordingly, all share and per share amounts for all periods presented in the accompanying unaudited condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split.

Going Concern — The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is a business that has not yet generated profits, with a net loss during the three months ended March 31, 2025 of $2.16 million, net operating cash outflows of $1.54 million for the same period, positive working capital of $1.44 million, and an accumulated deficit of $63.62 million as of March 31, 2025.

The Company’s ability to continue as a going concern in the next twelve months following the date the unaudited condensed consolidated financial statements were available to be issued is dependent upon its ability to produce revenues and/or obtain financing sufficient to meet current and future obligations and deploy such to produce profitable operating results. Management has evaluated these conditions and plans to generate revenue and raise capital as needed to satisfy the Company’s capital needs. While the negotiation of significant additional revenue is well advanced, it has not reached a stage that allows it to be factored into a going concern evaluation. In addition, although the Company has previously been successful in raising capital as needed and has already made plans to do so as well as restructuring expenses to meet the Company’s cash needs, no assurance can be given that the Company will be successful in its capital raising efforts. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for the next twelve months since issuance of these financial statements.

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with US Generally Accepted Accounting Principles (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The accompanying unaudited condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

Basis of Consolidation — The accompanying unaudited condensed consolidated financial statements reflect the activity of the Company and its subsidiaries, Trust Stamp Malta Limited (“Trust Stamp Malta”), Biometric Innovations Limited (“Biometrics”), Trust Stamp Rwanda Limited, Trust Stamp Denmark ApS, Trust Stamp Nigeria Limited, Quantum

Foundation, Trusted Mail Inc. (“Trusted Mail”), and Finnovation LLC (“Finnovation”). All significant intercompany transactions and accounts have been eliminated.

The Company has completed the process of administratively dissolving AIID Payments Limited and the dissolution was effective October 29, 2024.

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

In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments necessary (which adjustments are of a normal and recurring nature) for the fair presentation of the Company's financial position as of March 31, 2025 and December 31, 2024, and the results of operations for the three months ended March 31, 2025 and 2024. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of results expected for the full year. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. The accounting policies employed are substantially the same as those shown in note 1 of the notes to consolidated financial statements included therein.

Variable Interest Entity — On April 9, 2023, management created a new entity, Tstamp Incentive Holdings (“TSIH”) to which the Company issued 21,368 shares of Class A Common Stock that the Board of Directors of TSIH could use for employee stock awards in the future. The purpose of the entity was to provide an analogous structure to a traditional stock incentive plan. As of March 31, 2025 and the date of this report, no shares of Class A Common Stock are held by TSIH as all shares have been issued pursuant to employee Restricted Stock Units. The Company has completed the process of administratively dissolving TSIH with the dissolution effective as of February 13, 2025.

Major Customers and Concentration of Risks — Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of Cash and cash equivalents, and Accounts receivable. We maintain our Cash and cash equivalents with high-quality financial institutions, mainly in the United States; the composition of which are regularly monitored by us. The Federal Deposit Insurance Corporation covers$250 thousand for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits. As of March 31, 2025 the Company had$674 thousand ofdeposits in excess of insured limits, meanwhile as at December 31, 2024, the Company had$2.16 million in U.S. bank accounts which exceeded insured limits. Management believes minimal credit risk exists with respect to these financial institutions and the Company has not experienced any losses on such amounts.

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 unaudited condensed 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.

Two customers represented 79.81% or 40.92% and 38.88% of the balance of total Accounts receivable as of March 31, 2025 and one customer represented 78.50% of the balance of total accounts receivable as of December 31, 2024. The Company seeks to mitigate its credit risk with respect to accounts receivable by regularly monitoring the aging of accounts receivable balances and contracting with large commercial customers and government agencies. As of March 31, 2025 and December 31, 2024, the Company had not experienced any significant losses on its accounts receivable.

During the three months ended March 31, 2025, the Company sold to primarily two customers which made up approximately 79.69% of total net revenue, and consisted of 63.59% and 16.10%, from an S&P 500 Bank and QID, respectively.

Additionally, during the three months ended March 31, 2024, the Company sold to primarily three customers which made up approximately 94.63% of total net revenue, and consisted of 58.08%,27.38%, and 9.17% from an S&P 500 Bank, Mastercard, and Triton, respectively.

Property and Equipment, Net —Property and equipment, net is stated at cost less accumulated depreciation. Depreciation is recognized using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs that do not improve or extend the useful lives of the assets are expensed when incurred, whereas additions and major improvements are capitalized. Upon sale or retirement of assets, the cost and related accumulated depreciation are derecognized from the consolidated balance sheet and any resulting gain or loss is recorded in the consolidated statements of operations in the period realized.

Accounting for Impairment of Long-Lived Assets —Long-lived assets with finite lives include Property and equipment, net, Capitalized internal-use software, Operating lease right-of-use assets, and Intangible assets, net subject to amortization. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset exceeds these estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

As of March 31, 2025, the Company determined thatno Capitalized internal-use software were impaired. As of December 31, 2024, the Company determined that $25 thousand of Capitalized internal-use software and $2 thousand of Intangible assets was impaired. The impaired Capitalized internal-use software was expensed to research and development during the year ended December 31, 2024.

Cost Method Investment —Cost method investments are accounted for in accordance with ASC 321, Investments – Equity Securities (“ASC 321”). Under this guidance, investments in equity securities in privately-held companies without readily determinable fair values are generally recorded at cost, plus or minus subsequent observable price changes in identical or similar investments, less impairments. The Company elected the practical expedient permitted by ASC 321 and recorded the above investment on a cost basis. As a part of the assessment for impairment indicators, the Company considers significant deterioration in the earnings performance and overall business prospects of the investee as well as significant adverse changes in the external environment the investment operate. If qualitative assessment indicates the investment is impaired, the fair value of the investments would be estimated, which would involve a significant degree of judgement and subjectivity.

The Company evaluates the investment on a quarterly basis for indicators of impairment or observable price changes in orderly transactions for the same or similar investments. There wasno impairment of the Boumarang investment as of March 31, 2025. As of December 31, 2024, the Company recorded $4.38 million for impairment of the Boumarang prepaid warrant and common stock investment as a result of a change in fair value identified by an observable market transaction.

Equity Method Investment —Equity method investments are accounted for in accordance with ASC 323, Investments — Equity Method and Joint Ventures ("ASC 323"). An investment in an entity in which the Company has significant influence over the entity’s financial and operating policies, but does not control, is accounted for using the equity method of accounting. Equity method investments are initially recorded at cost, and subsequently increased for capital contributions and allocations of net income, and decreased for capital distributions, allocations of net loss, or impairments. The Company’s proportionate share of the income or loss from equity method investments is recognized on a one-quarter lag. Net income (loss) from the equity method investment is allocated based on the Company’s economic interest.

Equity method investments are reviewed for impairment whenever significant events or changes in circumstances occur and indicate that the carrying amount may not be recoverable. When those changes are other than temporary, an impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. There wasno impairment of the Company's equity method investments as of March 31, 2025 or December 31, 2024

Goodwill — Goodwill is accounted for in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other. The Company allocates the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase consideration transferred over the fair value of the net assets acquired, including other Intangible assets, net, is recorded as Goodwill. Goodwill is tested for impairment at the reporting unit level at least quarterly or more frequently when events or circumstances occur that indicate that it is more likely than not that an impairment has occurred. In assessing Goodwill for impairment, the Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In the qualitative assessment, the Company considers factors including economic conditions, industry and market conditions and developments, overall financial performance and other relevant entity-specific events in determining whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. Should the Company conclude that it is more likely than not that the recorded Goodwill amounts have been impaired, the Company would perform the impairment test. Goodwill impairment exists when a reporting unit’s carrying value exceeds its fair value. Significant judgment is applied when Goodwill is assessed for impairment. There were no impairment charges to Goodwill as of March 31, 2025 and December 31, 2024.

Remaining Performance Obligations —The Company’s arrangements with its customers often have terms that span over multiple years. However, the Company generally allows its customers to terminate contracts for convenience prior to the end of the stated term with less than twelve months’ notice. Revenue allocated to remaining performance obligations represents non-cancelable contracted revenue that has not yet been recognized, which includes deferred revenue and, in certain instances, amounts that will be invoiced. The Company has elected the practical expedient allowing the Company to not disclose remaining performance obligations for contracts with original terms of twelve months or less. Cancellable contracted revenue, which includes customer deposit liabilities, is not considered a remaining performance obligation. As of March 31, 2025 and December 31, 2024, the Company did not have any related performance obligations for contracts with terms exceeding twelve months.

Disaggregation of Revenue

Recent Accounting Pronouncements Not Yet Adopted — In January 2025, the FASB issued ASU Update 2025-01, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)". The Board issued this Update to clarify the effective date of Accounting Standards Update 2024-03 to be effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027., "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The Company does not expect this guidance to have a material impact to its consolidated financial statements or related disclosures.

In November 2024, the FASB issued Update 2024-03 on November 4, 2024 to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general, and administrative expenses, and research and development expenses). The Company does not expect this guidance to have a material impact to its consolidated financial statements or related disclosures.

Recently Adopted Accounting Pronouncement — In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures". ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption of the amendments is permitted. The Company adopted this update effective December 31, 2024, on a retrospective basis. Refer to Note 12 for the disclosures related to our single operating segment.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures. ASU 2023-09 requires enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. The Company adopted this standard as of January 1, 2025, and the guidance did not have a material impact on its unaudited condensed consolidated financial statements or related disclosures.

2. Borrowings

Promissory Notes Payable

In May 2020, the Company formed a subsidiary in the Republic of Malta, Trust Stamp Malta, with the intent to establish a research and development center with the assistance of potential grants and loans from the Maltese government. As part of the creation of this entity, we entered into an agreement with the government of Malta for a potentially repayable advance of up to €800 thousand or $858 thousand to assist in covering the costs of 75% of the first 24 months of payroll costs for any employee who begins 36 months from the execution of the agreement on July 8, 2020. On February 9, 2021 the Company began receiving funds and as of March 31, 2025, the balance received was $865 thousand which includes changes in foreign currency rates. The liability was paid in full on November 15, 2024.

The Company will pay an annual interest rate of 2% over the European Central Banks (ECB) base rate as set on the beginning of the year in review. If the ECB rate is below negative 1%, the interest rate shall be fixed at 1%. The Company will repay a minimum of 10% of Trust Stamp Malta’s pre-tax profits per annum capped at 15% of the amount due to the Corporation until the disbursed funds are repaid. At this time, Trust Stamp Malta does not have any revenue-generating contracts and therefore, we do not believe any amounts shall be classified as current. The Malta loan interest rate decreased from 6.50% for the three months ended March 31, 2024 to 5.15% for the three months ended March 31, 2025.

Subordinated Business Loans

On July 9, 2024, the Company entered into a subordinated secured promissory note with Agile Lending, LLC ("Agile Loan - July 9, 2024") as lead lender (“Agile”) and Agile Capital Funding, LLC as collateral agent, which provides for a term loan to the Company of $454 thousand with the principal amount of $315 thousand and interest of $139 thousand. Commencing July 18, 2024, the Company is required to make weekly payments of $16 thousand until the due date, January 23, 2025. The loan may be prepaid subject to a prepayment fee. An administrative agent fee of $15 thousand was paid on the loan. In connection with the loan, Agile was issued a subordinated secured promissory note, dated July 9, 2024, in the principal amount of $315 thousand which note is secured by all of the Borrower’s assets, including receivables.

On August 29, 2024, the Company entered into another subordinated secured promissory note with Agile Lending, LLC ("Agile Loan - August 29, 2024") as lead lender (“Agile”) and Agile Capital Funding, LLC as collateral agent, which provides for a term loan to the Company of $763 thousand with the principal amount of $530 thousand and interest of $233 thousand. Commencing September 6, 2024, the Company is required to make weekly payments of $27 thousand until the due date, March 14, 2025. The loan may be prepaid subject to a prepayment fee. An administrative agent fee of $27 thousand was paid on the loan. In connection with the loan, Agile was issued a subordinated secured promissory note, dated August 29, 2024, in the principal amount of $530 thousand which note is secured by all of the Borrower’s assets, including receivables.

On November 15, 2024, the last payment was made by the Company to Agile in order to settle the remaining balance of the promissory note. Even though the Company decided to repay all the balance remaining of the loan ahead of schedule, as per one of the contract clauses, the agreement specified a "Make-Whole Premium," which means that the Company must pay the remaining interest that would have accrued through the full 28 weeks, even if repaying early. The remaining interest that would have accrued for the Agile Loan - July 9, 2024 amounted to $20 thousand, meanwhile for Agile Loan - August 29, 2024, this amounted to $150 thousand. This resulted in a final figure of $1,216,800, which represents the total amount owed by the Company and also the total amount paid by the Company to Agile.

Secured Promissory Note

On November 13, 2024, the Company entered into a secured promissory note with SentiLink Corporation whereas the Company promised to pay to SentiLink Corp. the principal sum of $3,000,000. Interest expense accrued from the date of this promissory note on the unpaid principal amount at a rate equal to 14% per annum, computed as simple interest on the basis of a year of 365 days. On January 10, 2025 the Company repaid the secured promissory note in full totaling $3,069,041, including $69,041 of total interest expense.

3. Warrants

Liability Classified Warrants

The following table presents the change in the liability balance associated with the liability classified warrants, which are classified in Level 3 of the fair value hierarchy from January 1, 2024 to March 31, 2025:

As of March 31, 2025, 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 March 31, 2025.

On December 16, 2016, the Company issued an investor warrant to purchase $50 thousand worth of shares of our Class A Common Stock. The warrants have no vesting period and expires on December 16, 2026. The warrant agreement states that the investor is entitled to the “number of shares of Common Stock with a Fair Market Value as of the Determination Date of $50,000”. The determination date is defined as the “date that is the earlier of (A) the conversion of the investor’s Note into the equity interests of the Company or (B) the maturity date of the Note.” The investor converted the referenced Note on June 30, 2020, therefore, defining the determination date. The number of shares to be purchased is settled as 428 shares as of June 30, 2020. The exercise price of the warrants is variable until the exercise date.

The Company used a Black-Scholes-Merton pricing model to determine the fair value of the warrants and uses this model to assess the fair value of the warrant liability. As of March 31, 2025, the warrant liability is recorded at $480 which is a

$5 thousand decrease, recorded to Change in fair value of warrant liability, from the balance of $5 thousand as of December 31, 2024.

The following assumptions were used to calculate the fair value of the warrant liability:

Equity Classified Warrants

November 9, 2016

The Company has issued a customer a warrant to purchase 5,342 shares of Class A Common Stock with an exercise price of $46.80 per share. The warrant was issued on November 9, 2016. There is no vesting period, and the warrant expires on November 30, 2026.

The warrants to purchase the remaining 5,342 shares of the Company’s Class A Common Stock remain outstanding as of March 31, 2025.

September 3, 2024

On September 3, 2024, the Company entered into a securities purchase agreement with a single institutional investor to purchase 95,494 shares of Class A Common Stock, par value $0.01 of the Company (or pre-funded warrants in lieu thereof) in a registered direct offering priced at-the-market under Nasdaq rules. The shares were purchased at $4.8195 resulting in proceeds of $460,230.

On November 6, 2024, the 95,494 shares were issued upon the exercise of the warrants for $0.0150 per share resulting in $1,432 in proceeds.

In a concurrent private placement, the Company also agreed to issue and sell unregistered warrants to purchase up to an aggregate of 190,987 shares of Class A Common Stock, par value $0.01 of the Company. The exercise price for each share of common stock (or pre-funded warrant in lieu thereof) and accompanying warrant is $4.8345. The private placement warrants will be exercisable upon receipt of shareholder approval and will expire five years from the initial exercise date and will have an exercise price of $4.8345 per share.

The warrants to purchase the remaining 190,987 shares of the Company’s Class A Common Stock remain outstanding as of March 31, 2025.

September 3, 2024

On September 3, 2024, the Company also entered into a warrant inducement agreement with a single institutional investor to exercise 78,203 outstanding warrants that the Company issued on June 5, 2023 (as amended on December 20, 2023) and 240,000 outstanding warrants that the Company issued on December 20, 2023. These warrant exercises are discussed under the June 5, 2023 and December 20, 2023 sections above. In consideration for the immediate exercise of the warrants, the Company also agreed to issue to the investor unregistered warrants to purchase an aggregate of 636,404 shares of the Company's common stock. These warrants have an exercise price of $4.8345 per share, are exercisable upon receipt of shareholder approval on November 18, 2024, and will expire five years from the initial exercise date or November 18, 2029.

In accordance with the Inducement Agreement we recognized a deemed dividend of $1.94 million calculated as the fair value of the warrants and reduction in exercise price of the warrants as described above immediately following the Inducement Agreement. The fair values were determined using the Black Scholes Model. This deemed dividend is added to net loss to arrive at net loss attributable to common stockholders on the statements of operations.

The warrants to purchase the remaining 636,404 shares of the Company’s Class A Common Stock remain outstanding as of March 31, 2025.

September 10, 2024

On September 10, 2024, T Stamp Inc., a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement the (“SPA”) with a certain institutional investor. The investor and the Company previously entered into that certain Securities Purchase Agreement dated July 13, 2024, in which the Company issued 306,514 shares of Class A Common Stock, par value $0.01 of the Company (the “Class A Common Stock”) in exchange for the issuance by the investor to the Company of (i) a $500,000 promissory note payable on July 31, 2024; (ii) a $500,000 promissory note payable on August 31, 2024; and (iii) a $1,000,000 promissory note payable within three (3) trading days of an effective resale registration statement. As of March 31, 2025, all promissory notes have been repaid.

Pursuant to the terms of the SPA, the Company agreed, at the closing of the SPA and upon the terms and subject to the conditions set forth in the SPA, to issue shares certain warrants to purchase 250,930 shares of Class A Common Stock, with an exercise price equal to $3.4095, subject to adjustment in certain circumstances.

The warrants to purchase the remaining 250,930 shares of the Company’s Class A Common Stock remain outstanding as of March 31, 2025.

December 6, 2024

On December 5, 2024, the Company entered into a securities purchase agreement (the “December 2024 SPA”) with an investor, pursuant to which the Company agreed to issue and sell to the Selling Stockholder (i) in a registered direct offering, (a)139,000 shares of Class A Common Stock (the “December 2024 Shares”); and (b) Prefunded Warrants (the "December 2024 Prefunded Warrants") to purchase 231,370 shares of the Company’s Class A Common Stock at an exercise price of $0.015 per share and (ii) in a concurrent private placement, common stock purchase warrants consisting of Series A common warrants exercisable for up to 370,370 shares of Class A Common Stock at an exercise price of $8.1000 per share of Class A Common Stock (the “December 2024 Series A Warrants”), and Series B common warrants exercisable for up to 277,778 shares of Class A Common Stock at an exercise price of $8.10 per share (the “December 2024 Series B Warrants”, and collectively with the December 2024 Series A Warrants, (the “December 2024 Private Placement Warrants”). The offering price per December 2024 Share and respective December 2024 Private Placement Warrants was $8.10 and the offering price per December 2024 Prefunded Warrant was $8.09.

The December 2024 SPA closed on December 6, 2024 resulting in net proceeds of $2,706,769 which includes $1,125,900 for the December 2024 shares and $1,870,626 from the December 2024 Pre-Funded Warrants and is net of placement fees, legal expenses, and audit expenses totaling $290 thousand. The 139,000 shares of Class A Common Stock were issued on December 6, 2024.

Prefunded Warrants shall be exercisable immediately and shall expire when exercised in full. Series A Warrants shall be exercisable on or after the Shareholder Approval Date and have a term of exercise equal to 5 years from the Shareholder Approval Date. Series B Warrants shall be exercisable on or after the Shareholder Approval Date and have a term of exercise equal to 5 years from the Shareholder Approval Date. The Company has not obtained shareholder approval as of the date of this report.

The warrants to purchase the 370,370 December 2024 Series A Warrants and the 277,778 December 2024 Series B Warrants remain outstanding as of March 31, 2025.

January 6, 2025

On January 6, 2025, the Company entered into a securities purchase agreement (the “January 2025 SPA”) with an institutional investor (the “Selling Stockholder”), pursuant to which the Company agreed to issue and sell to the Selling Stockholder (i) in a registered direct offering, (a)175,000 shares of Class A Common Stock (the “January 2025 Shares”); and (b) Prefunded Warrants (the "January 2025 Prefunded Warrants") to purchase 239,202 shares of the Company’s Class A Common Stock at an exercise price of $0.001 per share and (ii) in a concurrent private placement, common stock purchase warrants consisting of Series A common warrants exercisable for up to 414,202 shares of Class A Common Stock at an exercise price of $8.45 per share of Class A Common Stock (the “January 2025 Series A Warrants”), and Series B common warrants exercisable for up to 207,101 shares of Class A Common Stock at an exercise price of $8.45 per share (the “January 2025 Series B Warrants”, and collectively with the January 2025 Series A Warrants, the “January 2025 Private Placement Warrants”). The offering price per January 2025 Share and respective January 2025 Private Placement Warrants was $8.45, and the offering price per Prefunded Warrant was $8.449.

On January 8, 2025, the Company closed the registered direct offering and the private placement offering (collectively, the “January 2025 Offering”), raising gross proceeds of approximately $3.50 million before deducting placement agent fees and other offering expenses payable by the Company. In the event that all January 2025 Private Placement Warrants are exercised for cash, the Company will receive additional gross proceeds of approximately $5,250,250. The Company’s primary use of the net proceeds will be for working capital, capital expenditures and other general corporate purposes.

On January 30, 2025, the institutional investor exercised 188,202 warrants to purchase shares of Class A Common Stock of the Company at a price of $0.001 per warrant for total proceeds of $188.20.

On February 19, 2025, the institutional investor exercised 51,000 warrants to purchase shares of Class A Common Stock of the Company at a price of $0.001 per warrant for total proceeds of $51.00.

The warrants to purchase the 414,202 January 2025 Series A Warrants and the 207,101 January 2025 Series B Warrants remain outstanding as of March 31, 2025.

4. Investments

Cost Method Investments

Boumarang License Agreement — On August 6, 2024, the Company entered into a License Agreement (the “Agreement”) with Boumarang Inc. (“Boumarang”), a developer, manufacturer, and seller of hydrogen-powered UAV and USV drones.

Pursuant to the Agreement, the Company agreed to grant a non-exclusive license to Boumarang to exploit certain of the Company’s patents for the purpose of producing, selling, marketing, and distributing drones. As consideration for the grant of the non-exclusive license, Boumarang agreed to pay the Company a non-refundable license fee of $5,000,000 in the form of a prepaid warrant issued by Boumarang to the Company for 5,000,000 shares of common stock of Boumarang at $1.00 per share (the “Prepaid Warrant”).

The Prepaid Warrant may be exercised in whole or in part at any time prior to the tenth annual anniversary of the issuance date of the Prepaid Warrant. No additional exercise price must be paid by the Company to exercise any portion of the Prepaid Warrant. The Prepaid Warrant also provides that the Company will receive any dividends declared by Boumarang that it would have been entitled to had the Prepaid Warrant been fully exercised, even if the Prepaid Warrant has not been exercised as of such time the distribution is made. Boumarang agreed to reserve a number a sufficient number of shares at all times to allow the Company to fully exercise the Prepaid Warrant. The Prepaid Warrant has certain anti-dilution protections, whereby the number of shares issuable upon the exercise of the Prepaid Warrant will proportionately adjust in the case of a stock-split or stock dividend of Boumarang’s common stock.

The investment in Boumarang was recorded in accordance with ASC 321, Investments –Equity Securities (“ASC 321”). Under this guidance, investments in equity securities in privately-held companies without readily determinable fair values are generally recorded at cost, plus or minus subsequent observable price changes in identical or similar investments, less impairments. The Company elected the practical expedient permitted by ASC 321 and recorded the above investment on a cost basis. As a part of the assessment for impairment indicators, the Company considers significant deterioration in the earnings performance and overall business prospects of the investee as well as significant adverse changes in the external environment the investment operate. If qualitative assessment indicates the investment is impaired, the fair value of the Prepaid Warrants would be estimated, which would involve a significant degree of judgement and subjectivity.

The Company qualitatively assessed the investment for impairment in accordance with ASC 321. There wasno impairment of the Boumarang investment as of March 31, 2025. As of December 31, 2024, the Company recorded $4.38 million for impairment of the Boumarang prepaid warrant and common stock investment as a result of a change in fair value identified by an observable market transaction.

Boumarang Subscription Agreement — On August 6, 2024, Trust Stamp executed a Subscription Agreement with Boumarang to participate in a Regulation D offering being conducted by Boumarang, subscribing for 100,000 shares of Boumarang's common stock at a price per share of $1.00. The Company made the $100,000 subscription payment on August 6, 2024.

Equity Method Investments

QID Technologies, LLC — On November 12, 2024, the Company entered into a business arrangement with Qenta Inc. ("Qenta") under which Qenta spun its Goldstar KYC technology off into a newly formed subsidiary, QID Technologies LLC (“QID”). In parallel, the Company entered into a license and assignment agreement with QID, in which the Company provided a non-exclusive license of its AI-powered identity technologies to QID in exchange for (I) a $1 million license fee in the form of a promissory note, which was due and payable in three equal tranches on December 31, 2024; February 1, 2025, and March 1, 2025; and (ii) the transfer of 10% of QID to the Company by Qenta. The Company has received all payments pursuant to this promissory note as of the date of this report.

Additionally, on January 1, 2025 the Company (through its subsidiary, Trust Stamp Malta Ltd.) and QID agreed to enter into a Master Technology Services Agreement, under which QID will contract with the Company for business development, product development, and product operations for identity and privacy services and solutions in return for monthly service fees capped at $3.60 million annually. During the first six months of this agreement, the service fee shall be a minimum $100 thousand per month. Thereafter, the service fee payable shall be up to $300 thousand per month.

The Company recorded the initial investment in QID of $100,000 in “Investments” on its unaudited condensed consolidated balance sheet. Due to the timing and availability of QID’s financial information, the Company is recording its proportionate share of losses from QID on a one quarter lag basis. QID’s summary balance sheet information as of December 31, 2024 is below:

QID did not have a net loss as of December 31, 2024 as the entity was formed on November 12, 2024. As a result, the Company did not recognize income or expense from QID during thethree months ended March 31, 2025.

The Company held a weighted average of 10.00% of QID’s equity during thethree months ended March 31, 2025.

Activity recorded for the Company’s equity method investment in QID during thethree months ended March 31, 2025 is summarized in the following table:

5. Balance Sheet Components

Note receivable, related party

Note receivable, related party as of March 31, 2025 and December 31, 2024 consisted of the following:

On November 12, 2024, the Company entered into a business arrangement with Qenta. Under the arrangement, Qenta spun its Goldstar KYC technology off into a newly formed subsidiary, QID Technologies LLC (“QID”). In parallel, the Company entered into a license and assignment agreement with QID, in which the Company provided a non-exclusive license of its AI-powered identity technologies to QID in exchange for (I) a $1,000,000 license fee in the form of a promissory note, which is due and payable in three equal tranches on December 31, 2024; March 3, 2025, and April 30, 2025; and (ii) the transfer of 10% of QID to the Company by Qenta. As of the date of this report the Company has received all payments pursuant to this note totaling $900 thousand.

Prepaid expenses and other current assets

Prepaid expenses and other current assets as of March 31, 2025 and December 31, 2024 consisted of the following:

Capitalized internal-use software, net

Capitalized internal-use software, net as of March 31, 2025 and December 31, 2024 consisted of the following:

Amortization expense is recognized on a straight-line basis and during the three months ended March 31, 2025 and 2024 totaled $143 thousand and $138 thousand, respectively.

Property and equipment, net

Property and equipment, net as of March 31, 2025 and December 31, 2024 consisted of the following:

Depreciation expense is recognized on a straight-line basis and during the three months ended March 31, 2025 and 2024 totaled $6 thousand and $10 thousand, respectively.

Accrued expenses

Accrued expenses as of March 31, 2025 and December 31, 2024 consisted of the following:

6. Goodwill and Intangible Assets, Net

There were no changes in the carrying amount of Goodwill for the three months ended March 31, 2025.

Intangible assets, net as of March 31, 2025 and December 31, 2024 consisted of the following:

Intangible asset amortization expense is recognized on a straight-line basis and during the three months ended March 31, 2025 and 2024 totaled $34 thousand and $37 thousand, respectively.

Estimated future amortization expense of Intangible assets, net is as follows:

7. Net Loss per Share Attributable to Common Stockholders

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

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:

8. Stock Awards and Stock-Based Compensation

From time to time, the Company may issue stock awards in the form of Class A Common Stock grants, Restricted Stock Units (RSUs), or Class A Common Stock options with vesting/service terms. Stock awards are valued on the grant date using the Company’s common stock share price quoted on an active market. Stock options are valued using the Black-Scholes-Merton pricing model to determine the fair value of the options. We generally issue our awards in terms of a fixed monthly value, resulting in a variable number of shares being issued, or in terms of a fixed monthly share number.

Stock Options

The following table summarizes stock option activity as of March 31, 2025:

The aggregate intrinsic value of options outstanding, exercisable, and vested is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock. The aggregate intrinsic value of options exercised during the three months ended March 31, 2025 and 2024 was $0.

The weighted average grant-date fair value of options granted during the three months ended March 31, 2025 and 2024 was $2.74 and $9.15 per share, respectively. The total grant-date fair value of options that vested during the three months ended March 31, 2025 and 2024 was $3 thousand and $2 thousand, respectively.

The following assumptions were used to calculate the fair value of options granted during the three months ended March 31, 2025 and 2024:

As of March 31, 2025, the Company had 23,563 stock options outstanding of which all are fully vested options.

The Company recognized $2 thousand in stock option expense during the three months ended March 31, 2025 and 2024. As of March 31, 2025 the Company has no unrecognized stock-based compensation related to options.

Stock Grants

As of March 31, 2025, the Company had 7,570 common stock grants outstanding of which 5,268 were vested but not issued and 2,302 were not yet vested. All granted and outstanding common stock grants will fully vest by March 31, 2026.

The Company recognized $89 thousand and $21 thousand in common stock grant expense during the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, the Company has $63 thousand unrecognized stock-based compensation related to common stock grants that will be recognized over the next year.

RSU

As of March 31, 2025, the Company had 62,805 RSUs outstanding of which 15,141 were vested but not issued and 47,664 were not yet vested. All granted and outstanding RSUs fully vested by January 2, 2026.

The Company recognized $43 thousand and $275 thousand in RSU expense during the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025 the Company has $158 thousand unrecognized stock-based compensation related to RSUs, that will be recognized over the next nine months.

A summary of outstanding RSU activity as of March 31, 2025 is as follows:

Stock-based compensation expense

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

The Company recognized a total of $134 thousand stock-based compensation during the three months ended March 31, 2025 of which $74 thousand was related to prepaid services paid in stock-based compensation.

9. Related Party Transactions

Related party payables of $42 thousand and $57 thousand as of March 31, 2025 and December 31, 2024, respectively. The Related party payables as of March 31, 2025 and December 31, 2024 primarily relate to amounts owed to contractors and smaller amounts payable to members of management as expense reimbursements. There were no costs incurred in relation to 10Clouds for the three months ended March 31, 2025 and costs incurred in relation to 10Clouds for the three months ended March 31, 2024 totaled approximately $104 thousand.

Related party receivables of $15 thousand and $22 thousand as of March 31, 2025 and December 31, 2024, respectively, are primarily related to amounts due from an employee loan and smaller amounts due from employee.

Mutual Channel Agreement

On November 15, 2020, the Company entered into a Mutual Channel Agreement with Vital4Data, Inc., a company at which one of our Directors serves as Chief Executive Officer. Pursuant to the agreement, the Company engaged Vita4Data, Inc. as a non-exclusive sales representative for the Company’s products and services. Vital4Data, Inc. is entitled to compensation in the form of commissions, receiving a 20% of commission-eligible on net revenue from sales generated by Vital4Data, Inc. in the first year of the contract term, which is reduced to 10% in the second year, and 5% in the third year. The Company has not earned or expensed any commissions pursuant to the Vital4Data, Inc. agreement to date. As of March 31, 2025 and December 31, 2024, the Vital4Data, Inc. commission due was $0.

10. Malta Grant

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.

On January 25, 2022, the Company entered into an agreement with the government of Malta for a grant of up to €100 thousand or $107 thousand, in terms of the ‘Investment Aid to produce the COVID-19 Relevant Product’ program, to support the proposed investment. The estimated value of the grant is €137 thousand or $146 thousand, at an aid intensity of 75% to cover eligible wage costs incurred after February 1, 2022 in relation to new employees engaged specifically for the implementation of the project. On September 22, 2022, the Company entered into an amendment agreement that enables the Company to submit eligible employee expenses for reimbursement by October 31, 2022. The grant was approved in January 2022, however, the request for payment was not approved and management abandoned the agreement. During the three months ended March 31, 2025 and 2024, the Company incurred no expenses that are reimbursable under the grant. As of March 31, 2025, no amounts provided under this grant were received.

On January 2, 2024, an agreement became effective between the Company and government of Malta and the University of Malta. The government of Malta has appointed the Managing Authority to administer the funds granted by it as the national contribution to the Technology Development Program 2023 Call. The project's effective date is on January 2, 2024. The grant funds shall be transferred into three separate tranches: Pre-financing (50%) resulting in €38 thousand or $41 thousand, interim financing 30% resulting in €23 thousand or $25 thousand, and retention (20%) resulting in €30 thousand or $32 thousand. The Company received the pre-financing tranche during theyear ended December 31, 2024. The Company did not recognize any income related to these grants during thethree months ended March 31, 2025 and three months ended March 31, 2024. As a result, the Company recorded €25 thousand or $27 thousand and €25 thousand or $26 thousand to deferred revenue as of March 31, 2025 and December 31, 2024, respectively.

On October 18, 2024, the Company entered into an agreement with the government of Malta. The government of Malta has appointed the Managing Authority to administer the funds granted by it as the national contribution to the Technology Development Program LITE, 2024 Call. The project's effective date is on November 1, 2024. The grant funds shall be transferred intwo separate tranches, pre-financing resulting in €120 thousand or $130 thousand and 20% retention resulting in €30 thousand or $32 thousand. The Company received the pre-financing tranche during theyear ended December 31, 2024. During thethree months ended March 31, 2025, the Company recognized €24 thousand or $26 thousand, recorded to other income, in line with the percentage of completion which was obtained by the respective project managers responsible for the project. The Company did not recognized any income related to these grants during thethree months ended March 31, 2024. As a result, the Company recorded €86 thousand or $93 thousand and €112 thousand or $115 thousand to deferred revenue as of March 31, 2025 and December 31, 2024, respectively.

11. Leases and Commitments

Operating Leases — The Company leases office space in Atlanta, Georgia, which serves as its corporate headquarters, office space in Malta, which serves as its research and development facility, and vehicles in Malta that are considered operating lease arrangements under ASC 842 guidance. In addition, the Company contracts for month-to-month coworking arrangements in other office spaces in North Carolina, Denmark, Rwanda, and Japan to support its dispersed workforce. As of March 31, 2025, there wereno minimum lease commitments related to month-to-month lease arrangements.

Initial lease terms are determined at commencement date, the date the Company takes possession of the property, and the commencement date is used to calculate straight-line expense for operating leases. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s Operating lease right-of-use assets and Operating lease liabilities. The Company’s leases have remaining terms of 1 year or less. As the Company’s leases do not provide an implicit rate, the present value of future lease payments is determined using the Company’s incremental borrowing rate based on information available at the commencement date.

Balance sheet information related to leases as of as of March 31, 2025 and December 31, 2024 was as follows:

Future maturities of ASC 842 lease liabilities as of March 31, 2025 are as follows:

Total lease expense, under ASC 842, was included in Selling, general, and administrative expenses in our unaudited condensed consolidated statement of operations for the three months ended March 31, 2025 and 2024 as follows:

Supplemental cash flows information related to leases was as follow:

During the three months ended March 31, 2025, the Company did not incur variable lease expense.

Litigation — The Company is not currently involved with and does not know of any pending or threatening litigation against the Company or any of its officers or directors in connection with its business.

12. Segment Reporting

The Company adheres to the provisions of ASC 280, Segment Reporting, which establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in our unaudited condensed consolidated financial statements. The Company currently operate inone reportable segment, artificial intelligence-powered solutions. The artificial intelligence-powered solutions segment generates revenue primarily from software licenses, professional services, and recurring Software-as-a-Service ("SaaS") revenue. The Company determined that providing the geographic information is impracticable as consolidated financial results are evaluated regardless of the location.

The Company’s Chief Operating Decision Maker (the "CODM") is the Chief Executive Officer (CEO). Our CODM uses the segment information primarily to evaluate the profitability and strategic growth potential of the segment. The reported measures of profit or loss are evaluated at the consolidated financial level and is benchmarked against historical performance and expectations. The CODM does not distinguish between markets or segments for the purpose of internal reporting. Based on this analysis, the CODM evaluates strategic decisions such as investing in new technologies or reallocating operational resources, particularly workforce-related expenses.

Our CODM assesses performance and makes operating decisions through review of the Company's revenues and expenses at the consolidated level as disclosed in our unaudited condensed consolidated statements of operations. Segment assets are disclosed in the unaudited consolidated balance sheets.