T Stamp Inc. 2023 Form 10-K Summary
Business Context and Reporting Period
T Stamp Inc., doing business as Trust Stamp, develops artificial intelligence-powered identity authentication, biometric tokenization, privacy, and cybersecurity software for enterprise, government, humanitarian, financial inclusion, and peer-to-peer applications. Its principal technology, the Irreversibly Transformed Identity Token, converts biometric and other identifying data into tokenized identifiers intended to support authentication without retaining original biometric images or templates.
The filing covers the fiscal year ended December 31, 2023, with comparative results for 2022. The company operates as a single reportable segment and is listed on Nasdaq under the symbol IDAI.
Financial Performance and Position
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $4.56 million | $5.39 million | Down 15.3% |
| Cost of services | $0.91 million | $1.79 million | Down 48.8% |
| Research and development | $2.35 million | $2.47 million | Down 5.0% |
| SG&A | $8.40 million | $12.44 million | Down 32.5% |
| Operating loss | $7.89 million | $12.08 million | Improved $4.19 million |
| Net loss attributable to T Stamp | $7.64 million | $12.09 million | Improved $4.45 million |
| Adjusted EBITDA loss | $6.50 million | $8.81 million | Improved 26.2% |
| Basic and diluted loss per share | $1.07 | $2.55 | Improved |
| Operating cash flow | $(7.85) million | $(6.34) million | Outflow increased |
| Cash flow from financing | $10.21 million | $5.10 million | Increased |
| Cash and cash equivalents | $3.14 million | $1.25 million | Increased $1.89 million |
Approximate gross margin based on revenue less cost of services was 79.9% in 2023 versus 66.9% in 2022. The operating margin remained deeply negative at approximately negative 173% in 2023, although it improved from approximately negative 224% in 2022.
At December 31, 2023, total assets were $7.89 million, total liabilities were $3.98 million, and total stockholders’ equity was $3.91 million. Current assets were $4.70 million compared with current liabilities of $2.71 million, producing a current ratio of approximately 1.73 versus 0.65 in 2022.
Debt consisted primarily of $953.9 thousand of Malta government promissory notes, including accrued interest, and $256.5 thousand of warrant liabilities. The company also had $135.0 thousand of operating lease liabilities and $162.1 thousand of short-term financial liabilities.
Material Changes Versus the Prior Comparable Period
- Revenue declined primarily because the ICE contract generated $3.29 million in 2022 and was terminated during 2022. The decline was partly offset by $2.51 million of revenue recognized from IGS and growth in Orchestration Layer activity.
- IGS terminated its master services agreement effective September 15, 2023. The company recognized $2.51 million of previously deferred, non-refundable revenue advances and stated that it has no remaining performance obligations or contingencies under that agreement.
- Orchestration Layer revenue increased to approximately $310 thousand from $104 thousand. By year-end, 43 enterprise customers were fully implemented or implementing, including 40 financial institutions onboarded through FIS.
- SG&A declined by $4.05 million, primarily from lower personnel-related costs, stock-based compensation, travel, consulting, office rent, and mobile hardware costs. Stock-based compensation declined to $763 thousand from $2.40 million.
- Cost of services declined by $871 thousand, helped by the absence of ICE-related costs and the relatively low marginal cost of the SaaS platform.
- Net cash used in operations increased to $7.85 million despite the lower net loss, reflecting the recognition of deferred IGS revenue and related working-capital effects.
- The company raised capital through common stock, pre-funded warrants, and warrants and received approximately $10.21 million of net financing cash flow. In December 2023, an institutional investor exercised warrants at a reduced price of $1.34 per share, generating approximately $2.41 million of gross proceeds before fees and expenses.
- The company completed a one-for-five reverse stock split effective March 23, 2023. The filing presents share and per-share information on a retroactively adjusted basis.
Guidance, Outlook, Risks, and Unusual Items
Management expects continued operating losses into 2024 while it invests in research and development, sales resources, and customer acquisition. Management expects the Orchestration Layer, FIS distribution relationship, Mastercard user-based pricing, and direct sales expansion to support revenue growth, including potentially significant revenue in 2024. The filing does not provide quantitative revenue, earnings, or cash-flow guidance.
Under the Mastercard technology services agreement, the company expects user-based revenue to begin in 2024 and grow thereafter. Mastercard’s Community Pass program was reported as serving approximately 3.5 million users and targeting 30 million users by 2027; these figures are based on information attributed to Mastercard and are not company guidance.
The auditor included an explanatory paragraph regarding going concern. The company reported a $7.64 million net loss, $7.85 million of operating cash outflow, and a $50.85 million accumulated deficit for 2023. Management stated that continued operations depend on generating additional revenue and/or obtaining financing, and that substantial doubt exists regarding the company’s ability to continue as a going concern for a reasonable period. The financial statements do not include adjustments that could result from this uncertainty.
- Revenue concentration is significant: approximately 89.8% of 2023 revenue came from IGS, an S&P 500 bank customer, and Mastercard.
- The company expects to raise additional equity or debt capital, which could dilute existing shareholders or impose additional restrictions.
- Cash burn, extended enterprise sales cycles, dependence on FIS, and reliance on a small number of customers create execution and liquidity risks.
- The business is exposed to privacy, biometric, cybersecurity, data protection, and regulatory requirements, including GDPR, HIPAA, CCPA/CPRA, and BIPA.
- The company reported no material cybersecurity breaches during 2023 and no pending or threatened litigation known to management.
- Management concluded that internal control over financial reporting was effective at December 31, 2023 and stated that previously reported material weaknesses had been remediated.
- The company had 6.45 million equity-classified warrants outstanding at December 31, 2023, and additional potentially dilutive options, RSUs, grants, and warrants were excluded from diluted loss per share because their effect was anti-dilutive.
- Three customers represented 91.1% of accounts receivable at year-end. Approximately $2.62 million of U.S. bank deposits exceeded FDIC insurance limits.
Most Important Facts for Investors to Verify
- Whether the company can secure sufficient financing and achieve the revenue growth required to address the going-concern uncertainty.
- The timing, conversion, and recurring economics of revenue from FIS, the Orchestration Layer, Mastercard, and other enterprise customers.
- The effect of the IGS contract termination on future revenue, deferred revenue, and customer concentration.
- Current cash burn, expected financing needs, and the terms and dilution associated with future equity or debt offerings.
- The outstanding share count and potential dilution from approximately 6.45 million warrants, options, RSUs, and other equity awards.
- Whether cost reductions can be sustained while the company expands sales and product development.
- Compliance with evolving biometric and data privacy regulations and the potential financial impact of a security incident or regulatory enforcement.