AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

PRELIMINARY OFFERING CIRCULAR DATED NOVEMBER 19, 2021

T Stamp Inc. (D/B/A Trust Stamp)

3017 Bolling Way NE, Floors 1 and 2,

Atlanta, Georgia, 30305, USA 

(404) 806-9906

www.truststamp.ai

Our shares of Class A Common Stock are quoted on OTC Markets Group Inc.’s OTCQX quotation platform (the “OTCQX”) under the symbol IDAI. The last reported close price of our Class A Common Stock was $4.95 per share as of November 18, 2021. Our Class A Common Stock is also listed on the Euronext Growth Exchange under the symbol AIID. As of November 18, 2021, the last reported sale price of our Class A Common Stock was $1.558 per share on this exchange.

We have applied to have our Class A Common Stock listed on the Nasdaq Capital Market under the symbol “IDAI”. We intend to list our Class A Common Stock on the Nasdaq Capital Market following Nasdaq’s certification of the Form 8-A of the Company to be filed concurrently with qualification of this Offering Statement.

This offering will terminate at the earlier of: (1) the date at which the maximum offering amount has been received by the Company, (2) one year from the date upon which the Securities and Exchange Commission qualifies the Offering Statement of which this Offering Circular forms a part, or (3) the date at which the offering is earlier terminated by the Company in its sole discretion. This offering is being conducted on a best-efforts basis. The Company may undertake one or more closings on a rolling basis. After each closing, funds tendered by warrantholders will be made available to the Company.

INVESTING IN THE CLASS A COMMON STOCK OF TRUST STAMP IS SPECULATIVE AND INVOLVES SUBSTANTIAL RISKS. YOU SHOULD PURCHASE THESE SECURITIES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE “RISK FACTORS” BEGINNING ON PAGE 6 TO READ ABOUT THE MORE SIGNIFICANT RISKS YOU SHOULD CONSIDER BEFORE BUYING THE CLASS A COMMON STOCK OF THE COMPANY.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION

GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO www.investor.gov.

Sales of these securities will commence on approximately December [_], 2021

This Offering Circular is following the disclosure format of Part I of SEC Form S-1 pursuant to the general instructions of Part II(a)(1)(ii) of Form 1-A.

In the event that we become a reporting company under the Securities Exchange Act of 1934, we intend to take advantage of the provisions that relate to “Emerging Growth Companies” under the JOBS Act of 2012. See “Implications of Being an Emerging Growth Company”.

TABLE OF CONTENTS

In this Offering Circular, the term “Trust Stamp”, “we”, “us”, “our” or “the Company” refers to T Stamp Inc. d/b/a Trust Stamp, as well as its operating subsidiaries on a consolidated basis, through which certain aspects of Trust Stamp’s operations are conducted.

THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE”, “PROJECT”, “BELIEVE”, “ANTICIPATE”, “INTEND”, “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

SUMMARY

Overview

Trust Stamp develops proprietary artificial intelligence powered solutions; researching and leveraging biometric science, cryptography, and data mining to deliver insightful identity & trust predictions while identifying and defending against fraudulent identity attacks. We utilize the cutting-edge power and agility of technologies such as GPU processing and neural networks to process data faster and more effectively than has ever previously been possible, as well as deliver results at a disruptively low cost for usage across multiple industries, including:

Our Industry

Trust Stamp considers itself to be in the identity authentication market which is primarily comprised of biometric authentication providers. Trust Stamp’s key sub-markets are:

We believe the market potential for our services is significant, due to growing prevalence of biometrics being utilized in payment and other transactions, the increase in online and remote transactions, increasing payment fraud losses, and the presence of large populations that continue to be underbanked and who lack access to basic financial services.

Competition

While we can work with any identity data from any source, our primary market target is the biometric service industry which is growing exponentially while being threatened by a consumer, media, and legislative backlash against storing biometric data. The  IT² can potentially be overlaid on any biometric or other identity data provider.

In general, we compete for customer budget with any company in the identity authentication industry. Major competitors in this space include companies such as NEXT Biometrics, Gemalto, IDEMIA, Synaptics, Cognitec, Jumio, Onfido, Innovatrics, Suprema, FaceTec, Rank One Computing, Acuant and Mitek. However, we believe that, due to the uniqueness of our technology solution, the Company does not at this time have any direct competitors for the core IT² tokenization solutions upon which the growth in our business plan is focused.

Our Strengths and Growth Strategy

The commercial advantage of our solution is our ability to work across providers and modalities and we continue to pursue a first-mover advantage including our global-scale-partnership which is achieving a network-effect in the global Humanitarian and Development market. We believe that this combination will make it unattractive for a potential competitor to replicate the 6-years and multi-million dollars that we have already expended to try and circumvent our multiple (and continuing) patent filings and/or offer a parallel product based upon a different technology.

We believe that given sufficient time and resources, we can augment any biometric modalities including face, hand, iris, voice, gait, and behavior together with any other identifying data which places us in a unique position versus typical providers of (often single modality) biometric services.

We are unaware of any other provider being able to offer or support a proliferation of authentication modalities in this fashion, and therefore, we believe we there are no other companies that directly compete with us in this space. If our go-to-market strategy is successful, biometric service providers can be a channel distributer, and not necessarily a competitor.

Our business plan calls for our capturing a small fraction of one percent (1%) of the projected expenditure for biometric authentication services. Our strategy in this respect is to:

Company Information

Our principal executive office is located at 3017 Bolling Way NE, Floors 1 and 2, Atlanta, Georgia, 30305, United States of America, which serves as our headquarters. Our telephone number is (404) 806-9906. Our website address is www.truststamp.ai. Information contained in, or accessible through, our website does not constitute a part of this Offering Circular or any Offering Circular supplement.

Except as otherwise indicated herein, all information in this Offering Circular assumes no exercise of the outstanding stock options or warrants described above.

Implications of Being an Emerging Growth Company

As an issuer with less than $1.07 billion in total annual gross revenues during our last fiscal year, we will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and this status will be significant if and when we become subject to the ongoing reporting requirements of the Exchange Act upon filing a Form 8-A. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company we:

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards, and hereby elect to do so. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time that we no longer meet the definition of an emerging growth company. Note that this offering, while a public offering, is not a sale of common equity pursuant to a registration statement, since the Offering is conducted pursuant to an exemption from the registration requirements. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1.07 billion in annual revenues, have more than $700 million in market value of our limited liability company membership interests held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.

Certain of these reduced reporting requirements and exemptions are also available to us due to the fact that we may also qualify, once listed, as a “smaller reporting company” under the Commission’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.

Summary Consolidated Financial Data

You should read the following summary consolidated financial data together with our consolidated financial statements and the related notes appearing elsewhere in this Offering Circular and the “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Offering Circular. We have derived the consolidated statement of operations data for the years ended December 31, 2020 and 2019 from our audited consolidated financial statements appearing elsewhere in this Offering Circular. The consolidated statement of operations data for the six months ended June 30, 2021 and 2020 and the consolidated balance sheet data as of June 30, 2021 have been derived from our unaudited consolidated financial statements appearing elsewhere in this Offering Circular and have been prepared on the same basis as the audited consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future, and our results for any interim period are not necessarily indicative of results that may be expected for any full year.

RISK FACTORS

The SEC requires the Company to identify risks that are specific to its business and its financial condition. The Company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events, and technological developments (such as cyber-attacks and the ability to prevent such attacks). Additionally, early-stage companies are inherently riskier than more developed companies, and the risk of business failure and complete loss of your investment capital is present. You should consider general risks as well as specific risks when deciding whether to invest.

Below is a summary of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:

Risks Related to Our Company

We have a limited operating history upon which you can evaluate our performance and have not yet generated profits. Accordingly, our prospects must be considered in light of the risks that any new company encounters. Our Company was incorporated under the laws of the State of Delaware on April 11, 2016, and we have not yet generated profits. The likelihood of our creation of a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the growth of a business, operation in a competitive industry, and the continued development of our technology and products. We anticipate that our operating expenses will increase for the near future, and there is no assurance that we will be profitable in the near future. You should consider our business, operations, and prospects in light of the risks, expenses and challenges faced as an emerging growth company.

We have historically operated at a loss, which has resulted in an accumulated deficit. For the fiscal year ended December 31, 2020, we incurred a net loss of $11,032,994, and for the six-month period ended June 30, 2021, we incurred a net loss of $4,687,704. There can be no assurance that we will ever achieve profitability. Even if we do, there can be no assurance that we will be able to maintain or increase profitability on a quarterly or annual basis. Failure to do so would continue to have a material adverse effect on our accumulated deficit, would affect our cash flows, would affect our efforts to raise capital and is likely to result in a decline in our Class A Common Stock price.

The auditor included a “going concern” note in its audit report for the Company’s consolidated financial statements for the year ended December 31, 2020 and 2019. Additionally, the Company’s unaudited consolidated financial statements for the six months ended June 30, 2021 and 2020 includes a “going concern” note. We may not have enough funds to sustain the business until it becomes profitable. Even if we raise funds through this offering, we may not accurately anticipate how quickly we may use the funds and whether these funds are sufficient to bring the business to profitability.

Our technology continues to be developed, and it is unlikely that we will ever develop our technology to a point at which no further development is required. Trust Stamp is developing complex technology that requires significant technical and regulatory expertise to develop, commercialize and update to meet evolving market and regulatory requirements. If we are unable to successfully develop and commercialize our technology and products, it will significantly affect our viability as a company. 

If our security measures are breached or unauthorized access to individually identifiable biometric or other personally identifiable information is otherwise obtained, our reputation may be harmed, and we may incur significant liabilities. In the ordinary course of our business, we may collect and store sensitive data, including protected health information (“PHI”), personally identifiable information (“PII”), owned or controlled by ourselves or our customers, and other parties. We communicate sensitive data, including patient data, electronically, and through relationships with multiple third-party vendors and their subcontractors. These applications and data encompass a wide variety of business-critical information, including research and development information, patient data, commercial information, and business and financial information. We face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate use or disclosure, inappropriate modification, and the risk of our being unable to adequately monitor, audit, and modify our controls over our critical information. This risk extends to the third-party vendors and subcontractors we use to manage this sensitive data. As a custodian of this data, Trust Stamp therefore inherits responsibilities related to this data, exposing itself to potential threats. Data breaches occur at all levels of corporate sophistication (including at companies with significantly greater resources and security measures than our own) and the resulting fallout stemming from these breaches can be costly, time-consuming, and damaging to a company’s reputation. Further, data breaches need not occur from malicious attack or phishing only. Often, employee carelessness can result in sharing PII with a much wider audience than intended. Consequences of such data breaches could result in fines, litigation expenses, costs of implementing better systems, and the damage of negative publicity, all of which could have a material adverse effect on our business operations and financial condition.

We are subject to substantial governmental regulation relating to our technology and will continue to be for the lifetime of our Company. By virtue of handling sensitive PII and biometric data, we are subject to numerous statutes related to data privacy and additional legislation and regulation should be anticipated in every jurisdiction in which we operate. Examples of federal (US) and European statutes we could be subject to are:

Any such access, breach, or other loss of information could result in legal claims or proceedings, liability under federal or state laws that protect the privacy of personal information under HIPAA and/or “HITECH”. Notice of breaches must be made to affected individuals, the Secretary of the Department of Health and Human Services (“HHS”), and for extensive breaches, notice may need to be made to the media or state attorneys general. Penalties for violations of these laws vary. For instance, penalties for failure to comply with a requirement of HIPAA and HITECH vary significantly, and include significant civil monetary penalties and, in certain circumstances, criminal penalties with fines up to $250,000 per violation and/or imprisonment. A person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty of up to $50,000 and up to one-year imprisonment. The criminal penalties increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain, or malicious harm.

Further, various states, such as California, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information. Where state laws are more protective, we have to comply with the stricter provisions. In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused. California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages. The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and data we receive, use and share, potentially exposing us to additional expense, adverse publicity, and liability. Further, as regulatory focus on privacy issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business could intensify. Changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as PII or PHI, along with increased customer demands for enhanced data security infrastructure, could greatly increase our cost of providing our services, decrease demand for our services, reduce our revenues and/or subject us to additional liabilities.

Compliance with U.S. and international data protection laws and regulations could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business. Moreover, complying with these various laws could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. We rely on our customers to obtain valid and appropriate consents from data subjects whose biometric samples and data we process on such customers’ behalf. Given that we do not obtain direct consent from such data subjects and we do not audit our customers to ensure that they have obtained the necessary consents required by law, the failure of our customers to obtain consents that are in compliance with applicable law could result in our own non-compliance with privacy laws. Such failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend, could result in adverse publicity and could have a material adverse effect on our business, financial condition and results of operations.

We anticipate sustaining operating losses for the foreseeable future. It is anticipated that we will sustain operating losses into 2022 as we continue to expand our team, continue with research and development, and strive to gain customers for our technology and gain market share in our industry. Our ability to become profitable depends on our ability to expand our customer base, consisting of companies willing to license our technology. There can be no assurance that this will occur. Unanticipated problems and expenses are often encountered in offering new products which may impact whether the Company is successful. Furthermore, we may encounter substantial delays and unexpected expenses related to development, technological changes, marketing, regulatory requirements and changes to such requirements or other unforeseen difficulties. There can be no assurance that we will ever become profitable. If the Company sustains losses over an extended period of time, it may be unable to continue in business.

If our products do not achieve broad acceptance both domestically and internationally, we will not be able to achieve our anticipated level of growth. Our revenues are derived from licensing our identity authentication solutions. We cannot accurately predict the future growth rate or the size of the market for our technology. The expansion of the market for our solutions depends on a number of factors, such as

Even if our technology gains wide market acceptance, our solutions may not adequately address market requirements and may not continue to gain market acceptance. If authentication solutions generally or our solutions specifically do not gain wide market acceptance, we may not be able to achieve our anticipated level of growth and our revenues and results of operations would suffer.

We operate in a highly competitive industry that is dominated by multiple very large, well-capitalized market leaders and is constantly evolving. New entrants to the market, existing competitor actions, or other changes in market dynamics could adversely impact us. The level of competition in the identity authentication industry is high, with multiple exceptionally large, well-capitalized competitors holding a majority share of the market. Currently, we are not aware of any direct competitors of the Company able to offer our main technological offering which is non-PII tokenized identity authentication using a hash that is derived from biometric or other identifying data and capable of being probabilistically matched and deduplicated on both a 1:1 and 1:n basis. Nonetheless, many of the companies in the identity authentication market have longer operating histories, larger customer bases, significantly greater financial, technological, sales, marketing, and other resources than we do. At any point, these companies may decide to devote their resources to creating a competing technology solution which will impact our ability to maintain or gain market share in this industry. Further, such companies will be able to respond more quickly than we can to new or changing opportunities, technologies, standards, or client requirements, more quickly develop new products or devote greater resources to the promotion and sale of their products and services than we can. Likewise, their greater capabilities in these areas may enable them to better withstand periodic downturns in the identity management solutions industry and compete more effectively on the basis of price and production. In addition, new companies may enter the markets in which we compete, further increasing competition in the identity management solutions industry.

We believe that our ability to compete successfully depends on a number of factors, including the type and quality of our products and the strength of our brand names, as well as many factors beyond our control. We may not be able to compete successfully against current or future competitors, and increased competition may result in price reductions, reduced profit margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand the development and marketing of new products, any of which would adversely impact our results of operations and financial condition.

We face competition from companies with greater financial, technical, sales, marketing, and other resources, and, if we are unable to compete effectively with these competitors, our market share may decline, and our business could be harmed. We face competition from well established companies. Many of our competitors have longer operating histories, larger customer bases, significantly greater financial, technological, sales, marketing, and other resources than we do. As a result, our competitors may be able to respond more quickly than we can to new or changing opportunities, technologies, standards, or client requirements, more quickly develop new products or devote greater resources to the promotion and sale of their products and services than we can. Likewise, their greater capabilities in these areas may enable them to better withstand periodic downturns in the identity management solutions industry and compete more effectively on the basis of price and production. In addition, new companies may enter the markets in which we compete, further increasing competition in the identity management solutions industry.

We believe that our ability to compete successfully depends on a number of factors, including the type and quality of our products and the strength of our brand names, as well as many factors beyond our control. We may not be able to compete successfully against current or future competitors, and increased competition may result in price reductions, reduced profit margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand the development and marketing of new products, any of which would adversely impact our results of operations and financial condition.

The Company may be unable to effectively protect its intellectual property. To date, the Company has been issued four patents related to its products and technology. The Company has many more pending patent applications as of the date of this offering circular. There is no guarantee that the Company will ever be issued patents on the applications it has submitted. In addition, in order to control costs, we have filed patent applications only in the United States. This may result in our having limited or no protection in other jurisdictions. Our success depends to a significant degree upon the protection of our products and technology. If we are unable to secure patents for our products and technology, or are otherwise are unsuccessful at protecting our technology, other companies with greater resources may copy our technology and/or products, or improve upon them, putting us at a disadvantage to our competitors.

Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products. We believe our products and technology may be highly disruptive to a very large and growing market. Our competitors are well capitalized with significant intellectual property protection and resources and they (and/or patent trolls) may initiate infringement lawsuits against our Company. Such litigation could be expensive and could also prevent us from selling our products, which would significantly harm our ability to grow our business as planned.

Our failure to attract and retain highly qualified personnel in the future could harm our business. As the Company grows, it will be required to hire and attract additional qualified professionals such as a Deputy Science Officer (for cryptography and certifications), additional staff for research and development, regulatory professionals, sales and marketing professionals, accounting, legal, and finance experts. The Company may not be able to locate or attract qualified individuals for such positions, which will affect the Company’s ability to grow and expand its business.

We rely on third party service providers. Our third-party partners provide a variety of essential business functions, including distribution, manufacturing, and many others. It is possible that some of these third parties will fail to perform their services or will perform them in an unacceptable manner. If we encounter problems with one or more of these parties and they fail to perform to expectations, it could have a material adverse impact on the Company.

We currently have four customers that account for substantially all of our revenues. During the Company’s development, we have focused on developing relationships with a few partners and customers. As such, our historical financial results identify that we generated substantially all of our revenue from two customers – which relatively recently has increased to four. As we grow, we intend to expand the number of customers from which we generate revenues. In the opinion of our management, we would be able to continue operations without our current customers. However, the unanticipated loss of the Company’s current customers could have an adverse effect on the company’s financial position.

Our future success is dependent on the continued service of our small management team. Six directors and four executive officers provide leadership to Trust Stamp. Two of the directors are also executive officers. Two additional non-executive directors will commence serving on December 1 2021. Our success is dependent on their ability to manage all aspects of our business effectively. Because we are relying on our small management team, we lack certain business development resources that may hurt our ability to grow our business. Although we are currently growing our board and management team, there is no guarantee that newly added board and management team members will contribute to Trust Stamp as we hope. Any loss of key members of our executive team could have a negative impact on our ability to manage and grow our business effectively. We do not maintain a key person life insurance policy on any of the members of our senior management team. As a result, we would have no way to cover the financial loss if we were to lose the services of our directors or officers. 

We expect to raise additional capital through equity and/or debt offerings to support our working capital requirements and operating losses. In order to fund future growth and development, the Company will likely need to raise additional funds in the future by offering shares of its Common or Preferred Stock and/or other classes of equity, or debt that convert into shares of common or Preferred Stock, any of which offerings would dilute the ownership percentage of investors in this offering. See “Dilution”. In order to issue sufficient shares in this regard, we may be required to amend our certificate of incorporation to increase our authorized capital stock, which would be require us to obtain a consent of a majority of our shareholders. Furthermore, if the Company raises capital through debt, the holders of our debt would have priority over holders of common and Preferred Stock and the Company may be required to accept terms that restrict its ability to incur more debt. We cannot assure you that the necessary funds will be available on a timely basis, on favorable terms, or at all, or that such funds if raised, would be sufficient. The level and timing of future expenditure will depend on a number of factors, many of which are outside our control. If we are not able to obtain additional capital on acceptable terms, or at all, we may be forced to curtail or abandon our growth plans, which could adversely impact the Company, its business, development, financial condition, operating results, or prospects.

Any valuation at this stage is difficult to assess. The valuation for this offering was established by the Company. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially early-stage companies, is difficult to assess and you may risk overpaying for your investment.

If we cannot raise sufficient funds, we will not succeed. We are qualifying for issuance in this offering, pursuant to the exercise of outstanding the Reg CF and Reg D Warrants, up to $6,000,000 worth of our Class A Common Stock on a best-efforts basis and may not raise this entire amount. Even if the maximum amount is raised, we are likely to need additional funds in the future in order to grow, and if we cannot raise or generate those funds for whatever reason, including reasons relating to the Company itself or to the broader economy, the Company may not survive. If we raise a substantially lesser amount than the maximum offering amount, we will have to find other sources of funding or rely on our own revenues for some of the plans outlined in “Use of Proceeds To Issuer”, for which there is no guarantee we will be successful,

We are and may continue to be significantly impacted by the worldwide economic downturn due to the COVID-19 pandemic. In December 2019, a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China. COVID-19 has spread to many countries, including the United States, and was declared to be a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified and the U.S., Europe and Asia have implemented severe travel restrictions and social distancing. The impacts of the outbreak are unknown and rapidly evolving. A widespread health crisis has adversely affected and could continue to affect the global economy, resulting in an economic downturn that could negatively impact the operations of the Company, which could negatively impact your investment in our securities.

The continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. It is possible that the continued spread of COVID-19 could cause a further economic slowdown or recession or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

The extent to which COVID-19 affects our financial results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 outbreak and the actions to contain the outbreak or treat its impact, among others. Moreover, the COVID-19 outbreak has had and may continue to have indeterminable adverse effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected to the extent that COVID-19 or any other pandemic harms the global economy generally.

We are subject to risks related foreign currency exchange rates. We operate on a global basis. We have operations (through our subsidiaries and/or directly) in many foreign countries and territories, including, but not limited to, Great Britain, Poland, Rwanda, and the Republic of Malta. The translation from any currencies to United States Dollars for financial statement presentation resulted in a foreign currency translation gain of $45,133 for the year ended December 31, 2020, and $44,728 for the six months ended June 30, 2021, but it could lead to a loss in the future. Such foreign currency translation losses could have a material adverse effect on our business.

Risks Related to the Securities in this Offering

There is a limited or no public market for our securities. There has been a limited public market for our Class A Common Stock and no public market for our outstanding stock options and warrants. Our Class A Common Stock is currently quoted on the OTCQX. The daily trading volume of our Class A Common Stock has been limited.

We cannot predict the extent to which investor interest in our Company will lead to the development of an active trading market or how liquid that trading market might become. The lack of an active trading market may reduce the value of shares of our Class A Common Stock and impair the ability of our stockholders to sell their shares at the time or price at which they wish to sell them. An inactive trading market may also impair our ability to raise capital by selling our Class A Common Stock and may impair our ability to acquire or invest in other companies, products, or technologies by using our Class A Common Stock as consideration.

We may be unable to list our stock on a national exchange, such as the Nasdaq Capital Market. There has been a limited public market for our Class A Common Stock. Our Class A Common Stock is listed on the Euronext Growth Exchange but there is no trading. Our Class A Common Stock is traded on the OTCQX Best Market in the United States but there is very limited liquidity leading to price volatility. Although it is our intention to qualify for the trading of our Class A Common Stock on a national exchange and we have applied to list our Class A Common Stock on Nasdaq following the qualification of the offering and declaration of effectiveness for a Form 8-A, we may not meet or maintain certain qualifying requirements for Nasdaq. If we are unable to meet these requirements, we may be limited to trading conducted on the OTCQX and the Euronext Growth Exchange (provided that we continue to meet the trading criteria for those trading platforms, which is not guaranteed).

Sales of large numbers of shares could adversely affect the price of our Class A Common Stock Most of our shares of Class A Common Stock that are currently outstanding were issued as “restricted securities” as that term is defined in Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. All outstanding shares of Class A Common Stock are or will be eligible for resale in the public markets at various times within the next six months with respect to affiliates, subject to compliance with the volume and manner of sale requirements of Rule 144 under the Securities Act of 1933, as amended, and with respect to all restricted securities held by affiliates.

In general, under Rule 144 as currently in effect, any affiliate (or persons whose shares are aggregated for purposes of Rule 144) who beneficially owns restricted securities with respect to which at least six months has elapsed since the later of the date the shares were acquired from us, or from an affiliate of ours, is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of the then outstanding shares of our Class A Common Stock or the average weekly trading volume in our Class A Common Stock during the four calendar weeks preceding such sale. Sales under Rule 144 by affiliates also are subject to certain manner-of-sale provisions and notice requirements and to the availability of current public information about us. A person who is not an affiliate, who has not been an affiliate within three months prior to sale, and who beneficially owns restricted securities with respect to which at least six months has elapsed since the later of the date the shares were acquired from us, or from an affiliate of ours, is entitled to sell such shares under Rule 144 without regard to any of the volume limitations or other requirements described above. Sales of substantial amounts of Class A Common Stock in the public market could adversely affect prevailing market prices.

Investors in this offering previously agreed to a forum selection provision contained in the subscription agreement for the Company’s Reg CF and Reg D Warrants, which could result in less favorable outcomes to the plaintiff(s) in any action against our Company. The subscription agreement that holders of the Reg CF and Reg D Warrants executed to initially purchase those warrants included a forum selection provision that requires any claims against the company by stockholders not arising under the federal securities laws to be brought a state or federal court of competent jurisdiction located within the State of Georgia. This forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims.

The value of your investment will be diluted if the Company issues stock, options, or other equity awards to employees, contractors, advisors, or Board members. The Company may (with the approval of the Board of Directors) issue stock or options to employees, contractors, advisors, or Board members as an element of their compensation package. Any such issuance will dilute your investment.

The Company has a significant amount of authorized but unissued Series A Preferred Stock. No shareholder consent is required to issue these authorized shares. As such, the Company may issue additional Series A Preferred Stock in a future round without first receiving the consent of shareholders of the Company, which could lead to changes in voting control of the Company, or dilution of existing shareholders.

USE OF PROCEEDS

Assuming a maximum raise of $6,000,000 we estimate that the net proceeds from the sale of the Class A Common Stock in this offering will be approximately $5,877,500 based on an assumed public offering price of $4.00 per share of Class A Common Stock after deducting estimated offering expenses of $90,000 in legal fees, $2,500 in EDGARization fees and $30,000 in accounting fees related to this offering.

Assuming a raise of $3,350,000 representing approximately 67% of the maximum offering amount, we estimate that the net proceeds from the sale of the Class A Common Stock in this offering will be approximately $3,227,500 based on an assumed public offering price of $4.00 per share of Class A Common Stock after deducting estimated offering expenses of $90,000 in legal fees, $2,500 in EDGARization fees and $30,000 in accounting fees related to this offering.

Assuming a raise of $1,650,000, representing approximately 33% of the maximum offering amount, we estimate that the net proceeds from the sale of the Class A Common Stock in this offering will be approximately $3,227,500 based on an assumed public offering price of $4.00 per share of Class A Common Stock after deducting estimated offering expenses of $90,000 in legal fees, $2,500 in EDGARization fees and $30,000 in accounting fees related to this offering.

Please see the table below for a summary our intended use of proceeds from this offering:

Working capital expenditures may include, but are not limited to, growing the Company’s administrative staff and infrastructure to support accelerated product and business development and the additional legal, accounting, compliance and regulatory obligations of being a publicly traded entity. Working capital expenditures will include compensation to officers and directors. Working Capital will not include repayment of any outstanding indebtedness of the Company.

We believe that the expected net proceeds from this offering, and our existing cash and cash equivalents, together with revenues generated from our operations, will be sufficient to fund our operations for at least the next 12 months, although we cannot assure you that this will occur.

The amount and timing of our actual expenditures will depend on numerous factors, including the status of our development efforts, sales and marketing activities and the amount of cash generated or used by our operations. We may find it necessary or advisable to use portions of the proceeds for other purposes, and we will have broad discretion and flexibility in the application of the net proceeds. Pending these uses, the proceeds will be invested in short-term bank deposits.

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our Class A Common Stock is quoted on the OTC Markets Group Inc.’s OTCQX quotation platform (the “OTCQX”) under the trading symbol “IDAI”. We have applied to have our Class A Common Stock listed on the Nasdaq Capital Market under the symbol “IDAI”.

As of November 19, 2021, there were approximately 2,682 registered holders of record of our Class A Common Stock and the last reported sale price of our Class A Common Stock on the OTCQX was $4.95 per share on November 18, 2021.

Any OTCQX quotations of our Class A Common Stock reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

The number of shares of our Class A Common Stock that are freely tradeable as of November 15, 2021 was 8,287,380.

The following table sets forth, for the periods indicated the high and low bid quotations for our Class A Common Stock on OTCQX. These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown, or commission and may not represent actual transactions.

*On August 18, 2021, by written consent of the stockholders, the Company effected a 5-for-1 forward stock split. The prices listed in the table above have been retroactively restated to reflect the stock split.

Euronext Growth Dublin (Ticker code: “AIID”).

On December 8, 2020, Trust Stamp was listed on Euronext Growth Dublin through the admission to trading of 3,588,651 shares under a direct listing. The admission and issue price of our Class A Common Stock was set at $7.79 per share.

The last reported sale price of our Class A Common Stock on the Euronext Growth Dublin on May 7, 2021 was $3.80 per share.

The following table sets forth, for the periods indicated the high and low bid quotations for our Class A Common Stock on Euronext Growth Dublin. These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown, or commission and may not represent actual transactions.

*On August 18, 2021, by written consent of the stockholders, the Company effected a 5-for-1 forward stock split. The prices listed in the table above have been retroactively restated to reflect the stock split.

Dividend Policy

To date, we have not paid any dividends on our Class A Common Stock and do not anticipate paying any dividends in the foreseeable future. The declaration and payment of dividends on the Class A Common Stock is at the discretion of our Board of Directors and will depend on, among other things, our operating results, financial condition, capital requirements, contractual restrictions or such other factors as our Board of Directors may deem relevant. We currently expect to use all available funds to finance the future development and expansion of our business and do not anticipate paying dividends on our Class A Common Stock in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

On April 9, 2019, management created a new entity, Tstamp Incentive Holdings (“TSIH”) to which the Company issued 1,620,565 shares of Class A Common Stock that the Board of Directors of TSIH could use for employee stock awards in the future. As of December 31, 2020, 282,565 of these shares were outstanding, and 282,565 remained available for issuance. The purpose of the entity was to provide an analogous structure to a traditional stock incentive plan. Any equity compensation approved by the Company would be issued by TSIH. As of the date of this Offering Circular, 282,565 shares of Class A Common Stock are still held by TSIH – however, all of these shares of Class A Common Stock have been allocated for issuance pursuant to RSUs that will vest on January 2, 2022. The Company has no plans to issue additional equity securities to TSIH. As such, once these remaining shares are issued, it is expected this entity will become dormant going forward.

The Company expects to adopt another equity compensation plan in the near future, but has not yet done so as of the date of this Offering Circular.

Executive Compensation Philosophy

Our Board of Directors determines the compensation given to our executive officers in their sole discretion. Our Board of Directors reserves the right to pay our executives or any future executives a salary, and/or issue them shares of Class A Common Stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, the Board of Directors has granted and reserves the right to grant performance based equity awards in the future, if the Board of Directors in its sole determination believes such grants would be in our best interests.

Incentive Bonus

The Board of Directors may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are in our best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.

Long-Term, Stock Based Compensation

In order to attract, retain and motivate executive talent necessary to support our long-term business strategy we may award our executives and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors.

CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents and capitalization as of June 30, 2021 on an actual basis and as of November 19, 2021 on a pro forma and pro forma as adjusted basis to reflect (i) the sale of 1,250,000 units at $4.00 per unit, with each unit consisting of one share of Class A Common Stock and one Reg CF Warrant (each, a “ Reg CF Unit”); and (i) the sale of 250,000 units at $4.00 per unit, with each unit consisting of one share of Class A Common Stock and one Reg D Warrant in a Regulation D offering (each, a “Reg D Unit”). Total direct offering costs to be paid as a result of these equity raises is estimated to be $525,000, none of which had been paid as of June 30, 2021.

You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited consolidated financial statements and the related notes appearing elsewhere in this Offering Circular. 

DILUTION

Dilution means a reduction in value, control, or earnings of the shares the investor owns.

Immediate dilution  

An early-stage Company typically sells its shares (or grants options over its shares) to its founders and early employees at a very low cash cost, because they are, in effect, putting their “sweat equity” into the Company. When the Company seeks cash investments from outside investors, like you, the new investors typically pay a much larger sum for their shares than the founders or earlier investors, which means that the cash value of your stake is diluted because all the shares are worth the same amount, and you paid more than earlier investors for your shares.

The following table illustrates the dilution that new investors will experience upon investment in the Company relative to existing holders of our securities. Because this calculation is based on the net tangible assets of the Company, we are calculating based our net tangible book value of $1,535,977 as of June 30, 2021, as included in our unaudited financial statements. Note, no securities issuances from 2021 are reflected in the table to maintain consistency with the unaudited net tangible book value as of June 30, 2021.

The offering costs assumed in the following table includes up to $122,500 in offering expenses that may be incurred in connection with this offering.

The following table presents three scenarios for the convenience of the reader: a $1,650,000 raise from this offering, a $3,350,000 raise from this offering, and a fully subscribed $6,000,000 raise from this offering (the maximum offering).

The following table presents the same three scenarios as the above table, but is presented on a fully-diluted basis as of June 30, 2021.

Future dilution

Another important way of looking at dilution is the dilution that happens due to future actions by the Company. The investor’s stake in a company could be diluted due to the company issuing additional shares. In other words, when the Company issues more shares, the percentage of the Company that you own will go down, even though the value of the Company may go up. You will own a smaller piece of a larger company. This increase in number of shares outstanding could result from a stock offering (such as an initial public offering, another crowdfunding round, a venture capital round, angel investment), employees exercising stock options, or by conversion of certain instruments (e.g. convertible bonds, preferred shares or warrants) into stock.

If the Company decides to issue more shares, an investor could experience value dilution, with each share being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if the Company offers dividends, and most early stage companies are unlikely to offer dividends, preferring to invest any earnings into the Company).

The type of dilution that hurts early-stage investors most occurs when a company sells more shares in a “down round”, meaning at a lower valuation than in earlier offerings. An example of how this might occur is as follows (numbers are for illustrative purposes only):

This type of dilution might also happen upon conversion of convertible notes into shares. Typically, the terms of convertible notes issued by early-stage companies provide that in the event of another round of financing, the holders of the convertible notes get to convert their notes into equity at a “discount” to the price paid by the new investors, i.e., they get more shares than the new investors would for the same price. Additionally, convertible notes may have a “price cap” on the conversion price, which effectively acts as a share price ceiling. Either way, the holders of the convertible notes get more shares for their money than new investors. In the event that the financing is a “down round” the holders of the convertible notes will dilute existing equity holders, and even more than the new investors do, because they get more shares for their money. Investors should pay careful attention to the amount of convertible notes that the Company has issued (and may issue in the future), and the terms of those notes.

If you are making an investment expecting to own a certain percentage of the Company or expecting each share to hold a certain amount of value, it is important to realize how the value of those shares can decrease by actions taken by the Company. Dilution can make drastic changes to the value of each share, ownership percentage, voting control, and earnings per share.

PLAN OF DISTRIBUTION

The Company is qualifying the issuance by us of up to 1,500,000 shares of our Class A Common Stock that may be issued upon exercise of the Reg CF Warrants and Reg D Warrants. The Reg CF and Reg D Warrants were previously issued pursuant to offerings by the Company utilizing Regulation Crowdfunding and Regulation D, respectively, each of which commenced on August 25, 2021. The Reg CF Warrants and Reg D Warrants are exercisable into Class A Common Stock of our Company, par value $0.01, at an exercise price of $4.00 per share. The Company may receive up to $6,000,000 from the exercise of these warrants.

This offering is being conducted on a “best efforts” basis, which means that there is no guarantee that any minimum amount will be sold in this offering. Offers and sales of our Class A Common Stock through the exercise of the Reg CF and Reg D Warrants will be made by our management who will not receive any commissions or other remunerations for their efforts. We intend for our management to use methods of general solicitation to contact our Reg CF and Reg D Warrant holders to inform them about the opportunity to exercise their warrants. To the extent that our officers and directors make any communications in connection with the Offering, we intend for such efforts to be done in accordance with an exemption from registration contained in Rule 3a4-1 under the Exchange Act. We reserve the right to engage the services of a registered broker-dealer who will offer, sell and process the subscriptions for our Class A Common Stock, although we do not presently expect to engage such selling agent. If any broker-dealer or other agent/person is engaged to sell our Class A Common Stock, we will file a post-qualification amendment to the offering statement of which this offering circular forms a part disclosing the names and compensation arrangements prior to any sales by such persons. See “Plan of Distribution and Selling Securityholders.”

There is no minimum amount we are required to raise from the shares of Class A Common Stock being offered hereby. There is no guarantee that we will sell any of the shares of Class A Common Stock being offered in this offering. Additionally, there is no guarantee that this offering will successfully raise enough funds to implement our Company’s business plan or pay for the expenses of this offering, which we estimate to be $122,500.

The approximate date of the commencement of the sales of the shares of Class A Common Stock will be within two calendar days from the date on which the Offering is qualified by the SEC and on a continuous basis thereafter until the maximum number of shares of Class A Common Stock offered hereby are sold, 12 months from the date of qualification, or the Offering is earlier terminated by the Company. Termination of this Offering does not foreclose any Reg CF or Reg D Warrant holder’s ability to exercise the respective warrants pursuant to the terms of the Reg CF and Reg D Warrants. All offering expenses will be borne by us and will be paid out of the proceeds of this offering. The Company may undertake one or more closings on an ongoing basis. After each closing, funds tendered by investors will be available to the Company.

Procedures for Subscribing

As described above, the Company will only issue shares pursuant to the exercise of Reg CF Warrants or Reg D Warrants by holders of these warrants.

After the qualification of this Offering Statement by the SEC, if you decide to exercise your Reg CF Warrants and/or Reg D Warrants for shares of Class A Common Stock in this Offering, you may exercise your Reg CF Warrants or Reg D Warrants in accordance with the applicable Warrant Agreement for such warrants on or before the expiration date set forth therein by sending, at the office of the warrant agent, Colonial Stock Transfer Co., Inc., the applicable “Notice of Exercise”, duly completed and executed by or on behalf of the holder, together with the surrender of the warrant, accompanied by full payment of the exercise price to an account designated by the Company and any and all applicable taxes due in connection with the exercise of the warrant. Additionally, while the first exercise of warrants by a warrantholder will be of no charge to the warrantholder, for each subsequent exercise, a warrantholder must submit $15.00 in addition to the exercise price for the shares to cover certain processing fees payable to Colonial Stock Transfer Co., Inc. for its services as warrant agent.

A form of the “Notice of Exercise” for each of the Reg CF and Reg D Warrants is included as Exhibit 3.8 and Exhibit 3.9, respectively, to the offering statement of which this offering circular forms a part. (see “Exhibit A” of Exhibit 3.8 and Exhibit 3.9, respectively).

Minimum and Maximum Investment Amount

The minimum investment amount per investor in this offering is $4.00, or the exercise of one (1) Reg D or Reg CF Warrant. There is no maximum investment amount per investor in this offering.

As stated above, investors should be aware that there is a $15.00 processing fee payable to Colonial Stock Transfer Co., Inc. for its services as warrant agent that must be paid in addition to the exercise price for the warrants being exercised. The Company will cover this fee on behalf of warrantholders for their initial exercise of Reg D and/or Reg CF Warrants for shares of Class A Common Stock in this offering – but warrantholders will be responsible for this fee for any subsequent exercises of warrants.

No Escrow

The proceeds of this offering will not be placed into an escrow account. We will offer our Class A Common Stock from the exercise of the Reg CF and Reg D Warrants on a best efforts basis. There is no minimum offering amount as a condition for the Company to receive any proceeds in this offering, and upon the successful exercise of the warrants, proceeds received by the Company shall be immediately available for its use.

No Selling Securityholders

No securities are being sold for the account of security holders. All net proceeds of this offering will go to the Company.

Warrant Agent, Transfer Agent and Registrar 

The Company has engaged Colonial Stock Transfer Co., Inc., a registered transfer agent with the SEC, to serve as transfer agent to maintain shareholder information on a book-entry basis, as well as to act as the warrant agent for the exercise of the Reg D and Reg CF Warrants for shares of Class A Common Stock in this Offering. A copy of the Company’s agreement with Colonial Stock Transfer Co., Inc. for its services as warrant agent is included as Exhibit 6.18 to the offering statement of which this offering circular forms a part.

Provisions of Note in the Subscription Agreement for the Reg CF and Reg D Warrants

The subscription agreement that holders of our Reg CF Warrants and Reg D Warrants executed to purchase such warrants contains forum selection provisions that require any claims against the Company based on the subscription agreement not arising under the federal securities laws to be brought in a court of competent jurisdiction in the State of Georgia. These forum selection provisions may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. The Company has adopted these provisions to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers not to lose a significant amount of time traveling to any particular forum so they may continue to focus on operations of the Company.

Determination of Offering Price

The Company is offering shares of its Class A Common Stock in this offering at $4.00 per share, which is the exercise price per share of the Reg CF Warrants and Reg D Warrants. The closing price of the Company’s Class A Common Stock on OTCQX was $4.95 on November 18, 2021, The average closing price over the last 60 days of our Class A Common Stock on OTCQX is $4.08. As such, there is no material disparity between the Company’s market price on OTCQX and the price per share for investors in this offering.

DESCRIPTION OF CAPITAL STOCK

General

The Company is qualifying shares of its Class A Common Stock in this offering for issuance pursuant to the exercise of outstanding Reg D and Reg CF Warrants.

The following description summarizes the most important terms of the Company’s capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of Trust Stamp’s amended certificate of incorporation, as amended (our “A&R Certificate of Incorporation”) and its amended and restated bylaws (our “Bylaws”), copies of which have been filed as exhibits to the Offering Statement of which this Offering Circular is a part. For a complete description of Trust Stamp’s capital stock, you should refer to the A&R Certificate of Incorporation and Bylaws, and to the applicable provisions of Delaware law.

The authorized capital stock of the Company consists of Common Stock, par value $0.01 per share, and Preferred Stock, par value $0.01 per share. The total number of authorized shares of Common Stock of Trust Stamp is 37,500,000, all of which have been designated Class A Common Stock, and the total number of authorized shares of Preferred Stock is 2,000,000, all of which are designated as Series A Preferred Stock. 

As of November 19, 2021, the outstanding shares of the Company included:

Common Stock

Pursuant to the Company’s A&R Certificate of Incorporation, the Board of Directors of the Company has the right to designate shares of the Company’s Common Stock as either Class A or Class B Common Stock. As of the date of this Offering Circular, all shares of Common Stock of the Company have been designated as Class A Common Stock, and there is no issued (or designated) Class B Common Stock. The rights and preferences of each of the Class A and Class B classes of Common Stock are summarized below.

Class A Common Stock

Voting Rights

Holders of shares of Class A Common Stock are entitled to one vote for each on all matters submitted to a vote of the shareholders, including the election of directors.

The holders of our Common Stock (Class A and Class B Common Stock) are entitled to elect four (4) directors of the corporation to our Board of Directors, so long as 25% of the Company’s initially issued shares of Preferred Stock remains outstanding (which refers to the 718,804 shares of Series A Preferred Stock issued in the Company’s Series A Preferred Stock offering under Tier 2 of Regulation A (the “Series A Preferred Offering”). As of the date of this Offering Circular, no shares of the Company’s Preferred Stock are outstanding.

Dividend Rights

Holders of each class of Common Stock are entitled to receive dividends, as may be declared from time to time by the Board of Directors out of legally available funds as detailed in our A&R Certificate of Incorporation. The Company has never declared or paid cash dividends on any of its capital stock and currently does not anticipate paying any cash dividends after this offering or in the foreseeable future.

Liquidation Rights

In the event of a voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of Class A Common Stock are entitled to share ratably in the net assets legally available for distribution to shareholders after the payment of all debts and other liabilities of the Company.

Holders of the Series A Preferred Stock are entitled to a liquidation preference that is senior to holders of each class of the Common Stock, and therefore would receive dividends and liquidation assets prior to the holders of the Common Stock.

Exchange Rights

A holder of shares of Class A Common Stock shares that is a bank, savings association, or a holding company (or an affiliate thereof) may at any time choose to exchange all or any portion of shares of Class A Common Stock it holds for shares of Class B Common Stock. In the event of such an election, each Class A share for which the holder makes such election shall be exchanged for a Class B share on a one-for-one basis without the payment of any additional consideration. In the event of such an election, the Company will take all necessary corporate actions to effect such exchange, the holder will surrender its certificate or certificates representing the Shares of Class A Common Stock for which it made such election, and such Shares of Class A Common Stock shall be cancelled.

Transfer Rights

There are no restrictions on transfer for shares of Class A Common Stock of the Company.

Class B Common Stock

The rights and preferences of the Company’s Class B Common Stock are identical to those of the Class A Common Stock of the Company, except for as described below.

Voting Rights

Holders of shares of Class B Common Stock have no voting rights with respect to such shares; provided that the holders of Class B Common Stock shall be entitled to vote (one vote for each Class B share held) to the same extent that the holders of Shares of Class A Common Stock would be entitled to vote on matters as to which non-voting equity interests are permitted to vote pursuant to 12 C.F.R. § 225.2(q)(2) (or a successor provision thereto).

Transfer Rights

In the event a holder of shares of Class B Common Stock transfers all or any portion of his or her shares of Class B Common Stock to a “Permitted Transferee” (as defined below), such Permitted Transferee will be entitled to elect to exchange all or any portion of such Shares of Class B Common Stock for Shares of Class A Common Stock on a one-for-one basis without the payment of any additional consideration. No fractional shares may be so exchanged. In the event of such an election, the Company will take all necessary corporate actions to effect such exchange, the holder will surrender its certificate or certificates representing the Shares of Class B Common Stock for which it made such election, and such Shares of Class B Common Stock shall be cancelled. A “Permitted Transferee” is a person or entity who acquires Shares of Class B Common Stock from a bank, savings association, or a holding company (or an affiliate thereof) in any of the following transfers:

Series A Preferred Stock

Voting Rights

Each holder of the Company’s Series A Preferred Stock is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors. Each holder of Series A Preferred Stock will be entitled to one vote for each share of Common Stock into which such share of Preferred Stock could be converted. Fractional votes will not be permitted and if the conversion results in a fractional share, it will be disregarded.

Additionally, the holders of the Series A Preferred Stock are entitled to certain protective provisions that require the Company to obtain the written consent or affirmative vote of a majority of the outstanding shares of Preferred Stock prior to effecting certain corporate actions, comprised of the following:

The Series A Preferred Stockholders do not have the right to vote for any directors of the Company as a standalone class, which is a right held by the Common Stockholders. The holders of the Series A Preferred Stock are entitled to vote together with the holders of the Common Stock for the election of one (1) independent director, and may vote together with the holders of the Common Stock on any additional directors to be elected to our Board of Directors after the initial five (5) directors are elected.

Dividend Rights

Holders of Series A Preferred Stock will be entitled to receive dividends as may be declared from time to time by the Board of Directors out of legally available funds and on a pari passu basis with holders of the Common Stock. The Company has never declared or paid cash dividends on any of its capital stock and currently does not anticipate paying any cash dividends after this offering or in the foreseeable future.

Conversion Rights

Shares of Series A Preferred Stock will be convertible, at the option of the holder, at any time, into fully paid and nonassessable shares of the Company’s Common Stock at the then-applicable conversion rate. Initially, the conversion rate will be one share of Common Stock per share of Series A Preferred Stock. The conversion rate is subject to adjustment in the event of stock splits, reverse stock splits or the issuance of a dividend or other distribution payable in additional shares of Common Stock.

Additionally, each share of Series A Preferred Stock will automatically convert into Common Stock:

In either of these events, the shares will convert in the same manner as a voluntary conversion.

Right to Receive Liquidation Distributions

In the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or certain other events (each a “Deemed Liquidation Event”) such as the sale or merger of the Company, all holders of Series A Preferred Stock will be entitled to a liquidation preference that is senior to holders of the Common Stock. Holders of Series A Preferred Stock will receive a liquidation preference equal to the greater of (a) an amount for each share equal to the Original Issue Price for such share, adjusted for any stock dividends, combinations, splits, recapitalizations and the like (the “liquidation preference”) plus any declared but unpaid dividends with respect to such shares or (b) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event. Initially, the liquidation preferences for the shares of Series A Preferred Stock will be $7.79 per share (the “Original Issue Price”).

If, upon such liquidation, dissolution, or winding up or Deemed Liquidation Event, the assets (or the consideration received in a transaction) that are distributable to the holders of Preferred Stock are insufficient to permit the payment to such holders of the full amount of their respective liquidation preference, then all of such funds will be distributed ratably among the holders of the Preferred Stock in proportion to the full amounts to which they would otherwise be entitled to receive.

After the payment of the full liquidation preference of the Series A Preferred Stock, the remaining assets of the Company legally available for distribution (or the consideration received in a transaction), if any, will be distributed ratably to the holders of the Common Stock in proportion to the number of shares of Common Stock held by each such holder.

Investors’ Rights Agreement

In connection with the Company’s previous Series A Preferred Offering in which it issued shares of Series A Preferred Stock, the Company entered into an investors’ rights agreement with each investor in the Series A Preferred Offering (the “Series A IRA”). On September 8, 2020, all shares of Series A Preferred Stock of the Company converted into shares of Class A Common Stock. However, under the terms of the Series A IRA, the agreement does not terminate upon conversion of the Series A Preferred Stock into another class of the Company’s securities. As such, the provisions of the Series A IRA are still applicable to the holders of Class A Common Stock that purchased shares of Series A Preferred Stock of the Company in the Company’s Series A Preferred Offering, which represents 3,594,020 shares of the Company’s Class A Common Stock.

The Series A IRA will terminate and have no further force or effect immediately upon the Company becoming an Exchange Act reporting company, which will occur upon the declaration of effectiveness of a Form 8-A filed by the Company, which the Company intends to file concurrently with the qualification of this Offering.

The material provisions of the Series A IRA are summarized below.

Drag Along Right

The Series A IRA contains a “drag-along provision” related to the certain events, such as the sale, merger, or dissolution of the Company (a “Liquidating Event”). Parties to the Series A IRA agree that, if the Board of Directors, the majority of the holders of the Company’s Common Stock, and the majority of the holders of the Company’s Series A Preferred Stock vote in favor of such a Liquidating Event, then such holders of Series A Preferred Stock will vote in favor of the transaction if such vote is solicited, refrain from exercising dissenters’ rights with respect to Liquidating Event, and deliver any documentation or take other actions reasonably requested by the Company or the other holders in connection with the Liquidating Event.

Information Rights

The Company also agrees in the Series A IRA to grant certain information rights parties to the agreement that invested $50,000 or more into the Company (“Major Purchasers”). The information rights provided to Major Purchasers include: (1) annual unaudited financial statements for each fiscal year of the Company, including an unaudited balance sheet as of the end of such fiscal year, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices; and (2) quarterly unaudited financial statements for each fiscal quarter of the Company (except the last quarter of the Company’s fiscal year), including an unaudited balance sheet as of the end of such fiscal quarter, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices, subject to changes resulting from normal year-end audit adjustments. If the Company has audited records of any of the foregoing, it will provide those in lieu of the unaudited versions.

Additional Rights and Participation Rights

The Series A IRA grants the parties to the agreement and their transferees’ certain rights in connection with future equity financings of the Company. If in any equity offering conducted after the date that an investor executes the Series A IRA (a “Next Financing”) the Company issues securities that (a) have rights, preferences or privileges that are more favorable than the terms of the Series A Preferred Stock or (b) provide all such future investors in the Next Financing contractual terms such as registration rights, the Company agrees to provide substantially equivalent rights to the investor (with appropriate adjustment for economic terms or other contractual rights), including the amount of the Series A preferred stock liquidating distributions, through the investor’s proxy, if applicable, subject to the investor’s execution of any documents, including, if applicable, investor rights, co-sale, voting, and other agreements, executed by the investors purchasing securities in the Next Financing (the “Next Financing Documents”), provided that certain rights may be reserved for investors with a minimum amount of investment in the Next Financing. Upon the execution and delivery of the Next Financing Documents, the Series A IRA (excluding any then-existing and outstanding obligations) will be automatically amended and restated by and into the Next Financing Documents and will be terminated and of no further force or effect. As a result, the rights of investors who participate in any Next Financing will instead be governed by the Next Financing Documents.

In the Series A IRA, the Company also grants parties to the agreement participation rights. Parties to the Series A IRA have the right of first refusal to purchase the investor’s Pro Rata Share of any New Securities (each as defined below) that the Company may issue in a Next Financing. The investor that is party to the Series A IRA will have no right to purchase any New Securities if the investor cannot demonstrate to the Company’s reasonable satisfaction that the investor is at the time of the proposed issuance of New Securities eligible to purchase such New Securities under applicable securities laws. Such investor’s “Pro Rata Share” means the ratio of (i) the number of shares of the Company’s Common Stock issued or issuable upon conversion of the Series A Preferred Stock owned by the investor, to (ii) that number of shares of the Company’s capital stock equal to the sum of (A) all shares of the Company’s capital stock (on an as-converted basis) issued and outstanding, assuming exercise or conversion of all options, warrants and other convertible securities and promissory notes, and (B) all shares of the Company’s capital stock reserved and available for future grant under any equity incentive or similar plan.

“New Securities” means any shares of the Company’s capital stock to be issued in a Next Financing, including Common Stock or Preferred Stock, whether now authorized or not, and rights, options or warrants to purchase Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may become, convertible or exchangeable into Common Stock or Preferred Stock “New Securities” does not include: (i) shares of Common Stock issued or issuable upon conversion of any outstanding shares of Preferred Stock; (ii) Common Stock or Series A Preferred Stock issued upon conversion of any outstanding convertible notes; a(iii) shares of Common Stock or Preferred Stock issuable upon exercise of any options, warrants, or rights to purchase any securities of the Company outstanding as of the date the Offering Statement is qualified by the Commission and any securities issuable upon the conversion thereof; (iv) shares of Common Stock or Preferred Stock issued in connection with any stock split or stock dividend or recapitalization; (v) shares of Common Stock (or options, warrants or rights therefor) granted or issued after the date the Offering Statement is qualified by the Commission to employees, officers, directors, contractors, consultants or advisers to, the Company or any subsidiary of the Company pursuant to incentive agreements, stock purchase or stock option plans, stock bonuses or awards, warrants, contracts or other arrangements that are approved by the Board of Directors; (vi) shares of the Company’s Series A Preferred Stock issued in this offering; (vii) any other shares of Common Stock or Preferred Stock (and/or options or warrants therefor) issued or issuable primarily for other than equity financing purposes and approved by the Board of Directors; (vii) shares of Common Stock issued or issuable by the Company to the public pursuant to a registration statement filed under the Securities Act; and (ix) any other shares of the Company’s capital stock, the issuance of which is specifically excluded by approval of the Board of Directors.

The Company will send investors, or investors’ proxies, if applicable, a notice describing the type of New Securities and the price and the general terms upon which it proposes to issue the New Securities. An investor will have fourteen (14) days from the date of notice, to agree to purchase a quantity of New Securities, up to their Pro Rata Share. If an investor fails to exercise in full the right of first refusal within the 14-day period, then the Company will have one hundred twenty (120) days after that to sell the New Securities with respect to which the investor’s right of first refusal was not exercised. If the Company has not issued and sold the minimum amount of New Securities to be sold in the Next Financing within the 120-day period, then the Company will not issue or sell any New Securities without again first offering those New Securities to investors in accordance with the terms of the Series A IRA.

Warrants

The Company has various warrants outstanding that are convertible into shares of its Class A Common Stock. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information on the outstanding warrants of the Company.

Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws

Our A&R Certificate of Incorporation and Bylaws contain certain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, could discourage takeovers, coercive or otherwise. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our Board of Directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us.

Authorized but Unissued Capital Stock

We have authorized but unissued shares of Preferred Stock and Common Stock, and our Board of Directors may authorize the issuance of one or more series of preferred stock without stockholder approval. These shares could be used by our Board of Directors to make it more difficult or to discourage an attempt to obtain control of us through a merger, tender offer, proxy contest or otherwise.

Limits on Stockholder Action to Call a Special Meeting

Our Bylaws provide that special meetings of the stockholders may be called only by our Board of Directors. A stockholder may not call a special meeting, which may delay the ability of our stockholders to force consideration of a proposal or for holders controlling a majority of our capital stock to take any action, including the removal of directors.

Our certificate of incorporation authorizes our Board of Directors to fill vacancies or newly created directorships.

If there is a vacancy on our Board of Directors, the majority of the directors then in office may elect a successor to fill any vacancies or newly created directorships. This may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect their own slate of directors or otherwise attempt to obtain control of our Company.

THE COMPANY’S BUSINESS

Organizational History

Trust Stamp was incorporated under the laws of the State of Delaware on April 11, 2016 as “T Stamp Inc.” The business was originally founded as “T Stamp LLC”, formed on November 9, 2015 as a Georgia limited liability company. In 2016, the Company effected a “hive down” business reorganization whereby the business of the Company was transferred into to a newly formed, wholly owned subsidiary, which was T Stamp Inc. (i.e. the Company). As of the date of this Offering Circular, the Company is no longer a subsidiary of T Stamp LLC, and T Stamp LLC is no longer a majority owner of the Company.

Overview

Trust Stamp is an artificial intelligence company that develops proprietary identity solutions to help determine whether an individual is who they say they are and that they can be trusted, including Trust Stamp’s AI-powered facial biometrics that establish proof of life and are resistant to presentation attacks. In that example, a biometric capture can be converted into a tokenized identity (IT²) that is unique to the user but cannot be reverse engineered and rebuilt into the user’s face or other biometric data, does not constitute PII.

Each IT²can be stored in an Identity Lake^TM or submitted to a zero-knowledge-proof matcher aand compared to all other hashes allowing our AI to predict if a single subject generated two or more IT² even if the subject has passed conventional KYC using (e.g.) falsified identity documents. Using this technology, the users’ IT² can be used for re-authentication purposes including account recovery, password-less login, new account creation etc. across the organization or even within a consortium of organizations all in a low-cost and low friction delivery that is fast and secure.

Our technology is being used for enhanced due diligence, KYC/AML compliance and “second chance” approval for customer onboarding and account access together with the delivery of humanitarian and development services. Using our technology, an enterprise can approve more users, keep bad actors from accessing systems and services and retain existing users with a superior user experience.

We utilize micro-service architecture and highly scalable cloud computing resources with cutting-edge tools, power and agility such as GPU processing, neural networks and a Quantum Ledger Database to process data faster and more effectively than has previously been possible, as well as delivering products at a disruptively low cost that allows usage across multiple industries, including: 

Our Background

We entered the market building facial-biometric authentication systems for onboarding, fraud-detection & safety applications. This allowed us to raise capital, generate revenue to fund our core AI microservices, and refine our technology using live data with informed consent from users. Following usage based upon facial biometrics, we started the process of hashing biometric data from 3rd party biometric service providers, initially touchless palm, and fingerprint templates. Our business model is now focused on licensing Annual Recurring Revenue (ARR) generating pay-per-use services implementing our hashing technology, limiting future pilots to very-large-scale use cases, using execution partners for commoditized implementations, and deploying our hashing technology with sector leading channel partners.

Business Model

Trust Stamp’s business model is that of a technology licensing company – we license our products to companies that in turn integrate our technology into products and services which they either sell or use for their own purposes. We focus on licensing ARR generating pay-per-use services including:

In addition, we have developed an encrypted e-mail product (Trusted Mail ® www.trustedmail.pro) using our facial recognition technology. This technology is held in a majority owned subsidiary entity: Trusted Mail Inc.

The Market

Trust Stamp considers itself to be in the identity authentication market which is primarily comprised of biometric authentication providers. Trust Stamp’s key sub-markets are identity authentication for the purpose of account opening, access and fraud detection and the creation of tokenized identities to facilitate financial & societal inclusion. Management has evaluated the market potential for its services in part by reviewing the following reports and articles, none of which were commissioned by the Company and none are to be incorporated by reference:

One of the biggest contributors to current authentication problems is the use of passwords. Static passwords (i.e. the type of password that we typically use to login to various accounts and services every single day that, for the most part, remains the same from the moment it is created) have a number of weaknesses: 

According to a 2015 report published by Oxford University Department of Computer Sciences and Mastercard, 21% of users forget passwords within 2 weeks, 25% of users fail to remember at least 1 password per day, and 1 out of 3 online transactions are abandoned at checkout due to a forgotten password. 

On top of this, stored biometric images and templates represent a growing and unquantified financial, security and PR liability and are the subject of growing governmental, media and public scrutiny, since biometric data cannot be “changed” once they are hacked, as they are intimately linked to the user’s physical features and/or behaviors.

With biometric technologies becoming nearly ubiquitous, a range of risks are becoming more prevalent. The popularity of biometric authentication across financial services, employment, travel and healthcare settings inevitably means biometric databases are becoming more accessible to criminals, and the motivation to take over biometric credentials is booming. Even when operating as intended, biometric technology raises privacy concerns which have led to close attention from regulators. Multiple jurisdictions have placed biometrics in a special or sensitive category of personal data and demand much stronger safeguards around collection and safekeeping.

To address this unprecedented danger, Trust Stamp has developed its IT2 solutions.

Principal Products and Services

Trust Stamp’s most important technology is the Irreversible Identity Token IT^2TM (also known as the Evergreen Hash^TM, EgHash^TM and MyHash^TM) combined with a data architecture that can use one or multiple sources of biometric or other identifying data. Once a “hash translation” algorithm is created, like-modality hashes are comparable regardless of their origin. The IT² protects against system and data redundancy providing a lifelong “digital-DNA” that can store (or pivot to) any type of KYC or relationship data with fields individually hashed or (salted and) encrypted, facilitating selective data sharing. Products utilizing the IT² are Trust Stamp’s primary products, accounting for over 90% of its revenues in the twelve months ended December 31, 2020.

IT² Solutions 

The IT² (for Irreversibly Transformed Identity Token) replace biometric templates and scans with meaningless numbers, letters and symbols in order to remove sensitive data from the reach of criminals using a proprietary process by which a deep neural network irreversibly converts biometric and other identifying data, from any source, into the secure tokenized identity. This IT² is unique to the user, is different every time generated from a live subject and cannot be reverse engineered and rebuilt into the user’s face or other original identity data.

Each token can be stored and compared to all other tokens from the same modality allowing the Company’s AI-powered analytics to predict if a single subject has generated two or more tokens, even if the subject has passed conventional KYC using, e.g., falsified identity documents. Using this technology, the users’ IT² can be used for re-authentication purposes including account recovery, password-less login, new account creation, and more across the organization or even within a consortium of organizations, all in a low-cost and low friction delivery that is fast and secure.

Our technology is being used for enhanced due diligence, KYC/AML compliance and “second chance” approval for customer onboarding and account access together with the delivery of humanitarian and development services. The solution allows organizations to approve more users, keep bad actors from accessing systems and services, and retain existing users with a superior user experience.

Our hashing and matching technology can maximize the effectiveness of all types of identity data while rendering it safer to use, store and share. Whatever the source of identity data, it can be stored and compared as an IT². See the chart below for examples.

Distribution

Through licensing we allow customers to utilize our technology in a wide variety of applications. Uses can include (e.g.):

Trust Stamp enters into licensing agreements, typically as a hosted offering, on-premise solution or both, with its customers, pursuant to which the customer pays for the initial product development plus a license fee for the use of Trust Stamp’s technologies on a periodic and/or volume-based basis. In addition to consuming and paying for Trust Stamp’s services for their own use, some key customers also serve as channel partners by offering Trust Stamp products to their own customer base whether as stand-alone products or integrated into their own services as upgraded product offerings.

Competition

We can work with any identity data from any source, potentially breaking vendor, and modality lock-in, but our primary market target is the biometric service industry which is growing exponentially while being threatened by a consumer, media, and legislative backlash against storing biometric data. The  IT² can potentially be overlaid on any biometric or other identity data provider.

In general, we compete for customer budget with any company in the identity authentication industry and our business plan calls for our capturing a fraction of one percent of the projected expenditure for biometric authentication services. Major competitors in this space include companies such as NEXT Biometrics, Gemalto, IDEMIA, Synaptics, Cognitec, Innovatrics, Suprema, FaceTec, Rank One Computing, Acuant, Jumio, Onfido and Mitek. However, we believe that, due to the uniqueness of our technology solution, the Company does not at this time have any direct competitors for the core IT² solutions upon which the growth in our business plan is focused.

The commercial advantage of our solution is our ability to work across providers and modalities and we continue to pursue a first-mover advantage including our global-scale-partnership which is achieving a network-effect in the global Humanitarian and Development market. We believe that this combination will make it unattractive for a potential competitor to replicate the 5-years and multi-million dollars that we have already expended to try and circumvent our multiple (and continuing) patent filings and/or offer a parallel product based upon a different technology.

We believe that given sufficient time and resources, we can augment any biometric modalities including face, hand, iris, voice, gait, and behavior together with any other identifying data which places us in a unique position versus providers of biometric services.

We are unaware of any other provider being able to offer or support a proliferation of authentication modalities in this fashion, and therefore, we believe we there are no other companies that directly compete with us in this space. If our go-to-market strategy is successful, biometric service providers can be a channel distributer, and not necessarily a competitor.

Growth Strategy

Our business plan calls for our capturing a small fraction of one percent (1%) of the projected expenditure for biometric authentication services. Our strategy in this respect is to:

Employees

Given the geographic diversity of its team and to facilitate cost-effective administration, Trust Stamp secures the services of its permanent team members through a variety of administrative structures that include wholly owned subsidiaries, professional employer organizations and consulting contracts. The Company currently has 11 full-time team members that work out of the United States and 35 full-time team members that work out of Malta. We have 8 full-time team members in Poland and Central Europe and 7 full-time and 4 part-time team members in the United Kingdom. We have 9 full-time team members working in the Philippines, 10 full-time team members working in Rwanda, 1 part-time team member working in the Netherlands and 6 full-time team members working remotely in India. Our permanent team is augmented as needed by contract development and other staff on both long and short-term basis.

Outsourcing

We design and develop our own products. We use an outsourcing company - 10Clouds - for additional development staff as needed. In addition, we also utilize SourceFit, a company in the Philippines, for PEO services, representing approximately 2-3% of operating expenses in 2020. As we increase our in-house resources, we anticipate reducing our reliance upon development staff outsourcing. Amazon Web Services provides cloud hosting and processing services, representing approximately 2-3% of our operating expenses in 2020. 

Key Customers

Historically, the Company generated most of its income through a relationship with Synchrony Financial, in which services were provided pursuant to a Master Software Agreement and Statements of Work. The scope of services provided to Synchrony Financial has grown throughout the relationship and additional growth has been seen in 2020 and 2021. In 2019, 2020 and continuing into 2021 the Company has also expanded its customer base to include relationships with Mastercard, FIS and other customers. In 2020 we engaged in accelerator programs and invested in new business development staff and systems which have led to new customer engagements in 2021 and, while we value the relationship highly, management believes that we are no longer financially dependent on our relationship with Synchrony Financial. As an example, Synchrony Financial and Mastercard made up 78% of total revenue as of June 30, 2021 compared to 97% of total revenue as of June 30, 2020. Further, the Company has continued to expand its customer base since June 30, 2021. On September 23, 2021, the Company was awarded a $3,920,764 contract with the U.S. Immigration and Customs Enforcement (“ICE”), which required an investment in productization, business development and satisfying extensive due diligence processes. The Company anticipates that the performance obligations associated with this contract will be substantially complete prior to the end of 2021. Alongside the revenue implications of this specific contract, it is believed that a successful execution may lead to extended and additional contracts of the same nature with ICE. However, the Company does not believe that it is financially dependent on any contract renewals with ICE.

Regulation

Our business is not currently subject to any licensing requirements in any jurisdiction in which we operate other than the requirement to hold a business license in the City of Atlanta (with which we are in compliance). This does not mean that licensing requirements may not be introduced in one or more jurisdiction in which we operate, and such requirements could be burdensome and/or expensive or even impose requirements that we are unable to meet.

We are subject to substantial governmental regulation relating to our technology and will continue to be for the lifetime of our Company. By virtue of handling sensitive PII and biometric data, we are subject to numerous statutes related to data privacy and additional legislation and regulation should be anticipated in every jurisdiction in which we operate. Example federal (US) and European statutes we could be subject to are:

HIPAA and HITECH

Under the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act “HITECH”), the U.S. Department of Health and Human Services (“HHS”) issued regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and requirements for protecting the privacy and security of protected health information (“PHI”), used or disclosed by covered entities and business associates. Covered entities and business associates are subject to HIPAA and HITECH. Our subcontractors that create, receive, maintain, transmit, or otherwise process PHI on behalf of us are HIPAA “business associates” and must also comply with HIPAA as a business associate.

HIPAA and HITECH include privacy and security rules, breach notification requirements, and electronic transaction standards.

The privacy rules cover the use and disclosure of PHI by covered entities and business associates. The privacy rules generally prohibit the use or disclosure of PHI, except as permitted under certain limited circumstances. The privacy rules also set forth individual patient rights, such as the right to access or amend certain records containing his or her PHI, or to request restrictions on the use or disclosure of his or her PHI.

The security rules require covered entities and business associates to safeguard the confidentiality, integrity, and availability of electronically transmitted or stored PHI by implementing administrative, physical, and technical safeguards. Under HITECH’s Breach Notification Rule, a covered entity must notify individuals, the Secretary of the HHS, and in some circumstances, the media of breaches of unsecured PHI.

In addition, we may be subject to state health information privacy and data breach notification laws, which may govern the collection, use, disclosure, and protection of health-related and other personal information. State laws may be more stringent, broader in scope, or offer greater individual rights with respect to PHI than HIPAA, and state laws may differ from each other, which may complicate compliance efforts.

Entities that are found to be in violation of HIPAA as the result of a failure to secure PHI, a complaint about our privacy practices or an audit by HHS, may be subject to significant civil and criminal fines and penalties and additional reporting and oversight obligations if such entities are required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. 

GDPR

The EU-wide General Data Protection Regulation imposes onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and policies. It requires data controllers to implement more stringent operational requirements for processors and controllers of personal data, including, for example, transparent and expanded disclosure to data subjects (in a concise, intelligible and easily accessible form) about how their personal information is to be used, imposes limitations on retention of information, increases requirements pertaining to health data and pseudonymized (i.e., key-coded) data, introduces mandatory data breach notification requirements and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. Fines for non-compliance with the GDPR will be significant—the greater of €20 million or 4% of global turnover. The GDPR provides that EU member states may introduce further conditions, including limitations, to make their own further laws and regulations limiting the processing of genetic, biometric or health data.

Subsidiaries and Affiliates

Given the geographic diversity of our team and to facilitate cost-effective administration, Trust Stamp conducts various aspects of its operations through subsidiaries. All subsidiaries share resources across the entire Trust Stamp organization. The officers and directors of Trust Stamp have influence over the operations of all subsidiaries and employees across jurisdictions. Only one of our subsidiaries, Biometric Innovations Limited, has its own management team.

T Stamp Corporate Structure Chart

T Stamp LLC. As described above, the Company was originally founded as “T Stamp LLC”, formed on November 9, 2015 as a Georgia limited liability company. In 2016, the Company effected a “hive down” business reorganization whereby the business of the Company was transferred into to a newly formed, wholly owned subsidiary, which was T Stamp Inc. (i.e. the Company). As of the date of this offering, the Company is no longer a subsidiary of T Stamp LLC, and T Stamp LLC is no longer a majority owner of the Company.

TStamp Incentive Holdings LLC. On April 9, 2019, management created a new entity, TStamp Incentive Holdings (“TSIH”) to which the Company issued 1,620,565 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 the date of this Offering Circular, 282,565 shares of Class A Common Stock are still held by TSIH – however, all of these shares of Class A Common Stock have been allocated for issuance pursuant to RSUs that will vest on January 2, 2022. The Company has no plans to issue additional equity securities to TSIH. As such, once these remaining shares are issued, it is expected this entity will become dormant going forward.

Sunflower Artificial Intelligence Technologies. Based out of Poland, this entity is a machine learning and AI company that has acted as the contracting entity for development contractors in Poland and Central Europe.

Trusted Mail Inc. The developer of an encrypted e-mail product (Trusted Mail ®) using or Company’s facial recognition technology. The Trusted Mail technology is held by Trusted Mail, Inc., which is our majority-owned subsidiary.

Biometric Innovations Limited (formerly “Trust Stamp Fintech Limited”). Biometric Innovations is our Company’s United Kingdom operating subsidiary. It was established to act as the contracting entity for development contractors in the UK, and has its own board and management team.

Trust Stamp Cayman. Trust Stamp Cayman was established with the intention of taking advantage of enterprise grants which were offered by the Cayman National Government’s Enterprise Zone. No operations have been established at this entity as of the date of this Offering Circular.

Trust Stamp Fintech Limited. Trust Stamp Fintech Limited is a company incorporated in the United Kingdom by the Company’s management. The purpose of this entity was to establish beachhead operations in the country in order to service a contract entered by the Company with the National Association of Realtors and Property Mark. This entity remains separate from the Company’s operations and serves as a sales and marketing function for the product “NAEA” which was developed for the contract between the listed parties. On June 11, 2020, the Company entered into a stock exchange transaction with Trust Stamp Fintech Limited, becoming a 100% owner of the entity. The stock exchange transaction was not pursuant to any formal written agreement.

Trust Stamp Malta Limited. Trust Stamp Malta Limited is a wholly owned subsidiary of T Stamp Inc. It operates an R&D Campus in the Republic of Malta, for which it has entered into a lease with a local commercial landlord in Malta, Vassallo Group Realty Ltd. The goal of Trust Stamp Malta Limited is to advance our biometric authentication technology. As part of the creation of this entity, we entered into an agreement with the government of Malta for a potential repayable advance of up to €800,000 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 May 1, 2020.

Trust Stamp Rwanda Limited. The Company opened an office in Rwanda, Africa in April 2021 and signed a one-year lease for office space commencing May 1, 2021 The Company has established an R&D center in Rwanda together with a back-office facility for the purpose of our expansion into Africa.

Non-Operational Subsidiaries

AIID Payments Limited. Established by the Company to provide payments services to NGO’s and other non-profit and social-welfare entities and activities. As of the date of this Offering Circular, the entity has no operations, and is essentially dormant.

T Avatar LLC. Established by the Company to provide anonymized age-verification tools for minors participating in online activities. As of the date of this Offering Circular, the entity has no operations, and is essentially dormant.

Finnovation LLC. Established by the Company to provide an innovative FinTech, Blockchain and Digital Identity innovation incubator. As of the date of this Offering Circular, this entity has no operations, and is essentially dormant.

Litigation

From time to time, the Company may be involved in a variety of legal matters that arise in the normal course of business. The Company is not currently involved in any litigation, and its management is not aware of any pending or threatened legal actions relating to its intellectual property, conduct of its business activities, or otherwise. See “Risk Factors” for a summary of risks our Company may face in relation to litigation against our Company. 

The Company’s Property

The Company contracts for use of office space at 3017 Bolling Way NE, Floors 1 and 2, Atlanta, Georgia, 30305, United States of America, which serves as its corporate headquarters and primary operational hub. The Company also leases office space (through a subsidiary) in Malta, which primarily serves as a research and development space. The Company contracts for coworking arrangements in other office spaces (either directly or through its subsidiaries) in New York, North Carolina, Cheltenham, the UK and Rwanda, Africa to support its dispersed workforce. As of June 30, 2021, there were no minimum lease commitments related to these agreements except for the Malta lease arrangements which terminate on July 27, 2022.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations for the fiscal years December 31, 2020 and 2019 as well as for the six months ended June 30, 2021 and 2020 should be read in conjunction with our financial statements and the related notes included in this Offering Circular. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

Overview

T Stamp Inc. was incorporated on April 11, 2016 in the State of Delaware. Trust Stamp and its subsidiaries develop and market identity authentication software solutions for enterprise partners and peer-to-peer markets.

Trust Stamp develops proprietary artificial intelligence powered solutions; researching and leveraging cutting edge technology including biometric science, cryptography, and data mining to deliver insightful identity and trust predictions while protecting the user’s privacy and identifying and defending against fraudulent identity attacks. We utilize the cutting-edge power and agility of technologies such as GPU processing, neural networks and edge computing to process data faster and more effectively than has ever previously been possible as well as delivering results at a disruptively low cost for usage across multiple industries, including:

During the six months ended June 30, 2021, Trust Stamp continued the diversification of our customer network while maintaining service agreements for our two largest clients, Synchrony Financial and Mastercard, which made up 78% of total revenue as of June 30, 2021 compared to 97% of total revenue as of June 30, 2020. Simultaneously, we increased focus on expanding our marketing efforts in the U.S., U.K., E.U., and Africa to recruit new clients including new vertical engagements with the travel and insurance industries. Our most recent investments include the openings of new offices and the addition of staff in the U.K., Rwanda, and Malta.  

On March 18, 2021, we completed the acquisition of PixelPin in exchange for $92 thousand of cash. PixelPin is an image-based "Pin-on-Glass" account access solution that alleviates pain-points of traditional login methods while ensuring the security of authentication. This acquisition further enhances Trust Stamp’s innovative portfolio of technology solutions that enable improved customer experiences and reputation while broadening the scope of internal risk-management strategies and providing additional options for multi-factor authentication.

Our investment in business development generated a growing component of Trust Stamp’s revenue during the six months ended June 30, 2021 and has led to a number of engagements with significant clients for proof-of-concept deliveries and new product sales, laying a solid foundation to grow future revenue including annual recurring revenue from access and usage fees.

Results of Operations for the six months ended June 30, 2021 and 2020

Gross Sales (non-GAAP). This discussion includes information about Gross Sales that is not prepared in accordance with U.S. GAAP. Gross Sales is not based on any standardized methodology prescribed by U.S. GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP measure is included below.

Gross Sales for the six months ended June 30, 2021 increased 29% to $1.4 million compared to $1.1 million for the six months ended June 30, 2020. The increase of gross sales in the six months ended June 30, 2021 included $171 thousand for the sale of outsourced web hosting services. Due to GAAP requirements, we did not include the third-party costs for web hosting in Net Sales, but instead, reduced Cost of Services.

Net Sales. Net sales for the six months ended June 30, 2021, increased 18% to $1.3 million as compared to $1.1 million for the six months ended June 30, 2020. This increase is largely the result of new technology services purchase orders from an existing customer for $224 thousand during the six months ended June 30, 2021. It is believed that the new technology services purchase orders from that customer will also lead to additional usage revenues in future periods.  

Cost of Services. Cost of services for the six months ended June 30, 2021, increased by 56% to $524 thousand as compared to $336 thousand for the six months ended June 30, 2020. This increase is largely the result of performing obligations under the new purchase orders discussed above. Further, several projects that were originally in the research and development stage became feasible projects, shifting the allocation of cost from research and development into cost of services in the current year as client specific products were implemented using the technologies. This increase of expense allocation is a result of our prior decision to invest more money in research and development in prior periods and our goal of accelerating our product roadmap coming to fruition.

The Company has increased its investment in business development with the knowledge that there is typically a considerable lead time between first engagement and revenue generation. At this point, the expenditure has led to an increase in both the prospect pipeline and proof of concept engagements, and as such management anticipates that the expenditure will result in future revenue generating contracts.

Gross Profit. During the six months ended June 30, 2021, gross profit increased by 1% due to several factors, including the addition of the new technology services purchase orders from an existing customer, as discussed above, as well as the continued expansion of the Company’s customer base.

Historically, management has contracted with a third-party software developer due to the need for additional research and development resources over and above available internal resources. As the Company scales its campuses in Malta, Rwanda and U.K., we initially incur higher establishment, onboarding, and training expenses, but as the capability of those campuses continues to develop, we anticipate an increase in the percentage of our contracts that are serviced internally at lower cost versus sub-contracting which will improve the Company’s overall margins.

Further, our management expects that as our customers’ software implementations are launched in the market, revenue will shift more and more to the pay-per-use elements of the contracts which have significantly higher margins.

Research and Development Expenses. Research and development expenses (“R&D”) consist primarily of personnel costs, including salaries and benefits. Personnel costs are allocated to R&D for time spent working on the preliminary project stage and post-implementation maintenance as well as time spent on bug fixes associated with internal-use software activities, front-end application development in which technological feasibility has not been established, and services rendered to customers under funded software-development arrangements. Expenses allocated as R&D for the six months ended June 30, 2021, decreased 61% to $237 thousand from $601 thousand for the six months ended June 30, 2020. This decrease in allocation is directly related to the increase in expenditure allocated to cost of services as discussed above.

Selling, General, and Administrative Expenses. Selling, general, and administrative (“SG&A”) expenses for the six months ended June 30, 2021 increased 173% to $4.9 million from $1.8 million for the six months ended June 30, 2020. SG&A expenses were generally composed of payroll, legal, and professional fees, including an increase in sales commission expense incurred because of new statements of work. In addition, our payroll expenses increased for the six months ended June 30, 2021 as a result of our investments in new offices and staff globally, as discussed above, as well as our new executive R&D and go-to-market team members. Our overall headcount increased from 18 employees and 30 contractors on June 30, 2020, to 78 employees and 8 contractors on June 30, 2021.

Additionally, there was a substantial increase of 771% in the booked expense for stock-based compensation in the six months ended June 30, 2021 to $1.5 million from $175 thousand for the six months ended June 30, 2020. Most of the change is driven by the Company vesting pre-existing long-term awards resulting in a disproportionate booked expense in the period as well as offering stock in lieu of cash compensation to add specialized executive personnel. Trust Stamp has continued expanding essential capabilities as an organization through the addition of industry experts, key sales personnel, and executive management team members. Over the past year, Trust Stamp has added two cyber security industry expert advisors, Dr. Neil Kempson and Daryl Burns, both former leaders in the Government and Communications Headquarters (GCHQ), the U.K.’s cyber, intelligence, and security agency. In addition, we have added experienced sales and market-facing personnel, including our Chief Commercial Officer, Kinny Chan, who has extensive expertise in the technology industry and is building our sales infrastructure globally, and our Chief Innovation Officer, Raman Narayanswamy, who joined the Company from Mastercard. Finally, the Company has added various EVP and VP level personnel with industry and role-specific backgrounds and expertise in scaling products and organizations.

Depreciation and Amortization. Depreciation and amortization expense for the six months ended June 30, 2021 increased 42% to $274 thousand from $193 thousand for the six months ended June 30, 2020. This increase is primarily due to a continued investment in internally developed software which will be used for future productization. 

Operating Loss. As a result of the foregoing, we sustained an operating loss of $4.7 million for the six months ended June 30, 2021, an increase of 151% compared to a loss of $1.9 million for the six months ended June 30, 2020. This was primarily driven by the increase in SG&A expenses driven by growth-focused activities that more than doubled the Company’s headcount, including adding various EVP, VP, and executive level R&D and commercial team members as well as growing our research and development teams and increasing the size of our finance, accounting and reporting teams to meet our anticipated reporting requirements as a publicly traded company.

Interest Expense. Interest expense on outstanding notes was $41 thousand for the six months ended June 30, 2021, a decrease of 67% from $125 thousand for the six months ended June 30, 2020. This decrease is due the payoff of various notes that were accruing more interest during the six months ended June 30, 2020 as well as the interest expense incurred related to the conversion of an outstanding convertible note to equity in June 2020.

Warrant Expense. There was no warrant expense for the six months ended June 30, 2021, a decrease from $1.4 million for the six months ended June 30, 2020. This non-operating decrease is a result of the issuance of two warrants in January 2020 as described in the “Equity, Notes, Warrants and SAFEs” subsection below.

Other Income. Other income was $62 thousand for the six months ended June 30, 2021, an increase of 10% from $56 thousand for the six months ended June 30, 2020. The increase is a result of the receipt of grant income related to Trust Stamp Malta’s agreements with the Republic of Malta described in Note 8 to the financial statements.

Other Expense. Other expense was $36 thousand for the six months ended June 30, 2021, an increase of $36 thousand from the six months ended June 30, 2020. This increase was driven from an increase in foreign currency transactions related to the Company’s offices in the U.K., Malta, and Rwanda.

Net Income (Loss). As a result of the foregoing, net loss for the six months ended June 30, 2021 increased 40%, to $4.7 million from $3.3 million for the six months ended June 30, 2020.

Adjusted EBITDA

This discussion includes information about Adjusted EBITDA that is not prepared in accordance with U.S. GAAP. Adjusted EBITDA is not based on any standardized methodology prescribed by U.S. GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP measure is included below.

Adjusted EBITDA is a non-GAAP financial measure that represents U.S. GAAP net income (loss) adjusted to exclude (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) changes in assets and liabilities, and (6) certain other items management believes affect the comparability of operating results.

Management believes that Adjusted EBITDA, when viewed with our results under U.S. GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our Company and our management, and it will be a focus as we invest in and grow the business.

Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation from, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:

Due to these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only as a supplement to our U.S. GAAP results.

Adjusted EBITDA (non-GAAP) loss for the six months ended June 30, 2021, increased 89%, to $2.8 million from $1.4 million for the six months ended June 30, 2020. The overall increase in adjusted EBITDA loss was driven mostly by the increased net loss from June 30, 2020 to June 30, 2021 as discussed above.

Results of Operations for the years ended December 31 2020, and 2019

Gross Sales (non-GAAP). This discussion includes information about Gross Sales that is not prepared in accordance with U.S. GAAP. Gross Sales is not based on any standardized methodology prescribed by U.S. GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP measure is included below.

Gross Sales for the twelve months ended December 31, 2020 increased 31% to $2,872,343 compared to $2,193,638 for the twelve months ended December 31, 2019. The increase of gross sales in 2020 included $224 thousand for the sale of outsourced web hosting services. Due to GAAP requirements, we did not include the third party costs for web hosting in Net Sales, but instead, reduced Cost of Sales.

Net Sales. Net sales for the twelve months ended December 31, 2020 increased 26% to $2,648,324 as compared to $2,108,884 for the twelve months ended December 31, 2019. This increase was largely the result of purchase orders from Emergent Technology Holdings LP (“Emergent”) related to the tripartite agreement entered into with Emergent and others in 2020 (as discussed under “Certain Relationships and Related Party Transactions” of this offering circular) and came despite significant disruptions in sales activities due to the global pandemic which included restrictions on travel, something that the Company's sales team has relied upon heavily in the past. Additionally, management made the strategic decision to prioritize building the Company's R&D function by opening new offices in both the UK and Malta, which was needed to service existing clients and accelerate productization of intellectual property.

Cost of Services. Cost of sales for the twelve months ended December 31, 2020 increased by 98% to $1,393,623 as compared to $702,744 for the twelve months ended December 31, 2019. This increase is largely the result of fulfilling the purchase orders from Emergent related to the tripartite agreement in 2020 as discussed further below in this offering circular.

2020’s gross profit dropped by 11% due to several factors. First and foremost, a significant portion of the purchase orders from Emergent had to be subcontracted to a third-party software developer due to the need for additional internal research and development resources, something the Company was very focused on improving during the year. Subcontract work produces much lower margins on revenue, though, as the Company scales its R&D campus in Malta and elsewhere, we anticipate to increasingly service contracts internally and therefore improve the Company’s margins overall.

Research and Development Expenses. Research and development expenses for the twelve months ended December 31, 2020 increased 95% to $1,670,364 from $854,590 for the twelve months ended December 31, 2019. This increase was due to our strategic decision to invest more money in research and development with the goal of accelerating our product roadmap and resulted in 9 patent filings during 2020, and 3 additional patent filings in 2021. Research and development costs consist primarily of personnel costs, including salaries and benefits and relate primarily to time spent during the preliminary project stage and post implementation maintenance and bug fixes associated with internal-use software activities, front end application development in which technological feasibility has not been established, and services rendered to customers under funded software-development arrangements. Additionally, the Company hired several executive-level advisors including three Ph.Ds. in the United Kingdom.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the twelve months ended December 31, 2020 increased 247% to $7,923,730 from $2,284,613 for the twelve months ended December 31, 2019. General and administrative expenses were generally composed of payroll, legal and professional fees, which increased in 2020 in connection with our 2020 Regulation A offering and Euronext listing. In addition, our payroll expenses increased for the twelve months ended December 31, 2020 due to inflation and experience-based salary increases across the organization, as well as new sales, marketing and administrative personnel hiring in the UK and Malta offices to see our growing R&D and commercial teams.

Additionally, there was an exceptional and substantial increase in the recorded expense for stock-based compensation from $40 thousand to $2.9 million, the majority of which was the vesting and distribution of stock that in 2019 had been reserved for multi-year stock incentives. Although the stock-based compensation vested and was expensed in 2020, the stock awards reflected up to four years of service for the vested employees. In addition, the increase in stock-based compensation also reflected the Company offering stock in lieu of cash compensation for industry expert advisors and sales personnel, as well as for growth in the executive management team, including our Chief Commercial Officer who has been building our sales infrastructure in the US and Europe.

Depreciation and amortization. Depreciation and amortization expense for the twelve months ended December 31, 2020 increased 34% to $406,241 from $303,054. This increase is primarily due to an increase in the cumulative investment in internally developed software.

Operating Loss. As a result of the foregoing, we sustained an operating loss of $8,745,634 for the twelve months ended December 31, 2020, an increase of 329% compared to a loss of $2,036,117 for the twelve months ended December 31, 2019.

Interest Expense. Interest expense on outstanding notes was $185,599 for the twelve months ended December 31, 2020, an increase of 88% from $98,612 for the twelve months ended December 31, 2019. This increase is primarily due to extinguishment of outstanding convertible notes of the Company pursuant to the July 1, 2019 settlement agreement with Emergent and conversion of outstanding notes in conjunction with the Regulation A offering described above.

Impairment of Investment in Related Party. Impairment of investment in related party was $962,000 for the twelve months ended December 31, 2020. The Company was informed in April 2021 that Emergent wound up and ceased operations in December 2020 therefore, the investment was written off as a non-operating expense. We note that all purchase orders related to Emergent were fully delivered prior to it winding up and no further obligation to them exists.

Warrant Expense. Warrant expense was $1,413,273 for the twelve months ended December 31, 2020, an increase from $0 for the twelve months ended December 31, 2019. This non-operating increase is a result of the issuance of two warrants in January 2020 as described below in Equity, Notes, Warrants and SAFEs.

Other Income/(Expense). Other income/(expense) was $81,137 for the twelve months ended December 31, 2020, an increase of $83,253 from the twelve months ended December 31, 2019. This is driven from foreign currency transactions.

Grant Income. Grant income for the twelve months ended December 31, 2020 was $189,507. The Company had Grant Income primarily related to Trust Stamp Malta’s agreements with Republic of Malta. During July 2019, the Company entered into an agreement with the Republic of Malta that would provide for a grant of up to €200 thousand as reimbursement for operating expenses over the first 12 months following incorporation in the Republic of Malta. The Company was required to provide an initial capital amount of €50 thousand euros, which is matched with a €50 thousand grant.

Net Income (Loss). As a result of the foregoing, net loss for the twelve months ended December 31, 2020, increased 415%, to $11,032,994 from $2,143,506 for the twelve months ended December 31, 2019. The overall increase in Net Loss was driven mostly by the non-recurring corporate development activities from 2020, non-recurring and non-cash GAAP entries such as the issuance of warrants during the Company’s Series A Preferred Offering, as well as growth in the Company's overall headcount for commercial executive management and R&D. Revenue was higher than the previous year, although margins were cut considerably due to the need to subcontract development work for new revenue contracts.

Adjusted EBITDA.

This discussion includes information about Adjusted EBITDA that is not prepared in accordance with U.S. GAAP. Adjusted EBITDA is not based on any standardized methodology prescribed by U.S. GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP measure is included below.

Adjusted EBITDA is a non-GAAP financial measure that represents U.S. GAAP net income (loss) adjusted to exclude (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) changes in assets and liabilities, and (6) certain other items management believes affect the comparability of operating results.

Management believes that Adjusted EBITDA, when viewed with our results under U.S. GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our Company and our management, and it will be a focus as we invest in and grow the business.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:

Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only as a supplement to our U.S. GAAP results.

Adjusted EBITDA (non-GAAP) loss for the twelve months ended December 31, 2020, increased 183%, to $(4,905,125) from $(1,733,726) for the twelve months ended December 31, 2019. The overall increase in adjusted EBITDA loss was driven mostly by the non-cash and non-routine activities related to corporate development activities from 2020.

Liquidity and Capital Resources

As of June 30, 2021, and December 31, 2020, we had approximately $1.2 million and $1.5 million cash in our banking accounts, respectively, with total current assets of $2.2 million and $2.1 million, respectively. The slight increase in our current assets as of June 30, 2021 compared to December 31, 2020 is a result of an increase in our accounts receivable balance driven by a customer’s payment term adjustment from net 30 days to net 60 days. We also have experienced a decrease in current liabilities of 43%. As of June 30, 2021, our current liabilities totaled $1.4 million, as compared to $2.5 million at December 31, 2020. The decrease is driven by a reduction in our current debt due to the payoff of a promissory note in April 2021 payable to Second Century Ventures (“SCV”) as described further below (see “Non-Convertible Promissory Notes Payable”) as well as a decrease in our payable accounts due to the drop in third-party developer billings. As a result of the foregoing, as of June 30, 2021, the Company had a positive working capital balance of $845 thousand, and an accumulated deficit of $23 million.

Effective September 3, 2019, the Company entered into a software license agreement with a customer pursuant to which the Company received total fees of $150,000 in 2020 and will receive minimum total fees of $200,000 in 2021, $250,000 in 2022, rising by 15% in each subsequent year beginning in 2023 with a minimum cap of $1.0 million. As such, we expect this to be a steady source of revenue for the Company going forward. The Company has recognized $100 thousand of the software license agreement fees for the six months ended June 30, 2021. After June 30, 2021, Trust Stamp received confirmation on September 17, 2021 that this license agreement has been extended through 2022.

On March 12, 2021, the Company launched a Regulation D raise limited to accredited investors for a maximum of $5 million or 1,633,986 shares of Class A Common Stock. The raise was marketed only to the Company’s existing investor email list with an initial minimum investment of $25 thousand and a share price of $3.06 per share of Class A Common Stock. The initial tranche of the round closed on April 5, 2021 with $3.9 million of reserved investment with the contracted sale of 1,279,825 shares of Class A Common Stock. After the initial tranche, on April 6, 2021, the Company then offered up to $700 thousand or 182,291 of additional shares, again only to accredited investors, with a $5 thousand minimum investment and at a share price of $3.84 per share. The second tranche of the round closed on June 4, 2021 with $88 thousand of reserved investment at $3.84 per share with the contracted sale of 21,400 shares of Class A Common Stock.

On August 25, 2021, the Company launched concurrent offerings under Regulation Crowdfunding and Regulation D. The Company initially sought to raise up to $5 million in the aggregate between the two offerings through the sale of units, but had the discretion to accept up to $5 million in each offering. Each unit consists of 1 share of the Company’s Class A Common Stock, par value $0.01 per share, and 1 warrant to purchase 1 share of Class A Common Stock of the Company in a future registered or exempt offering of the Company (i.e. a Reg CF Warrant or Reg D Warrant, as applicable). The minimum target amount under the Regulation Crowdfunding offering was $100 thousand, which the Company achieved.

On November 19, 2021, we closed the Regulation Crowdfunding offering, having received binding commitments for 1,250,000 units at $4.00 per unit for a total of $5,000,000 in gross proceeds. We are continuing to hold closings on investments in this offering until such time as all committed funds have been closed upon, and all 1,250,000 units (representing 1,250,000 shares of Class A Common Stock and 1,250,000 Reg CF Warrants) have been issued to investors in this offering.

On November 19, 2021, we closed the Regulation D offering, having received binding commitments for 250,000 units at $4.00 per unit for a total of $1,000,000 in gross proceeds. We are continuing to hold closings on investments in this offering until such time as all committed funds have been closed upon, and all 250,000 units (representing 250,000 shares of Class A Common Stock and 250,000 Reg D Warrants) have been issued to investors in this offering.

On September 23, 2021, the Company was awarded a $3,920,764 contract with the U.S. Immigration and Customs Enforcement (“ICE”). The Company anticipates that its performance obligations under this contract will be substantially complete in financial year 2021. A copy of this agreement is filed as Exhibit 6.15 to the offering statement of which this Offering Circular forms a part. Alongside the revenue implications of this specific contract, it is believed that a successful execution will lead to extended and additional contracts of the same nature with ICE.

The Company believes that revenues from its existing clients, without any new contracts (i.e. a renewal of the ICE contract described above) or proceeds from the Company’s current capital raising efforts, will provide it with adequate amounts of cash to meet the Company’s needs in the short-term (i.e., the next 12 months) and in the long-term (i.e., beyond the next 12 months).

The Company expects that human resources costs – i.e., compensation for new and existing officers, directors, and employees – will be the largest material cash obligation for the Company within the next 12 months, with projected human resources costs totaling approximately $750,000 per month. The Company believes, as described above, that revenues from its existing operations will be sufficient to cover these costs, and that any funds from new client contracts or offerings would provide additional operational capacity for the Company going forward.

Going Concern

The Company’s audited consolidated financial statements for the years ended December 31, 2020 and 2019, as well as the Company’s unaudited consolidated financial statements for the six months ended June 30, 2021 and 2020 included a going concern note. The Company’s ability to continue as a going concern in the 12 months following the date the June 30, 2021 and 2020 unaudited 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 revenues and raise capital as needed to satisfy its capital needs. Although the Company has been successful in raising capital, no assurance can be given that the Company will be successful in these efforts.

These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities. 

Equity, Notes, Warrants, and SAFEs

Series A Preferred Stock Offering. On July 17, 2020, we closed our Series A Preferred Offering, which utilized Regulation A under the Securities Act of 1933 and was qualified by the SEC on May 5, 2020. The Series A Preferred Offering involved sales through a combination of private placements, including through issuance of convertible notes, and investments through the SeedInvest platform. We issued through a conversion of convertible instruments or sold a total of 1,264,452 shares of Series A Preferred Stock at an offering price of $7.79 per share. During the year ended December 31, 2020, the Company received “on-platform” gross proceeds of $5.6 million and cash of $5.1 million, net of offering costs of $490 thousand. Gross proceeds were $8.4 million in total and offering costs were $1 million resulting in net cash proceeds of $7.4 million.

As part of this Series A Preferred Offering, during the year ended December 31, 2020, two buyers were also able to purchase shares of Class A Common Stock for $0.002 per share while paying a price of $7.79 per share for Series A Preferred Stock for a total purchase price of $475 thousand. As a result, the proceeds were allocated between the Series A Preferred Stock and Class A Common Stock on a relative fair value basis resulting in the recognition of $366 thousand as Series A Preferred Stock and $109 thousand to Class A Common Stock. Gross and net proceeds disclosed above have been adjusted for this allocation.

In addition to the gross cash proceeds above, as part of the Series A Preferred Offering, the Company also reserved shares of Class A Common Stock for stock options and restricted stock awards granted to employees in 2020 with a grant date fair value of $631 thousand, we exchanged $400 thousand worth of Class A Common Stock for a portion of the outstanding Emergent SAFE (as discussed further below – see “Emergent Settlement Agreement, Emergent SAFE, and Tripartite Agreement”), and we sold warrants for Shares of Class A Common Stock of Common Stock in exchange for the extinguishment of a SAFE for $125 thousand, $300 thousand in cash and $300 thousand in prepaid sponsorship value for an accelerator program that we participated in beginning in 2016.

On September 8, 2020, our Board and a majority of the Series A Preferred stockholders voted to convert all Series A Preferred Stock to Class A Common Stock, and it was effected on that date.

Regulation D and Regulation CF Offerings. See more information on Regulation D and Regulation CF fundraising in Liquidity and Capital Resources disclosure above.

Convertible Notes. On December 16, 2016, we entered into a convertible promissory note with an investor under which we received $100 thousand through the issuance of the convertible promissory note and a warrant to purchase $50 thousand of shares of Class A Common Stock of Common Stock. The principal balance, together with all accrued and unpaid interest on the note, was initially due on December 16, 2018 and was not pre- payable unless there was a change in control of the Company. An extension was granted by the investor to extend the maturity date to June 30, 2020. The convertible notes included several conversion terms, including that if our next financing occurred on or before the maturity date, and we raised $2 million or more in such case, the note would be automatically converted into preferred stock of our Company. The qualified financing term was triggered for this convertible note payable when $2 million was raised prior June 30, 2020 as discussed above. Therefore, this convertible note, along with all accrued interest, totaling $118 thousand was converted during the year ended December 31, 2020, to 68,203 shares of Series A Preferred Stock and is no longer reflected as outstanding.

On December 3, 2019, we entered a convertible promissory note with a customer in which they received $700 thousand. All unpaid principal and accrued interest was due on December 31, 2020 (i.e. the maturity date). However, in the event that the note was not converted into equity securities of the Company, the maturity date would be extended to December 31, 2025. The convertible note included several conversion terms, including one around qualified financing where if we issued and sold shares of our preferred stock for aggregate gross proceeds of at least $3 million (including this note but excluding all proceeds from the incurrence of all other prior indebtedness that is converted into such preferred stock, or otherwise cancelled in consideration for the issuance of such preferred stock) with the principal purpose of raising capital, the note would be converted into preferred stock. The qualified financing term was triggered for this convertible note payable as the $3 million was raised prior June 30, 2020, as discussed above. Therefore, the convertible note, along with all accrued interest, totaling $818 thousand was converted during the year ended December 31, 2020, to 89,859 shares of Series A Preferred Stock and is no longer reflected as outstanding as of June 30, 2021. 

Advisor Convertible Notes. As part of our Series A Preferred Offering, we agreed to issue convertible promissory notes to one of our advisors in the amount of $10 thousand per month, convertible to Series A Preferred Stock at a maximum conversion price per share of $7.79 per share. During 2020, we issued $45 thousand in convertible debt to the advisor. During the year ended December 31, 2020, the Company converted the $45 thousand in convertible debt to Series A Preferred Stock at a value of $7.79 per share, and ultimately into Class A Common Stock on December 8, 2020. There are no such advisor convertible notes outstanding as of the date of this Offering Circular.

Malta Loan. In May 2020, the Company formed a subsidiary in the Republic of Malta, Trust Stamp Malta Limited, with the intent to establish a R&D 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 the Republic of Malta for a potential repayable advance of up to €800 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 May 1, 2020. On February 9, 2021, the Company began receiving funds and as of June 30, 2021 the Company had received $548 thousand, recorded to Non-Convertible Notes. The repayable advance is with recourse only to Trust Stamp Malta Limited and is repayable only out of profits earned by Trust Stamp Malta Limited. A copy of the letter from Malta Enterprise setting forth the terms of this repayable advance is filed as Exhibit 6.14 to the offering statement of which this offering circular forms a part.

Non-Convertible Promissory Notes Payable. On April 22, 2020, the Company entered into a promissory note for $350 thousand with SCV in which the Company received net proceeds of $345 thousand after issuance costs. The unpaid principal, together with any then unpaid and accrued interest and any other amounts payable was due and payable on April 22, 2021 or in an event of default or a change in control as defined in the agreement. The note accrues interest at a rate of 8% per annum, compounded monthly. The outstanding principal of $350 thousand and interest of $29 thousand was paid off on April 22, 2021.

With the issuance of the note on April 22, 2020, the Company entered into a warrant agreement with SCV to purchase Class A Common Stock of the Company. Pursuant to the warrant agreement, we issued SCV a warrant to purchase 75,000 shares of Class A Common Stock at a strike price of $0.002 per share through April 22, 2021. These warrants were exercised on April 22, 2021 at $0.002 per share.

As the promissory note issued included equity classified warrants issued, U.S. GAAP requires that the proceeds from the sale of debt instruments with a separate equity instrument be allocated to the two elements based upon the relative fair values of the debt instrument without the warrant and of the warrant itself at the time of issuance. The portion of the proceeds allocated to the Class A Common Stock shall be accounted for within stockholders’ equity as additional paid-in capital and recorded as a debt discount and be charged to interest expense over the life of the convertible notes. The remainder of the proceeds shall be allocated to the debt instrument portion of the transaction. The value of the promissory note was allocated on a relative fair value basis between the note and the warrants. During the year ended December 31, 2020, this allocation based upon relative fair values of the promissory note and warrant resulted in an amount of $88 thousand being allocated to the equity warrants and $262 thousand being allocated to the promissory notes, resulting in the same amount representing a discount to the promissory note. Accretion expense of $26 thousand and $17 thousand was recorded related to these notes during the six months ended June 30, 2021 and June 30, 2020, respectively. 

On June 11, 2020 we entered into an agreement with Emergent Technology Holdings LP, as described below, whereby their SAFE would be extinguished in exchange for several forms of consideration. As part of that agreement, the Company issued promissory notes to Emergent Technology Holdings LP in the amount of $387 thousand which were due in two tranches in August and September 2020. No interest was due and payable under these notes if we repaid the notes in full by the maturity dates previously described. Both notes were repaid by their respective maturity dates, and are no longer outstanding.

Warrants. In January 2020, the Company issued to SCV warrants to purchase 932,210 shares of the Company’s Shares of Class A Common Stock of Common Stock at an exercise of $1.60 per share in exchange for the cancellation of a $100 thousand SAFE issued on August 18, 2017 by the Company’s affiliate Trusted Mail Inc. with an agreed value of $125 thousand. The warrants were issued on January 23, 2020. There is no vesting period, and the warrants expire on December 20, 2024. A copy of the form of this warrant is included as Exhibit 3.7 to the offering statement of which this offering circular forms a part.

In January 2020, the Company issued to an investor a warrant to purchase 4,660,555 shares of the Company’s Class A Common Stock at a strike price of $1.60 per share in exchange for $300 thousand in cash and “premium” sponsorship status with a credited value of $100 thousand per year for 3 years totaling $300 thousand. This “premium” sponsorship status provides the Company with certain benefits in marketing and networking, such as the Company being listed on the investor’s website, as well providing the Company certain other promotional opportunities organized by the investor. The warrants were issued on January 23, 2020. There is no vesting period, and the warrants expire on December 20, 2024.

The fair value of the two warrants above issued in January 2020 was estimated on the date of grant using the Black-Scholes-Merton model and was valued using the following assumptions: fair value of shares of Class A Common Stock of $1.56, exercise price of $1.60 risk free interest rate of 1.58%, dividend yield of 0%, expected volatility of 44%, and contractual term of two years. The total fair value of these warrants was determined to be $2.1 million and is recorded in the statement of Stockholders’ Equity. Thus, fair value is $1.4 million in excess of the total consideration received for the warrants of $725 thousand. This amount was expensed in the consolidated statements of operations as of June 30, 2020.

In 2016, the Company issued a number of warrants to investors, certain of which were issued in connection with convertible notes that the Company issued to certain investors in 2016. Certain of these warrants remain outstanding today, including:

The forms of each of these warrants are included as Exhibits 3.2, 3.3, 3.4, and 3.5 respectively, to the offering statement of which this offering circular forms a part. 

Emergent Settlement Agreement, Emergent SAFE, and Tripartite Agreement. See the section of this offering circular entitled “Certain Relationships and Related Party Transactions” for a description of these agreements.  

Trend Information

From June 30, 2020 to June 30, 2021, Trust Stamp increased its concentration of non-affiliated clients, generating significant portions of its revenue from two clients during the period ending June 30, 2020 to generating significant revenue from four clients during the period ending June 30 2021, with further client-revenue growth achieved and anticipated in the second half of 2021.

In addition, the Company has expanded its services to a long-standing S&P500 bank client through two additional contracts for specialized retail client microservices. The additional contracts are anticipated to generate volume-based revenue in Q4 of 2021 and substantial volume-based revenue in 2022.

It was publicly announced in September 2021 that Mastercard's Community Pass is being implemented for a project between Mastercard and Paycode, with a goal of servicing 30 million customers that are underserved and unbanked in Africa. Given that Trust Stamp’s IT² and Facial Recognition technologies are utilized within the Mastercard Community Pass platform on a pay-per-use basis, it is anticipated that the implementation will generate substantial pay-per-use revenue over and above guaranteed minimum revenue under the software agreement.

In the first three quarters of 2021 we pursued the award of a significant contract with the U.S. Immigration and Customs Enforcement (“ICE”) which required an investment in productization, business development and satisfying extensive due diligence processes. The $3,920,764 contract was awarded September 23, 2021 for commencement of services on September 27, 2021 and the Company anticipates that the performance obligations will be substantially complete in financial year 2021. Alongside the revenue implications of this specific contract, it is believed that a successful execution will lead to extended and additional contracts of the same nature in addition to increasing Trust Stamp’s corporate visibility, reputation, and trust in associated markets.

Trust Stamp continues to expand a robust sales pipeline in the Company’s key markets and the velocity of pipeline growth has increased in 2021. Our pipeline included 55 potential revenue contracts and projects as of June 30, 2021 representing a projected $12.4 million in probability-adjusted revenue over the balance of 2021 and in 2022.

The Company has historically contracted with a third-party software developer to meet the need for additional research and development resources over and above internal resources.

The cost of those services has been the largest single expense other than internal employment costs. During 2021 we have continued scaling our development team in Malta and have established a new development team in Rwanda. The expansion of our internal development teams has required additional hiring, onboarding, training and equipment costs in the first-half of 2021 but will going forward allow us to substantially increase the percentage of contracts that are serviced internally with an estimated 60% reduction in our per-hour development costs versus contracted services.

Trust Stamp's key sub-markets are identity authentication for the purpose of account opening, access and fraud detection and the creation of tokenized identities to facilitate financial & societal inclusion. Management has evaluated the market potential for its services in part by reviewing the following reports and articles, none of which were commissioned by the Company, and none are to be incorporated by reference:

One of the biggest contributors to current authentication problems is the use of passwords. Static passwords (i.e. the type of password that we typically use to login to various accounts and services every single day that, for the most part, remains the same from the moment it is created) have a number of weaknesses:

According to a 2015 report published by Oxford University Department of Computer Sciences and Mastercard, 21% of users forget passwords within 2 weeks, 25% of users fail to remember at least 1 password per day, and 1 out of 3 online transactions are abandoned at checkout due to a forgotten password.

On top of this, stored biometric images and templates represent a growing and unquantified financial, security and PR liability and are the subject of growing governmental, media and public scrutiny, since biometric data cannot be "changed" once they are hacked, as they are intimately linked to the user's physical features and/or behaviors.

With biometric technologies becoming nearly ubiquitous, a range of risks are becoming more prevalent. The popularity of biometric authentication across financial services, employment, travel and healthcare settings inevitably means biometric databases are becoming more accessible to criminals, and the motivation to take over biometric credentials is booming. Even when operating as intended, biometric technology raises privacy concerns which have led to close attention from regulators. Multiple jurisdictions have placed biometrics in a special or sensitive category of personal data and demand much stronger safeguards around collection and safekeeping

To address this unprecedented danger, Trust Stamp has developed its IT² solutions, which replace biometric templates and scans with meaningless numbers, letters and symbols in order to remove sensitive data from the reach of criminals using a proprietary process by which a deep neural network irreversibly converts biometric and other identifying data, from any source, into the secure tokenized identity.

Relaxed Ongoing Reporting Requirements

To be accepted by Nasdaq, we will need to become a public reporting company that is required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company”, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies”, including but not limited to:

If we become a public reporting company in the future, we expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an “emerging growth company” for up to five years, although if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company” as of the following December 31.

If we do not become a public reporting company under the Exchange Act for any reason, we will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A for Tier 2 issuers. The ongoing reporting requirements under Regulation A are more relaxed than for “emerging growth companies” under the Exchange Act. The differences include, but are not limited to, being required to file only annual and semiannual reports, rather than annual and quarterly reports. Annual reports are due within 120 calendar days after the end of the issuer’s fiscal year, and semiannual reports are due within 90 calendar days after the end of the first six months of the issuer’s fiscal year. Further, if we do not become a public reporting company, we will not be accepted to list our Class A Common Stock on Nasdaq. Even if we choose to become a public reporting company, we may not meet the eligibility requirements to be listed on the Nasdaq market.

In either case, we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies”, and our shareholders could receive less information than they might expect to receive from more mature public companies.

*Independent Director 

Gareth Genner, Chief Executive Officer, Director  

With over 20 years’ experience in founding, operational and advisory capacities, Gareth provides Trust Stamp with technical, managerial, and visionary skills, as well as legal expertise. Gareth has successfully conceptualized, implemented, scaled, and exited multiple businesses including a cloud storage enterprise which was sold, and an online educational platform which was acquired by a non-profit educational entity. Immediately prior to Trust Stamp, Gareth served as full-time CEO of Edevate LLC, and President of Pontifex University as well as part-time Chancellor of Holy Spirit College. Gareth now serves as unpaid President of Pontifex University and Holy Spirit College which are merged and managed by a professional team. A British lawyer by training, Gareth holds a U.S. LLM in International Taxation & Financial Service Regulation.

Andrew Gowasack, President, Director  

An economist by education, Andrew began his career in financial services sales and marketing. Although Trust Stamp is Andrew’s first start-up, he has immersed himself in the lean-start-up environment by completing multiple incubator programs, each of which programs provided a unique perspective and honed a distinct set of startup skills. Andrew is actively committed to ongoing learning, studying at world-class institutions. He completed Harvard Business School's HBX CORe program and, through MIT Sloan School of Management, he has completed courses in design thinking and business innovation and application of blockchain technologies. Prior to joining Trust Stamp, Andrew worked at Ashford Advisers, a financial services company, where he worked as a Marketing Coordinator. As President, Andrew oversees business development and operations and acts as Chief Product Evangelist.

Alex Valdes, Chief Financial Officer, Board Secretary  

Before graduating college, Alex founded and operated four separate companies to pay his way through college. Before graduating, Alex spent 15 months studying abroad in Mexico where he launched an innovative microfinance lending system in partnership with the Yucatan State Department of Economic Development. From 2007 to 2012, Alex successfully exited each of the businesses and completed his degree in accounting at The University of Georgia. Alex qualified as both a CMA and CPA and worked in public accounting from 2014 to 2016 as a strategy consultant. In January of 2016, Alex became an Advisor for Trust Stamp. After 9 months as an Advisor, Alex joined the company full-time and now serves as the Chief Financial Officer, EVP, & Board Secretary.

Andrew Scott Francis, Chief Technology Officer

Prior to joining Trust Stamp as CTO, Scott served for 9 years in the Program Management Office with Google. This role was very entrepreneurial in nature as he was tasked with helping oversee the creation and development of a global PMO team spread across multiple data centers across the US and Europe, essentially acting as a startup intrapreneur. Prior to Google, Scott served for 10 years in a number of startup companies in Atlanta, Austin and Silicon Valley in software programming, management, and configuration management roles. As CTO, Scott oversees the Company’s software development team and programs, has responsibility for the Company’s hardware and software assets and plays a key role in working with the Company’s clients on all technical aspects of the relationship.

Mark Birschbach, Director

Mark is the Senior Vice President of Strategic Business, Innovation & Technology at the National Association of REALTORS. Mark and his team drive innovation in real estate and benefits to NAR members through strategic relationships with a broad range of business and technology players around the globe. Those strategic relationships drive significant non-dues revenue, return on investment, and cost savings to NAR members. Mark drives the success NAR’s tech investment portfolio through Second Century Ventures, the most active investor in real estate technology; the award-winning REACH technology accelerator, with operations in the US, Australia, Canada and the UK; Mark leads NAR’s strategy and innovation efforts through the creation of NAR’s Emerging Technology group, the Innovation, Opportunity, and Investment (iOi) Summit, NAR’s Strategic Think Tank, Big Tech Initiatives, and other strategic projects. Mark also leads NAR’s Realtor Benefits® Program, NAR’s top level domain businesses with .realtor and .realestate, NAR’s Products business, MVP program; manages NAR’s relationship with Move Inc., operator of Realtor.com.

David Story, Chairman of the Board

David is a Fellow of the Royal Institute of Chartered Surveyors with a focus on commercial real estate investment and portfolio management. David is Managing Director of Trust Stamp’ UK subsidiary and Chairman of the Board. For more than three decades, David has worked alongside Gareth in multiple ventures in parallel to building and managing his own commercial property investment portfolio and serving as a consultant to several property investment enterprises. David has served in management, operational and advisory capacities in multiple European ventures and brings strong analytical and consensus building skills to the Trust Stamp team.

Joshua Allen, EVP, Director

Josh joins Trust Stamp as EVP of Mergers and Acquisitions in addition to serving as a director, having spent over 20 years in private equity, venture capital, and non-profit management. He serves on the Board of Directors of several charitable and educational organizations. Josh has applied entrepreneurial models of operation to several US domestic and international non-profit organizations, transforming them into effective leaders in their respective spaces. Josh’s M&A transactional expertise is centered around financial services and technology.

William McClintock, Director

Bill McClintock serves as chairman of the Board of Directors for Biometric Innovations which is Trust Stamp's UK operating subsidiary. Bill is a well-respected figure within the United Kingdom property market, having been involved in real estate for over fifty years. During that time, he had also been Managing Director of Royal Life Estates South with a chain of two hundred and fifty offices. He successfully exited Cornerstone Estate Agencies (three hundred and forty-seven offices), when it was purchased from Abbey National plc., and subsequently joined Hamptons as International Development Director with specific responsibility for business generated in the markets of Hong Kong, Singapore, and Malaysia. In 2003 he became the Chief Operating Officer of The Ombudsman for Estate Agents for the UK and in 2007 became Chairman, a post he held until the end of 2015.

Kristin Stafford, Independent Director (Incoming December 1, 2021)

Kristin Stafford is a successful serial entrepreneur specializing in SaaS and enterprise platforms supporting global compliance and background screening. Kristin is the co-founder and CEO of Vital4, a global enterprise, cloud-based platform, which provides instant data screening to support compliance, background screening, due diligence and more, on a global scale. Kristin has served as CEO of Vital4 from its inception in February 2016, and still serves as its CEO as of the date of this offering circular.

Kristin is the co-founder and former managing partner of one of the first independent wholesale international background screening firms in the US – International Screening Solutions, Inc. Kristin managed and developed the company from 2009 and 2015, helping to lead the Company from the ground-up into a multi-million-dollar business that recently sold the platform she designed to Dun and Bradstreet in 2021.

Kristin has more than 20 years of experience in operations management, process architecture and software development. She has organized and managed teams of over 100 employees and consultants and brings to the table a vast array of experience in facilitating the requirements of corporate clients in the development and implementation of operations systems management and software development. Before entering the international background screening space, she managed the financial operations of a large Atlanta-based financial services corporation, served as a senior consultant for Delta Technology and Northern Trust Bank and held a management role within a start-up division of GE Capital.

In her off time, Kristin is usually found surrounded by family and friends, or travelling with her three children, husband Scott, and her three fur babies Chubbs, Mable and Dipper.

Kristin has been elected by the Board of Directors of the Company to serve as an independent director on the Company’s Board beginning December 1, 2021.

Berta Pappenheim, Independent Director (Incoming December 1, 2021)

Berta Pappenheim is the CEO and Co-Founder of The CyberFish Company, an organizational psychology and industry leading cyber security company that assesses and improves cybersecurity incident response capabilities of its clients. Prior to co-founding The CyberFish in January 2018, Berta worked as an occupational psychologist, delivering competency-based assessment programs in the financial and professional services, natural resources and manufacturing industries. From July 2012 to January 2017, Berta was the Managing Director of a cyber threat intelligence consulting firm, Tempest Security Intelligence, where she established and cultivated the firm’s first international office in the UK.

Berta holds a Masters in Social Sciences from the University of Linköping in Sweden and currently studies towards an MSc in Neuroscience at King’s College London.

Berta has been elected by the Board of Directors of the Company to serve as an independent director on the Company’s Board beginning December 1, 2021.

Family Relationships

There are no family relationships among any of our executive officers and directors.

Corporate Governance

Board of Directors and Board Committees

We intend to list our shares of Class A Common Stock on the Nasdaq Capital Market. Under the rules of Nasdaq, “independent” directors must make up a majority of a listed company’s Board of Directors. In addition, applicable Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable Nasdaq rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.

Our Board of Directors currently consists of six (6) members. An additional two independent, non-executive directors – Ms. Kristin Stafford and Ms. Berta Pappenheim – have been approved by the Board, have agreed to serve and will take office on December 1, 2021. Our Board of Directors has determined that Mark Birschbach and William McClintock (as well as Ms. Kristin Stafford and Ms. Berta Pappenheim) qualify as independent directors in accordance with the Nasdaq Capital Market, or Nasdaq listing requirements. Messrs. Genner, Gowasack, Allen, and Story are not considered independent. Nasdaq’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three (3) years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by Nasdaq rules, our Board of Directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our Board of Directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.

As required under Nasdaq rules and regulations and in expectation of listing on Nasdaq, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present.

Board Leadership Structure and Board’s Role in Risk Oversight

David Story is the Chairman of the Board. The Chairman has authority, among other things, to preside over Board meetings and set the agenda for Board meetings. Accordingly, the Chairman has substantial ability to shape the work of our Board of Directors. We currently believe that separation of the roles of Chairman and Chief Executive Officer ensures appropriate oversight by the Board of our business and affairs. However, no single leadership model is right for all companies and at all times. The Board of Directors recognizes that depending on the circumstances, other leadership models, such as the appointment of a lead independent director, might be appropriate. Accordingly, the Board may periodically review its leadership structure. In addition, following the qualification of the offering, the Board will hold executive sessions in which only independent directors are present.

Our Board is generally responsible for the oversight of corporate risk in its review and deliberations relating to our activities. Risk is inherent in every business. As is the case in virtually all businesses, we face a number of risks, including operational, economic, financial, legal, regulatory, and competitive risks. Our management is responsible for the day-to-day management of the risks we face. Our Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management.

In its oversight role, our Board of Directors’ involvement in our business strategy and strategic plans plays a key role in its oversight of risk management, its assessment of management’s risk appetite, and its determination of the appropriate level of enterprise risk. Our Board of Directors receives updates at least quarterly from senior management and periodically from outside advisors regarding the various risks we face, including operational, economic, financial, legal, regulatory, and competitive risks. Our Board of Directors also reviews the various risks we identify in our filings with the SEC and risks relating to various specific developments, such as acquisitions, debt and equity placements, and new service offerings.

Our Board committees assist our Board of Directors in fulfilling its oversight role in certain areas of risk.

Committees of the Board of Directors

The Board of Directors has already established an Audit Committee (the “Audit Committee”), a Compensation Committee (the “Compensation Committee”) and a Nominating and Corporate Governance Committee (the “The Nominating and Corporate Governance Committee”). The composition and function of each committee are described below.

Audit Committee

The Audit Committee has three members, including Messrs. Birschbach, McClintock, and Allen. Mr. Birschbach serves as the chairman of the Audit Committee and satisfies the definition of “audit committee financial expert”. Mr. Allen will cease to serve on the Audit Committee on December 1, 2021 with the appointment of Ms. Kristin Stafford to that committee.

Our Audit Committee is authorized to:

Compensation Committee

The Compensation Committee has three members, including Messrs. McClintock, Birschbach, and Story. Mr. McClintock serves as the chairman of the Compensation Committee. Mr. Story will cease to serve on the Compensation Committee on December 1, 2021 with the appointment of Ms. Berta Pappenheim to that committee.

Our Compensation Committee is authorized to:

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee has three members, including Messrs. Story, McClintock, and Birschbach. Mr. Story serves as the chairman of the Nominating and Corporate Governance Committee. Mr. Story will cease to serve on the Nominating and Corporate Governance Committee on December 1, 2021 with the appointment of Ms. Kristin Stafford to that committee and Mr. McClintock will thereupon serve as the chairman of the Nominating and Corporate Governance Committee.

The functions of our Nominating and Corporate Governance Committee, among other things, include:

Our goal is to assemble a Board that brings together a variety of skills derived from high quality business and professional experience.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is or has been an officer or employee of our Company, nor will they be. None of our executive officers has served as a member of the board of directors, or as a member of the Compensation Committee or similar committee, of any entity that has one or more executive officers who served on our board of directors or compensation committee during 2020 or thus far in 2021. For a description of transactions between us and members of our Compensation Committee and affiliates of such members, please see “Certain Relationships and Related Party Transactions”.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting.

Indemnification of Directors and Officers

Our Amended and Restated Certificate of Incorporation contains provisions limiting the liability of directors to the fullest extent permitted by Delaware law, and provide that we will indemnify each of our directors and officers to the fullest extent permitted under Delaware law. Our Amended Charter and Amended Bylaws also provide our Board of Directors with discretion to indemnify our employees and other agents when determined appropriate by the Board. In addition, each employment agreement entered into between the Company and its officers and/or directors contain certain indemnification provisions, which requires us to indemnify them in certain circumstances.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our Company pursuant to the foregoing provision, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

The following Summary Compensation Table sets forth all compensation earned in all capacities during the fiscal years ended December 31, 2020 and 2019 by (i) our principal executive officer and (ii) our two most highly compensated executive officers, other than our principal executive officer, who were serving as executive officers as of December 31, 2020 and whose total compensation for the 2020 fiscal year, as determined by Regulation S-K, Item 402, exceeded $100,000 (collectively referred to as the “Named Executive Officers”):

Director Compensation

For the fiscal year ended December 31, 2020 we paid our directors as a group (6) $0 for their services as directors. There are six directors as of the date of this Offering Circular.

Elements of Compensation

Base Salary

For the year ended December 31, 2020, Messrs. Genner, Gowasack, and Francis received a fixed base salary in an amount determined in accordance with their employment agreements with the Company. Factors influencing the salary of each of these individuals include:

Bonus

Each executive officer that has an employment agreement with the Company is entitled to receive an annual bonus of not less than 50% nor more than 100% of such officer’s Base Salary (the “Bonus”) in accordance with and based on achievement of criteria established from year to year by the Board of Directors of the Company, provided that such officer is employed as of the date the Bonus is paid.

Stock Awards

For the years ended December 31, 2020 and 2019, we issued 204,115 and 50,000 Restricted Stock Units, respectively, vesting on January 2, 2023 to our named executive officers.

Equity Incentive Plans 

As of the date of this Offering Circular, the Company does not have a formal equity incentive plan pursuant to which it can issue awards

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table sets out, as of November 19, 2021, the voting securities of the Company that are owned by executive officers and directors, and other persons holding more than 5% of any class of the Company’s voting securities or having the right to acquire those securities.