Executive Summary / Key Takeaways

• Pioneering AI Identity Solutions: Trust Stamp (NASDAQ:IDAI) is at the forefront of AI-powered identity authentication, leveraging proprietary machine learning, computer vision, and cryptography to combat a rapidly escalating global fraud problem and address financial inclusion gaps. Its core technology, including Irreversibly Transformed Identity Tokens (IT2) and Stable Key, offers a privacy-first approach with unique competitive advantages.
• Accelerating Revenue Growth Amidst Strategic Shifts: The company reported a significant 62.41% year-over-year revenue increase in Q2 2025, reaching $813 thousand, and a 26.45% increase for the first half of 2025 to $1.36 million. This growth is driven by new strategic partnerships and increased activity from key clients, demonstrating early returns on recent operational restructuring and go-to-market adjustments.
• Enhanced Operational Efficiency: Despite continued net losses, IDAI has shown improved operational efficiency, with its operating loss decreasing by 35.91% in Q2 2025 and Adjusted EBITDA loss narrowing by 42.29% to $1.23 million, reflecting successful cost-cutting measures and strategic reallocations of R&D.
• Critical Liquidity and Going Concern Risk: The company faces substantial doubt about its ability to continue as a going concern, with only $292 thousand in cash as of June 30, 2025, and an accumulated deficit of $65.33 million. Recent and ongoing capital raises, including a $2.21 million secured promissory note and potential $6.2 million from an Equity Distribution Agreement, are vital for funding operations and executing its ambitious growth strategy.
• Strategic Partnerships and Market Expansion: IDAI is actively expanding its market reach through key partnerships (e.g., Neural Payments for P2P fraud, Partisia for decentralized ID) and geographic initiatives (e.g., Tokyo office, African digital identity programs). The extension of its S&P 500 bank agreement to 2031 provides a stable, growing revenue stream, while the expiration of Mastercard's (MA) exclusivity opens new direct contracting opportunities.

The Identity Imperative: Trust Stamp's AI-Powered Defense

In an increasingly digital and interconnected world, the integrity of identity has become the bedrock of commerce, security, and social inclusion. The scale of the challenge is staggering: global losses from payment card fraud alone reached approximately $33.8 billion in 2024, with online payment fraud projected to hit $362 billion globally by 2028. Beyond fraud, 1.4 billion people remain unbanked, highlighting a profound need for accessible and secure identity verification to foster financial inclusion. This dual challenge of rampant fraud and widespread exclusion forms the fertile ground for Trust Stamp's innovative solutions.

Trust Stamp, founded in 2016, has positioned itself as a specialized leader in AI-powered identity authentication. The company's overarching strategy centers on developing proprietary, privacy-first solutions that leverage machine learning, computer vision, cryptography, and data mining. These technologies process and protect data, identify and defend against fraud, safeguard sensitive user information, and extend digital services globally at a disruptively low cost. IDAI's historical journey, from early partnerships with industry giants like Mastercard in 2019 to its NASDAQ listing in 2022, has consistently underscored its commitment to deep technological innovation and strategic market penetration.

The competitive landscape for identity authentication is robust, featuring larger, more generalized players like Okta (OKTA), Ping Identity, and ForgeRock. Okta, a leader in identity and access management, boasts an extensive ecosystem and strong revenue growth, but its broad platform may not offer the same depth in specialized biometric fraud detection as Trust Stamp. Ping Identity, focused on enterprise identity security, excels in API capabilities and compliance, yet IDAI's advanced biometric tokenization could provide superior fraud resistance in high-stakes scenarios. ForgeRock, with its open-source emphasis, offers flexibility but may lack IDAI's niche innovation in cryptographic identity. Trust Stamp differentiates itself by focusing on the core science of identity, particularly in biometric transformation and privacy preservation, rather than broad access management.

Technological Moats: The Core of Trust Stamp's Value

Trust Stamp's competitive edge is deeply embedded in its proprietary technology, which directly addresses the vulnerabilities of traditional identity systems. The company utilizes GPU processing, edge computing, neural networks, and large language models to deliver results faster and more effectively than historically possible. This technological foundation underpins several key differentiators.

Central to IDAI's offering are its Irreversibly Transformed Identity Tokens (IT2). This core technology converts biometric data, such as a selfie, into a unique, irreversible token. Crucially, this process means sensitive biometric information is never stored in its original form, offering a privacy-first solution that is highly resistant to data breaches. This tangible benefit translates into enhanced trust for end-users and reduced liability for enterprises, fostering stronger customer loyalty and potentially higher adoption rates in privacy-sensitive sectors like banking and government. For investors, this technology represents a significant competitive moat, enabling IDAI to penetrate markets where data privacy is paramount and traditional methods fall short.

Further enhancing its biometric security, Trust Stamp developed Shape Overlay for Proof of Liveness. This patented mechanism requires users to interact in real-time with their captured image, effectively combating sophisticated deepfake and injection attacks. This innovation directly addresses a growing threat in digital fraud, offering a critical layer of defense that many competitors struggle to match. The "so what" for investors is clear: by mitigating advanced fraud vectors, Trust Stamp enhances the reliability and security of digital transactions, making its solutions more attractive to financial institutions and other high-value targets.

The company's Stable Key (Stable IT2) is a revolutionary technology that generates a unique key directly from a user's biometric data. This key maintains a mathematical correlation to all of the user's passwords, PINs, and other secrets across various accounts and use cases, eliminating the need to store these secrets in their entirety. This approach drastically reduces the risk of credential theft and simplifies user authentication, offering a qualitatively superior security paradigm. This technological advancement could unlock new revenue streams by providing a more secure and convenient alternative to existing multi-factor authentication and password management solutions.

Finally, Trust Stamp's patent for Interoperable Biometric Representations aims to break vendor lock-in. This technology allows for the comparison of like-modality biometric templates from different sources, a significant advantage in an industry often fragmented by proprietary systems. This capability enhances flexibility for clients and positions Trust Stamp as a facilitator of broader, more integrated identity ecosystems, potentially increasing its market share by offering a more versatile solution than many competitors.

Financial Performance: Signs of Strategic Traction

Trust Stamp's recent financial performance reflects a company in transition, demonstrating significant revenue growth while actively managing its cost structure. For the three months ended June 30, 2025, net revenue surged by 62.41% year-over-year to $813 thousand. This impressive growth was primarily fueled by the new Master Technology Services Agreement (MTSA) with QID Technologies LLC, which contributed $251 thousand in recognized revenue, and a $93 thousand increase in billing from a key S&P 500 bank due to new feature work and platform updates. The six-month period ending June 30, 2025, also saw robust revenue growth, increasing by 26.45% to $1.36 million.

Despite these gains, the company faced some headwinds, notably a reduction in fixed monthly license fees from Mastercard following a February 2025 amendment, which saw license revenue decrease from $86 thousand in Q2 2024 to $30 thousand in Q2 2025. This shift underscores the dynamic nature of its partnerships and the importance of diversifying revenue streams.

Operational efficiency has been a key focus. While the cost of services increased by 46.61% in Q2 2025, driven by web services, QID-related work, and increased driver license validations for the S&P 500 bank, the company has made strides in controlling other expenses. Research and development (R&D) expenses decreased by 9.10% in Q2 2025, largely due to strategic reallocations of R&D salaries to cost of services and capitalized software, alongside a 100% reduction in outsourced software development as work was internalized for cost savings. Selling, general, and administrative (SGA) expenses saw a substantial 32.90% decrease in Q2 2025, driven by a $457 thousand reduction in salaries, stock-based compensation, payroll costs, and sales commissions resulting from sales team reductions and management departures.

These efforts translated into a notable improvement in profitability metrics. The operating loss decreased by 35.91% in Q2 2025, and the Adjusted EBITDA loss (a non-GAAP measure) narrowed by 42.29% to $1.23 million for the quarter. While Trust Stamp continues to report net losses ($1.71 million in Q2 2025 and $3.87 million in H1 2025), the trend of accelerating revenue growth coupled with improving operational efficiency suggests that strategic adjustments are beginning to yield positive results.

Liquidity and Capital: Fueling Future Growth

Trust Stamp's financial health, while showing operational improvements, remains constrained by its liquidity position. As of June 30, 2025, the company held approximately $292 thousand in cash and cash equivalents. For the six months ended June 30, 2025, net operating cash outflows were $2.10 million, contributing to an accumulated deficit of $65.33 million. These factors collectively raise substantial doubt about the company's ability to continue as a going concern for the next twelve months.

Recognizing these challenges, Trust Stamp has been actively engaged in capital-raising initiatives. Subsequent to June 30, 2025, the company began selling shares under an Equity Distribution Agreement with Maxim Group LLC, generating $154 thousand in net proceeds from 47,000 shares sold, with the potential to raise up to $6.2 million. Additionally, on July 1, 2025, Trust Stamp secured a $2.21 million Secured Promissory Note with Streeterville Capital LLC, due November 1, 2026, which includes a mandatory prepayment clause requiring 50% of future fundraising proceeds to be applied to the note. These efforts follow a January 2025 offering that raised approximately $3.5 million in gross proceeds, with a potential for an additional $5.25 million if all private placement warrants are exercised. The company also fully repaid a $3.07 million secured promissory note in January 2025.

The ongoing need for capital underscores the high-growth, high-investment nature of the AI software sector. While the "going concern" warning is a significant risk, the company's ability to consistently raise capital and secure new debt financing indicates continued investor confidence in its long-term potential and technological vision. The primary use of these proceeds is for working capital, capital expenditures, and general corporate purposes, all essential for scaling operations and expanding market reach.

Strategic Outlook and Growth Catalysts

Trust Stamp's forward-looking strategy is built on leveraging its technological differentiators and expanding its market footprint through strategic partnerships and geographic expansion. The company projects revenue from existing contracted customers to exceed $5 million for fiscal year 2025, with additional upside from contracts yet to fully ramp up. This guidance, while not fully detailed, signals confidence in its current pipeline and operational execution.

A cornerstone of its future revenue stability is the extended agreement with an S&P 500 bank, now running until May 31, 2031. This partnership guarantees a minimum income stream, starting at $154 thousand per month and increasing to over $215 thousand per month with CPI adjustments. Management anticipates annual billings from this relationship will exceed these minimums, reflecting the deep integration and value IDAI provides.

The Master Technology Services Agreement with QID Technologies LLC, effective January 1, 2025, is another significant growth driver, with minimum monthly service fees of $100 thousand, potentially rising to $300 thousand. While the ramp-up has been slower than anticipated, successful acceleration of QID's customer-facing activities could substantially boost IDAI's revenue.

Strategic partnerships are central to Trust Stamp's go-to-market approach. The recent collaboration with Neural Payments, announced in June 2025, aims to integrate IDAI's Orchestration Platform into Neural Payments' real-time P2P payment solutions. This partnership directly addresses the burgeoning $3.63 trillion P2P payment market, offering enhanced KYC and selfie-based reauthentication to combat fraud. Similarly, the partnership with Partisia to develop a secure, decentralized biometric identity solution further strengthens IDAI's position in privacy-first identity.

Geographic expansion is also a key initiative. The company's new office in Tokyo, supported by Japanese government funding, targets opportunities in the APAC region. In Africa, Trust Stamp is actively pursuing national-level digital identity programs, engaging in serious discussions with two countries and conducting a pilot with Africa's largest mobile telecommunications provider. Participation in the Mastercard Lighthouse MASSIV program further underscores its commitment to addressing critical identity needs in emerging markets. These initiatives, combined with the expiration of Mastercard's limited exclusivity in December 2024, open new avenues for direct customer engagement and market penetration.

Risks and Challenges

While Trust Stamp's strategic direction and technological prowess are compelling, investors must consider several material risks. The most pressing is the going concern uncertainty, stemming from persistent net losses and negative operating cash flows. The company's continued reliance on external financing to fund operations introduces dilution risk and dependence on capital market conditions.

Customer concentration also presents a notable risk. As of June 30, 2025, two customers accounted for 86.91% of total accounts receivable, and in Q2 2025, two customers (the S&P 500 bank and QID) generated 83.79% of total net revenue. Any significant reduction in business from these key clients could materially impact Trust Stamp's financial performance.

The ramp-up of the QID Master Technology Services Agreement is another area of uncertainty. While offering substantial revenue potential, the pace of QID's customer-facing activities is not controlled by Trust Stamp, introducing variability in expected billings.

Furthermore, the company has identified a material weakness in its internal control over financial reporting related to the accounting for and recording of complex equity transactions. While remediation efforts are underway, the effectiveness of these controls has not yet been fully demonstrated, posing a risk to financial reporting accuracy and investor confidence.

Conclusion

Trust Stamp stands at a pivotal juncture, armed with a suite of innovative AI-powered identity solutions that directly address the escalating global challenges of fraud and financial exclusion. Its privacy-first approach, underpinned by technologies like IT2, Shape Overlay, Stable Key, and Interoperable Biometric Representations, provides a compelling competitive advantage in a market hungry for robust, ethical identity verification. The company's strategic pivot towards operational efficiency, coupled with significant revenue growth in Q2 2025, suggests that its focused initiatives are beginning to bear fruit.

However, the investment thesis for IDAI is not without its complexities. The "going concern" warning and ongoing reliance on capital raises underscore the inherent risks of a growth-stage technology company. Success hinges on the diligent execution of its strategic partnerships, the successful ramp-up of key contracts like QID, and its ability to translate technological leadership into sustained profitability. For investors with a high-risk tolerance and a long-term view, Trust Stamp represents a compelling opportunity to invest in a company with differentiated technology tackling critical global problems, provided it can effectively manage its liquidity and execute its ambitious growth roadmap. The coming quarters will be crucial in demonstrating its capacity to convert its innovative solutions into a financially sustainable enterprise.