Myseum.AI, Inc.
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 31, 2025
MYSE$1.26+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-29.
0001213900-24-027991
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001013762-25-004290
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 93 previous paragraphs and 81 current paragraphs.
36 unchanged; 23 reworded; 21 added; 33 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Myseum Social Media Platform
Current report
We recently launched our Myseum social media platform, aninnovative social media platform that brings a fresh approach to digital media and content management, allowing users to create a digital legacy that can be easily shared today and with future generations. Backed by AI technology and proprietary software, the multi-tiered social media ecosystem enables individuals, families, and other groups to store and share digital content such as messages, photos, videos, and documents within a highly secure and private family library. Myseum allows users to create amazing albums and galleries for everyone to see, create special private and secure galleries with limited access, personalize a user’s newsfeed with updates from other Myseums and leave time released video messages for both now and future generations.
Current report
RPM Interactive, Inc.
Current report
In October 2024, our majority owned subsidiary, Dragon Interact, Inc. (“Dragon”), entered into a Share Exchange Agreement with RPM Interactive, Inc., a Florida corporation (“RPM”), pursuant to which Dragon acquired 100% of the equity interests of RPM, including all assets of RPM in consideration for the issuance of 3,500,000 restricted shares of Dragon’s common stock. RPM’s assets included an artificial intelligence (“AI”) tool used for publishing AI-generated consumer gaming and podcasting/vodcasting applications and certain intellectual property. As part of the acquisition, Dragon has changed its corporate name to RPM Interactive, Inc. (“RPM Interactive”) and shifted its focus to developing AI-driven podcast and gaming technologies.
Current report
Following the acquisition, in January 2025, we returned 3,500,000 shares of the RPM Interactive common stock held by us to RPM Interactive, which shares were cancelled and are no longer outstanding on RPM Interactive’s stock ledger. Following these transactions, we hold 9,000,000 shares of the RPM Interactive’s common stock, or approximately 34% of its outstanding shares.
Current report
The Habytat
Current report
Prior ot the acquisition of RPM, we had developed and launched, in November 2022, the Habytat, a virtual space that blends real world and virtual realities into one, in real time, using emerging technology like virtual and augmented reality, to create a highly immersive 3D environment. We had further contemplated spinning-off our Habytat platform business into a new standalone public company pursuant to a distribution of the shares of the our shareholders. As discussed above, following our acquisition of RPM in October 2024, we ceased our development of the Habytat platform and are evaluating ways to utilize the technology that had been developed by our subsidiary.
Current report
Return of Subsidiary Shares
Current report
In January 2025, we returned 3,500,000 shares of the Subsidiary’s. common stock held by us to the Subsidiary, which shares were cancelled and are no longer outstanding on the Subsidiary’s stock ledger. Following this transaction, we held 12.5 million shares of the Subsidiary’s common stock, or approximately 34% of its outstanding shares.
Current report
January 2025 Offering
Current report
On January 8, 2025, we entered into a securities purchase agreement with certain institutional investors, pursuant to which we sold 1,200,000 shares of our common stock at a purchase price of $4.25 per share of Common Stock. Proceeds from the offering were approximately $5.1 million, prior to deducting placement agent’s fees and other offering expenses payable by the Company. The shares of Common Stock were offered by the Company pursuant to its shelf registration statement on Form S-3 (File No. 333-268058), which was declared effective by the Securities and Exchange Commission on December 6, 2022, a base prospectus dated December 6, 2022, and a prospectus supplement dated January 8, 2025. The closing of the offering took place on January 9, 2025. In addition, pursuant to the terms of the offering, the Company issued to The Benchmark Company, LLC, the exclusive placement agent for the offering, warrants to purchase up to 60,000 shares of the Company’s common stock, at an exercise price equal to 100.0% of the offering price per share of Common Stock, or $4.25 per share. The Placement Agent Warrant is exercisable during the four-and-a-half year period commencing six months after the date of the closing of this Offering.
Current report
On March 31, 2024, based on the Company’s analysis, the Company deconsolidated Metabizz, LLC and Metabizz SAS. During the three months ended March 31, 2024, the Company ceased doing business with Metabizz, LLC and Metabizz SAS and will pay technology professionals directly. In connection with the deconsolidation of Metabizz, LLC and Metabizz SAS, during the nine months ended September 30, 2024, the Company recorded a gain on deconsolidation of $107.
Current report
On August 27, 2024, the Company entered into an Asset Purchase Agreement with the Seller, pursuant to which it acquired from Seller the Assets (See Note 1) in consideration for the transfer by the Company of 8,000,000 restricted shares of common stock of RPM Interactive. Accordingly, as of September 30, 2024, the Company owned 45.5% of RPM Interactive. On August 27, 2024, based on the Company’s analysis, the Company determined that RPM Interactive met the definition of a VIE under the VIE model, which provides for situations in which control may be demonstrated other than by the possession of voting rights in RPM Interactive. Based on Company’s analysis, the Company continues to have the power to direct the activities of RPM Interactive that most significantly impact RPM Interactive’s economic performance and the obligation to absorb losses of RPM Interactive that could potentially be significant to RPM Interactive or the right to receive benefits from RPM Interactive that could potentially be significant to RPM Interactive.
Current report
Noncontrolling interests
Current report
The Company follows ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCI”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to noncontrolling interests even when such allocation might result in a deficit balance. The net loss attributed to NCI was separately designated in the accompanying consolidated statements of operations and comprehensive loss. Losses attributable to NCI in a subsidiary may exceed a NCI’s interests in the subsidiary’s equity. The excess attributable to NCI is attributed to those interests. NCI shall continue to be attributed their share of losses even if that attribution results in a deficit NCI balance.
Current report
The Company allocates certain corporate common expenses to its subsidiaries based on the ratio of direct subsidiary expenses to total consolidated expenses. Management believes that this allocation method is reasonable.
Current report
The Company accounts for it noncontrolling interest in RPM Interactive in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations. Through January 10, 2024, the date that VR Interactive purchased 8,000,000 shares of RPM Interactive from Metabizz LLC, any noncontrolling interest eliminated in consolidation. Because this change in ownership moved from a consolidated entity (the VIE entities) to a nonconsolidated entity (VR Interactive), subsequent to January 10, 2024 the Company ceased eliminating the noncontrolling interest in consolidation and recorded an initial negative noncontrolling interest of $442,361 in total equity for the portion of equity ownership not attributable to DatChat based on the minority interest holders’ ownership interest in the carrying value of RPM Interactive’s equity. Additionally, during the year ended December 31, 2024, the Company recorded additional initial negative noncontrolling interest of $909,581 in total equity for the portion of additional equity ownership not attributable to the Company based on this minority interest holders’ ownership interest in the carrying value of RPM Interactive’s equity. The Company also allocated $785,847 of the net loss of the subsidiary to noncontrolling interest resulting in a total noncontrolling interest deficit of $2,137,789 as of December 31, 2024.
Current report
Net Loss and Net Loss Attributable Common Shareholders
Current report
The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. As of December 31, 2024, we had cash and cash equivalents of $1,196,699, short-term investments of $2,952,512, and working capital of $3,657,711. Short-term investments include U.S. Treasury zero coupon bills that are all highly rated and have initial maturities between four and twelve months. Additionally, on January 8, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors pursuant to which the Company agreed to sell to such investors 1,200,000 shares of common stock of the Company at a purchase price of $4.25 per share of Common Stock (the “Offering”). The closing of the sales of these securities under the Purchase Agreement took place on January 9, 2025 and we received net proceeds of $4,537,000. Net cash used in operations was $4,388,385 for the year ended December 31, 2024. Until such time that the Company implements its growth strategy, it expects to continue to generate operating losses in the foreseeable future, mostly due to corporate overhead, research and development, and costs of being a public company. We believe that our existing working capital and cash on hand will provide sufficient cash to enable the Company to meet its operating needs and debt requirements for the next twelve months from the issuance date of this report.
Current report
Net cash provided by (used in) financing activities totaled $2,394,971 and $(398,284) for the years ended December 31, 2024 and 2023, respectively.
Current report
During the year ended December 31, 2024, we received $559,251 from the sale of common stock, net, received $974,198 from the sale of subsidiary common stock, net, and received $861,522 from the sale of pre-funded warrants.
Removed paragraphs (33)
Previous report
Habytat
Previous report
In June 2022, we formed a wholly owned subsidiary, Dragon Interactive, Inc. (formerly, SmarterVerse, Inc.) (“Dragon Interactive”). In July 2022, Dragon Interactive entered into a development agreement with MetaBizz, LLC, an infrastructure firm that creates and develops 4D experiences in the metaverse (“MetaBizz”). In August 2022, we launched the “Habytat”, a virtual space that blends real world and virtual realities into one, in real time, using emerging technology like virtual and augmented reality, to create a highly immersive 3D environment. Habytat is supported by proprietary artificial intelligence (“AI”) and utilizes a machine learning engine to develop more realistic looking content, daily rewards, games, and new utilities that are designed to further enhance the user experience in an engaging way. Our goal is to leverage our patents and develop new technology that leads to more people joining and seeing the value in the metaverse. Currently, the development agreement is not active.
Previous report
Each Habytat user is granted user rights to use a designated piece of virtual property in Geniuz City, the first world within Habytat, through the minting and issuance of a unique NFT. Geniuz City is designed to be a near photo-realistic world based on Miami’s Wynwood arts district and its surrounding areas. Geniuz City enables users to visit art galleries, explore the town, interact with other users, take selfies with famous landmarks, customize their properties and enjoy the culture of Geniuz City.
Previous report
Users will be able to customize their virtual property to represent their personal style and taste. Users will then be able to accumulate reward points when they visit and interact with such virtual property or invite others to join Habytat, and such rewards can be used to enhance, expand, and improve their virtual property. The official in-world currency of Habytat is the “Nirad,” which can be earned through participation on the DatChat Social Network+ or Habytat and used to upgrade properties and experiences in Habytat.
Previous report
As of March 28, 2024, we had over 140,000 Habytat users.
Previous report
Mobile Metaverse
Previous report
In May 2023, we launched the open mobile metaverse, Habytat 1.0, as part of our mission to democratize access to the metaverse. We hope that by making Habytat available via mobile devices and offering free ownership of virtual land and homes, that Habytat will break down obstacles that previously limited participation, such as the necessity for expensive virtual reality (“VR”) gear or metaverse properties. We have assembled a team of over twenty game developers, graphic artists and back-end developers to create Habytat 1.0.
Previous report
HabyPets
Previous report
In August 2023, we launched a series of novel AI-powered pets called “HabyPets.” HabyPets provides an interactive experience within the Habytat world, creating a more immersive and personal experience for users. Supported by Habytat’s proprietary AI and machine learning engine, HabyPets grow over time from playful companions to mature adult pets. Similar to real-life pets, these AI pets can be trained by users via a range of behavioral commands, replicating the natural progression of real pets over time. These include, but are not limited to, catching frisbees, playing with toys, engaging in tug of war, and even participating in thrilling races with other pets at the park. By actively engaging with their pets, users can establish a connection and provide proper care for their virtual companions, fostering a realistic experience within the Habytat metaverse.
Previous report
Myseum
Previous report
We are currently developing “Myseum,” a platform that will allow users to create a personal museum designed to easily share pictures, videos and documents utilizing planned features, such as creating instant sharing spaces at family gatherings, time released video messages, multi-tiered social media, and secure family document storage and sharing. Currently, Myseum is scheduled to launch in the second quarter of 2024 and will encompass features and social networking technology designed to unlock and share digital media.
Previous report
Spin-off and Name Change
Previous report
In January 2024, we announced plans to spin-off the Habytat platform business into a new standalone public company pursuant to a distribution as further discussed below. As of the date of this Annual Report, we currently own approximately 71.5% of Dragon Interactive, the entity that owns and operates the Habytat platform business. This marked a significant step forward in our corporate strategy to reposition the Company as a pureplay social media ecosystem centered around our Myseum assets.
Previous report
In February 2024, Darin Myman was appointed as President of SmarterVerse.
Previous report
In February 2024, SmarterVerse changed its name to Dragon Interactive Corporation.
Previous report
If the distribution proceeds, our shareholders will maintain their current shares in the Company and receive a pro-rata distribution of a portion of our shares of Dragon Interactive. The proposed distribution remains subject to approval by our board of directors as well as other customary conditions, including the filing and effectiveness of either a Form S-1 or Form 10 registration statement with the U.S. Securities and Exchange Commission and obtaining of any other required regulatory approvals. Upon consummation of the proposed distribution, Dragon Interactive would become a standalone public company with plans seek a listing on a national stock exchange. No assurance can be given that the spin-off and/or the distribution will occur as anticipated or at all.
Previous report
On January 16, 2024, we entered into an underwriting agreement with EF Hutton LLC, as the representative of the underwriters named therein, relating to an underwritten public offering of 382,972 shares of our common stock and pre-funded warrants to purchase up 590,000 shares of our common stock for gross proceeds of approximately $1.8 million, before deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.** **
Previous report
Risks and Uncertainties
Previous report
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of these consolidated financial statements, and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
Previous report
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Previous report
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Previous report
Accounting for digital currencies and other digital assets
Previous report
The Company purchases Ethereum cryptocurrency (“Ethereum”) and other digital assets and accepts Ethereum as a form of payment for non-fungible tokens sales (NFTs). The Company accounts for these digital assets held as the result of the purchase or receipt of Ethereum and other digital assets, as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”). The Company has ownership of and control over its digital currencies and digital assets and the Company may use third-party custodial services to secure them. The digital currencies and digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred since acquisition. The Company believes that digital currencies and other digital assets meet the definition of indefinite-lived intangible assets and accounts for them at historical cost less impairment, applying the guidance in ASC 350. The Company monitors any standard-setting, regulatory or technological developments that may affect the Company’s accounting for digital currencies or its controls and processes related to digital currencies. Digital currencies are included in long-term assets in the consolidated balance sheet.
Previous report
The Company determines the fair value of its digital currencies and other digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that it has determined is the principal market for Ethereum (Level 1 inputs) and other digital assets. The Company performs an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that its digital assets are impaired. In determining if an impairment has occurred, the Company considers the lowest market price quoted on an active exchange since acquiring the respective digital asset. If the then current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value. The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale, at which point they are presented net of any impairment losses for the same digital assets held. In determining the gain or loss to be recognized upon sale, the Company calculates the difference between the sales price and carrying value of the digital assets sold immediately prior to sale. Impairment losses and gains or losses on sales are recognized within operating expenses in the consolidated statements of operations. During the year ended December 31, 2022, the Company recorded an impairment loss of $119,276.
Previous report
Leases
Previous report
We applied ASC Topic 842, Leases (Topic 842) to arrangements with lease terms of 12 months or more. Operating lease right of use assets (“ROU”) represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the statements of operations.
Previous report
During the year ended December 31, 2022, we concluded that the undiscounted cash flows did not support the carrying values of its intangible assets as of December 31, 2022. We determined the value of the patents acquired were fully impaired as of December 31, 2022 and recognized an impairment loss on its long-lived intangible assets of $981,000.
Previous report
Net Loss
Previous report
The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, we had a net loss of $8,404,970 for the year ended December 31, 2023. Net cash used in operations was $6,529,277 for the year ended December 31, 2023. Additionally, as of December 31, 2023, we had an accumulated deficit of $48,134,088 and have generated minimal revenues since inception. As of December 31, 2023, we had working capital of $5,969,447, including cash of $953,362 and short-term investments of $5,236,781. These factors raise substantial doubt about our ability to continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. We are seeking to raise capital through additional debt and/or equity financings to fund our operations in the future. Although we have historically raised capital from sales of common shares, there is no assurance that it will be able to continue to do so. If we are unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Previous report
On January 16, 2024, we entered into an underwriting agreement (the “Underwriting Agreement”) with EF Hutton LLC (the “Representative”), as the representative of the underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “Offering”) of 382,972 shares of the Company’s common stock (the “Shares”) and pre-funded warrants to purchase up to 590,000 shares of Common Stock (the “Pre-Funded Warrants”). The public offering price for each share of Common Stock was $1.85 for aggregate gross proceeds of $708,498, and public offering price for the Pre-Funded Warrants was $1.8499 for each Pre-Funded Warrant for aggregate gross proceeds of $1,091,441. In connection with this Offering, we raised aggregate gross proceeds of $1,799,939 and received net proceeds of $1,437,940, net of Underwriters discounts and offering costs of $261,999 and legal fees of $100,000.
Previous report
Cash Flow Activities for the Years ended December 31, 2023 and 2022
Previous report
Net cash (used in) provided by financing activities totaled approximately $(398,284) and $1,112 for the years ended December 31, 2023 and 2022, respectively.
Previous report
During the year ended December 31, 2022, financing activities was primarily attributable to proceeds from related party advances of $20,294 offset by the repayment of related party advances of $19,182.
Reworded paragraphs (23)
Previous wording
We are a blockchain, cybersecurity, and social media company that not only focuses on protecting privacy on personal devices, but also protects user information after it is shared with others. We believe that one’s right to privacy should not end the moment they click “send”, and that we all deserve the same right to privacy online that we enjoy in our own living rooms. Our flagship product, DatChat Messenger & Private Social Network, is a privacy platform and mobile application that gives users the ability to communicate with the privacy and protection they deserve. Recently, we have expanded our business and product offerings to include the co-development of a mobile-based social and gaming metaverse, known as “Habytat”, as well as the development of Museum, an a social network and multi-media storage platform for consumers and enterprises.
Current wording
We are a private messaging, cybersecurity, and social media company that not only focuses on protecting privacy on personal devices, but also protects user information after it is shared with others. We believe that one’s right to privacy should not end the moment they click “send”, and that we all deserve the same right to privacy online that we enjoy in our own living rooms. Our flagship product, DatChat Messenger & Private Social Network, is a privacy platform and mobile application that gives users the ability to communicate with the privacy and protection they deserve. Recently, we have expanded our business and product offerings to include the development of our Myseum platform, a secure digital content management and storage solution for families, groups and individuals. In addition, as a result of our acquisition of RPM Interactive, Inc. in October 2024, we have repositioned our majority-owned subsidiary, Dragon Interact, Inc. (recently renamed RPM Interactive, Inc.) away from the development of the Habytat platform to focus on becoming an AI generated publishing company of trivia mobile game apps and vodcasts/podcasts designed to publish content across hundreds of evergreen topics every day and be distributed to all major streaming platforms. See “Business – RPM Interactive, Inc.” and “Business – The Habytat.”
Previous wording
Costs incurred to develop internal-use software including Metaverse software development, are expensed as incurred during the preliminary project stage. Internal-use software development costs are capitalized during the application development stage, which is after: (i) the preliminary project stage is completed; and (ii) management authorizes and commits to funding the project and it is probable the project will be completed and used to perform the function intended. Capitalization ceases at the point the software project is substantially complete and ready for its intended use, and after all substantial testing is completed. Upgrades and enhancements are capitalized if it is probable that those expenditures will result in additional functionality. Amortization is provided for on a straight-line basis over the expected useful life of the internal-use software development costs and related upgrades and enhancements. When existing software is replaced with new software, the unamortized costs of the old software are expensed when the new software is ready for its intended use. Software development costs incurred during the year ended December 31, 2023 and 2022 were expensed since the Metaverse software development project is in the preliminary project stage. Such costs are included in research and development costs on the accompanying consolidated statement of operations.
Current wording
We capitalize costs to develop or purchase internal-use software in accordance with ASC section 350-40,Intangibles — Goodwill and Other — Internal-Use Software. Costs incurred to develop internal-use software are expensed as incurred during the preliminary project stage. Internal-use software development costs are capitalized upon purchase and during the application development stage, which is after: (i) the preliminary project stage is completed; and (ii) management authorizes and commits to funding the project and it is probable the project will be completed and used to perform the intended function. Capitalization ceases at the point where the software project is substantially complete and ready for its intended use, and after all substantial testing is completed. Upgrades and enhancements are capitalized if it is probable that those expenditures will result in additional functionality. Amortization is provided for on a straight-line basis over the expected useful life of the internal-use software development costs and related upgrades and enhancements. When existing software is replaced with new software, the unamortized costs of the old software are expensed when the new software is ready for its intended use. Software development costs incurred during the year ended December 31, 2024 and 2023 were expensed since the Metaverse software development project is in the preliminary project stage. Such costs are included in research and development costs on the accompanying consolidated statement of operations.
Previous wording
Based on the Company’s analysis, on February 14, 2023, Metabizz, LLC, a Florida corporation, and Metabizz SAS, a company incorporated under the laws of Columbia (collectively “Metabizz”), were determined to be VIE entities in accordance withASC 810-10-25-22because the equity owners in Metabizz do not have the characteristics of a controlling financial interest and the initial equity investments in these entities may be or are insufficient to meet or sustain its operations without additional subordinated financial support from DatChat. The equity owners of Metabizz have only a nominal equity investment at risk, and the Company absorbs or receives a majority of the entity’s expected losses or benefits. The Company participates significantly in the design of Metabizz. The Company has provided working capital advances to Metabizz to allow Metabizz to fund its day to day obligations. Substantially all of the activities of Metabizz are conducted for the Company’s benefit, as evidenced by the fact that the operations of Metabizz consists of development of software and technologies to be used by SmarterVerse and the Company provides work capital to Metabizz to pay employees and independent contractors to perform the development services on behalf of the Company. Repayment of the working capital advances is not guaranteed by the equity owner of Metabizz and creditors of Metabizz do not have recourse against the Company. Accordingly, the Company is required to consolidate the assets, liabilities, revenues and expenses of Metabizz using the fair value method. Additionally, the managing partner of Metabizz is also the Chief Innovation Officer of SmarterVerse. Since Metabizz, LLC and Metabizz SAS are considered VIE’s, any noncontrolling interest eliminates in consolidation.
Current wording
Based on the Company’s analysis, on February 14, 2023, Metabizz, LLC, a Florida corporation, and Metabizz SAS, a company incorporated under the laws of Columbia (collectively “Metabizz”), were determined to be VIE entities in accordance withASC 810-10-25-22 because the equity owners in Metabizz did not have the characteristics of a controlling financial interest and the initial equity investments in these entities may be or were insufficient to meet or sustain its operations without additional subordinated financial support from DatChat. The equity owners of Metabizz had only a nominal equity investment at risk, and the Company absorbed or received a majority of the entity’s expected losses or benefits. The Company participated significantly in the design of Metabizz. The Company provided working capital advances to Metabizz to allow Metabizz to fund its day-to-day obligations. Substantially all of the activities of Metabizz were conducted for the Company’s benefit, as evidenced by the fact that the operations of Metabizz consisted of development of software and technologies to be used by RPM Interactive and the Company provided working capital to Metabizz to pay employees and independent contractors to perform the development services on behalf of the Company. Repayment of the working capital advances is not guaranteed by the equity owner of Metabizz and creditors of Metabizz do not have recourse against the Company. Accordingly, the Company was required to consolidate the assets, liabilities, revenues and expenses of Metabizz using the fair value method. Additionally, the managing partner of Metabizz was also the Chief Innovation Officer of RPM Interactive. Since Metabizz, LLC and Metabizz SAS were considered VIE’s, any noncontrolling interest eliminated in consolidation. In connection with the initial consolidation of Metabizz, on February 14, 2023 (the initial consolidation date), the Company recorded a gain on initial consolidation of variable interest entities of $42,737.
Previous wording
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange for an award of equity instruments over the period the employee, non-employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee, non-employee, and director services received in exchange for an award based on the grant-date fair value of the award.
Current wording
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange for an award of equity instruments over the period the employee, non-employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee, non-employee, and director services received in exchange for an award based on the grant-date fair value of the award. The fair value of each option granted is estimated as of the date of grant using the Black-Scholes-Merton option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. The Black-Scholes-Merton option-pricing model includes various assumptions, including the fair market value of our common stock, the expected life of stock options, the expected volatility, and the expected risk-free interest rate, among others. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside of our control. As a result, if other assumptions had been used, stock-based compensation expense, as determined in accordance with authoritative guidance, could have been materially impacted. Furthermore, if we use different assumptions on future grants, stock-based compensation expense could be materially affected in future periods.
Previous wording
During the years ended December 31, 2023 and 2022, we generated revenues of $672 and $46,214, respectively. For the year ended December 31, 2022, revenues consisted of subscription revenues of $9,820 and revenues from the sale of NFT’s of $36,394, as compared to $672 of revenues from subscriptions for the year ended December 31, 2023. We do not expect to generate any revenues from the sale of NFT’s in the near future.
Current wording
During the years ended December 31, 2024 and 2023, we generated revenues of $436 and $672, respectively, which consisted of subscription revenues.
Previous wording
For the year ended December 31, 2023, operating expenses amounted to $8,784,703 as compared to $12,272,939 for the year ended December 31 2022, a decrease of $3,488,236, or 28.4%. For the years ended December 31 2023 and 2022, operating expenses consisted of the following:
Current wording
For the year ended December 31, 2024, operating expenses amounted to $5,281,339 as compared to $8,784,703 for the year ended December 31 2023, a decrease of $3,503,364, or 39.9%. For the years ended December 31 2024 and 2023, operating expenses consisted of the following:
Previous wording
During the year ended December 31, 2023 and 2022, compensation and related expenses amounted to $4,760,180 and $6,551,776, respectively, a decrease of $1,791,596, or 27.3%. The decrease was attributable to a decrease in stock-based compensation of $1,170,624 and a decrease in other compensation and other related expenses of $620,972.
Current wording
During the year ended December 31, 2024 and 2023, compensation and related expenses amounted to $2,320,127 and $4,760,180, respectively, a decrease of $2,440,053, or 51.3%. The decrease was attributable to a decrease in stock-based compensation of $1,985,961 and a decrease in other compensation and other related expenses of $454,092 related to a reduction in staff.
Previous wording
During the years ended December 31, 2023 and 2022, marketing and advertising expenses amounted to $388,444 and $828,736, respectively, a decrease of $440,292, or 53.1%, primarily due to an overall decrease in promotions, branding and digital marketing strategies and social media ads.
Current wording
During the years ended December 31, 2024 and 2023, marketing and advertising expenses amounted to $128,656 and $388,444, respectively, a decrease of $259,788, or 67.0%, primarily due to an overall decrease in promotions, branding and digital marketing strategies and social media ads.
Previous wording
During the years ended December 31, 2023 and 2022, we reported professional and consulting expenses of $1,324,640 and $2,285,312, respectively, a decrease of $960,672, or 42.0%. The decrease is attributable to a decrease in consulting fees of $154,396 which includes a decrease in stock-based consulting fees of $96,431, a decrease in investor relations fees of $295,850, a decrease in legal fees of $224,180, and a decrease in recruiting fees of $322,000, offset be an increase in other professional fees of $35,754.
Current wording
During the years ended December 31, 2024 and 2023, we reported professional and consulting expenses of $1,031,898 and $1,324,640, respectively, a decrease of $292,742, or 22.1%. The decrease is attributable to a decrease in consulting fees of $96,202, which includes a decrease in stock-based consulting fees of $144,818, offset by an increase in other consulting fees of $48,616, a decrease in investor relations fees of $224,026, a decrease in legal fees of $27,195, and a decrease in other professional fees of $43,970, offset by an increase in accounting fees of $98,651.
Previous wording
During the years ended December 31, 2023 and 2022, we incurred $1,351,415 and $514,957 in research and development costs, an increase of $836,458, or 162.4%. Research and development costs were incurred in connection with our Metaverse software development project, including the development of Habytat which is in the preliminary stage.
Current wording
During the years ended December 31, 2024 and 2023, we incurred $857,668 and $1,351,415 in research and development costs, a decrease of $493,747, or 36.5%. Research and development costs were incurred in connection with our Metaverse software development project, including the development of Habytat which is in the preliminary stage. During the year ended December 31, 2024, we ceased development of our Metaverse software.
Previous wording
During the years ended December 31, 2023 and 2022, general and administrative expenses amounted to $892,972 and $991,882, a decrease of $98,910, or 10.0%. The decreases are primarily attributable to a decrease in conference fees and a decrease in other general and administrative expenses, offset by an increase in travel expense.
Current wording
During the years ended December 31, 2024 and 2023, general and administrative expenses amounted to $942,990 and $892,972, an increase of $50,018, or 5.6%. The increases are primarily attributable to an increase in computer and internet expenses of approximately $54,000.
Previous wording
During the year ended December 31, 2023, we wrote off the balance of property and equipment held by MetaBizz since the property and equipment was abandoned and no longer being used by the Company as of December 31, 2023. Accordingly, we recognized an impairment loss on property and equipment of $43,671.
Current wording
During the year ended December 31, 2023, we wrote off the balance of property and equipment held by MetaBizz since the property and equipment was abandoned and no longer being used by the Company as of December 31, 2023. Accordingly, we recognized an impairment loss on property and equipment of $43,671. We did not recognize any impairment loss on property and equipment during the year ended December 31, 2024.
Previous wording
During the years ended December 31, 2023 and 2022, operating expenses included an impairment charge related to the write down of digital assets of $23,381 and $119,276, respectively.
Current wording
During the year ended December 31, 2024 and 2023, operating expenses included an impairment charge related to the write down of digital assets of $0 and $23,381, respectively.
Previous wording
During the year ended December 31, 2023, loss from operation amounted to $8,784,031 as compared to $12,226,725 during the year ended December 31, 2022, a decrease of $3,442,694, or 28.2%.
Current wording
During the year ended December 31, 2024, loss from operation amounted to $5,280,903 as compared to $8,784,031 during the year ended December 31, 2023, a decrease of $3,503,128, or 39.9%.
Previous wording
Other income (expenses) primarily consisted of interest income, gain on initial consolidation of variable interest entities, and realized gain on short-term investments and unrealized gains or losses on short-term investments. During the years ended December 31, 2023 and 2022, we reported other income, net of $379,061 and $88,153, respectively. During the year ended December 31, 2023, other income, net primarily consisted of interest income of $9,281, gain on initial consolidation of variable interest entities of $42,737, and a realized gain on short-term investments of $327,145. During the year ended December 31, 2022, other income primarily consisted of interest income of $12,305, a realized gain on short-term investments of $28,176, and an unrealized gain on short-term investments of $47,672.
Current wording
During the year ended December 31, 2024, other income, net primarily consisted of interest income of $268,754, a gain on deconsolidation of variable interest entities of $107, and a foreign currency exchange loss of $12,965. During the year ended December 31, 2023, other income, net primarily consisted of interest income of $384,098, a gain on initial consolidation of variable interest entities of $42,737, a foreign currency exchange loss of $102, and a realized loss on short-term investments of $47,672.
Previous wording
Due to the foregoing reasons, during the years ended December 31, 2023 and 2022, our net loss was $8,404,970, or $(4.14) per common share (basic and diluted) and $12,138,572, or ($6.04) per common share (basic and diluted), respectively, a decrease of $3,733,602, or 30.8%.
Current wording
Due to the foregoing reasons, during the years ended December 31, 2024 and 2023, our net loss was $5,025,007 and $8,404,970, respectively, a decrease of $3,379,963, or 40.2%. During the year ended December 31, 2024 and 2023, we adjusted net loss for the net loss of subsidiary attributable to noncontrolling interest by $785,847 and $0, respectively Accordingly, during the years ended December 31, 2024 and 2023, our net loss attributable to common shareholders was $4,239,160, or $(1.43) per common share (basic and diluted) and $8,404,970, or $(4.14) per common share (basic and diluted), respectively, a decrease of $4,165,810, or 49.6%.
Previous wording
As of December 31, 2023, we had cash and cash equivalents of $953,362 and short-term investments of $5,236,781. Short-term investments include U.S. Treasury bills that are all highly rated and have initial maturities between four and twelve months.
Current wording
As of December 31, 2024, we had cash and cash equivalents of $1,196,699 and short-term investments of $2,952,512. Short-term investments include U.S. Treasury bills that are all highly rated and have initial maturities between four and twelve months.
Previous wording
Our primary uses of cash have been for compensation and related expenses, fees paid to third parties for professional services, marketing and advertising expenses, and general and administrative expenses. All funds received have been expended in the furtherance of growing the business. We received funds from the sale of our common stock and the exercise of warrants. The following trends are reasonably likely to result in changes in our liquidity over the near to long term:
Current wording
Our primary uses of cash have been for research and development, compensation and related expenses, fees paid to third parties for professional services, marketing and advertising expenses, and general and administrative expenses. All funds received have been expended in the furtherance of growing the business. We received funds from the sale of our common stock, sale of common stock in our subsidiary, RPM Interactive, and the exercise of warrants. The following trends are reasonably likely to result in changes in our liquidity over the near to long term:
Previous wording
Net cash used in operating activities totaled $6,529,277 and $7,258,765 for the years ended December 31, 2023, and 2022, respectively, a decrease of $729,488.
Current wording
Net cash used in operating activities totaled $4,388,385 and $6,529,277 for the years ended December 31, 2024 and 2023, respectively, a decrease of $2,140,892.
Previous wording
Net cash flow used in operating activities for the years ended December 31, 2022 primarily reflected a net loss of $12,138,572, adjusted s was adjusted for the add-back (reduction) of non-cash items consisting of stock-based compensation of $3,173,401, stock-based professional fees of $347,733, amortization or right of use assets of $49,783, depreciation and amortization of $127,501, impairment loss of intangible assets of $981,000, and impairment loss on digital currencies and other digital assets of $119,276, offset by realized and unrealized gains on short-term investments of $75,848, and non-cash revenues from the sale of NFT’s of $36,394, and operating asset and liability changes of $179,616, primarily due to a decrease in prepaid expenses of $242,221 and accounts payable and accrued expenses of $61.
Current wording
Net cash flow used in operating activities for the year ended December 31, 2024 primarily reflected a net loss of $5,025,007, adjusted for the add-back (reduction) of non-cash items consisting of depreciation and amortization of $23,129, amortization of right of use assets of $73,977, accretion of stock-based stock option and common stock expense of $123,300, a non-cash gain from deconsolidation of variable interest entities of $(107), foreign currency exchange loss of $12,965, and non-cash research and development expense of $166,667, offset by changes in operating assets and liabilities primarily consisting of an increase in prepaid expenses of $9,649, an increase in accounts payable and accrued expenses of $307,568, and a decrease in operating lease liabilities of $83,674.
Previous wording
Net cash flow used in operating activities for the year ended December 31, 2023 primarily reflected a net loss of $8,404,970 adjusted for the add-back (reduction) of non-cash items consisting of depreciation and amortization of $28,943, amortization of right of use assets of $60,549, accretion of stock-based stock option and common stock expense of $2,254,079, a non-cash gain from initial consolidation of variable interest entities of $(42,737), impairment loss on digital assets of $23,381, impairment of property and equipment of $43,671, and net realized gain on short-term investments of $327,145, offset by changes in operating assets and liabilities primarily consisting of a decrease in prepaid expenses of $5,797, a decrease in accounts payable and accrued expenses of $103,639, and a decrease in operating lease liabilities of $67,339.
Current wording
Net cash flow used in operating activities for the year ended December 31, 2023 primarily reflected a net loss of $8,404,970 adjusted for the add-back (reduction) of non-cash items consisting of depreciation and amortization of $28,943, amortization of right of use assets of $60,549, accretion of stock-based stock option and common stock expense of $2,254,079, a non-cash gain from initial consolidation of variable interest entities of $(42,737), impairment loss on digital assets of $23,381, impairment of property and equipment of $43,671, and net realized gain on short-term investments of $327,145, offset by changes in operating assets and liabilities primarily consisting of a decrease in prepaid expenses of $5,797, a decrease in accounts payable and accrued expenses of $103,741, and a decrease in operating lease liabilities of $67,339.
Previous wording
Net cash provided by (used in) investing activities amounted to $6,160,932 and $(11,209,126) for the years ended December 31, 2023 and 2022, respectively.
Current wording
Net cash provided by investing activities amounted to $2,236,751 and $6,160,932 for the years ended December 31, 2024 and 2023, respectively, a decrease of $3,924,181.
Previous wording
During the year ended December 31, 2022, we purchased property and equipment of $44,475, purchased digital currencies and other digital assets of $233,245, and we purchased short-term investments of $20,842,149, and received gross proceeds from the sale of short-term investments of $9,910,000.
Current wording
During the years ended December 31, 2024, we purchased short-term investments of $10,767,288 and received gross proceeds from the sale of short-term investments of $13,004,039.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Other income (expenses) primarily consisted of interest income, gain on initial consolidation of variable interest entities, a forerign curreny exchange loss, a gain on deconsolidation of variable interest entities, and realized gains on short-term investments. During the years ended December 31, 2024 and 2023, we reported other income, net of $255,896 and $379,061, respectively.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In connection with the initial consolidation of Metabizz, on February 14, 2023 (the initial consolidation date), the Company recorded a gain on initial consolidation of variable interest entities of $42,737.