DatChat Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
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-Q
Period ended 2024-03-31; filed 2024-05-14.
0001213900-24-042992
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001213900-24-069051
Item 2. 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 91 previous paragraphs and 97 current paragraphs.
52 unchanged; 34 reworded; 9 added; 5 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 4 previous and 5 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 (9)
Current report
On August 7, 2024, Dragon filed a Certificate of Amendment with the State of Nevada to change its name from “Dragon Interactive Corporation” to “Dragon Interact, Inc”.
Current report
During the six months ended June 30, 2024 and 2023, we reported professional and consulting expenses of $503,899 and $577,077, respectively, a decrease of $73,178, or 12.7%. The decrease was primarily attributable to a decrease in investor relations of $44,646, a decrease in legal fees of $28,835, a decrease in stock-based consulting fees of $12,283, and a decrease other professional fees of $2,476, offset by an increase in other consulting fees of $9,954, and an increase in accounting fees of $5,108.
Current report
During the three months ended June 30, 2024 and 2023, general and administrative expenses amounted to $235,443 and $241,679, a decrease of $6,236, or 2.6%. The decrease was primarily attributable to a decrease in travel expenses of $11,108, a decrease of public company fees of $5,796, and a decrease in other general and administrative expenses of $3,557, offset by an increase in internet and computer expenses of $14,225.
Current report
On April 3, 2024, Dragon entered into a Securities Purchase Agreement with an institutional and accredited investor, pursuant to which Dragon agreed to sell an aggregate of 120,000 shares of Dragon’s common stock, par value $0.0001 per share for an aggregate purchase price of $36,000. Following the sale, the Company retained approximately 71.4% ownership of Dragon.
Current report
On May 31, 2024, Dragon entered into a Securities Purchase Agreement with an institutional and accredited investor, pursuant to which Dragon agreed to sell an aggregate of 666,660 shares of Dragon’s common stock, par value $0.0001 per share for an aggregate purchase price of $199,998. Following the sale, the Company retains approximately 70.0% ownership of Dragon.
Current report
JOBS Act
Current report
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
Current report
We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.
Current report
Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our initial public offering, which would be December 31, 2024; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Removed paragraphs (5)
Previous report
As of May 12, 2024, we had over 140,000 Habytat users.
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.
Reworded paragraphs (34)
Previous wording
In June 2022, we formed a wholly owned subsidiary, Dragon Interactive, Inc. (formerly, SmarterVerse, Inc.) (“Dragon Interactive”). 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.
Current wording
In June 2022, we formed a majority owned subsidiary, Dragon Interact, Inc. (formerly, SmarterVerse, Inc.) (“Dragon “). 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 wording
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.
Current wording
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 half of 2024 and will encompass features and social networking technology designed to unlock and share digital media.
Previous wording
In January 2024, we announced plans to spin-off the Habytat platform business into a new standalone public company pursuant to a distribution the Dragon Interactive shares as further discussed below. As of the date of this Quarterly Report, we currently own approximately 71.4% 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.
Current wording
In January 2024, we announced plans to spin-off the Habytat platform business into a new standalone public company pursuant to a distribution of the Dragon shares as further discussed below. As of the date of this Quarterly Report, we currently own approximately 70.0% of Dragon, 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 wording
In February 2024, SmarterVerse changed its name to Dragon Interactive Corporation (“Dragon Interactive”).
Current wording
In February 2024, Dragon changes its name from “SmarterVerse, Inc.” name to “Dragon Interactive Corporation”.
Previous wording
In February 2024, Darin Myman was appointed as President of Dragon Interactive.
Current wording
In February 2024, Darin Myman was appointed as President of Dragon.
Previous wording
If the share 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 share 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 to list 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.
Current wording
If the share distribution proceeds, it is currently contemplated that our shareholders will maintain their current shares in the Company and receive a pro-rata distribution of a portion of our shares of Dragon. The proposed share 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 would become a standalone public company with plans to list 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 wording
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 $1.4 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.** **
Current wording
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 net proceeds of approximately $1.4 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, which closed on January 16, 2024.** **
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 three months ended March 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.
Current 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 six months ended June 30, 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 810-10-25-22 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 Dragon 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 Dragon 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.
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 Dragon 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 Dragon. 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
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 three months ended March 31, 2024, the Company recorded a gain on deconsolidation of $107.
Current wording
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 six months ended June 30, 2024, the Company recorded a gain on deconsolidation of $107.
Previous wording
During the three months ended March 31, 2024 and 2023, we generated minimal revenues of $131 and $154, respectively.
Current wording
During the three months ended June 30, 2024 and 2023, we generated minimal revenues of $151 and $172, respectively. During the six months ended June 30, 2024 and 2023, we generated minimal revenues of $282 and $326, respectively.
Previous wording
For the three months ended March 31, 2024, operating expenses amounted to $1,663,550 as compared to $2,422,671 for the three months ended March 31 2023, a decrease of $759,121, or 31.3%. For the three months ended March 31, 2024 and 2023, operating expenses consisted of the following:
Current wording
For the three months ended June 30, 2024, operating expenses amounted to $1,267,254 as compared to $2,326,931 for the three months ended June 30, 2023, a decrease of $1,059,677, or 45.5%. For the six months ended June 30, 2024, operating expenses amounted to $2,930,804 as compared to $4,749,602 for the six months ended June 30 2023, a decrease of $1,818,798, or 38.3%. For the three and six months ended June 30, 2024 and 2023, operating expenses consisted of the following:
Previous wording
During the three months ended March 31, 2024 and 2023, compensation and related expenses amounted to $897,664 and $1,549,692, respectively, a decrease of $652,028, or 42.1%. The decrease was attributable to a decrease in stock-based compensation of $596,583 and an overall decrease in compensation and other related expenses of $55,445.
Current wording
During the three months ended June 30, 2024 and 2023, compensation and related expenses amounted to $522,596 and $1,380,038, respectively, a decrease of $857,442, or 62.1%. The decrease was attributable to a decrease in stock-based compensation of $746,806 and an overall decrease in compensation and other related expenses of $110,636.
Previous wording
During the three months ended March 31, 2024 and 2023, marketing and advertising expenses amounted to $34,717 and $113,803, respectively, a decrease of $79,086, or 69.5%, primarily due to an overall decrease in promotions, branding and digital marketing strategies and social media ads.
Current wording
During the three months ended June 30, 2024 and 2023, marketing and advertising expenses amounted to $32,883 and $46,599, respectively, a decrease of $13,716, or 29.4%. During the six months ended June 30, 2024 and 2023, marketing and advertising expenses amounted to $67,600 and $160,402, respectively, a decrease of $92,808, or 57.9%. The decrease was primarily due to an overall decrease in promotions, branding and digital marketing strategies and social media ads.
Previous wording
During the three months ended March 31, 2024 and 2023, we reported professional and consulting expenses of $253,625 and $255,920, respectively, a decrease of $2,295, or 0.9%. The decrease is attributable to a decrease in consulting fees of $1,343, a decrease in accounting fees of $1,099, and a decrease in investor relations fees of $9,805, offset by an increase in legal fees of $9,918, and an increase in other professional fees of $34.
Current wording
During the three months ended June 30, 2024 and 2023, we reported professional and consulting expenses of $250,274 and $321,157, respectively, a decrease of $70,883, or 22.1%. The decrease was primarily attributable to a decrease in legal fees of $38,753, a decrease in investor relations of $34,840, a decrease in stock-based consulting fees of $28,727, and a decrease other professional fees of $2,511, offset by an increase in other consulting fees of $27,742, and an increase in accounting fees of $6,207.
Previous wording
During the three months ended March 31, 2024 and 2023, we incurred $233,918 and $282,773 in research and development expenses, a decrease of $48,855, or 17.3%. 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 three months ended June 30, 2024 and 2023, we incurred $226,058 and $337,458 in research and development expenses, a decrease of $111,400, or 33.0%. During the six months ended June 30, 2024 and 2023, we incurred $459,976 and $620,231 in research and development expenses, a decrease of $160,255, or 25.8%. 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.
Previous wording
During the three months ended March 31, 2024 and 2023, general and administrative expenses amounted to $243,626 and $197,102, an increase of $46,524, or 23.6%. The increases are primarily attributable to an increase in proxy meeting expenses of $28,465, an increase in computer expenses of $16,709, and an increase in other general and administrative expenses of $26,058, offset by an decrease in travel expense of $24,708.
Current wording
During the six months ended June 30, 2024 and 2023, general and administrative expenses amounted to $479,069 and $438,781, an increase of $40,288, or 9.2%. The increases are primarily attributable to an increase in internet and computer expenses of $62,219, and an increase in proxy meeting expense of $28,465, offset by a decrease in travel expense of $43,100 and a decrease in other general and administrative expenses of $7,296.
Previous wording
During the three months ended March 31, 2024 and 2023, operating expenses included an impairment charge related to the write down of digital assets of $0 and $23,381, respectively.
Current wording
During the three months ended June 30, 2024 and 2023, operating expenses included an impairment charge related to the write down of digital assets of $0. During the six months ended June 30, 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 three months ended March 31, 2024, loss from operation amounted to $1,663,419 as compared to $2,422,517 during the three months ended March 31, 2023, a decrease of $759,098, or 31.3%.
Current wording
During the three months ended June 30, 2024, loss from operation amounted to $1,267,103 as compared to $2,326,759 during the three months ended June 30, 2023, a decrease of $1,059,656, or 45.5%. During the six months ended June 30, 2024, loss from operation amounted to $2,930,522 as compared to $4,749,276 during the six months ended June 30, 2023, a decrease of $1,818,754, or 38.3%.
Previous wording
Other income (expenses) primarily consisted of interest income, gain on initial consolidation of variable interest entities, gain on deconsolidation of variable interest entities, foreign currency exchange loss, and unrealized gains or losses on short-term investments. During the three months ended March 31, 2024 and 2023, we reported other income, net of $101,612 and $23,303, respectively.
Current wording
Other income (expenses) primarily consisted of interest income, gain on initial consolidation of variable interest entities, gain on deconsolidation of variable interest entities, foreign currency exchange loss, and realized gains or losses on short-term investments. During the three months ended June 30, 2024 and 2023, we reported other income, net of $62,995 and $39,529, respectively. During the six months ended June 30, 2024 and 2023, we reported other income, net of $164,607 and $62,832, respectively.
Previous wording
During the three months ended March 31, 2024, other income, net primarily consisted of interest income of $114,470, a gain on deconsolidation of variable interest entities of $107, and a foreign currency exchange loss of $12,965. During the three months ended March 31, 2023, other income, net primarily consisted of interest income of $28,238, a gain on initial consolidation of variable interest entities of $42,737, and a realized loss on short-term investments of $47,672.
Current wording
During the six months ended June 30, 2024, other income, net primarily consisted of interest income of $177,465, a gain on deconsolidation of variable interest entities of $107, and a foreign currency exchange loss of $12,965. During the six months ended June 30, 2023, other income, net primarily consisted of interest income of $67,833, a gain on initial consolidation of variable interest entities of $42,737, a foreign currency exchange loss of $66, and a realized loss on short-term investments of $47,672.
Previous wording
Due to the foregoing reasons, during the three months ended March 31, 2024 and 2023, our net loss was $1,561,807, or $(0.56) per common share (basic and diluted) and $2,399,214, or ($1.16) per common share (basic and diluted), respectively, a decrease of $837,407, or 34.9%.
Current wording
Due to the foregoing reasons, during the three months ended June 30, 2024 and 2023, our net loss was $1,204,108, or $(0.33) per common share (basic and diluted) and $2,287,230, or ($1.10) per common share (basic and diluted), respectively, a decrease of $1,083,122, or 47.4%. During the six months ended June 30, 2024 and 2023, our net loss was $2,765,915, or $(0.73) per common share (basic and diluted) and $4,686,444, or ($2.27) per common share (basic and diluted), respectively, a decrease of $1,920,529, or 41.0%.
Previous wording
As of March 31, 2024, we had cash and cash equivalents of $249,983 and short-term investments of $5,836,175. Short-term investments include U.S. Treasury zero coupon bills that are all highly rated and have initial maturities between four and twelve months.
Current wording
As of June 30, 2024, we had cash and cash equivalents of $587,518 and short-term investments of $4,661,494. Short-term investments include U.S. Treasury zero coupon bills that are all highly rated and have initial maturities between four and twelve months.
Previous wording
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 $1,561,807 for the three months ended March 31, 2024. Net cash used in operations was $1,477,240 for the three months ended March 31, 2024. Additionally, as of March 31, 2024, we had an accumulated deficit of $49,271,900 and have generated minimal revenues since inception. As of March 31, 2024, we had working capital of $5,867,979, including cash of $249,983 and short-term investments of $5,836,175. 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.
Current wording
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 unaudited consolidated financial statements, we had a net loss of $2,765,915 for the six months ended June 30, 2024. Net cash used in operations was $2,550,384 for the six months ended June 30, 2024. Additionally, as of June 30, 2024, we had an accumulated deficit of $50,255,147 and have generated minimal revenues since inception. As of June 30, 2024, we had working capital of $4,949,028, including cash of $587,518 and short-term investments of $4,661,494. 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 unaudited 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 wording
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 $1,420,773, net of Underwriters discounts and offering costs of $279,166 and legal fees of $100,000.
Current wording
On January 16, 2024, we entered into an underwriting agreement with EF Hutton LLC, 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 $1,420,773, net of Underwriters discounts and offering costs of $279,166 and legal fees of $100,000.
Previous wording
Net cash used in operating activities totaled $1,477,240 and $1,759,562 for the three months ended March 31, 2024, and 2023, respectively, a decrease of $282,322.
Current wording
Net cash used in operating activities totaled $2,550,384 and $3,180,118 for the six months ended June 30, 2024, and 2023, respectively, a decrease of $629,734.
Previous wording
Net cash flow used in operating activities for the three months ended March 31, 2024 primarily reflected a net loss of $1,561,807 adjusted for the add-back (reduction) of non-cash items consisting of depreciation and amortization of $5,782, amortization of right of use assets of $17,123, accretion of stock-based stock option and common stock expense of $59,018, a non-cash gain from deconsolidation of variable interest entities of $(107), and foreign currency exchange loss of $12,965, offset by changes in operating assets and liabilities primarily consisting of an increase in prepaid expenses of $52,659, an increase in accounts payable and accrued expenses of $61,794, and a decrease in operating lease liabilities of $19,376.
Current wording
Net cash flow used in operating activities for the six months ended June 30, 2024 primarily reflected a net loss of $2,765,915 adjusted for the add-back (reduction) of non-cash items consisting of depreciation and amortization of $11,565, amortization of right of use assets of $35,131, accretion of stock-based stock option and common stock expense of $116,698, a non-cash gain from deconsolidation of variable interest entities of $(107), and foreign currency exchange loss of $12,965, offset by changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of $9, a decrease in prepaid expenses of $40,207, an increase in accounts payable and accrued expenses of $38,693, an increase in contract liabilities of $25, and a decrease in operating lease liabilities of $39,637.
Previous wording
Net cash flow used in operating activities for the three months ended March 31, 2023 primarily reflected a net loss of $2,399,214 adjusted for the add-back (reduction) of non-cash items consisting of depreciation of $5,782, amortization of right of use assets of $14,036, accretion of stock-based stock option and common stock expense of $639,156, a non-cash gain from initial consolidation of variable interest entities of $(42,737), and net unrealized and realized loss on short-term investments of $24,795, offset by changes in operating assets and liabilities primarily consisting of a decrease in accounts payable – related party of $21,801, an increase in prepaid expenses of $33,271, an increase in accounts payable and accrued expenses of $45,948, and a decrease in operating lease liabilities of $15,548.
Current wording
Net cash flow used in operating activities for the six months ended June 30, 2023 primarily reflected a net loss of $4,686,444 adjusted for the add-back (reduction) of non-cash items consisting of depreciation of $12,941, amortization of right of use assets of $28,782, accretion of stock-based stock option and common stock expense of $1,474,369, a non-cash gain from initial consolidation of variable interest entities of $(42,737), impairment loss on digital assets of $23,381, and net unrealized and realized gain on short-term investments of $78,110, offset by changes in operating assets and liabilities primarily consisting of a decrease in accounts receivable of $277, a decrease in accounts receivable – related party of $42,000, a decrease in prepaid expenses of $53,612, an increase in accounts payable and accrued expenses of $23,699, a decrease in contract liabilities of $81, and a decrease in operating lease liabilities of $31,807.
Previous wording
Net cash (used in) provided by investing activities amounted to $(648,447) and $1,095,466 for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Net cash provided by investing activities amounted to $527,769 and $2,913,281 for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
During the three months ended March 31, 2024, we purchased short-term investments of $3,337,115 and received gross proceeds from the sale of short-term investments of $2,688,668.
Current wording
During the six months ended June 30, 2024, we received gross proceeds from the sale of short-term investments of $6,121,770 and purchased short-term investments of $5,594,001.
Previous wording
During the three months ended March 31, 2023, we purchased short-term investments of $964,072 and received gross proceeds from the sale of short-term investments of $1,995,000. Additionally, we received $64,538 in cash upon initial consolidation of variable interest entities.
Current wording
During the six months ended June 30, 2023, we received gross proceeds from the sale of short-term investments of $3,845,000 and purchased short-term investments of $964,072. Additionally, we received $64,538 in cash upon initial consolidation of variable interest entities and purchased property and equipment of $32,185.
Previous wording
Net cash provided by (used in) financing activities totaled approximately $1,420,773 and $(312,489) for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Net cash provided by (used in) financing activities totaled approximately $1,656,771 and $(399,284) for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
During the three months ended March 31, 2024, we received $559,251 from the sale of common stock, net, and received $861,522 from the sale of pre-funded warrants.
Current wording
During the six months ended June 30, 2024, we received $559,251 from the sale of common stock, net, received $235,998 from the sale of subsidiary common stock, net, and received $861,522 from the sale of pre-funded warrants.
Previous wording
During the three months ended March 31, 2023, we repaid related party advances of $1,315 and we used cash of $311,174 to purchase treasury stock.
Current wording
During the six months ended June 30, 2023, we repaid related party advances of $1,315 and we used cash of $397,969 to purchase treasury stock.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
During the six months ended June 30, 2024 and 2023, compensation and related expenses amounted to $1,420,260 and $2,929,730, respectively, a decrease of $1,509,470, or 51.5%. The decrease was attributable to a decrease in stock-based compensation of $1,345,389 and an overall decrease in compensation and other related expenses of $164,081.
Current report — wording carried from elsewhere
During the three months ended June 30, 2024, other income, net solely consisted of interest income of $62,995. During the three months ended June 30, 2023, other income, net primarily consisted of interest income of $39,595 and a foreign currency exchange loss of $66.