Myseum, Inc.

Previous 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 the 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. During the three months ending March 31, 2025, we capitalized certain software development costs incurred amounting to $72,625 since the Company’s software development projects were in the application development stage. During the three months ending March 31, 2024, software development costs incurred internally, other than purchased software, were expensed since the Company’s software development projects were in the preliminary project stage. Such costs were included in research and development costs on the accompanying unaudited consolidated statement of operations and comprehensive loss.

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 the 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. During the six months ending June 30, 2025, we capitalized certain software development costs incurred amounting to $174,641 since the Company’s software development projects were in the application development stage. During the six months ending June 30, 2024, software development costs incurred internally, other than purchased software, were expensed since the Company’s software development projects were in the preliminary project stage. Such costs were included in research and development costs on the accompanying unaudited consolidated statement of operations and comprehensive loss.

Previous wording

The Company accounts for its 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 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. Due to the issuance of common shares by RPM Interactive, during the three months ended March 31, 2025, the Company recorded aggregate initial negative noncontrolling interest of $188,810 in total equity for the portion of additional equity ownership not attributable to the Company based on the minority interest holders’ ownership interest in the carrying value of RPM Interactive’s equity. The Company allocated $145,914 of the net loss of the subsidiary to noncontrolling interest during the three months ended March 31, 2025. As a result of changes in RPM Interactive outstanding common stock and the Company’s share of losses of subsidiary since January 2024, aggregate noncontrolling interest deficit amounted to $2,472,513 as of March 31, 2025.

Current wording

The Company accounts for its 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 in total equity for the portion of equity ownership not attributable to Myseum based on the minority interest holders’ ownership interest in the carrying value of RPM Interactive’s equity. Due to the issuance of common shares by RPM Interactive, during the six months ended June 30, 2025, the Company recorded aggregate initial negative noncontrolling interest of $181,530 in total equity for the portion of additional equity ownership not attributable to the Company based on the minority interest holders’ ownership interest in the carrying value of RPM Interactive’s equity. The Company allocated $286,231 of the net loss of the subsidiary to noncontrolling interest during the six months ended June 30, 2025. As a result of changes in RPM Interactive outstanding common stock and the Company’s share of losses of subsidiary since January 2024, aggregate noncontrolling interest deficit amounted to $2,605,550 as of June 30, 2025.

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 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.

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 Myseum. 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

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, 2025 and 2024, we generated minimal revenues of $83 and $131, respectively, which consisted of subscription revenues.

Current wording

During the three months ended June 30, 2025 and 2024, we generated minimal revenues of $78 and $151, respectively. During the six months ended June 30, 2025 and 2024, we generated minimal revenues of $161 and $282, respectively. Revenue consisted of subscription revenues.

Previous wording

For the three months ended March 31, 2025, operating expenses amounted to $1,660,529 as compared to $1,663,550 for the three months ended March 31, 2024, a decrease of $3,021, or 0.2%. For the three months ended March 31, 2025 and 2024, operating expenses consisted of the following:

Current wording

For the three months ended June 30, 2025, operating expenses amounted to $1,406,906 as compared to $1,267,254 for the three months ended June 30, 2024, an increase of $139,652, or 11.0%. For the six months ended June 30, 2025, operating expenses amounted to $3,067,435 as compared to $2,930,804 for the six months ended June 30, 2024, an increase of $136,631, or 4.7%. For the three and six months ended June 30, 2025 and 2024, operating expenses consisted of the following:

Previous wording

During the three months ended March 31, 2025 and 2024, compensation and related expenses amounted to $967,280 and $897,664, respectively, an increase of $69,616, or 7.8%. The increase was attributable to an increase in executive bonus of $350,000, and an increase in stock-based compensation of $148,359 due to the issuance of new stock options, offset by an overall decrease in compensation and other related expenses of $428,743 due to a reduction in staff.

Current wording

During the three months ended June 30, 2025 and 2024, compensation and related expenses amounted to $679,107 and $522,596, respectively, an increase of $156,511, or 29.9%. The increase was attributable to an increase in stock-based compensation of $153,771 due to the issuance of new stock options and an overall increase in compensation and other related expenses of $2,740.

Previous wording

During the three months ended March 31, 2025 and 2024, marketing and advertising expenses amounted to $38,262 and $34,717, respectively, an increase of $3,545, or 10.2%. The increase was primarily due to an increase in promotions, branding and digital marketing strategies and social media ads.

Current wording

During the three months ended June 30, 2025 and 2024, marketing and advertising expenses amounted to $72,241 and $32,883, respectively, an increase of $39,358, or 119.7%. During the six months ended June 30, 2025 and 2024, marketing and advertising expenses amounted to $110,503 and $67,600, respectively, an increase of $42,903, or 63.5%. The increase was primarily due to an increase in promotions, branding and digital marketing strategies and social media ads.

Previous wording

During the three months ended March 31, 2025 and 2024, we reported professional and consulting expenses of $455,484 and $253,625, respectively, an increase of $201,859, or 79.6%. The increase was primarily attributable to an increase in investor relations of $77,500, an increase in legal fees of $73,410, an increase in accounting fees of $40,137, an increase in consulting fees – related party of $18,000, and an increase of other professional fees of $1,485, offset by a decrease in aggregate consulting fees of $8,673, which includes a decrease in stock-based consulting fees of $52,323 and an increase in other consulting fees of $43,650.

Current wording

During the six months ended June 30, 2025 and 2024, we reported professional and consulting expenses of $866,380 and $503,899, respectively, an increase of $362,481, or 71.9%. The increase was primarily attributable to an increase in investor relations of $210,303, an increase in accounting fees of $96,574, an increase in legal fees of $91,196, an increase in other consulting fees of $29,908, an increase in Edgar agents fees of $21,745, and an increase in consulting fees – related party of $18,000, offset by a decrease in stock-based consulting fees of $105,162, and a decrease in other professional fees of $83.

Previous wording

During the three months ended March 31, 2025 and 2024, we incurred $6,000 and $233,918 in research and development expenses, a decrease of $227,918, or 97.4%. 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. As of March 31, 2025, we ceased development of our Metaverse software.

Current wording

During the three months ended June 30, 2025 and 2024, we incurred $5,000 and $226,058 in research and development expenses, a decrease of $221,058, or 97.8%. During the six months ended June 30, 2025 and 2024, we incurred $11,000 and $459,976 in research and development expenses, a decrease of $448,976, or 97.6%. Research and development costs were incurred in connection with our Metaverse software development project, including the development of Habytat which was in the preliminary stage. As of June 30, 2025, we ceased development of our Metaverse software.

Previous wording

During the three months ended March 31, 2025 and 2024, general and administrative expenses amounted to $193,503 and $243,626, a decrease of $50,123, or 20.6%. The decrease was primarily attributable to a decrease in computer and internet expenses of $26,517, a decrease in proxy meeting expenses of $19,288, and a decrease in other general and administrative expenses of $4,318.

Current wording

During the six months ended June 30, 2025 and 2024, general and administrative expenses amounted to $433,165 and $479,069, a decrease of $45,904, or 9.6%. The decrease was primarily attributable to a decrease in computer and internet expenses of $14,141, a decrease in proxy meeting expenses of $9,288, and a decrease in other general and administrative expenses of $22,475.

Previous wording

Other income (expenses) primarily consisted of interest income, gain on deconsolidation of variable interest entities, and foreign currency exchange loss. During the three months ended March 31, 2025 and 2024, we reported other income, net of $41,336 and $101,612, respectively.

Current wording

Other income (expenses) primarily consisted of interest income, gain on deconsolidation of variable interest entities, and foreign currency exchange loss. During the three months ended June 30, 2025 and 2024, we reported other income, net of $49,639 and $62,995, respectively, which solely consisted of interest income. During the six months ended June 30, 2025 and 2024, we reported other income, net of $90,975 and $164,607, respectively.

Previous wording

During the three months ended March 31, 2025, other income, net solely consisted of interest income of $41,336. During the three months ended March 31, 2024, other income, net primarily consisted of interest income of $114,470, gain on deconsolidation of variable interest entities of $107, and a foreign currency exchange loss of $12,965.

Current wording

During the six months ended June 30, 2025, other income, net solely consisted of interest income of $90,975. During the six months ended June 30, 2024, other income, net primarily consisted of interest income of $177,465, gain on deconsolidation of variable interest entities of $107, and a foreign currency exchange loss of $12,965.

Previous wording

Due to the foregoing reasons, during the three months ended March 31, 2025 and 2024, our net loss was $1,619,110 and $1,561,807, respectively, an increase of $57,303, or 3.7%. During the three months ended March 31, 2025 and 2024, after adjusting net loss for the net loss of subsidiary attributable to noncontrolling interest of $145,914 and $423,995, respectively, net loss attributable to common shareholders of was $1,473,196, or ($0.36) per common share (basic and diluted) and $1,137,812, or ($0.41) per common share (basic and diluted), respectively, an increase of $335,384, or 29.5%.

Current wording

Due to the foregoing reasons, during the three months ended June 30, 2025 and 2024, our net loss was $1,357,189 and $1,204,108, respectively, an increase of $153,081, or 12.7%. During the three months ended June 30, 2025 and 2024, after adjusting net loss for the net loss of subsidiary attributable to noncontrolling interest of $140,317 and $220,861, respectively, net loss attributable to common shareholders of was $1,216,872, or ($0.29) per common share (basic and diluted) and $983,247, or ($0.33) per common share (basic and diluted), respectively, an increase of $233,625, or 23.8%.

Previous wording

The accompanying unaudited 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 March 31, 2025, we had cash and cash equivalents of $1,265,478, short-term investments of $5,785,219, and working capital of $6,506,071. Short-term investments include U.S. Treasury zero coupon bills that are all highly rated and have initial maturities between four and twelve months. 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 $4,532,000. Net cash used in operations was $1,405,389 for the three months ended March 31, 2025. 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 wording

The accompanying unaudited 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 June 30, 2025, we had cash and cash equivalents of $407,888, short-term investments of $5,306,701, and working capital of $5,142,897. Short-term investments include U.S. Treasury zero coupon bills that are all highly rated and have initial maturities between two and twelve months. 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 $4,532,000. Net cash used in operations was $2,610,978 for the six months ended June 30, 2025. 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.

Previous wording

Cash Flow Activities for the Three Months ended March 31, 2025 and 2024

Current wording

Cash Flow Activities for the Six Months ended June 30, 2025 and 2024

Previous wording

Net cash used in operating activities totaled $1,405,389 and $1,477,240 for the three months ended March 31, 2025 and 2024, respectively, a decrease of $71,851.

Current wording

Net cash used in operating activities totaled $2,610,978 and $2,550,384 for the six months ended June 30, 2025 and 2024, respectively, an increase of $60,594.

Previous wording

Net cash flow used in operating activities for the three months ended March 31, 2025 primarily reflected a net loss of $1,619,110 adjusted for the add-back of non-cash items consisting of depreciation and amortization of $5,541, and accretion of stock-based stock option and common stock expense of $155,054, offset by changes in operating assets and liabilities primarily consisting of an increase in prepaid expenses of $15,959, and an increase in accounts payable and accrued expenses of $69,092.

Current wording

Net cash flow used in operating activities for the six months ended June 30, 2025 primarily reflected a net loss of $2,976,299 adjusted for the add-back of non-cash items consisting of depreciation and amortization of $11,209, amortization of right of use assets of $10,318, and accretion of stock-based stock option and common stock expense of $313,666, offset by changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of $13, a decrease in prepaid expenses of $66,258, a decrease in accounts payable and accrued expenses of $32,572, an increase in contract liabilities of $17, and a decrease in operating lease liabilities of $3,562.

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 used by investing activities amounted to $2,905,332 and $648,447 for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Net cash provided by (used in) investing activities amounted to $(2,533,305) and $527,769 for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

During the three months ended March 31, 2025, we purchased short-term investments of $4,314,310 and received gross proceeds from the sale of short-term investments of $1,481,603. Additionally, we capitalized internal-use software of $72,625.

Current wording

During the six months ended June 30, 2025, we received gross proceeds from the sale of short-term investments of $2,963,546 and purchased short-term investments of $5,317,735. Additionally, we purchased property and equipment of $4,475 and capitalized internal-use software of $174,641.

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 purchased short-term investments of $5,594,001.

Previous wording

Net cash provided by financing activities totaled $4,379,500 and $1,420,773 for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Net cash provided by financing activities totaled 4,355,472 and $1,656,771 for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

During the three months ended March 31, 2025, we received $4,532,000 from the sale of common stock, net, and paid deferred offering costs of $152,500.

Current wording

During the six months ended June 30, 2025, we received $4,532,000 from the sale of common stock, net, and paid deferred offering costs of $176,528.

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.