What changed in Myseum, Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of Myseum, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+201 added−182 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)
Top changes in Myseum, Inc.'s 2023 10-K
201 paragraphs added · 182 removed · 125 edited across 6 sections
- Item 7. Management's Discussion & Analysis+82 / −74 · 39 edited
- Item 1A. Risk Factors+72 / −70 · 61 edited
- Item 1. Business+36 / −30 · 20 edited
- Item 5. Market for Registrant's Common Equity+7 / −5 · 2 edited
- Item 2. Properties+3 / −2 · 2 edited
Item 1. Business
Business — how the company describes what it does
20 edited+16 added−10 removed34 unchanged
Item 1. Business
Business — how the company describes what it does
20 edited+16 added−10 removed34 unchanged
2022 filing
2023 filing
Biggest changeInitial marketing is expected to consist of public relations, “cost-per-install” campaigns, social media marketing using the Facebook’s ad platform and other readily available advertising platforms. We anticipate utilizing social influencers and additional public relations strategies to promote the application on a global basis, which also includes making the application available for use in other languages.
Biggest changeMarketing and Monetization DatChat Messenger & Private Social Network The application is currently offered for free on Apple’s App Store and Google Play. Initial marketing is expected to consist of public relations, “cost-per-install” campaigns, social media marketing using the Facebook’s ad platform and other readily available advertising platforms.
In addition to the foregoing, the application also provides users with the ability to connect via an encrypted live video chat that also is designed to prevent screenshots or screen grabs. The application integrates with iMessage, making private messages potentially available to hundreds of millions of users. The Habytat In June 2022, we formed a wholly owned subsidiary, SmarterVerse, Inc.
In addition to the foregoing, the application also provides users with the ability to connect via an encrypted live video chat that also is designed to prevent screenshots or screen grabs. The application integrates with iMessage, making private messages potentially available to hundreds of millions of users. Habytat In June 2022, we formed a wholly owned subsidiary, Dragon Interactive, Inc.
Users will then be able to accumulate reward points when they visit and interact with such virtual property or invite others to join The Habytat, and such rewards can be used to enhance, expand, and improve the virtual property.
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 application also includes a screen shot protection system, which makes it virtually impossible for the recipient to screenshot a message or picture before it gets destroyed. In addition, users can delete entire conversations at any time, making it like the conversation never even happened.
Users can decide how long their messages last on the recipient’s device. The application also includes a screen shot protection system, which makes it virtually impossible for the recipient to screenshot a message or picture before it gets destroyed. In addition, users can delete entire conversations at any time, making it like the conversation never even happened.
(“SmarterVerse”). In July 2022, SmarterVerse entered into a development agreement with MetaBizz, LLC, an infrastructure firm that creates and develops 4D experiences in the metaverse (“MetaBizz”).
(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”).
As of March 27, 2023, we had 7 issued patents, 0 notices of allowance and 0 filed patent applications in the United States relating to our encryption technologies and blockchain platform. Our issued patents will expire in 2036. In addition, we plan to continue expanding and strengthening our IP portfolio with additional patent applications in the future.
As of March 28, 2024, we had 11 issued patents, no notices of allowance and 3 filed patent applications in the United States relating to our encryption technologies, blockchain platform and digital assets. Our issued patents will expire in 2036. In addition, we plan to continue expanding and strengthening our IP portfolio with additional patent applications in the future.
In November 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. In January 2023, we launched Geniuz City, the first world within The Habytat.
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.
Observing that mobile messaging and social media users are drawn to several different messaging platforms by specific capabilities, we set out to create the application to consolidate popular messaging and social media features such as group chats, emoticons and video sharing, offer new and unique features such as being able to “nuke” a conversation to remove all traces of it from all parties involved, and deliver increased levels of privacy and security.
In addition, we are developing a blockchain-based, decentralized communications platform that is being designed to allow consumers and businesses to connect directly with each other. -2- Observing that mobile messaging and social media users are drawn to several different messaging platforms by specific capabilities, we set out to create the application to consolidate popular messaging and social media features such as group chats, emoticons and video sharing, offer new and unique features such as being able to “nuke” a conversation to remove all traces of it from all parties involved, and deliver increased levels of privacy and security.
For example, users may exercise their rights pursuant to the EU General Data Protection Regulation (“GDPR”) or Section 1798.83 of the California Civil Code, simply by submitting a request via email to privacy@DatChat.com. Employees As of March 27, 2023, we have a total of 15 full-time employees and 1 consultant. We are not a party to any collective bargaining agreements.
For example, users may exercise their rights pursuant to the EU General Data Protection Regulation (“GDPR”) or Section 1798.83 of the California Civil Code, simply by submitting a request via email to privacy@DatChat.com. Employees As of March 28, 2024, we have a total of 12 full-time employees.
We believe that we maintain good relations with our employees. Our Corporate Information DatChat, Inc. was initially incorporated in Nevada on December 4, 2014 under the name YssUp, Inc.
Our Corporate Information DatChat, Inc. was initially incorporated in Nevada on December 4, 2014 under the name YssUp, Inc.
The application also enables users to hide secret and encrypted messages behind a cover, which messages can only be unlocked by the recipient and which are automatically destroyed after a fixed number of views or fixed amount of time. Users can decide how long their messages last on the recipient’s device.
A user can elect at any time to delete a message that they previously sent to a recipient’s device. The application also enables users to hide secret and encrypted messages behind a cover, which messages can only be unlocked by the recipient and which are automatically destroyed after a fixed number of views or fixed amount of time.
We intend to roll out additional features including video chat, attachments, unique social posts and other features to enhance the messaging and social media experience. -2- Software and Development DatChat Messenger & Private Social Network Our ability to compete depends in large part on our continuous commitment to research and development, our ability to rapidly introduce new features and functionality and our ability to improve proven applications for established markets in which we have competitive advantages.
Software and Development DatChat Messenger & Private Social Network Our ability to compete depends in large part on our continuous commitment to research and development, our ability to rapidly introduce new features and functionality and our ability to improve proven applications for established markets in which we have competitive advantages.
Our goal is to make the application a leader in the mobile secure messaging and social media market based upon our proprietary technology and enhanced privacy and security features.
Our goal is to make the application a leader in the mobile secure messaging and social media market based upon our proprietary technology and enhanced privacy and security features. We intend to roll out additional features including video chat, attachments, unique social posts and other features to enhance the messaging and social media experience.
Through our application, users can delete messages that they have sent, on their own device and the recipient’s device as well. There is no set time limit within which they must exercise this choice. A user can elect at any time to delete a message that they previously sent to a recipient’s device.
DatChat Messenger & Private Social Network Our platform allows users to exercise control over their messages and posts, even after they are sent. Through our application, users can delete messages that they have sent, on their own device and the recipient’s device as well. There is no set time limit within which they must exercise this choice.
In the future, we may develop other mobile applications and services for consumers once our user base reaches a level at which we deem it to be economically feasible. No assurance can be given that we will successfully develop new or future applications that will be embraced by users or generate revenue.
We anticipate monetizing the application with a subscription-based service for small and medium size businesses. In the future, we may develop other mobile applications and services for consumers once our user base reaches a level at which we deem it to be economically feasible.
Additionally, MetaBizz will contribute over twenty engineers and designers based in both North and South America. -3- Intellectual Property Portfolio DatChat Messenger & Private Social Network We strive to protect and enhance the proprietary technology and inventions that are commercially important to our business, including seeking, maintaining and defending patent rights.
No assurance can be given that we will successfully develop new or future applications that will be embraced by users or generate revenue. -3- Intellectual Property Portfolio DatChat Messenger & Private Social Network We strive to protect and enhance the proprietary technology and inventions that are commercially important to our business, including seeking, maintaining and defending patent rights.
The Habytat and VenVūū Our software and development is led by our Head of Business Development, Gianfranco Lopane and SmaterVerse’s Chief Innovation Officer, Rene J. Palacio Mongui, Chief Technology Officer, Mark Mathis, and Chief Operating Officer, Ingrith Gartner Salazar.
Habytat and HabyPets Our software and development is led by SmarterVerse’s Chief Technology Officer, Rene J. Palacio Mongui, and Chief Operating Officer, Ingrith Gartner Salazar. The software and development team is responsible for the engineering, development, design, integration and testing of the Habytat metaverse and the HabyPets AI platform.
We also plan to add in-app purchases such as user customization features, unique emoticons, stickers and long form video messages to monetize the application. We anticipate monetizing the application with a subscription-based service for small and medium size businesses.
We anticipate utilizing social influencers and additional public relations strategies to promote the application on a global basis, which also includes making the application available for use in other languages. We also plan to add in-app purchases such as user customization features, unique emoticons, stickers and long form video messages to monetize the application.
Recently. we have expanded our business and product offerings to include the co-development of a mobile-based social metaverse, known as “The Habytat”, as well as the development of VenVūū, an advertising and non-fungible token (“NFT”) monetization platform. DatChat Messenger & Private Social Network Our platform allows users to exercise control over their messages and posts, even after they are sent.
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.
Geniuz City is intended to be a near photo-realistic world that is based on the city of Miami and its surrounding areas.
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.
Removed
Geniuz City has been designed in a manner that can enable users to participate in a number of different activities, such as parties, business conferences, shopping, socializing, and game play. -1- Currently, once users download The Habytat application, we plan to grant each user rights to use a designated piece of virtual property in Geniuz City through the minting and issuance of a unique NFT.
Added
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.
Removed
NFTs (or non-fungible tokens) are digital assets that can represent a unique real-world asset, such as art, music, in-game items, videos, or a piece of real estate or virtual property. Users will initially be able to choose the style of house they want, then start customizing it to represent their personal style and taste.
Added
Our goal is to leverage our patents and develop new technology that leads to more people joining and seeing the value in the metaverse. The development agreement with MetaBizz is no longer active.
Removed
In addition, we plan to offer users the ability to have their own pets in the Habytat, which they will need to care for and can train to follow basic obedience commands.
Added
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. Users will be able to customize their virtual property to represent their personal style and taste.
Removed
Finally, as described below, we plan to integrate our VenVūū, platform and VenVūū, dynamic NFTs (collectively, VenVūū,”) into The Habytat, and that such integration will enable us and users to generate advertising-based revenues in The Habytat. VenVūū We are currently developing VenVūū, an advertising and NFT monetization platform.
Added
The official in-world currency of Habytat is the “Nirad,” which can be earned through participation on the DatChat Social Network+ or the Habytat and used to upgrade properties and experiences in Habytat. As of March 28, 2024, we had over 140,000 Habytat users.
Removed
VenVūū is based upon a proprietary metaverse ad network and dynamic NFT technology which we believe will allow advertisers and landowners to connect in the metaverse. Management believes that metaverse advertising parallels reality,.and that VenVūū can be considered as a parallel to billboards in the real world or “Google Ads” within the internet.
Added
Mobile Metaverse In May 2023, we launched the open mobile metaverse, Habytat 1.0, as part of our mission to democratize access to the metaverse.
Removed
Through the integration of VenVūū, which advertises in a way similar to a billboard or video screen, we plan to enable users of The Habytat opportunities to monetize their virtual property rights by directly displaying approved advertisements on their virtual property.
Added
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.
Removed
While we currently plan to launch VenVuu in the Habytat, it may also by interoperable within other metaverses in the future We believe that these features can potentially provide brands with the ability to run campaigns that target the land parcels they want to reach, simultaneously across multiple metaverses.
Added
We have assembled a team of over twenty game developers, graphic artists and back-end developers to create Habytat 1.0. -1- HabyPets 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.
Removed
In addition, we are developing a blockchain-based, decentralized communications platform that is being designed to allow consumers and businesses to connect directly with each other.
Added
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.
Removed
The software and development team is responsible for the engineering, development, design, integration and testing of The Habytat metaverse and the VenVūū dynamic content NFT technology. Marketing and Monetization DatChat Messenger & Private Social Network The application is currently offered for free on Apple’s App Store and Google Play.
Added
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.
Removed
The Habytat and VenVūū We have entered into strategic alliances with House of Kibba’s Project Origin metaverse, Yakushima Corp.’s Yakuverse, AVTR Studios Taipei’s metaverse, and ZOAN’s Cornerstone.land metaverse to integrate the VenVūū NFT monetization platform and The Habytat. We anticipate that each strategic alliance will mutually benefit from the cross-promotion of each other’s platforms and products.
Added
Myseum 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.
Added
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. Spin-off and Name Change 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.
Added
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.
Added
In February 2024, Darin Myman was appointed as President of SmarterVerse. In February 2024, SmarterVerse changed its name to Dragon Interactive Corporation. 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.
Added
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.
Added
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.
Added
We have established a network of external professionals and consultants to which we outsource various research and development and operational tasks in an effort to minimize administrative overhead. We are not a party to any collective bargaining agreements. We believe that we maintain good relations with our employees.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
61 edited+11 added−9 removed208 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
61 edited+11 added−9 removed208 unchanged
2022 filing
2023 filing
Biggest changeThe significant concentration of stock ownership may negatively impact the value of our Common Stock due to potential investors’ perception that conflicts of interest may exist or arise. -24- Our Articles of Incorporation, as amended, our Amended and Restated Bylaws, and Nevada law may have anti-takeover effects that could discourage, delay or prevent a change in control, which may cause our stock price to decline.
Biggest changeOur Articles of Incorporation, as amended, our Amended and Restated Bylaws, and Nevada law may have anti-takeover effects that could discourage, delay or prevent a change in control, which may cause our stock price to decline. Anti-takeover provisions may limit the ability of another party to acquire us, which could cause our stock price to decline.
As a result of these or other factors, our metaverse strategy and investments may not be successful in the foreseeable future, or at all, which could adversely affect our business, reputation, or financial results. The Habytat is currently under development and no assurance can be given that it will be accepted by others or generate sufficient interest.
As a result of these or other factors, our metaverse strategy and investments may not be successful in the foreseeable future, or at all, which could adversely affect our business, reputation, or financial results. Habytat is currently under development and no assurance can be given that it will be accepted by others or generate sufficient interest.
We may be unsuccessful in our research and product development efforts, including if we are unable to develop relationships with key participants in the metaverse or develop products that operate effectively with metaverse technologies, products, systems, networks, or standards. Our metaverse efforts may also divert resources and management attention from other areas of our business.
We may be unsuccessful in our research and product development efforts, including if we are unable to develop relationships with key participants in the metaverse or develop products that operate effectively with metaverse technologies, products, systems, networks, or standards. Our metaverse efforts may also divert resources and management attention from other areas of our business.
There are many factors that could negatively affect user retention, growth, and engagement, including if: ● users increasingly engage with competing products instead of ours; ● our competitors may mimic our products and therefore harm our user engagement and growth; ● we fail to introduce new and exciting products and services or those we introduce are poorly received; ● our products fail to operate effectively on the iOS and Android mobile operating systems; ● we are unable to continue to develop products that work with a variety of mobile operating systems, networks, and smartphones; ● we are unable to combat hostile or inappropriate usage on our products; ● there are changes in user sentiment about the quality or usefulness of the application; ● there are concerns about the privacy implications, safety, or security of our products; -8- ● there are changes in our products that are mandated by legislation, regulatory authorities, or litigation, including settlements or consent decrees that adversely affect the user experience; ● technical or other problems frustrate the user experience, particularly if those problems prevent us from delivering our products in a fast and reliable manner; ● we fail to provide adequate service to users; ● we are the subject of adverse media reports or other negative publicity; and ● we do not maintain our brand image or our reputation is damaged.
There are many factors that could negatively affect user retention, growth, and engagement, including if: ● users increasingly engage with competing products instead of ours; ● our competitors may mimic our products and therefore harm our user engagement and growth; ● we fail to introduce new and exciting products and services or those we introduce are poorly received; ● our products fail to operate effectively on the iOS and Android mobile operating systems; ● we are unable to continue to develop products that work with a variety of mobile operating systems, networks, and smartphones; ● we are unable to combat hostile or inappropriate usage on our products; ● there are changes in user sentiment about the quality or usefulness of the application; ● there are concerns about the privacy implications, safety, or security of our products; ● there are changes in our products that are mandated by legislation, regulatory authorities, or litigation, including settlements or consent decrees that adversely affect the user experience; ● technical or other problems frustrate the user experience, particularly if those problems prevent us from delivering our products in a fast and reliable manner; ● we fail to provide adequate service to users; ● we are the subject of adverse media reports or other negative publicity; and ● we do not maintain our brand image or our reputation is damaged.
Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, are: ● sale of our common stock by our shareholders, executives, and directors; ● volatility and limitations in trading volumes of our shares of common stock; ● our ability to obtain financing; ● the timing and success of introductions of new products by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors; ● our ability to attract new customers; ● changes in our capital structure or dividend policy, future issuances of securities, sales of large blocks of common stock by our shareholders; ● our cash position; ● announcements and events surrounding financing efforts, including debt and equity securities; ● our inability to enter into new markets or develop new products; ● reputational issues; ● announcements of acquisitions, partnerships, collaborations, joint ventures, new products, capital commitments, or other events by us or our competitors; ● changes in general economic, political and market conditions in or any of the regions in which we conduct our business; -19- ● changes in industry conditions or perceptions; ● analyst research reports, recommendation and changes in recommendations, price targets, and withdrawals of coverage; ● departures and additions of key personnel; ● disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations; ● changes in applicable laws, rules, regulations, or accounting practices and other dynamics; and ● other events or factors, many of which may be out of our control.
Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, are: ● sale of our common stock by our shareholders, executives, and directors; ● volatility and limitations in trading volumes of our shares of common stock; ● our ability to obtain financing; ● the timing and success of introductions of new products by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors; ● our ability to attract new customers; ● changes in our capital structure or dividend policy, future issuances of securities, sales of large blocks of common stock by our shareholders; ● our cash position; ● announcements and events surrounding financing efforts, including debt and equity securities; ● our inability to enter into new markets or develop new products; ● reputational issues; ● announcements of acquisitions, partnerships, collaborations, joint ventures, new products, capital commitments, or other events by us or our competitors; ● changes in general economic, political and market conditions in or any of the regions in which we conduct our business; ● changes in industry conditions or perceptions; -17- ● analyst research reports, recommendation and changes in recommendations, price targets, and withdrawals of coverage; ● departures and additions of key personnel; ● disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations; ● changes in applicable laws, rules, regulations, or accounting practices and other dynamics; and ● other events or factors, many of which may be out of our control.
If we fail to accurately anticipate or manage the risks associated with The Habytat and VenVūū, or if we directly or indirectly become subject to disputes, liability, or other legal or regulatory issues in connection with either of these initiatives, they may not be successful and our business, financial condition, results of operations, reputation, and prospects could be materially harmed.
If we fail to accurately anticipate or manage the risks associated with Habytat or if we directly or indirectly become subject to disputes, liability, or other legal or regulatory issues in connection with either of these initiatives, they may not be successful and our business, financial condition, results of operations, reputation, and prospects could be materially harmed.
Such lapses could have a material adverse effect on our business, prospects, results of operations and financial condition. -11- If third parties claim that we infringe their intellectual property, it may result in costly litigation. We cannot assure you that third parties will not claim our current or future products or services infringe their intellectual property rights.
Such lapses could have a material adverse effect on our business, prospects, results of operations and financial condition. If third parties claim that we infringe their intellectual property, it may result in costly litigation. We cannot assure you that third parties will not claim our current or future products or services infringe their intellectual property rights.
Any decrease to user retention, growth, or engagement could render our products less attractive to users, advertisers, or partners, and would seriously harm our business. There is a risk that the public will not perceive the privacy protections that we offer to be necessary or useful and therefore would not be interested in our services.
Any decrease to user retention, growth, or engagement could render our products less attractive to users, advertisers, or partners, and would seriously harm our business. -8- There is a risk that the public will not perceive the privacy protections that we offer to be necessary or useful and therefore would not be interested in our services.
In addition, advanced notice is required prior to stockholder proposals, which might further delay a change of control. -23- Our ability to have our securities traded on the Nasdaq Capital Market is subject to us meeting applicable listing criteria. We are currently listed on the Nasdaq Stock Market, LLC (“Nasdaq”), a national securities exchange.
In addition, advanced notice is required prior to stockholder proposals, which might further delay a change of control. Our ability to have our securities traded on the Nasdaq Capital Market is subject to us meeting applicable listing criteria. We are currently listed on the Nasdaq Stock Market, LLC (“Nasdaq”), a national securities exchange.
In addition, these provisions could limit the price investors would be willing to pay in the future for shares of our common stock. If our shares become subject to the penny stock rules, it would become more difficult to trade our shares. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.
In addition, these provisions could limit the price investors would be willing to pay in the future for shares of our common stock. -21- If our shares become subject to the penny stock rules, it would become more difficult to trade our shares. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.
There can be no assurance that the Company will recognize gains on such liquidation, nor is there any assurance that Common Stock holders will receive a distribution in such a case. We do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.
There can be no assurance that the Company will recognize gains on such liquidation, nor is there any assurance that Common Stock holders will receive a distribution in such a case. -19- We do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.
If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, we may not be able to create revenue and expand our business. Defects in the application and the technology powering it may adversely affect our business.
If we are unable to adapt to changing market conditions, customer requirements or emerging industry standards, we may not be able to create revenue and expand our business. -7- Defects in the application and the technology powering it may adversely affect our business.
The Habytat and VenVūū may not be successful and may expose us to legal, regulatory, and other risks. Given the nascent and evolving nature of the metaverse, digital assets and blockchain technology, we may be unable to accurately anticipate or adequately address such risks or the potential impact of such risks.
Habytat may not be successful and may expose us to legal, regulatory, and other risks. Given the nascent and evolving nature of the metaverse, digital assets and blockchain technology, we may be unable to accurately anticipate or adequately address such risks or the potential impact of such risks.
This legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment in resources to compliance programs, could impact strategies and availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies. -13- Various U.S. federal privacy laws are potentially relevant to our business, including the Federal Trade Commission Act, Controlling the Assault of Non-Solicited Pornography and Marketing Act, the Family Educational Rights and Privacy Act, the Children’s Online Privacy Protection Act, and the Telephone Consumer Protection Act.
This legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment in resources to compliance programs, could impact strategies and availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies. -12- Various U.S. federal privacy laws are potentially relevant to our business, including the Federal Trade Commission Act, Controlling the Assault of Non-Solicited Pornography and Marketing Act, the Family Educational Rights and Privacy Act, the Children’s Online Privacy Protection Act, and the Telephone Consumer Protection Act.
Demand for the application is affected by a number of factors, many of which are beyond our control, such as continued market acceptance; the timing of development and release of competing new products; consumer preferences; the development and acceptance of new features, integrations, and capabilities; price or product changes by us or our competitors; technological changes and developments within the markets we serve; growth, contraction, and rapid evolution of our market; and general economic conditions and trends.
Demand for our products or the applications is affected by a number of factors, many of which are beyond our control, such as continued market acceptance; the timing of development and release of competing new products; consumer preferences; the development and acceptance of new features, integrations, and capabilities; price or product changes by us or our competitors; technological changes and developments within the markets we serve; growth, contraction, and rapid evolution of our market; and general economic conditions and trends.
If we fail to retain users or add new users, or if our users decrease their level of engagement with The Habytat, revenue, bookings, and operating results will be harmed.
If we fail to retain users or add new users, or if our users decrease their level of engagement with Habytat, revenue, bookings, and operating results will be harmed.
The launch of The Habytat and VenVūū also subjects us to risks similar to those associated with any new platform offering, including, but not limited to, our ability to accurately anticipate market demand and acceptance, our ability to successfully launch these initiatives, technical issues with the operation of The Habytat and/or VenVūū, and legal and regulatory risks as discussed above.
The launch of Habytat also subjects us to risks similar to those associated with any new platform offering, including, but not limited to, our ability to accurately anticipate market demand and acceptance, our ability to successfully launch these initiatives, technical issues with the operation of Habytat and legal and regulatory risks as discussed above.
It may take significant time and expenditures to shift financial and personnel resources to that technology or business model, and it may be more difficult to compete against existing companies that incorporate that technology or business model effectively. -18- We may not be successful in our metaverse strategy and investments, which could adversely affect our business, reputation, or financial results.
It may take significant time and expenditures to shift financial and personnel resources to that technology or business model, and it may be more difficult to compete against existing companies that incorporate that technology or business model effectively. -16- We may not be successful in our metaverse strategy and investments, which could adversely affect our business, reputation, or financial results.
In addition, as our efforts to develop The Habytat evolve, we may be subject to a variety of existing or new laws and regulations in the United States and international jurisdictions, including in the areas of privacy, safety, competition, content regulation, consumer protection, and e-commerce, which may delay or impede the development of our products and services, increase our operating costs, require significant management time and attention, or otherwise harm our business.
In addition, as our efforts to continue developing Habytat evolve, we may be subject to a variety of existing or new laws and regulations in the United States and international jurisdictions, including in the areas of privacy, safety, competition, content regulation, consumer protection, and e-commerce, which may delay or impede the development of our products and services, increase our operating costs, require significant management time and attention, or otherwise harm our business.
Any deterioration in our relationship with Apple or any application market place we utilize in the future would harm our business and adversely affect the value of our common stock. We are subject to Apple’s standard terms and conditions for application developers, which govern the promotion, distribution and operation of mobile applications on its platform.
Any deterioration in our relationship with Apple or any application marketplace we utilize in the future would harm our business and adversely affect the value of our common stock. We are subject to Apple’s standard terms and conditions for application developers, which govern the promotion, distribution and operation of mobile applications on its platform.
If we are unable to continue to meet demands of our users or trends in preferences or to achieve more widespread market acceptance of the application, our business, results of operations, and financial condition could be harmed. Changes in preferences of users may have a disproportionately greater impact on us than if we offered multiple products.
If we are unable to continue to meet demands of our users or trends in preferences or to achieve more widespread market acceptance of our products and applications, our business, results of operations, and financial condition could be harmed. Changes in preferences of users may have a disproportionately greater impact on us than if we offered multiple products.
Because both The Habytat and VenVūū are based on certain new technologies, they are subject to risks of failure that are particular to new technologies, including the possibility that: ● The Habytat and/or VenVūū may not gain market acceptance; ● proprietary rights of third parties may preclude us from marketing a new product or service; ● The Habytat and/or VenVūū may not receive the exposure required to obtain new users; or ● third parties may market superior products or services. -16- We may not be able to adequately evaluate the risks associated with our planned social metaverse and advertising platforms.
Because both Habytat is based on certain new technologies, it is subject to risks of failure that are particular to new technologies, including the possibility that: ● Habytat may not gain market acceptance; ● proprietary rights of third parties may preclude us from marketing a new product or service; ● Habytat may not receive the exposure required to obtain new users; or ● third parties may market superior products or services. -14- We may not be able to adequately evaluate the risks associated with our planned social metaverse and advertising platforms.
If we do not generate sufficient interest in our social metaverse platform we will not attract enough advertisers to make it profitable. The Habytat and VenVūū are both based on new and unproven technologies and therefore are subject to the risks of failure inherent in the development of new products and services.
If we do not generate sufficient interest in our social metaverse platform we will not attract enough advertisers to make it profitable. Habytat is based on new and unproven technologies and therefore is subject to the risks of failure inherent in the development of new products and services.
Such negative publicity could also have an adverse effect on the size, engagement, and loyalty of our user base and, in turn, adversely affect our business, results of operations and financial condition. We expect to derive substantially all of our revenue from a single product. We expect to derive substantially all of our revenue from the application.
Such negative publicity could also have an adverse effect on the size, engagement, and loyalty of our user base and, in turn, adversely affect our business, results of operations and financial condition. We expect to derive substantially all of our revenue from a limited number of products.
Any failure or perceived failure by us to comply with our posted privacy policies, our privacy-related obligations to users, or any other legal obligations or regulatory requirements relating to privacy, data protection, or data security, may result in governmental investigations or enforcement actions, litigation, claims, or public statements against us by consumer advocacy groups, or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation and business.
These changes could lead to additional costs and increase our overall risk exposure. -13- Any failure or perceived failure by us to comply with our posted privacy policies, our privacy-related obligations to users, or any other legal obligations or regulatory requirements relating to privacy, data protection, or data security, may result in governmental investigations or enforcement actions, litigation, claims, or public statements against us by consumer advocacy groups, or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation and business.
Any disruption in the services provided by such third-party provider could adversely affect our business. Our products are hosted from, and use computing infrastructure, secure network connectivity, and other technology-related services provided by AWS. We do not control the operations of this third-party provider or own the equipment used to provide such services.
Our products are hosted from, and use computing infrastructure, secure network connectivity, and other technology-related services provided by AWS. We do not control the operations of this third-party provider or own the equipment used to provide such services.
To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. -25- Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
We believe these risks may be heightened with respect to both of these initiatives, as metaverse assets and services, NFTs and other digital assets and services are still considered relatively novel concepts.
We believe these risks may be heightened with respect to this initiative, as metaverse assets and services, NFTs and other digital assets and services are still considered relatively novel concepts.
These and other factors may lead users to switch to another entertainment option rapidly, which can interfere with our ability to forecast usage and would negatively affect our user retention, growth, and engagement. Falling user retention, growth, or engagement rates could harm our business.
These and other factors may lead users to switch to another entertainment option rapidly, which can interfere with our ability to forecast usage and would negatively affect our user retention, growth, and engagement.
We also continue to develop and refine functions of the application. We have not developed a strong customer base, and we have not generated sustainable revenue since inception. We cannot assure you that we ever will. We will incur significant losses in launching products and we may not realize sufficient subscriptions or profits in order to sustain our business.
We have not developed a strong customer base, and we have not generated sustainable revenue since inception. We cannot assure you that we ever will. We will incur significant losses in launching products and we may not realize sufficient subscriptions or profits in order to sustain our business.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval. Our directors, executive officers and each of our stockholders who owned greater than 5% of our outstanding Common Stock beneficially, as of March 27, 2023, own approximately 13.90% of our common stock outstanding.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval. Our directors, executive officers and each of our stockholders who owned greater than 5% of our outstanding Common Stock beneficially, as of March 28, 2024, own approximately 15.0% of our common stock outstanding.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: ● inability to integrate or benefit from acquired technologies or services in a profitable manner; ● unanticipated costs or liabilities associated with the acquisition; ● difficulty integrating the accounting systems, operations and personnel of the acquired business; ● difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; ● difficulty converting the customers of the acquired business onto our platform and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company; ● diversion of management’s attention from other business concerns; ● adverse effects to our existing business relationships with business partners and customers as a result of the acquisition; ● the potential loss of key employees; ● use of resources that are needed in other parts of our business; and ● use of substantial portions of our available cash to consummate the acquisition. -20- In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: ● inability to integrate or benefit from acquired technologies or services in a profitable manner; ● unanticipated costs or liabilities associated with the acquisition; ● difficulty integrating the accounting systems, operations and personnel of the acquired business; ● difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; ● difficulty converting the customers of the acquired business onto our platform and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company; -18- ● diversion of management’s attention from other business concerns; ● adverse effects to our existing business relationships with business partners and customers as a result of the acquisition; ● the potential loss of key employees; ● use of resources that are needed in other parts of our business; and ● use of substantial portions of our available cash to consummate the acquisition.
However, if this market shrinks or grows more slowly than anticipated, if the metaverse does not gain widespread adoption as a forum for experiences, social interaction and creative expression for our users, or if demand for The Habytat does not grow as quickly as we anticipate, whether as a result of competition, product obsolescence, budgetary constraints of our developers, creators, and users, technological changes, unfavorable economic conditions, uncertain geopolitical or regulatory environments or other factors, we may not be able to increase our revenue and bookings sufficiently to ever achieve profitability and our stock price would decline. -17- The multitude of other entertainment options, online gaming, and other interactive experiences is high, making it difficult to retain users who are dissatisfied with The Habytat and seek other entertainment options.
However, if this market shrinks or grows more slowly than anticipated, if the metaverse does not gain widespread adoption as a forum for experiences, social interaction and creative expression for our users, or if demand for Habytat does not grow as quickly as we anticipate, whether as a result of competition, product obsolescence, budgetary constraints of our developers, creators, and users, technological changes, unfavorable economic conditions, uncertain geopolitical or regulatory environments or other factors, we may not be able to increase our revenue and bookings sufficiently to ever achieve profitability and our stock price would decline.
Accidental or willful security breaches or other unauthorized access by third parties or our employees, our information systems or the systems of our third-party providers, or the existence of computer viruses or malware in our or their data or software could expose us to risks of information loss and misappropriation of proprietary and confidential information, including information relating to our products or customers and the personal information of our employees. -12- In addition, we could become subject to unauthorized network intrusions and malware on our own IT networks.
Accidental or willful security breaches or other unauthorized access by third parties or our employees, our information systems or the systems of our third-party providers, or the existence of computer viruses or malware in our or their data or software could expose us to risks of information loss and misappropriation of proprietary and confidential information, including information relating to our products or customers and the personal information of our employees.
We must continue to enhance and improve the performance, functionality and reliability of the application. The mobile application industry is characterized by rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies and the emergence of new industry standards and practices that could render our product and services obsolete.
The mobile application industry is characterized by rapid technological change, changes in user requirements and preferences, frequent new product and services introductions embodying new technologies and the emergence of new industry standards and practices that could render our product and services obsolete.
In the event that Apple’s standard terms and conditions become prohibitively costly or unduly burdensome, we plan to host our own servers in a co-location facility and create a web-based, desktop version of the application that does not require users to install the application from the App store. -7- The mobile application industry is subject to rapid technological change and, to compete, we must continually enhance the application.
In the event that Apple’s standard terms and conditions become prohibitively costly or unduly burdensome, we plan to host our own servers in a co-location facility and create a web-based, desktop version of the application that does not require users to install the application from the App store.
Amazon has broad discretion to change and interpret its terms of service and other policies with respect to us, and those actions may be unfavorable to us. They may also alter how we are able to process data on their cloud platform. If Amazon makes changes or interpretations that are unfavorable to us, our business could be seriously harmed.
Amazon has broad discretion to change and interpret its terms of service and other policies with respect to us, and those actions may be unfavorable to us. They may also alter how we are able to process data on their cloud platform.
To date, we have minimal revenues. As reflected in the accompanying consolidated financial statements, for the years ended December 31, 2022 and 2021, we incurred a net loss of $12,138,572 and $10,829,034, respectively. Additionally, for the years ended December 31, 2022 and 2021, we used cash in operations of $7,258,765 and $8,454,504, respectively.
To date, we have minimal revenues. As reflected in the accompanying consolidated financial statements, for the years ended December 31, 2023 and 2022, we incurred a net loss of $8,404,970 and $12,138,572, respectively. Additionally, for the years ended December 31, 2023 and 2022, we used cash in operations of $6,529,277 and $7,258,765, respectively.
As of December 31, 2022, we has an accumulated deficit of $39,729,118. We intend, in the long term, to derive revenues from advertisement sales, technology licensing, and other forms of revenue. The application is available for download on certain mobile platforms and we are developing compatibility on with other platforms.
As of December 31, 2023, we has an accumulated deficit of $48,134,088. We intend, in the long term, to derive revenues from advertisement sales, technology licensing, and other forms of revenue. The application is available for download on certain mobile platforms and we are developing compatibility with other platforms. We also continue to develop and refine functions of the application.
The Habytat, our social metaverse platform, is currently under development. It is our intent that The Habytat will feature a virtual world containing immersive experiences in intelligent retail, social networking, gaming and the use of NFTs to grant property rights, boasting a wide range of “online + offline” and “virtual + reality” scenarios.
Habytat, our social metaverse platform, launched in 2023 and features a virtual world containing immersive experiences in intelligent retail, social networking, gaming and the use of NFTs to grant property rights, boasting a wide range of “online + offline” and “virtual + reality” scenarios.
Anti-takeover provisions may limit the ability of another party to acquire us, which could cause our stock price to decline. Our articles of incorporation, as amended, bylaws and Nevada law contain provisions that could discourage, delay or prevent a third party from acquiring us, even if doing so may be beneficial to our stockholders.
Our articles of incorporation, as amended, bylaws and Nevada law contain provisions that could discourage, delay or prevent a third party from acquiring us, even if doing so may be beneficial to our stockholders.
Major network failures could have an adverse effect on our business. Our technology infrastructure is critical to the performance of the application and customer satisfaction. The application runs on a complex distributed system, or what is commonly known as cloud computing.
If Amazon makes changes or interpretations that are unfavorable to us, our business could be seriously harmed. -10- Major network failures could have an adverse effect on our business. Our technology infrastructure is critical to the performance of the application and customer satisfaction. The application runs on a complex distributed system, or what is commonly known as cloud computing.
Many of our current and potential competitors have a significantly larger market presence, greater name recognition, access to more potential customers and substantially greater financial, technical, sales and marketing, management, support, and other resources than we have.
Many competitors exist in the overlapping areas of Web 3 and traditional digital marketing, data analytics, and digital transformation. Many of our current and potential competitors have a significantly larger market presence, greater name recognition, access to more potential customers and substantially greater financial, technical, sales and marketing, management, support, and other resources than we have.
Failure to comply with the GDPR could result in penalties for noncompliance (including possible fines of up to the greater of €20 million and 4% of our global annual turnover for the preceding financial year for the most serious violations, as well as the right to compensation for financial or non-financial damages claimed by individuals under Article 82 of the GDPR). -14- In addition to the GDPR, the European Commission has another draft regulation in the approval process that focuses on a person’s right to conduct a private life.
Failure to comply with the GDPR could result in penalties for noncompliance (including possible fines of up to the greater of €20 million and 4% of our global annual turnover for the preceding financial year for the most serious violations, as well as the right to compensation for financial or non-financial damages claimed by individuals under Article 82 of the GDPR).
The application depends on effectively operating with mobile operating systems, hardware, networks, regulations, and standards that we do not control. Changes in our products or to those operating systems, hardware, networks, regulations, or standards may seriously harm our user growth, retention, and engagement.
If demand declines for any of these or other reasons, our business could be adversely affected. -9- The application depends on effectively operating with mobile operating systems, hardware, networks, regulations, and standards that we do not control. Changes in our products or to those operating systems, hardware, networks, regulations, or standards may seriously harm our user growth, retention, and engagement.
In addition, competitors may develop or acquire their own tools or software and people may continue to rely on traditional tools and software, such as text message and email, which would reduce or eliminate the demand for the application. If demand declines for any of these or other reasons, our business could be adversely affected.
In addition, competitors may develop or acquire their own tools or software and people may continue to rely on traditional tools and software, such as text message and email, which would reduce or eliminate the demand for our products and applications.
The proposed legislation, known as the Regulation of Privacy and Electronic Communications (“ePrivacy Regulation”), would replace the current ePrivacy Directive. While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies and tracking technologies.
While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies and tracking technologies.
Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and share price and could require us to delay or abandon development or commercialization plans. -21- The ability of a stockholder to recover all or any portion of such stockholder’s investment in the event of a dissolution or termination may be limited.
Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and share price and could require us to delay or abandon development or commercialization plans.
Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personal information or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment to our reputation in the marketplace.
Any failure or perceived failure to successfully manage the collection, use, disclosure, or security of personal information or other privacy related matters, or any failure to comply with changing regulatory requirements in this area, could result in legal liability or impairment to our reputation in the marketplace. -11- Unauthorized breaches or failures in cybersecurity measures adopted by us and/or included in our products and services could have a material adverse effect on our business.
In this context, the application may be used to facilitate both illegal activity and the destruction of evidence, which could potentially draw scrutiny from regulators.
In this context, the application may be used to facilitate both illegal activity and the destruction of evidence, which could potentially draw scrutiny from regulators. In addition, the application could develop a stigma that it is associated with illegal activity and deter certain people from communicating through the application.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business and results in a decline in the market price of our common stock. -22- Financial reporting obligations of being a public company in the United States are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business and results in a decline in the market price of our common stock.
Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential problems.
Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential problems. -20- If we fail to comply with the rules under Sarbanes-Oxley related to accounting controls and procedures in the future, or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult.
To the extent internet service providers engage in such blocking, throttling or “paid prioritization” of content or similar actions as a result of this order and the adoption of similar laws or regulations, our business, financial condition and results of operations could be materially adversely affected. -10- Risks Related to Information Technology Systems, Intellectual Property and Privacy Laws We rely on a single third-party provider, Amazon Web Services (“AWS”), for computing infrastructure, secure network connectivity, and other technology-related services needed to deliver our products.
To the extent internet service providers engage in such blocking, throttling or “paid prioritization” of content or similar actions as a result of this order and the adoption of similar laws or regulations, our business, financial condition and results of operations could be materially adversely affected.
As such, the continued growth in market demand for and market acceptance of the application is critical to our continued success.
Currently, we expect to derive substantially all of our revenue from a limited number of products and applications. As such, the continued growth in market demand for and market acceptance of the product or application is critical to our continued success.
However, the metaverse may not develop in accordance with our expectations, and market acceptance of features, products, or services we build for The Habytat is uncertain. In addition, we have limited experience with virtual and augmented reality technology, which may enable other companies to compete more effectively than us.
In addition, we have limited experience with virtual and augmented reality technology, which may enable other companies to compete more effectively than us.
We recently announced our plan to develop The Habytat, a mobile based social metaverse. We expect this will be a complex, evolving, and long-term initiative that will involve the development of new and emerging technologies and collaboration with other companies, developers, partners, and other participants.
Our continued development of Habytat be a complex, evolving, and long-term initiative that will involve the development of new and emerging technologies and collaboration with other companies, developers, partners, and other participants. However, the metaverse may not develop in accordance with our expectations, and market acceptance of features, products, or services we build for Habytat is uncertain.
These technologies are subject to rapidly changing technological developments, shifting organizational priorities and requirements, frequent introductions of new products and services, and increased marketing and sales activities of other industry participants Many competitors exist in the overlapping areas of Web 3 and traditional digital marketing, data analytics, and digital transformation.
Additionally, the metaverse has become more readily recognized as a method of completing transactions and as such, more competitors are seeking to enter this marketplace. These technologies are subject to rapidly changing technological developments, shifting organizational priorities and requirements, frequent introductions of new products and services, and increased marketing and sales activities of other industry participants.
We face intense competition for our products and services There are numerous technology companies seeking ways to support efforts to enter the Web 3 technologies business. Additionally, the metaverse has become more readily recognized as method of completing transactions and as such, more competitors are seeking to enter this marketplace.
Falling user retention, growth, or engagement rates could harm our business. -15- We face intense competition for our products and services There are numerous technology companies seeking ways to support efforts to enter the Web 3 technologies business.
Additionally, new regulations are being considered in various jurisdictions to require the monitoring of user content or the verification of users’ identities and age.
Additionally, new regulations are being considered in various jurisdictions to require the monitoring of user content or the verification of users’ identities and age. Such new regulations, or changes to existing regulations, could increase the cost of our operations. We may not be successful in our metaverse strategy and investments, which could adversely affect our business, reputation, or financial results.
As a publicly traded company, we will incur significant additional legal, accounting and other expenses that we did not incur as a privately company.
Financial reporting obligations of being a public company in the United States are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters. As a publicly traded company, we will incur significant additional legal, accounting and other expenses that we did not incur as a privately company.
Such new regulations, or changes to existing regulations, could increase the cost of our operations. -15- We may not be successful in our metaverse strategy and investments, which could adversely affect our business, reputation, or financial results. We believe the metaverse, an embodied internet where people have immersive experiences beyond two-dimensional screens, is the next evolution in social technology.
We believe the metaverse, an embodied internet where people have immersive experiences beyond two-dimensional screens, is the next evolution in social technology. In 2023, we launched Habytat, a mobile based social metaverse.
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In addition, the application could develop a stigma that it is associated with illegal activity and deter certain people from communicating through the application. -9- Negative publicity could adversely affect our reputation, our business, and our operating results.
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The mobile application industry is subject to rapid technological change and, to compete, we must continually enhance the application. We must continue to enhance and improve the performance, functionality and reliability of the application.
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Unauthorized breaches or failures in cybersecurity measures adopted by us and/or included in our products and services could have a material adverse effect on our business.
Added
Negative publicity could adversely affect our reputation, our business, and our operating results.
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These changes could lead to additional costs and increase our overall risk exposure.
Added
Risks Related to Information Technology Systems, Intellectual Property and Privacy Laws We rely on a single third-party provider, Amazon Web Services (“AWS”), for computing infrastructure, secure network connectivity, and other technology-related services needed to deliver our products. Any disruption in the services provided by such third-party provider could adversely affect our business.
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If we fail to comply with the rules under Sarbanes-Oxley related to accounting controls and procedures in the future, or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult.
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In addition, we could become subject to unauthorized network intrusions and malware on our own IT networks.
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On October 14, 2022, we received written notice from Nasdaq that we were not in compliance with Nasdaq Listing Rule 5550(a)(2), as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days.
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In addition to the GDPR, the European Commission has another draft regulation in the approval process that focuses on a person’s right to conduct a private life. The proposed legislation, known as the Regulation of Privacy and Electronic Communications (“ePrivacy Regulation”), would replace the current ePrivacy Directive.
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In accordance with Nasdaq Listing Rule 5810, we have a period of 180 calendar days, or until April 12, 2023, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for at least 10 consecutive business days during this 180 calendar day period.
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The multitude of other entertainment options, online gaming, and other interactive experiences is high, making it difficult to retain users who are dissatisfied with Habytat and seek other entertainment options.
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In the event we do not regain compliance by April 12, 2023, we may be eligible for an additional 180 calendar day grace period if we meet the continued listing standards, with the exception of bid price, for The Nasdaq Capital Market, and we provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period.
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In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually.
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Although we may effect a reverse stock split of our issued and outstanding common stock in the future, there can be no assurance that such reverse stock split will enable us to regain compliance with the Nasdaq minimum bid price requirement.
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The ability of a stockholder to recover all or any portion of such stockholder’s investment in the event of a dissolution or termination may be limited.
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If we are unable to regain compliance with the Nasdaq minimum bid price requirement and Nasdaq delists our common stock and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our stockholders: ● the liquidity of our common stock; ● the market price of our common stock; ● our ability to obtain financing for the continuation of our operations; ● the number of institutional and general investors that will consider investing in our common stock; ● the number of investors in general that will consider investing in our common stock; ● the number of market makers in our common stock; ● the availability of information concerning the trading prices and volume of our common stock; and ● the number of broker-dealers willing to execute trades in shares of our common stock.
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The significant concentration of stock ownership may negatively impact the value of our Common Stock due to potential investors’ perception that conflicts of interest may exist or arise. There are risks associated with the completion of the proposed spin-off of our platform business.
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As previously announced, we plan to spin-off the Habytat platform business, which will operate independently as a publicly listed company. There is no assurance we will be able to successfully complete the proposed spin-off. In the event the Company does not complete the spin-off, it could incur write-offs related to the legal, tax and regulatory costs of the proposed transaction.
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Item 2. Properties
Properties — owned and leased real estate
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Item 2. Properties
Properties — owned and leased real estate
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2022 filing
2023 filing
Biggest changeITEM 2. PROPERTIES Our principal executive offices are located at 204 Nielson Street, New Brunswick, NJ 08901. We lease our office for a minimum base rent of $28.00 per rentable square foot with three percent (3%) annual increases in monthly installments on the first day of each month pursuant to a lease which terminates on December 31, 2024.
Biggest changeWe lease our office for a monthly base rent of $7,156 plus a pro rata share of operating expenses, with three percent (3%) annual increases in monthly installments on the first day of each year pursuant to a lease which terminates on December 31, 2024. We believe that our current office space will be adequate for the foreseeable future.
We believe that our current office space will be adequate for the foreseeable future. We intend to add new facilities or expand existing facilities as we add employees, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.
We intend to add new facilities or expand existing facilities as we add employees, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.
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ITEM 2. PROPERTIES Our principal executive offices are located at 204 Neilson Street, New Brunswick, NJ 08901.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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2022 filing
2023 filing
Biggest changeWe are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. -26- PART II
Biggest changeWe are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. -23- PART II
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+5 added−3 removed1 unchanged
2022 filing
2023 filing
Biggest changeWe intend to retain all available funds and any future earnings to fund the development and expansion of our business.
Biggest changeDividend Policy We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock and Series A Warrants are listed on the Nasdaq Capital Market under the symbols “DATS” and “DATSW,” respectively. Shareholders As of March 27, 2023, we had 1,477 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock and Series A Warrants are listed on the Nasdaq Capital Market under the symbols “DATS” and “DATSW,” respectively. Shareholders As of March 28, 2024, we had 1,463 shareholders of record of our common stock.
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This does not include shares held in the name of a broker, bank or other nominees (typically referred to as being held in “street name”). Dividend Policy We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Added
The actual number of holders of our common stock is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
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Issuer Purchases of Equity Securities We did not purchase any of our registered equity securities during the period covered by this Annual Report.
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Issuer Purchases of Equity Securities The following table provides information relating to our purchases of shares of our common stock during the three months ended December 31, 2023.
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Recent Sales of Unregistered Securities During the year ended December 31, 2022, the Company issued 1,000,000 shares in connection with the acquisition of all the issued and outstanding shares of Avila Security Corporation. -27- ITEM 6. [RESERVED] Not applicable.
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(a) (b) (c) (d) Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1, 2023 - October 31, 2023 0 - - November 1, 2023 - November 30, 2023 0 - - December 1, 2023 - December 31, 2023 0 - - 0 $ - - $ 0 (1) On January 6, 2023, our Board of Directors approved a stock repurchase program authorizing a stock repurchase plan of up to $2,000,000 of our issued and outstanding common stock, from time to time, with such program to be in place until December 31, 2023.
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Through December 31, 2023, the Company purchased 66,945 shares of its common stock for $397,969, or at an average price of $5.94 per share, which has been reflected as treasury stock on the accompanying audited balance sheet for the period ended December 31, 2023.
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Recent Sales of Unregistered Securities On August 4, 2023, we entered into a Subscription and Investment Representation Agreement with an investor (the “Purchaser”) pursuant to which we issued and sold 2,000,000 shares of our newly designated Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), to such Purchaser for an aggregate purchase price of $1,000 .
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
39 edited+43 added−35 removed32 unchanged
2022 filing
2023 filing
Biggest changeGeneral and administrative expenses General and administrative expenses for the years ended December 31, 2022 and 2021, were $991,882 and $607,621, an increase of $384,261 or 63.2%, primarily attributable to an increase in insurance expense of $73,743, an increase in computer and internet expense of $23,579, an increase in travel expenses of $97,029, an increase in conference fees of $42,078, and an increase in rent expense of $16,644.
Biggest changeGeneral and administrative expenses 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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with and our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K.
While our significant accounting policies are more fully described in Note 1 in the “Notes to Financial Statements”, we believe the following accounting policies are critical to the process of making significant judgments and estimates in preparation of our consolidated financial statements.
While our significant accounting policies and significant estimates are more fully described in Note 1 in the “Notes to Financial Statements”, we believe the following estimates are critical to the process of making significant judgments and estimates in preparation of our consolidated financial statements.
During the year ended December 31, 2022, the Company recorded an impairment loss of $119,276. Capitalized software costs Costs incurred to develop internal-use software including Metaverse software development, are expensed as incurred during the preliminary project stage.
During the year ended December 31, 2022, the Company recorded an impairment loss of $119,276. Capitalized internal-use software costs Costs incurred to develop internal-use software including Metaverse software development, are expensed as incurred during the preliminary project stage.
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 exercise of warrants.
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.
These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis of Presentation The financial statements contained herein have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) and the requirements of the Securities and Exchange Commission.
These financial statements do not include any adjustments that might result from the outcome of this uncertainty. -26- Basis of Presentation The financial statements contained herein have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) and the requirements of the Securities and Exchange Commission.
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. Recently Issued Accounting Pronouncements Refer to the notes to the audited financial statements.
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. -28- Recently Issued Accounting Pronouncements Refer to the notes to the audited financial statements.
Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of these condensed 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.
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.
Users will then be able to accumulate reward points when they visit and interact with such virtual property or invite others to join The Habytat, and such rewards can be used to enhance, expand, and improve the virtual property.
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.
As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments.
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.
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. During the year ended December 31, 2021, we purchased property and equipment of $56,039.
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.
Critical Accounting Policies and Significant Judgments and Estimates This management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP.
Critical Estimates This management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP.
Results of Operations Revenue During the years ended December 31, 2022 and 2021, we generated revenues of $46,214 and $4,445, 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 $4,445 of revenues from subscriptions for the year ended December 31, 2021.
Results of Operations Revenue 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.
Impairment loss on digital currencies and other digital assets During the year ended December 31, 2022, operating expenses included an impairment charge related to the write down of digital currencies and other digital assets of $119,276.
Impairment loss on digital currencies and other digital assets 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.
For the year ended December 31, 2022, net loss was adjusted for stock-based compensation of $3,173,401, stock-based professional fees of $347,733, amortization expense of $49,783, depreciation 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 changes were a net increase of $179,616, primarily due to a decrease in prepaid expenses of $242,221 and accounts payable and accrued expenses of $61.
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.
In November 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. In January 2023, we launched Geniuz City, the first world within The Habytat.
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.
The application also enables users to hide secret and encrypted messages behind a cover, which messages can only be unlocked by the recipient and which are automatically destroyed after a fixed number of views or fixed amount of time. Users can decide how long their messages last on the recipient’s device.
A user can elect at any time to delete a message that they previously sent to a recipient’s device. The application also enables users to hide secret and encrypted messages behind a cover, which messages can only be unlocked by the recipient and which are automatically destroyed after a fixed number of views or fixed amount of time.
As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus.
Risks and Uncertainties 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.
Software development costs incurred during the year ended December 31, 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.
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.
Other Income (Expense) During the years ended December 31, 2022 and 2021, we reported other income of $88,153 and $9,516, respectively. Other income (expense) consisted of interest income, interest expense and unrealized gains or losses on short-term investments.
Other Income (Expense) 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.
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.
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. Leases We applied ASC Topic 842, Leases (Topic 842) to arrangements with lease terms of 12 months or more.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
Through our application, users can delete messages that they have sent, on their own device and the recipient’s device as well. There is no set time limit within which they must exercise this choice. A user can elect at any time to delete a message that they previously sent to a recipient’s device.
DatChat Messenger & Private Social Network Our platform allows users to exercise control over their messages and posts, even after they are sent. Through our application, users can delete messages that they have sent, on their own device and the recipient’s device as well. There is no set time limit within which they must exercise this choice.
The following trends are reasonably likely to result in changes in our liquidity over the near to long term: ● An increase in working capital requirements to finance our current business, ● Cost of research and development, ● Addition of administrative, technical and sales personnel as the business grows, and ● The cost of being a public company.
The following trends are reasonably likely to result in changes in our liquidity over the near to long term: ● An increase in working capital requirements to finance our current business, ● Cost of research and development, ● Addition of administrative, technical and sales personnel as the business grows, and ● The cost of being a public company. -30- Cash Flow Activities for the Years ended December 31, 2023 and 2022 Cash Flows from Operating Activities 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.
General and administrative expenses primarily consisted of the following expense categories: insurance, travel, utilities, office related expenses and rent expense. Impairment loss on intangible assets 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.
Accordingly, we recognized an impairment loss on property and equipment of $43,671. -29- 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.
Research and development costs During the year ended December 31, 2022, we incurred $514,957 in research and development costs with a related party in connection with the development of our Metaverse software development project which is in the preliminary stage. We did not incur any research and development costs in the 2021 period.
Research and development costs 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.
The application integrates with iMessage, making private messages potentially available to hundreds of millions of users. The Habytat In June 2022, we formed a wholly owned subsidiary, SmarterVerse, Inc. (“SmarterVerse”). In July 2022, SmarterVerse entered into a development agreement with MetaBizz, LLC, an infrastructure firm that creates and develops 4D experiences in the metaverse (“MetaBizz”).
(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”).
The application also includes a screen shot protection system, which makes it virtually impossible for the recipient to screenshot a message or picture before it gets destroyed.
Users can decide how long their messages last on the recipient’s device. The application also includes a screen shot protection system, which makes it virtually impossible for the recipient to screenshot a message or picture before it gets destroyed. In addition, users can delete entire conversations at any time, making it like the conversation never even happened.
Stock-based compensation expense amounted to $3,173,401 and $1,090,027 for the years ended December 31, 2022 and 2021, respectively, and was attributable to the accretion of stock option expense. -32- Marketing and advertising expenses Marketing and advertising expenses for the years ended December 31, 2022 and 2021, were $828,736 and $5,090,763, respectively, a decrease of $4,262,027 or 83.7%, primarily due to a decrease in promotions, branding and digital marketing strategy and social media ads.
Marketing and advertising expenses 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.
Cash Flows from Investing Activities Net cash used in investing activities amounted to $11,209,126 and $56,039 for the years ended December 31, 2022, and 2021, respectively.
Cash Flows from Investing Activities 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. During the years ended December 31, 2023, we purchased short-term investments of $8,599,121 and received gross proceeds from the sale of short-term investments of $14,745,000.
Currently, once users download The Habytat application, we plan to grant each user rights to use a designated piece of virtual property in Geniuz City through the minting and issuance of a unique NFT .
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.
Net Loss For the foregoing reasons, our net loss for the years ended December 31, 2022 and 2021 was $12,138,572, or ($0.60) per common share (basic and diluted) and $10,829,034, or ($0.71) per common share (basic and diluted), respectively, an increase of $1,309,538, or 12.1%.
Net Loss 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%.
In addition, users can delete entire conversations at any time, making it like the conversation never even happened. -28- In addition to the foregoing, the application also provides users with the ability to connect via an encrypted live video chat that also is designed to prevent screenshots or screen grabs.
In addition to the foregoing, the application also provides users with the ability to connect via an encrypted live video chat that also is designed to prevent screenshots or screen grabs. The application integrates with iMessage, making private messages potentially available to hundreds of millions of users. Habytat In June 2022, we formed a wholly owned subsidiary, Dragon Interactive, Inc.
Recently. we have expanded our business and product offerings to include the co-development of a mobile-based social metaverse, known as “The Habytat”, as well as the development of VenVūū, an advertising and non-fungible token (“NFT”) monetization platform. DatChat Messenger & Private Social Network Our platform allows users to exercise control over their messages and posts, even after they are sent.
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.
Cash Flows from Financing Activities Net cash (used in) provided by financing activities totaled approximately $(203) and $27,643,282 for the nine months ended September 30, 2022, and 2021, respectively. During the nine months ended September 30, 2022, we repaid related party advances of $203.
Cash Flows from Financing Activities 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.
Net cash provided by financing activities totaled approximately $1,112 and $28,019,855 for the years ended December 31, 2022 and 2021, respectively. 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.
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. Off-Balance Sheet Arrangements We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.
In addition, we used cash in operations of $7,258,765 for the year ended December 31, 2022. We have an accumulated deficit of $39,729,118 at December 31, 2022 and have generated minimal revenues since inception.
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.
We did not incur any impairment charges in the 2021 period. -33- Loss from Operations For the year ended December 31, 2022, loss from operation amounted to $12,226,725 as compared to $10,838,550 for the year ended December 31, 2021, an increase of $1,388,175, or 12.8%.
Loss from Operations 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%.
Short-term investments include U.S. Treasury bills and certificates of deposit that are all highly rated and have initial maturities between four and twelve months. These events served to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern.
Liquidity, Capital Resources and Plan of Operations 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.
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Geniuz City is intended to be a near photo-realistic world that is based on the city of Miami and its surrounding areas. Geniuz City has been designed in a manner that can enable users to participate in a number of different activities, such as parties, business conferences, shopping, socializing, and game play.
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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.
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NFTs (or non-fungible tokens) are digital assets that can represent a unique real-world asset, such as art, music, in-game items, videos, or a piece of real estate or virtual property. Users will initially be able to choose the style of house they want, then start customizing it to represent their personal style and taste.
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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.
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In addition, we plan to offer users the ability to have their own pets in the Habytat, which they will need to care for and can train to follow basic obedience commands.
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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. Users will be able to customize their virtual property to represent their personal style and taste.
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Finally, as described below, we plan to integrate our VenVūū, platform and VenVūū, dynamic NFTs (collectively, VenVūū,”) into The Habytat, and that such integration will enable us and users to generate advertising-based revenues in The Habytat. VenVūū We are currently developing VenVūū, an advertising and NFT monetization platform.
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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. As of March 28, 2024, we had over 140,000 Habytat users.
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VenVūū is based upon a proprietary metaverse ad network and dynamic NFT technology which we believe will allow advertisers and landowners to connect in the metaverse. Management believes that metaverse advertising parallels reality,.and that VenVūū can be considered as a parallel to billboards in the real world or “Google Ads” within the internet.
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Mobile Metaverse In May 2023, we launched the open mobile metaverse, Habytat 1.0, as part of our mission to democratize access to the metaverse.
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Through the integration of VenVūū, which advertises in a way similar to a billboard or video screen, we plan to enable users of The Habytat opportunities to monetize their virtual property rights by directly displaying approved advertisements on their virtual property.
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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.
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While we currently plan to launch VenVuu in the Habytat, it may also by interoperable within other metaverses in the future We believe that these features can potentially provide brands with the ability to run campaigns that target the land parcels they want to reach, simultaneously across multiple metaverses.
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We have assembled a team of over twenty game developers, graphic artists and back-end developers to create Habytat 1.0. -25- HabyPets 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.
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Recent Events On January 10, 2023, we announced that our Board of Directors has authorized a Stock Repurchase Plan under which the Company may repurchase up to $2,000,000 of the Company’s outstanding common stock, par value $0.0001 per share. Additionally, the Board has approved EF Hutton to be engaged as the broker to implement the Repurchase Plan.
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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.
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As of March 29, 2023, the Company reported that it has purchased $480,025 shares of common stock at an average price of $0.648 per share. -29- Risks and Uncertainties In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine.
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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.
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Use of estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates.
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Myseum 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.
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Significant estimates include the valuation of deferred tax assets, and the value of stock-based compensation expenses. -30- Short-term investments The Company considers investments with original maturities greater than three months and remaining maturities less than one year to be short-term investments. Short-term investments include U.S.
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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. Spin-off and Name Change 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.
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Treasury bills and certificates of deposit that are all highly rated and have initial maturities between four and twelve months. Short-term investments are carried at fair value, which is based on quoted market prices for such securities, if available, or is estimated on the basis of quoted market prices of financial instruments with similar characteristics.
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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.
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For the year ended December 31, 2022, net unrealized gain on short-term investments of $47,672 and realized gain on short-term investments of $28,176 are reported in other income (expenses) on the consolidated statements of operations.
Added
In February 2024, Darin Myman was appointed as President of SmarterVerse. In February 2024, SmarterVerse changed its name to Dragon Interactive Corporation. 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.
Removed
Revenue recognition The Company recognizes revenue in accordance with ASC Topic 606 Revenue from Contracts with Customers, which requires revenue to be recognized in a manner that depicts the transfer of goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.
Added
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.
Removed
The Company recognizes revenues from subscription fees on the Company’s messaging application in the month they are earned. Annual and lifetime subscription payments received that are related to future periods are recorded as deferred revenue to be recognized as revenues over the contract term or period.
Added
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.
Removed
Lifetime subscriptions are being recognized to revenues over a 12-month period. -31- The Company’s NFT revenues were generated from the sale of NFTs. The Company accepts Ethereum as a form of payment for NFT sales. The Company’s NFTs exist on the Ethereum Blockchain under the Company’s VenVuu brand.
Added
Recent Events 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.
Removed
VenV uu is an iMetaverse advertising platform that allows advertisers and metaverse landowners to connect using the Company’s proprietary metaverse ad network and dynamic NFT technology. The Company uses the NFT exchange, OpenSea, to facilitate its sales of NFTs.
Added
Such costs are included in research and development costs on the accompanying consolidated statement of operations. -27- Variable interest entities Pursuant to ASC 810-10-25-22 , an entity is defined as a VIE if it either lacks sufficient equity to finance its activities without additional subordinated financial support, or it is structured such that the holders of the voting rights do not substantively participate in the gains and losses of the entity.
Removed
The Company, through OpenSea, has custody and control of the NFT prior to the delivery to the customer and records revenue at a point in time when the NFT is delivered to the customer and the customer pays. The Company has no obligations for returns, refunds or warranty after the NFT sale.
Added
When determining whether an entity that meets the definition of a business qualifies for a scope exception from applying VIE guidance, the Company considers whether: (i) it has participated significantly in the design of the entity, (ii) it has provided more than half of the total financial support to the entity, and (iii) substantially all of the activities of the VIE are conducted on its behalf.
Removed
The value of the sale is determined based on the value of the Ethereum crypto currency received as consideration. Each NFT that is generated produces a unique identifying code.
Added
A VIE is consolidated by its primary beneficiary, the party that has the power to direct the activities that most significantly impact the VIE’s economic performance and has the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE.
Removed
Research and Development Research and development costs incurred in the development of the Company’s products are expensed as incurred and includes costs such as outside development costs and other allocated costs incurred.
Added
The primary beneficiary assessment must be re-evaluated on an ongoing basis.
Removed
For the year ended December 31, 2022, research and development costs incurred in the development of the Company’s software products with a related party were $514,957 and are included in research and development expense – related party on the accompanying consolidated statements of operations.
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