DatChat(DATS) - 2024 Q3 - Quarterly Report

Financial Performance - Revenue for the three months ended September 30, 2024, was $62, a decrease of 64.6% compared to $175 for the same period in 2023 [157]. - Operating expenses for the three months ended September 30, 2024, decreased to $1,238,246, down 51.3% from $2,542,326 in 2023 [159]. - Compensation and related expenses for the three months ended September 30, 2024, were $461,422, a decrease of 63.0% from $1,247,302 in 2023 [161]. - Marketing and advertising expenses for the three months ended September 30, 2024, were $34,134, down 84.4% from $219,008 in 2023 [163]. - Research and development expenses for the three months ended September 30, 2024, were $363,472, a decrease of 4.4% from $380,017 in 2023 [167]. - Net loss for the three months ended September 30, 2024, was $1,183,458, a decrease of 50.0% from $2,364,580 in 2023 [177]. - Net cash used in operating activities for the nine months ended September 30, 2024, was $3,507,202, a decrease of 32.1% from $5,159,510 in 2023 [185]. - Net cash flow used in operating activities for the nine months ended September 30, 2024 was $3,949,373, an improvement from a net loss of $7,051,024 for the same period in 2023 [186][187]. - The accumulated deficit as of September 30, 2024, was $51,526,948, raising substantial doubt about the company's ability to continue as a going concern [179]. Cash Flow and Investments - Cash and cash equivalents as of September 30, 2024, were $632,497, with short-term investments totaling $3,919,697 [178]. - Cash flows from investing activities provided $1,269,566 in 2024, a decrease from $4,496,890 in 2023 [188][189]. - The company received gross proceeds from the sale of short-term investments of $9,757,175 in 2024, compared to $9,845,000 in 2023 [188][189]. - Net cash provided by financing activities totaled approximately $1,916,771 in 2024, a significant increase from a net cash used of $(398,284) in 2023 [190][191]. - The company raised $559,251 from the sale of common stock and $495,998 from the sale of subsidiary common stock during the nine months ended September 30, 2024 [190]. - The company purchased short-term investments totaling $8,487,609 in 2024, compared to $5,363,163 in 2023 [188][189]. Business Developments - The company currently owns approximately 45.5% of Dragon, the entity that operates the Habytat platform business, following a planned spin-off to create a standalone public company [143]. - The company launched the open mobile metaverse, Habytat 1.0, in May 2023, aiming to democratize access to the metaverse by offering free ownership of virtual land and homes [140]. - The company introduced HabyPets in August 2023, an AI-powered interactive pet experience within the Habytat world, enhancing user engagement [141]. - The company is developing "Myseum," a platform scheduled to launch in the second half of 2024, allowing users to create personal museums for sharing digital media [142]. - The company aims to leverage its patents and develop new technology to enhance user experience in the metaverse, particularly through the Habytat platform [136]. - The company has assembled a team of over twenty game developers and graphic artists to support the development of Habytat 1.0 [140]. - The company plans to utilize the "Nirad" as the official in-world currency of Habytat, which can be earned through participation and used to upgrade properties [138]. Consolidation and Financial Adjustments - The company recorded a gain on initial consolidation of variable interest entities of $42,737 on February 14, 2023, related to Metabizz, LLC and Metabizz SAS [152]. - The company deconsolidated Metabizz, LLC and Metabizz SAS on March 31, 2024, and recorded a gain on deconsolidation of $107 during the nine months ended September 30, 2024 [154]. - The company recorded a research and development expense of $166,667 related to the acquisition of RenAI Software [168]. - The company reported a non-cash research and development expense of $166,667 for the nine months ended September 30, 2024 [186]. - The company experienced a foreign currency exchange loss of $12,965 in 2024 [186]. - The company has not entered into any financial guarantees or derivative contracts that are not reflected in its financial statements [191]. - The company intends to rely on exemptions under the JOBS Act until it no longer qualifies as an "emerging growth company" [194].