What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-29 · 339 added, 126 removed, 86 unchanged (84% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITIONS AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

You should read the following discussion and

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dollars, unless otherwise noted.

We are a communication software company.

that one’s right to privacy should not end the moment they click “send.” Our flagship product, DatChat Messenger &

Private Social Network (the “Application”), is a mobile application that gives users the ability to communicate with privacy

and protection.

The Application allows users to exercise control

over their messages, even after they are sent.

Through the Application, users can delete messages that they have sent, on their own device

and the recipient’s device as well.

We are a blockchain, cybersecurity, and social

media company that not only focuses on protecting privacy on personal devices, but also protects user information after it is shared

We believe that one’s right to privacy should not end the moment they click “send” , and that we all deserve

the same right to privacy online that we enjoy in our own living rooms.

Our flagship product, DatChat Messenger & Private Social

Network, is a privacy platform and mobile application that gives users the ability to communicate with the privacy and protection they

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.

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.

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

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In addition, users can delete entire conversations at any time, making it like the conversation never even

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

The application integrates with iMessage, making

private messages potentially available to hundreds of millions of users.

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”).

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.

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.

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 .

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.

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.

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.

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.

We are currently developing VenVūū,

an advertising and NFT monetization platform.

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.

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.

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.

Recent Events

On July 28, 2021, the Company filed a certificate

of change to the Company’s amended and restated certificate of incorporation, with the Secretary of State of the State of Nevada

to effectuate a one-for-two (1:2) reverse stock split of the Company’s common stock.

Proportional adjustments for the Reverse Stock

Split were made to the Company’s outstanding stock options, warrants and equity incentive plans.

All share and per-share data and

amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the

Reverse Stock Split.

On August 17, 2021, the Company completed its

initial public offering (“IPO”), in which we issued 3,325,301 shares of our common stock and Series A warrants (the “Series

A Warrants”) to purchase up to 3,325,301 shares of our common stock for gross proceeds of approximately $13,800,000 before deducting

underwriting discounts, commissions, and other offering expenses, including legal expenses related to the Offering of approximately $1,718,000

which are offset against the proceeds in additional paid in capital resulting in net proceeds to the Company of approximately $12.1 million.

Additionally, between August 27, 2021 and October 5, 2021, the Company received aggregate gross proceeds of $14,356,272 from the exercise

of 2,882,785 Series A Warrants, resulting in an aggregate issuance of 2,882,785 shares of common stock.

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.

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.

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.

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

On August 16, 2022, the Inflation Reduction Act

of 2022 (the “IR Act”) was signed into federal law.

The IR Act provides for, among other things, a new U.S.

federal 1% excise

tax on certain repurchases of stock by publicly traded U.S.

domestic corporations and certain U.S.

domestic subsidiaries of publicly

traded foreign corporations occurring on or after January 1, 2023.

The excise tax is imposed on the repurchasing corporation itself,

not its shareholders from which shares are repurchased.

The amount of the excise tax is generally 1% of the fair market value of the

shares repurchased at the time of the repurchase.

However, for purposes of calculating the excise tax, repurchasing corporations are

permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same

taxable year.

In addition, certain exceptions apply to the excise tax.

Department of the Treasury (the “Treasury”)

has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

Management continues to evaluate the impact of

the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect

on the Company’s financial position and results of its operations, the specific impact is not readily determinable as of the date

of these financial statements.

These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation

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of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of

assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts

of revenue and expenses during the reported period.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported

amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements,

and the reported amounts of revenue and expenses during the reported period.

In accordance with U.S.

GAAP, we base our estimates on historical experience and

on various other assumptions we believe to be reasonable under the circumstances.

Actual results may differ from these estimates if conditions

differ from our assumptions.

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 financial statements.

GAAP, we base our estimates on historical

experience and on various other assumptions we believe to be reasonable under the circumstances.

Actual results may differ from these

estimates if conditions differ from our assumptions.

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.

Use of estimates

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of deferred tax assets, and the value of stock-based compensation expenses.

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

Treasury bills and certificates of deposit that are all highly rated and have initial maturities between four and twelve

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.

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.

Accounting for digital currencies and other

digital assets

The Company purchases Ethereum cryptocurrency

(“Ethereum”) and other digital assets and accepts Ethereum as a form of payment for non-fungible tokens sales (NFTs).

Company accounts for these digital assets held as the result of the purchase or receipt of Ethereum and other digital assets, as indefinite-lived

intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”).

The Company has ownership

of and control over its digital currencies and digital assets and the Company may use third-party custodial services to secure them.

digital currencies and digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred

since acquisition.

The Company believes that digital currencies and other digital assets meet the definition of indefinite-lived intangible

assets and accounts for them at historical cost less impairment, applying the guidance in ASC 350.

The Company monitors any standard-setting,

regulatory or technological developments that may affect the Company’s accounting for digital currencies or its controls and processes

related to digital currencies.

Digital currencies are included in long-term assets in the consolidated balance sheet.

The Company determines the fair value of its digital

currencies and other digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices

on the active exchange(s) that it has determined is the principal market for Ethereum (Level 1 inputs) and other digital assets.

performs an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on

active exchanges, indicate that it is more likely than not that its digital assets are impaired.

In determining if an impairment has occurred,

the Company considers the lowest market price quoted on an active exchange since acquiring the respective digital asset.

If the then current

carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the

amount equal to the difference between their carrying values and the fair value.

The impaired digital assets are written down to their

fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value.

are not recorded until realized upon sale, at which point they are presented net of any impairment losses for the same digital assets

In determining the gain or loss to be recognized upon sale, the Company calculates the difference between the sales price and carrying

value of the digital assets sold immediately prior to sale.

Impairment losses and gains or losses on sales are recognized within operating

expenses in the consolidated statements of operations.

During the year ended December 31, 2022, the Company recorded an impairment loss

Capitalized software costs

Costs incurred to develop internal-use software including Metaverse

software development, are expensed as incurred during the preliminary project stage.

Internal-use software development costs are capitalized

during the application development stage, which is after:

(i) the preliminary project stage is completed;

and (ii) management authorizes

and commits to funding the project and it is probable the project will be completed and used to perform the function intended.

Capitalization

ceases at the point the software project is substantially complete and ready for its intended use, and after all substantial testing is

Upgrades and enhancements are capitalized if it is probable that those expenditures will result in additional functionality.

Amortization is provided for on a straight-line basis over the expected useful life of the internal-use software development costs and

related upgrades and enhancements.

When existing software is replaced with new software, the unamortized costs of the old software are

expensed when the new software is ready for its intended use.

Software development costs incurred during the year ended December 31, 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.

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.

The Company recognize 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.

Lifetime subscriptions are being recognized to revenues over a 12-month

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.

The Company recognizes revenues from subscription fees on the Company’s messaging application in the month they

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.

Lifetime subscriptions are being recognized to revenues over a 12-month period.

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.

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.

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.

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.

Stock-based compensation

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services received in exchange for an award based on the grant-date fair value of the award.

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.

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.

The Company applied ASC Topic 842, Leases (Topic

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in the statements of operations.

Capital Expenditures

We do not have any contractual obligations for

ongoing capital expenditures at this time.

We do, however, purchase equipment and software necessary to conduct our operations on an

as needed basis.

Recently Issued Accounting Pronouncements

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Results of Operations

During the years ended December 31, 2021 and

2020, we generated minimal revenues from operations.

For the year ended December 31, 2021, revenues consisted of subscription revenues

of $4,445, as compared to $0 for the year ended December 31, 2020.

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.

do not expect to generate any revenues from the sale of NFT’s in the near future.

Compensation and related expenses

Compensation and related expenses for the years

ended December 31, 2021 and 2020, were $2,963,294 and $494,002, respectively, an increase of $2,469,292 or 500%, and relates to salaries,

health insurance and other benefits of our four officers and nine full time employees.

The increase in compensation is primarily related

to increase salaries and bonuses of our CEO, the hiring of three executive officers and additional employees, and stock-based compensation

related to option grants during the third quarter of fiscal 2021.

Compensation and related expenses for the years ended December 31,

2022 and 2021, were $6,551,776 and $2,963,294, respectively, an increase of $3,588,482 or 121.1%.Compensation and related expenses include

salaries, stock-based compensation, health insurance and other benefits.

The increase in compensation and related expenses is primarily

related to increase in the number of full-time employees, and an increase in stock-based compensation.

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.

Marketing and advertising expenses

Marketing and advertising expenses for the years

ended December 31, 2021 and 2020, were $5,090,763 and $220,881, respectively, an increase of $4,869,882 or 2,205%, primarily due to increase

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.

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During the years ended December 31, 2022 and 2021,

2020, we reported professional and consulting fees of $2,100,317 and $263,245, respectively, an increase of $1,837,072 or 698%, which

are principally comprised of the following items:

We incurred $1,657,292 and $173,485 of consulting fees for general advisory consulting,

investor relation, technology services, and other incidental services for the year ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021 and 2020, $1,213,350 and $20,000, respectively, of these services were primarily related

to stock based consulting expenses from stock option grants to various consultants of $443,350 and accretion of deferred stock-based

consulting fees of $350,000 and common stock issued for services valued on the date of grant at its estimated fair value using recent

sales of common stock of $420,000.

The remaining amounts attributed to professional and consulting fees incurred during

the years ended December 31, 2021 and 2020 were primarily attributed to legal, accounting fees and investor fees which amounted to

$443,025 and $89,760, respectively.

The increase during the years ended December 31, 2021 were primarily due to legal and accounting

services for our public filings related to our Nasdaq listing.

we reported professional and consulting fees of $2,285,312 and $2,181,317, respectively, an increase of $103,995 or 4.8%, which are principally

comprised of the following items:

$514,469 and $1,657,292 of consulting fees for general advisory consulting, investor relation, technology services, and other incidental

services for the year ended December 31, 2022 and 2021, respectively.

During the year ended December 31, 2022 and 2021, $347,733 and

$1,213,350, respectively, related to stock-based consulting expenses from stock option grants to various consultants, accretion of deferred

stock-based consulting fees and common stock issued for services.

The remaining

amounts attributed to professional and consulting fees incurred during the years ended December 31, 2021 and 2022 were primarily attributed

to legal fees, accounting fees, recruitment fees, and investor relations fees which amounted to $1,770,843 and $524,025, respectively.

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.

General and administrative expenses

General and administrative expenses for the years

ended December 31, 2021 and 2020, were $688,621 and $106,303, an increase of $582,318 or 548%.

General and administrative expenses primarily

consisted of the following expense categories:

insurance, travel, utilities, office related expenses, public company expenses, and rent

Such increase was primarily attributable to increase in insurance, travel, office expenses, rent, and public company expenses

primarily related to our Nasdaq listing.

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.

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.

We determined the

value of the patents acquired were fully impaired as of December 31, 2022 and recognized an impairment loss on its long-lived intangible

assets of $981,000.

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.

incur any impairment charges in the 2021 period.

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%.

Other Income (Expense)

During the years ended December 31, 2021 and

2020, we reported other income of $9,516 and $104,961, respectively.

During the year ended December 31, 2021, other income primarily

consisted of interest income of $3,516, offset by interest expense of $127 and gain from forgiveness of debt of $6,127.

During the year

ended December 31, 2020, other income primarily consisted of gain on extinguishment of a convertible note totaling $143,353, and other

income of $7,000 from grant received from the SBA under the SBA’s Economic Injury Disaster Loan assistance program in light of

the impact of the COVID-19 pandemic in 2020.

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.

During the year ended December 31, 2022, other income primarily consisted of interest income of $12,305,

a realized gain on short-term investments of $28,176, and an unrealized gain on short-term investments of $47,672.

During the year ended

December 31, 2021, other income primarily consisted of interest income of $3,516, offset by interest expense of $127 and gain from forgiveness

of debt of $6,127.

For the foregoing reasons, our net loss for the

years ended December 31, 2021 and 2020 was $10,829,034 and $979,470, respectively.

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%.

Liquidity, Capital Resources and Plan of Operations

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approximately $1,732,956.

We were incorporated on December 4, 2014 and

have generated minimal revenues to date.

We were incorporated on December 4, 2014 and have

generated minimal revenues to date.

For the year ended December 31, 2022, we had a net loss of $12,138,572.

In addition, we used

cash in operations of $8,454,504 for the year ended December 31, 2021.

We have an accumulated deficit of $27,590,546 at December 31,

2021 and have generated minimal revenues since inception.

During the year ended, the Company has received net proceeds of approximately

$13.7 million from the sale of its securities in connection with an initial public offering and gross proceeds of approximately $14.4

million from the exercise of the Company’s Series A warrants.

These events served to mitigate the conditions that historically

raised substantial doubt about the Company’s ability to continue as a going concern.

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.

During the year ended December 31, 2022, the Company has received no net proceeds from

the sale of its securities and no gross proceeds from the exercise of the Company’s Series A warrants.

As of December 31, 2022,

we had cash and cash equivalents of $1,732,956.

Additionally, on December 31, 2022, we had short-term investments of $11,007,997.

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.

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

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.

The following trends are reasonably likely to result in changes in our liquidity over the near to long

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.

On August 17, 2021, the Company completed its

initial public offering (“IPO”), in which we issued 3,325,301 shares of our common stock and Series A warrants (the “Series

A Warrants”) to purchase up to 3,325,301 shares of our common stock for gross proceeds of approximately $13,800,000 before deducting

underwriting discounts, commissions, and other offering expenses, including legal expenses related to the Offering of approximately $1,718,000

which are offset against the proceeds in additional paid in capital resulting in net proceeds to the Company of approximately $12.1 million.

Additionally, between August 27, 2021 and October 5, 2021, the Company received aggregate gross proceeds of $14,356,272 from the exercise

of 2,882,785 Series A Warrants, resulting in an aggregate issuance of 2,882,785 shares of common stock.

Net cash used in operating activities totaled

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31, 2022 and 2021 totaled approximately $12,138,572 and $10,829,034, respectively.

For the year ended December 31, 2021, net loss was adjusted

for stock-based compensation of $2,303,377, amortization expense of $43,221, depreciation of $2,319, offset by gain from forgiveness

of debt of $6,127 and operating changes were a net increase of $31,740 primarily due to increase in prepaid expenses of $351,713 and

accounts payable and accrued expenses of $397,502.

During the year ended December 31, 2020, net loss was adjusted for stock-based compensation

expense of $20,000 and amortization expense of $23,948, offset by gain from extinguishment of debt of $143,353.

Total accounts payable

and accrued expenses increased by $26,506, prepaid expenses increased by $19,260 and operating lease liabilities decreased by $23,948

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.

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.

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

Net cash used investing activities was $56,039

for the year ended December 31, 2021 as compared to $0 for the year ended December 31, 2020.

Net used in investing activities for the

year ended December 31, 2021 consisted of purchases of property and equipment.

31, 2021, we purchased property and equipment of $56,039.

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.

During the nine months ended September 30, 2021, financing activities

was primarily attributable to net proceeds of approximately $13,671,074 from the sale of common stock, $13,979,370 from the exercise of

Series A warrants and $161,567 of advances from a related party, offset by the repayment of related party advances of $161,229 and the

repayment of related-party notes of $7,500.

Net cash provided by financing activities totaled

1 unchanged sentence

During the year ended December 31,

31, 2021, financing activities was primarily attributable to net proceeds of approximately $13,671,074 from the sale of common stock,

$14,356,272 from the exercise of Series A warrants and $177,624 of advances from a related party, offset by $177,615 repayment of related

party advances and $7,500 repayment of related-party notes.

During the year ended December 31, 2020, financing activities was primarily

attributable to net proceeds of $1,881,675 from the sale of common stock and $265,623 of advances from a related party and proceeds from

notes payable of $6,042, offset by $279,114 repayment of related party advances, $150,000 repayment of convertible notes payable and

$9,000 repayment of related-party notes.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

As a smaller reporting company, we are not required to provide the

information required by this item.

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, 2021, financing activities was primarily attributable to net proceeds of

approximately $13,671,074 from the sale of common stock, $14,356,272 from the exercise of Series A warrants and $177,624 of advances from

a related party, offset by $177,615 repayment of related party advances and $7,500 repayment of related-party notes.

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.

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.

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 do not have any variable interest in any unconsolidated entity that provides financing, liquidity,

market risk or credit support to us or engages in leasing, hedging or research and development services with us.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

As a smaller reporting company, we are not required

to provide the information required by this item.

FINANCIAL STATEMENTS AND SUPPLEMENTARY

Our financial statements are contained in pages F-1 through F-15,

which appear at the end of this Annual Report on Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL

Our financial statements are contained in pages

F-1 through F-22, which appear at the end of this Annual Report on Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis