What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-29 compared with 2023-03-31 · 417 added, 415 removed, 10 unchanged (99% of the section changed)

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.

In addition to historical information, this discussion and analysis contains

forward-looking statements that involve risks, uncertainties and assumptions.

Our actual results may differ materially from those discussed

Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those

discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.

All amounts in this

report are in U.S.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

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.

In addition to historical information,

this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

Our actual results

may differ materially from those discussed below.

Factors that could cause or contribute to such differences include, but are not limited

to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report

on Form 10-K.

All amounts in this report are in U.S.

dollars, unless otherwise noted.

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.

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.

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

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

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 with others.

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 deserve.

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.

Messenger & Private Social Network

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

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.

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.

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.

June 2022, we formed a wholly owned subsidiary, Dragon Interactive, Inc.

(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”).

In August 2022, we launched the “Habytat”, a virtual space that

blends real world and virtual realities into one, in real time, using emerging technology like virtual and augmented reality, to create

a highly immersive 3D environment.

Habytat is supported by proprietary artificial intelligence (“AI”) and utilizes a machine

learning engine to develop more realistic looking content, daily rewards, games, and new utilities that are designed to further enhance

the user experience in an engaging way.

Our goal is to leverage our patents and develop new technology that leads to more people joining

and seeing the value in the metaverse.

Currently, the development agreement is not active.

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.

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 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.

Geniuz City is designed to be a near photo-realistic world based on Miami’s Wynwood arts

district and its surrounding areas.

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.

will be able to customize their virtual property 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 Habytat, and such rewards can be used to enhance,

expand, and improve their virtual property.

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.

of March 28, 2024, we had over 140,000 Habytat users.

May 2023, we launched the open mobile metaverse, Habytat 1.0, as part of our mission to democratize access to the metaverse.

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

We have assembled a team of over twenty game developers, graphic artists and back-end developers to create Habytat 1.0.

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.

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.

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.

are currently developing “Myseum,” a platform that will allow users to create a personal museum designed to easily share

pictures, videos and documents utilizing planned features, such as creating instant sharing spaces at family gatherings, time released

video messages, multi-tiered social media, and secure family document storage and sharing.

Currently, Myseum is scheduled to launch in

the second quarter of 2024 and will encompass features and social networking technology designed to unlock and share digital media.

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.

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

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.

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.

proposed distribution remains subject to approval by our board of directors as well as other customary conditions, including the filing

and effectiveness of either a Form S-1 or Form 10 registration statement with the U.S.

Securities and Exchange Commission and obtaining

of any other required regulatory approvals.

Upon consummation of the proposed distribution, Dragon Interactive would become a standalone

public company with plans 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.

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.

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 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.

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

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

The financial statements contained herein have

been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.

and the requirements of the Securities and Exchange Commission.

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.

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 consolidated financial statements.

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.

Significant estimates include the valuation

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.

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.

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.

of Presentation

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.

Critical Estimates

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.

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

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 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.

for digital currencies and other digital assets

Company purchases Ethereum cryptocurrency (“Ethereum”) and other digital assets and accepts Ethereum as a form of payment

for non-fungible tokens sales (NFTs).

The 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

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.

The 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

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.

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.

The Company 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

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.

Gains are not recorded until realized upon sale, at which point they are presented

net of any impairment losses for the same digital assets held.

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.

losses and gains or losses on sales are recognized within operating expenses in the consolidated statements of operations.

year ended December 31, 2022, the Company recorded an impairment loss of $119,276.

internal-use software costs

incurred to develop internal-use software including Metaverse software development, are expensed as incurred during the preliminary project

Internal-use software development costs are capitalized during the application development stage, which is after:

(i) the preliminary

project stage is completed;

and (ii) management authorizes and commits to funding the project and it is probable the project will be

completed and used to perform the function intended.

Capitalization ceases at the point the software project is substantially complete

and ready for its intended use, and after all substantial testing is completed.

Upgrades and enhancements are capitalized if it is probable

that those expenditures will result in additional functionality.

Amortization is provided for on a straight-line basis over the expected

useful life of the internal-use software development costs and related upgrades and enhancements.

When existing software is replaced

with new software, the unamortized costs of the old software are expensed when the new software is ready for its intended use.

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.

Such costs are included in research and development costs on the accompanying consolidated statement

of operations.

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.

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.

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.

The primary beneficiary assessment must be re-evaluated on an ongoing basis.

Based on the Company’s analysis, on February

14, 2023, Metabizz, LLC, a Florida corporation, and Metabizz SAS, a company incorporated under the laws of Columbia (collectively “Metabizz”),

were determined to be VIE entities in accordance with ASC 810-10-25-22 because the equity owners in Metabizz do not have the characteristics

of a controlling financial interest and the initial equity investments in these entities may be or are insufficient to meet or sustain

its operations without additional subordinated financial support from DatChat.

The equity owners of Metabizz have only a nominal equity

investment at risk, and the Company absorbs or receives a majority of the entity’s expected losses or benefits.

The Company participates

significantly in the design of Metabizz.

The Company has provided working capital advances to Metabizz to allow Metabizz to fund its day

to day obligations.

Substantially all of the activities of Metabizz are conducted for the Company’s benefit, as evidenced by the

fact that the operations of Metabizz consists of development of software and technologies to be used by SmarterVerse and the Company provides

work capital to Metabizz to pay employees and independent contractors to perform the development services on behalf of the Company.

of the working capital advances is not guaranteed by the equity owner of Metabizz and creditors of Metabizz do not have recourse against

Accordingly, the Company is required to consolidate the assets, liabilities, revenues and expenses of Metabizz using the

fair value method.

Additionally, the managing partner of Metabizz is also the Chief Innovation Officer of SmarterVerse.

Since Metabizz,

LLC and Metabizz SAS are considered VIE’s, any noncontrolling interest eliminates in consolidation.

In connection with the initial consolidation of

Metabizz, on February 14, 2023 (the initial consolidation date), the Company recorded a gain on initial consolidation of variable interest

entities of $42,737.

compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock

Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee, non-employee

and director services received in exchange for an award of equity instruments over the period the employee, non-employee or director

is required to perform the services in exchange for the award (presumptively, the vesting period).

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

applied ASC Topic 842, Leases (Topic 842) to arrangements with lease terms of 12 months or more.

Operating lease right of use assets

(“ROU”) represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based

on the present value of the future minimum lease payments over the lease term at commencement date.

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.

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.

Issued Accounting Pronouncements

to the notes to the audited financial statements.

of Operations

the years ended December 31, 2023 and 2022, we generated revenues of $672 and $46,214, respectively.

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 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

Stock-based compensation is accounted for based

on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation” (“ASC 718”),

which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange

for an award of equity instruments over the period the employee, non-employee or director is required to perform the services in exchange

for the award (presumptively, the vesting period).

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.

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

842) to arrangements with lease terms of 12 months or more.

Operating lease right of use assets (“ROU”) represents the right

to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum

lease payments over the lease term at commencement date.

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.

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.

Results of Operations

During the years ended December 31, 2022 and 2021, we generated revenues

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.

We do not expect to generate any revenues from the sale of NFT’s

in the near future.

the year ended December 31, 2023, operating expenses amounted to $8,784,703 as compared to $12,272,939 for the year ended December 31

2022, a decrease of $3,488,236, or 28.4%.

For the years ended December 31 2023 and 2022, operating expenses consisted of the following:

Ended December 31,

and related expenses

and advertising expenses

and consulting expenses

and development

and administrative expenses

loss on property and equipment and intangible assets

loss on digital currencies and other digital assets

and related expenses

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

the year ended December 31, 2023 and 2022, compensation and related expenses amounted to $4,760,180 and $6,551,776, respectively, a decrease

of $1,791,596, or 27.3%.

The decrease was attributable to a decrease in stock-based compensation of $1,170,624 and a decrease in other

compensation and other related expenses of $620,972.

and advertising expenses

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

and consulting expenses

the years ended December 31, 2023 and 2022, we reported professional and consulting expenses of $1,324,640 and $2,285,312, respectively,

a decrease of $960,672, or 42.0%.

The decrease is attributable to a decrease in consulting fees of $154,396 which includes a decrease

in stock-based consulting fees of $96,431, a decrease in investor relations fees of $295,850, a decrease in legal fees of $224,180, and

a decrease in recruiting fees of $322,000, offset be an increase in other professional fees of $35,754.

and development costs

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,

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.

and administrative expenses

the years ended December 31, 2023 and 2022, general and administrative expenses amounted to $892,972 and $991,882, a decrease of $98,910,

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.

loss on property and equipment and intangible assets

the year ended December 31, 2023, we wrote off the balance of property and equipment held by MetaBizz since the property and equipment

was abandoned and no longer being used by the Company as of December 31, 2023.

Accordingly, we recognized an impairment loss on property

and equipment of $43,671.

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.

loss on digital currencies and other digital assets

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, 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,

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, 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.

Professional and consulting expenses

from Operations

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%.

Income (Expense)

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 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, 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, 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.

we reported other income, net of $379,061 and $88,153, respectively.

During the year ended December 31, 2023, other income, net primarily

consisted of interest income of $9,281, gain on initial consolidation of variable interest entities of $42,737, and a realized gain on

short-term investments of $327,145.

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, 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

As of December 31, 2022, we had cash totaling

approximately $1,732,956.

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 $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.

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%.

Capital Resources and Plan of Operations

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

Treasury bills that are all highly rated and have initial maturities between four and twelve months.

The consolidated financial statements have been

prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the

normal course of business.

As reflected in the accompanying consolidated financial statements, we had a net loss of $8,404,970 for the

year ended December 31, 2023.

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,

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,

2023, we had working capital of $5,969,447, including cash of $953,362 and short-term investments of $5,236,781.

These factors raise substantial

doubt about our ability to continue as a going concern for a period of twelve months from the issuance date of this report.

cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or

equity capital.

We are seeking to raise capital through additional debt and/or equity financings to fund our operations in the future.

Although we have historically raised capital from sales of common shares, there is no assurance that it will be able to continue to do

If we are unable to raise additional capital or secure additional lending in the near future, management expects that the Company

will need to curtail its operations.

These consolidated financial statements do not include any adjustments related to the recoverability

and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue

as a going concern.

On January 16, 2024, we entered into an underwriting

agreement (the “Underwriting Agreement”) with EF Hutton LLC (the “Representative”), as the representative of the

underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “Offering”)

of 382,972 shares of the Company’s common stock (the “Shares”) and pre-funded warrants to purchase up to 590,000 shares

of Common Stock (the “Pre-Funded Warrants”).

The public offering price for each share of Common Stock was $1.85 for aggregate

gross proceeds of $708,498, and public offering price for the Pre-Funded Warrants was $1.8499 for each Pre-Funded Warrant for aggregate

gross proceeds of $1,091,441.

In connection with this Offering, we raised aggregate gross proceeds of $1,799,939 and received net proceeds

of $1,437,940, net of Underwriters discounts and offering costs of $261,999 and legal fees of $100,000.

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.

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.

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

approximately $7,258,765 and $8,454,504 for the years ended December 31, 2022 and 2021, respectively.

Net loss for the years ended December

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

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

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

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

CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS AND FINANCIAL DISCLOSURE

Addition of administrative,

technical and sales personnel as the business grows, and

The cost of being a public

Flow Activities for the Years ended December 31, 2023 and 2022

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.

cash flow used in operating activities for the year ended December 31, 2023 primarily reflected a net loss of $8,404,970 adjusted for

the add-back (reduction) of non-cash items consisting of depreciation and amortization of $28,943, amortization of right of use assets

of $60,549, accretion of stock-based stock option and common stock expense of $2,254,079, a non-cash gain from initial consolidation

of variable interest entities of $(42,737), impairment loss on digital assets of $23,381, impairment of property and equipment of $43,671,

and net realized gain on short-term investments of $327,145, offset by changes in operating assets and liabilities primarily consisting

of a decrease in prepaid expenses of $5,797, a decrease in accounts payable and accrued expenses of $103,639, and a decrease in operating

lease liabilities of $67,339.

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.

Flows from Investing Activities

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.

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.

Additionally, we received $64,538 in cash upon initial consolidation of variable interest entities and purchased

property and equipment amounting to $49,485.

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.

Flows from Financing Activities

cash (used in) provided by financing activities totaled approximately $(398,284) and $1,112 for the years ended December 31, 2023 and

2022, respectively.

the year ended December 31, 2023, we repaid related party advances of $1,315, we used cash of $397,969 to purchase 66,945 treasury stock

at an average price of $5.94 per share, and we received $1,000 from the sale of Series B preferred stock.

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.

Sheet Arrangements

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.

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 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

a smaller reporting company, we are not required to provide the information required by this item.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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 ON ACCOUNTING 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