Myseum.AI, Inc. annual report, FY2021

Business context and reporting period

Filing identity: The supplied filing is DatChat, Inc.’s Form 10-K for the fiscal year ended December 31, 2021—not a filing identified as Myseum.AI, Inc. The filing describes DatChat, a communication software company, and its privacy-focused messaging application. The requested “2021 Q4” period is covered within this annual report; it does not provide a standalone fourth-quarter financial summary.

The application lets users delete sent messages and conversations, use encrypted messages that self-destruct, and access screenshot protections; it also integrates with iMessage. The company reported approximately 22,572 monthly active users, including approximately 16,620 Android users. It had minimal revenue and was developing additional messaging, social-network, and blockchain-related features.

Key financial metrics

Gross profit and gross margin are not clearly presented; with only $4,445 of revenue and no separate cost-of-revenue figure, a meaningful margin is not provided. Operating expenses were dominated by marketing and advertising ($5.09 million), compensation and related expenses ($2.96 million), and professional and consulting expenses ($2.10 million). The balance sheet reported no notes payable at year-end; operating lease liabilities totaled $204,909, including $53,897 current and $151,012 long-term.

Material changes versus the prior comparable period

• Revenue rose from zero to $4,445 but remained minimal; the company states it had not generated sustainable revenue since inception.
• Net loss increased to $10.83 million from $0.98 million. Marketing and advertising expense increased $4.87 million, compensation expense increased $2.47 million, and professional and consulting expense increased $1.84 million.
• Cash increased to $20.20 million from $0.69 million, mainly following the August 2021 IPO and subsequent warrant exercises. The IPO generated approximately $12.1 million in net proceeds; exercise of Series A warrants generated approximately $14.4 million gross proceeds.
• The company completed a one-for-two reverse stock split in July 2021. It issued 3,325,301 shares with Series A warrants in its IPO and issued 2,882,785 additional shares when warrants were exercised.

Outlook, risks, contingencies, and unusual items

Management said the 2021 financing proceeds were expected to provide sufficient cash flows to meet obligations for at least 12 months from the filing date. The filing provides no quantified revenue, earnings, or user-growth guidance. Management’s plan depends on growing users and developing monetization through subscriptions, in-app purchases, advertising, licensing, and business services; there is no assurance these plans will succeed.

• Going concern and funding: The company reported cumulative losses of $27.59 million, minimal revenue, and operating cash use of $8.45 million in 2021. Financing reduced the conditions that had historically raised substantial doubt about continued operations, but ongoing cash needs and access to future financing remain risks.
• Competition and execution: DatChat competes with established messaging platforms, has a limited operating history, and depends on user adoption, retention, product development, and monetization of a largely single-product business.
• Platform, infrastructure, and privacy: The company relies on Apple and Google distribution and on AWS hosting. It identifies risks from outages, cybersecurity incidents, intellectual-property disputes, and changing privacy and data-protection requirements.
• Controls: The filing contains conflicting statements about disclosure controls: one passage says they were effective, while another says they were not effective due to material weaknesses. The stated weaknesses include insufficient segregation of accounting duties, inadequate levels of management review, and inadequate system and manual controls. The external auditor did not attest to internal control effectiveness.
• Unusual expenses and items: Stock-based compensation was $2.30 million. The company expensed approximately $4 million for two social-media marketing campaigns in 2021. A $6,127 gain resulted from forgiveness of the PPP loan and accrued interest. The company also reported $19.9 million of cash above FDIC insurance limits at year-end, held at one financial institution.
• Subsequent events: In January 2022, DatChat signed a nonbinding letter of intent to acquire Avila Security for $1 million cash plus restricted stock valued at the greater of 739,650 shares or $2.5 million; the transaction had not closed as of the filing. The CFO changed in February 2022.
• Legal and commitments: The company reported no known legal proceedings expected to have a material adverse effect. Lease payments under the operating lease total $267,813 before the disclosed present-value discount.

Important facts for investors to verify

1. Confirm the issuer: the supplied filing is for DatChat, Inc., not Myseum.AI, Inc.
2. Review the audited financial statements and cash runway assumptions, particularly the relationship between $20.20 million of year-end cash and the company’s operating cash burn.
3. Resolve the filing’s inconsistent descriptions of disclosure-control effectiveness and assess the impact of the identified material weaknesses.
4. Check the status and final consideration for the proposed Avila Security acquisition, which was unclosed at filing.
5. Assess whether user growth, paid subscriptions, or other monetization has advanced beyond the minimal 2021 revenue base, and whether the company’s cash concentration and future financing needs have changed.