UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File No. 001-40729

DATCHAT, INC.

(Exact name of registrant as specified in its charter)

Nevada		47-2502264
(State or Other Jurisdiction		IRS Employer
of Organization)		Identification Number

204 Neilson Street,
New Brunswick, NJ		08901
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (732) 374-3529

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	DATS	The Nasdaq Stock Market LLC
Series A Warrants, each warrant exercisable for one share of Common Stock at an exercise price of $4.98 per share	DATSW	The Nasdaq Stock Market LLC

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 9, 2023, there were 2,103,321 shares of common stock, par value $0.0001 per share, issued and outstanding.

DATCHAT, INC.

FORM 10-Q

September 30, 2023

INDEX

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Consolidated Balance Sheets - As of September 30, 2023 (unaudited) and December 31, 2022	1
	Consolidated Statements of Operations and Comprehensive Loss - For the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	2
	Consolidated Statements of Changes in Stockholders’ Equity – For the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Cash Flows - For the Nine Months Ended September 30, 2023 and 2022 (unaudited)	5
	Condensed Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
Signatures		31

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement.

Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout our Annual Report on Form 10-K as filed with the SEC on March 31, 2023. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, but are not limited to:

	●	our business strategies;

	●	the timing of regulatory submissions;

	●	our ability to obtain and maintain regulatory approval of our existing product candidates and any other product candidates we may develop, and the labeling under any approval we may obtain;

	●	risks relating to the timing and costs of clinical trials and the timing and costs of other expenses;

	●	risks related to market acceptance of products;

	●	intellectual property risks;

	●	risks associated to our reliance on third party organizations;

	●	our competitive position;

	●	our industry environment;

	●	our anticipated financial and operating results, including anticipated sources of revenues;

	●	assumptions regarding the size of the available market, benefits of our products, product pricing and timing of product launches;

	●	management’s expectation with respect to future acquisitions;

	●	statements regarding our goals, intentions, plans and expectations, including the introduction of new products and markets;

	●	general business and economic conditions, such as inflationary pressures, geopolitical conditions including, but not limited to, the conflict between Russia and the Ukraine, the conflict between Israel and Gaza, and the effects and duration of outbreaks of public health emergencies, such as COVID-19; and

	●	our cash needs and financing plans.

The foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking statements. You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits our Annual Report on Form 10-K, completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the information appearing in this Quarterly Report on Form 10-Q is accurate as of the date hereof. Because the risk factors referred to in our Annual Report on Form 10-K, as filed with the SEC on March 31, 2023, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all the information presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DATCHAT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2023			2022
	(Unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	672,086		$	1,732,956
Short-term investments, at fair value		6,826,759			11,007,997
Accounts receivable		142			384
Prepaid expenses		277,928			134,752

Total Current Assets		7,776,915			12,876,089

OTHER ASSETS:
Property and equipment, net		108,492			79,694
Digital currencies and other digital assets		-			23,381
Operating lease right-of-use asset, net		90,254			134,526

Total Other Assets		198,746			237,601

Total Assets	$	7,975,661		$	13,113,690

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	390,317		$	404,600
Operating lease liability, current portion		79,354			67,338
Contract liabilities		78			186
Due to related party		-			1,315

Total Current Liabilities		469,749			473,439

LONG-TERM LIABILITIES:
Operating lease liability, less current portion		22,851			83,675

Total Long-Term Liabilities		22,851			83,675

Total Liabilities		492,600			557,114

Commitments and Contingencies (Note 8)

STOCKHOLDERS’ EQUITY:
Preferred stock ($0.0001 par value; 20,000,000 shares authorized)
Series A Preferred stock ($0.0001 Par Value;1 Share designated; none issued and outstanding on September 30, 2023 and December 31, 2022)		-			-
Series B Preferred stock ($0.0001 Par Value; 2,000,000 Share designated; 2,000,000 and none issued and outstanding on September 30, 2023 and December 31, 2022, respectively)		200			-
Common stock ($0.0001 par value; 18,000,000 shares authorized; 2,094,285 and 2,059,717 shares issued and outstanding on September 30, 2023 and December 31, 2022, respectively)		209			206
Common stock to be issued (139 shares on September 30, 2023 and December 31, 2022)		-			-
Additional paid-in capital		54,551,840			52,285,488
Treasury stock, at cost (66,944 shares on September 30, 2023)		(397,969	)		-
Accumulated other comprehensive gain		108,923			-
Accumulated deficit		(46,780,142	)		(39,729,118	)

Total Stockholders’ Equity		7,483,061			12,556,576

Total Liabilities and Stockholders’ Equity	$	7,975,661		$	13,113,690

See accompanying notes to unaudited consolidated financial statements.

DATCHAT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

SEC Form 10-Q filed by DatChat Inc.