Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes for the year ended December 31, 2025 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC. 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 Quarterly Report on Form 10-Q. All amounts in this report are in U.S. dollars, unless otherwise noted.

Overview

We are a privacy and social media technology company focused on innovative and creative user platforms. Our flagship platform is "Picture Party by Myseum", a next-generation social sharing platform that makes it easier to share your photos and videos both today, and for generations to come. Our innovative social media platform brings a fresh and needed approach to digital media and content management, allowing users to create a digital legacy that makes it easier to share both today, and with future generations. The platform is backed by both patented technology and proprietary software.

We also operate the DatChat Messenger & Private Social Network, which presents technology that allows users to change how long their messages can be viewed before or after users send them, prevents screenshots, and hides encrypted photos in plain sight on camera rolls. The patented technology offers users a traditional texting experience while providing control and security for their messages. With the DatChat Messenger, a user can decide how long their messages last on a recipient's device while feeling secure that at any time, and delete individual messages or entire message threads, making it like the conversation never happened.

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.

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 screenshot 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.

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 grabs. The application integrates with iMessage, making private messages potentially available to hundreds of millions of users.

Myseum Social Media Platform

In March 2025, we launched our Myseum social media platform, an innovative social media platform that brings a fresh approach to digital media and content management, allowing users to create a digital legacy that can be easily shared today and with future generations. Backed by Proprietary technology, the multi-tiered social media ecosystem enables individuals, families, and other groups to store and share digital content such as messages, photos, videos, and documents within a highly secure and private family library. Myseum allows users to create amazing albums and galleries for everyone to see, create special private and secure galleries with limited access, personalize a user's newsfeed with updates from other Myseums and leave time released video messages for both now and future generations.

Picture Party Platform

In December 2025, we launched Picture Party by Myseum, a new instant social networking and social sharing platform designed to address growing concerns around content control, security, and intentional digital connection. The platform was developed to capitalize on the widespread need for a more controlled and purposeful way to share photos and videos-one that solves persistent privacy and ownership challenges not adequately addressed by existing social media offerings. Picture Party by Myseum introduces a new way to make sharing photos and videos easier, a lot more fun and private. Picture party is much more than a shared album; it's a complete personal and private social network with a live feed that updates instantly as all guests' posts. A user can share a post with dozens of pictures, comment and react. It even organizes the photos in an album, or the user can relive the Picture Party with all the comments and posts as they happened. Unlike group chats that are unorganized, no matter when a user joins the Picture Party, they can see everything from the beginning. Picture Party by Myseum makes it easier and more fun to share with the people right next to the user, or anywhere in the world.

Picture Party by Myseum solves everyday sharing frustrations by eliminating the common headaches of modern photo sharing:

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No more passing around a phone for others to view photos and videos.

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No more crowds gathering over a user's shoulder to see a clip.

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No more debating whether to text, drop, email, or tag group photos.

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No more struggling with social media privacy, data exposure, or AI training risks.

Recent Events

Name Change and AI Developments

On April 15, 2026, the Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada to change the name of the Company to "Myseum.AI, Inc."

The rebrand illuminates the Company's core technology platform which will integrate proprietary privacy-first artificial intelligence (AI) into its secure messaging and social media platforms. The Company is developing privacy-first agentic localized AI agents that assist in managing personal media such as photos, videos, and messages, while maintaining privacy. The technology will adapt to individual patterns and preferences to better assist the user while maintaining data integrity and encryption to help ensure that user information is never shared with any other social platforms or large language models used to train traditional AI. The Company's goal is to maintain user privacy while providing personalized AI agents that can perform tasks such as creating user-defined albums automatically, turning photos into videos, repairing damaged media, sorting and identifying media, facial recognition auto-tagging and other media organizational tasks. The personalized AI assistant will learn from the user's individual actions and will not share that information with traditional AI models.

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. GAAP") and the requirements of the Securities and Exchange Commission.

Critical 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. GAAP. 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 and significant estimates are more fully described in Note 2 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.

Stock-based compensation

Stock-based compensation is accounted for based on the requirements of ASC 718 - "Compensation-Stock Compensation", which requires recognition in the consolidated 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 or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to account for forfeitures as they occur.

Recently Issued Accounting Pronouncements

Refer to the notes to the unaudited financial statements.

Results of Operations

Revenue

During the three months ended June 30, 2026 and 2025, we generated revenues of $37 and $78, respectively. During the six months ended June 30, 2026 and 2025, we generated revenues of $110 and $161, respectively. Revenue consisted of subscription revenues.

Operating expenses

For the three months ended June 30, 2026, operating expenses amounted to $2,152,348 as compared to $1,194,239 for the three months ended June 30, 2025, an increase of $958,109, or 80.2%. For the six months ended June 30, 2026, operating expenses amounted to $3,837,891 as compared to $2,628,283 for the six months ended June 30, 2025, an increase of $1,209,659, or 46.0%. For the three and six months ended June 30, 2026 and 2025, operating expenses consisted of the following:

		Three Months Ended June 30,								Six Months Ended June 30,
		2026				2025				2026				2025
Compensation and related expenses		$	1,187,674			$	660,534			$	1,984,215			$	1,576,696
Marketing and advertising expenses			131,451				59,121				363,190				92,958
Professional and consulting expenses			671,720				274,225				1,188,902				604,823
General and administrative expenses			161,503				200,359				301,584				353,806
Total		$	2,152,348			$	1,194,239			$	3,837,891			$	2,628,283

Compensation and related expenses

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

During the three months ended June 30, 2026 and 2025, compensation and related expenses amounted to $1,187,674 and $660,534, respectively, an increase of $527,140, or 79.8%. The increase was attributable to an increase in bonus of $350,000, an increase in stock-based compensation of $71,250, and an overall increase in compensation and other related expenses of $105,890 partially as a result of a decrease in the allocation of compensation and related expenses to RPM, which is included in loss from discontinued operations.

During the six months ended June 30, 2026 and 2025, compensation and related expenses amounted to $1,984,215 and $1,576,696, respectively, an increase of $407,519, or 25.8%. The increase was attributable to an increase in stock-based compensation of $142,056, and an overall increase in compensation and other related expenses of $265,463 partially as a result of a decrease in the allocation of compensation and related expenses to RPM, which is included in loss from discontinued operations.

Marketing and advertising expenses

During the three months ended June 30, 2026 and 2025, marketing and advertising expenses amounted to $131,451 and $59,121, respectively, an increase of $72,330, or 122.3%. During the six months ended June 30, 2026 and 2025, marketing and advertising expenses amounted to $363,190 and $92,958, respectively, an increase of $270,232, or 290.7%. The increases were primarily due to an overall increase in promotions, branding and digital marketing strategies and social media advertisements.

Professional and consulting expenses

During the three months ended June 30, 2026 and 2025, we reported professional and consulting expenses of $671,720 and $274,225, respectively, an increase of $397,495, or 145.0%. The increase was attributable to an increase in stock-based consulting of $367,258, an increase in other consulting fees of $118,100, and an increase in other professional fees of $29,605, primarily due to a decrease in the allocation of professional and consulting expenses to RPM, which is included in loss from discontinued operations, offset by a decrease in investor relations of $101,472 and a decrease in legal fees of $15,996.

During the six months ended June 30, 2026 and 2025, we reported professional and consulting expenses of $1,188,902 and $604,823, respectively, an increase of $584,079, or 96.6%. The increase was attributable to an increase in stock-based consulting fees of $531,024, an increase in other consulting fees of $152,600, and an increase in other professional fees of $61,477, primarily due to a decrease in the allocation of professional and consulting expenses to RPM, which is included in loss from discontinued operations, offset by a decrease in legal fees of $92,848 and a decrease in investor relations of $68,444.

General and administrative expenses

During the three months ended June 30, 2026 and 2025, general and administrative expenses amounted to $161,503 and $200,359, respectively, a decrease of $38,856, or 19.4%. The decrease was primarily attributable to a decrease in computer and internet expenses of $28,463, a decrease in travel expenses of $16,050, and a decrease in proxy meeting expenses of $10,000, offset by an increase in other general and administrative expenses of $15,657 primarily due to a decrease in the allocation of general and administrative expenses to RPM, which is included in loss from discontinued operations.

During the six months ended June 30, 2026 and 2025, general and administrative expenses amounted to $301,584 and $353,806, respectively, a decrease of $52,222, or 14.8%. The decrease was primarily attributable to a decrease in computer and internet expenses of $29,446, a decrease in travel expenses of $24,585, and a decrease in proxy meeting expenses of $20,749, offset by an increase in other general and administrative expenses of $22,558 primarily due to a decrease in the allocation of general and administrative expenses to RPM, which is included in loss from discontinued operations.

Loss from Operations

During the three months ended June 30, 2026, loss from operations amounted to $2,152,311 as compared to $1,194,161 during the three months ended June 30, 2025, an increase of $958,150, or 80.2%. During the six months ended June 30, 2026, loss from operations amounted to $3,837,781 as compared to $2,628,122 during the six months ended June 30, 2025, an increase of $1,209,659, or 46.0%. The increase was primarily a result of the changes in operating expenses discussed above.

Other Income (Expense)

Other income (expenses) primarily consisted of interest income and an unrealized loss on equity securities. During the three months ended June 30, 2026 and 2025, we reported other (expenses) income, net of $(898,053) and $49,639, respectively, a negative change of $947,692, or 1,909.2%. The negative change was primarily due to an increase in unrealized loss on equity securities of $910,000 that are primarily related to the decrease in the valuation of the fair value of the Avalon Series E Preferred Stock caused by the decrease in Avalon's quoted common share price, and a decrease in interest income, net of $37,692.

During the six months ended June 30, 2026 and 2025, we reported other (expenses) income, net of $(2,074,193) and $90,975, respectively, a negative change of $2,165,168, or 2,380.0%. The negative change was primarily due to an increase in unrealized loss on equity securities of $2,104,000 that are primarily related to the decrease in the valuation of the fair value of the Avalon Series E Preferred Stock caused by the decrease in Avalon's quoted common share price, and a decrease in interest income, net of $61,168.

Loss from Continuing Operations

During the three months ended June 30, 2026, loss from continuing operations amounted to $3,050,364 as compared to $1,144,522 during the three months ended June 30, 2025, an increase of $1,905,842, or 166.5%. During the six months ended June 30, 2026, loss from continuing operations amounted to $5,911,974 as compared to $2,537,147 during the six months ended June 30, 2025, an increase of $3,374,827, or 133.0%. The increase was primarily a result of the changes in operating expenses discussed above.

Loss from Discontinued Operations

For the three and six months ended June 30, 2026, there were no loss from discontinued operations. For the three and six months ended June 30, 2025, loss from discontinued operations amounted to $212,667 and $439,152, respectively. The following table summarizes the results of the discontinued operations for the three and six months ended June 30, 2026 and 2025:

		Three Months Ended June 30,								Six Months Ended June 30,
		2026				2025				2026				2025
Operating expenses		$	-			$	212,667			$	-			$	439,152
Other expenses			-				-				-				-
Loss from discontinued operations, net of tax			-				(212,667	)			-				(439,152	)
Gain on sale and deconsolidation of variable interest entities			-				-				-				-
Total loss from discontinued operations, net		$	-			$	(212,667	)		$	-			$	(439,152	)

Net Loss and Net Loss Attributable Common Shareholders

Due to the foregoing reasons, during the three months ended June 30, 2026 and 2025, our net loss was $3,050,364 and $1,357,189, respectively, an increase of $1,693,175, or 124.8%. During the three months ended June 30, 2026 and 2025, our net loss attributable to Myseum.AI, Inc. shareholders was $3,050,364 and $1,216,872, respectively, an increase of $1,833,492, or 150.7%.

Due to the foregoing reasons, during the six months ended June 30, 2026 and 2025, our net loss was $5,911,974 and $2,976,299, respectively, an increase of $2,935,675, or 98.6%. During the six months ended June 30, 2026 and 2025, our net loss attributable to Myseum.AI, Inc. shareholders was $5,911,974 and $2,690,068, respectively, an increase of $3,211,906, or 119.8%.

During the three and six months ended June 30, 2026, our total basic and diluted net loss per common share attributable to Myseum.AI, Inc. shareholders was $0.61 and $1.28, respectively. During the three and six months ended June 30, 2025, our total basic and diluted net loss per common share attributable to Myseum.AI, Inc. shareholders was $0.29 and $0.65, respectively.

Liquidity, Capital Resources and Plan of Operations

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. On June 30, 2026, we had a cash balance of $1,874,149, short-term investments of $2,056,196, and working capital of $3,373,096. Short-term investments include U.S. Treasury bills that are all highly rated and have initial maturities between one and four months. During the six months ended June 30, 2026, we incurred a net loss of $5,911,974 and used net cash in operations of $2,762,657. Additionally, we had nominal revenues in 2026.

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company's ability to continue as a going concern is dependent on its ability to raise additional capital to fund its research and development ("R&D") activities and meet its obligations on a timely basis. There can be no assurance that sufficient funding will be available to allow the Company to successfully continue its R&D activities and meet its obligations. If the Company is unable to obtain the necessary funds, significant reductions in spending and the delay or cancellation of planned activities may be necessary. These actions would have a material adverse effect on the Company's business, results of operations, and prospects. These conditions raise substantial doubt about the Company's ability to continue as a going concern within one year from the date these consolidated financial statements are issued. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Our primary uses of cash have been for research and development, 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, sale of common stock of RPM, and the exercise of warrants. The following trends are reasonably likely to result in changes in our liquidity over the near to long term:

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An increase in working capital requirements to finance our current business,

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Cost of research and development,

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Addition of administrative, technical and sales personnel as the business grows, and

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The cost of being a public company.

Cash Flows from Operating Activities

Net cash used in operating activities totaled $2,762,657 and $2,482,210 for the six months ended June 30, 2026 and 2025, respectively, an increase of $280,447.

Net cash flow used in operating activities for the six months ended June 30, 2026 primarily reflected a net loss of $5,911,974 adjusted for the add-back of non-cash items consisting of depreciation and amortization of $8,528, amortization of right of use assets of $24,879, accretion of stock-based stock option, compensatory warrants, and common stock expense of $986,747, changes in accrued interest income of $52,043, and an unrealized loss on equity securities of $2,104,000, offset by changes in operating assets and liabilities primarily consisting of a decrease in accounts receivable of $31, a decrease in prepaid expenses of $149,158, a decrease in accounts payable and accrued expenses of $151,813, a decrease in contract liabilities of $10, and a decrease in operating lease liabilities of $24,246.

Net cash flow used in operating activities for the six months ended June 30, 2025 primarily reflected a net loss of $2,976,299 adjusted for the add-back of non-cash items consisting of depreciation and amortization of $11,209, amortization of right of use assets of $10,318, and accretion of stock-based stock option and common stock expense of $313,666, offset by changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of $13, a decrease in prepaid expenses of $55,128, a decrease in assets of discontinued operations of $139,898, a decrease in accounts payable and accrued expenses of $132,181, an increase in contract liabilities of $17, a decrease in operating lease liabilities of $3,562, and an increase in liabilities of discontinued operations of $99,609.

Cash Flows from Investing Activities

Net cash provided by (used in) investing activities amounted to $873,670 and $(2,358,664) for the six months ended June 30, 2026 and 2025, respectively, a positive change of $3,232,334.

During the six months ended June 30, 2026, cash flows provided by investing activities comprised of gross proceeds from the sale of short-term investments of $4,017,475, offset by purchases of short-term investments of $3,143,805.

During the six months ended June 30, 2025, we purchased short-term investments of $5,317,735 and received gross proceeds from the sale of short-term investments of $2,963,546. Additionally, we purchased property and equipment of $4,475.

Cash Flows from Financing Activities

Net cash provided by financing activities totaled $3,014,106 for the six months ended June 30, 2026 as compared to net cash provided by financing activities of $4,477,972 for the six months ended June 30, 2025, a decrease of $1,463,866.

During the six months ended June 30, 2026, cash flows provided by financing activities comprised of proceeds from sale of common stock, net of $3,208,239 offset by payments of deferred offering costs of $194,133.

During the six months ended June 30, 2025, cash flows provided by financing activities comprised of proceeds from sale of common stock, net of $4,532,000 offset by payments of deferred offering costs of $54,028.

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. 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.

JOBS Act

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.

Subject to certain conditions set forth in the JOBS Act, as an "emerging growth company," we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an "emerging growth company" until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our initial public offering, which would be December 31, 2026; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.